<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, 1997.
                                   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 12, 1997 was $0. 




<PAGE>   2

The number of shares of Common Stock (no par value, $.01 stated value) of the
registrant outstanding as of December 12, 1997 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                                              12  

     Item  3.  Legal Proceedings                                       12
          
     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             23

     Item  9.  Changes In and Disagreements with Accountants
               on Accounting and Financial Disclosure                  40       
PART III
------------------------------------------------------------------
     Item 10.  Directors and Executive Officers of the Registrant      41
          
     Item 11.  Executive Compensation                                  42
          
     Item 12.  Security Ownership of Certain Beneficial Owners
               and Management                                          43
                                                                 
     Item 13.  Certain Relationships and Related Transactions          44       
PART IV
------------------------------------------------------------------
     Item 14.  Exhibits, Financial Statement Schedule,
               and Reports on Form 8-K                                 46
                                                       
     Financial Statement Schedule
      (including  Independent Auditors Report on Financial
       Statement Schedule)                                             47
               
     Signatures                                                        49
     
     Exhibit Index                                                     50
<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 170 grades of flat rolled custom and commodity steel products. 
Total shipments were 1,328,931 tons in fiscal 1997 and 1,396,732 tons in
fiscal 1996.  Custom flat rolled products, which include high carbon, alloy
and high strength, silicon electrical and galvanized steel, constituted
approximately 67.6% of net tons shipped during fiscal 1997 and 57.9% during
fiscal 1996.  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.


PRODUCTS

    OVERVIEW

WCI produces a wide range of custom flat rolled steel products, including
high carbon, alloy and high strength, silicon electrical and galvanized
steel.  In these markets, WCI competes principally on the basis of (a)
customer and product requirements, including small order quantities,
specialized chemistries, narrow widths and delivery performance, (b) quality
and (c) price.  WCI's commodity steel product sales consist principally of
hot and cold rolled low carbon sheet steel.  In these markets, WCI competes
principally on the basis of price and delivery performance.  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, 
                         1997      1996      1995        1997      1996      1995
<S>                   <C>       <C>       <C>           <C>       <C>       <C>
Custom Products:
 Hot and Cold
  Rolled.............   481,740   426,945   358,556      36.2      30.5      29.3
 Coated..............   416,854   382,352   367,444      31.4      27.4      30.1
                        -------   -------   -------      ----      ----      ----
Total Custom Products   898,594   809,297   726,000      67.6      57.9      59.4
Total Commodity......   430,337   587,435   495,940      32.4      42.1      40.6
                        -------   -------   -------      ----      ----      ----
Total Steel 
 Products...........  1,328,931 1,396,732 1,221,940     100.0%    100.0%    100.0%
                      ========= ========= =========     =====     =====     =====

</TABLE>

<PAGE>   5   

    CUSTOM PRODUCTS

High Carbon, Alloy, High Strength---WCI has developed niche 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 low order quantities, relatively narrow width and specific
metallurgical properties.  WCI presently produces over 100 specialized
chemistries for these niche markets.

WCI's customers in this sector, in turn, supply end-users which have highly
specific and defined 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 various major
integrated mills.

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

The market for 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 category and other foreign competitors.  In addition, the
Company's product also competes with cold rolled motor laminations produced
by several other integrated steel makers which have been developed as a
substitute product for silicon steels 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 is used in the manufacture of electrical boxes, automotive
bumpers, culvert coil and grain bins, as well as many other end uses.    

WCI's galvanized finishing line is suited to produce heavy gauge 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 1997, WCI shipped 430,337 tons in the aggregate of hot and cold
rolled low carbon sheet and strip and low carbon semi-finished steel, which
represented approximately 32.4% of the Company's net tons shipped.  Hot
rolled low carbon sheet is more price sensitive than custom hot rolled steels
and is sold to steel service centers or manufacturers producing a broad array 
of products, including tubing, stampings and roll formed parts.  Cold rolled



<PAGE>   6

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 and sales strategy is to focus on increasing sales of custom
products and on becoming a major supplier to its strategic customer base. 
Over 50% of WCI's shipments are to customers within 200 miles of the Warren
facility.  WCI believes that, due to the large number of active and potential
customers in this geographic area, it has an advantage over competitors
located farther away.

WCI has approximately 300 active accounts.  The Company has a direct sales
force which is assisted in the field by a staff of technical service
representatives with strong metallurgical and technical backgrounds. 
Collectively, the sales force and technical staff comprise a knowledgeable
team qualified to identify and meet customers' needs.

Marketing and pricing are centralized at the Warren facility, where the
marketing strategy and the pricing levels are established for all WCI
products.  WCI's marketing staff works closely with the sales and technical
service representatives to coordinate its sales and marketing strategies.

    
CUSTOMERS

WCI's customer base is dominated by steel converters and steel service
centers, which in fiscal 1997 represented 65.8% of shipments.  The remaining
shipments were direct 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                     1997       1996       1995

 <S>                                 <C>        <C>        <C>
 Conversion/further processing......  42.5%      44.6%      39.3%
 Steel service centers..............  23.3       24.0       23.0
 Construction.......................  15.8       11.5       13.1
 Electrical equipment...............   7.3        7.1        8.4
 Direct automotive..................   6.3        8.1       11.1
 Other..............................   4.8        4.7        5.1
                                     ------     ------     ------
   Total............................ 100.0%     100.0%     100.0%   
                                     ======     ======     ======
</TABLE>


In fiscal years 1997, 1996, and 1995, WCI's twenty largest customers
represented approximately 57%, 56%, and 56%, respectively, of net sales.  
No customer accounted for as much as 10% of net sales in fiscal 1997.




<PAGE>   7

BACKLOG

On October 31, 1997, WCI's order backlog was approximately 232,000 net tons
with an approximate value of $116 million compared to approximately 255,000
net tons with an approximate value of $128 million at October 31, 1996, 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, 1997
backlog by January 31, 1998.


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. 
Since minimills typically are not unionized, they have more flexible work
rules that have resulted in lower employment costs per net ton shipped. 
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.  In
addition, there is significant additional flat rolled minimill capacity under
construction or announced with various planned commissioning dates through
1999.  These minimills are expected to compete with the Company primarily in
the commodity flat rolled steel market.  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.

During 1996 and 1997, the domestic steel market experienced significant
increases in imports of foreign produced flat rolled products.  The relative
strength of the U.S. dollar and economy versus the strength of foreign
currencies and economies, Europe in particular, can significantly affect the
import/export trade balance for flat rolled steel products.  The status of
the trade balance may significantly affect the ability of the new minimill
capacity to come on-line without disrupting the domestic flat rolled steel
market.

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 



<PAGE>   8

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 normally 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
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 in fiscal 1998 and no less than half of its requirements in
fiscal 1999.  Iron ore pellets satisfied approximately 71% of WCI's iron ore
requirements in fiscal 1997, 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 1998 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.   

<PAGE>   9

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 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, WCI's facilities are located on
sites that have been used for heavy industrial purposes for decades.  WCI is
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.  WCI has made and intends
to continue to make the necessary expenditures for environmental remediation 
and compliance with environmental laws and regulations.  Environmental laws
and regulations 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 the Company's financial condition and results of
operations.  

On June 29, 1995, the Department of Justice, on behalf of the Environmental
Protection Agency (EPA), instituted a civil action against WCI under the
Clean Water Act in the United States District Court for the Northern District
of Ohio. The action alleges numerous violations of the Company's National
Pollution Discharge Elimination System permit alleged to have occurred during
the years 1989 through 1996, inclusive.  On March 29, 1996, the Department of
Justice on behalf of the EPA, instituted another civil action against the
Company in the same court under the Clean Air Act alleging 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. 
Each action seeks a civil penalty not to exceed the statutory maximum of
$25,000 per day per violation and also seeks an injunction against continuing
violations.  The Company believes that imposition of the statutory maximum
penalty for the alleged violations is unlikely based upon past judicial
penalties imposed under the Clean Water Act and the Clean Air Act, and that
it has defenses to liability.  By letter dated November 1, 1996, EPA's Region
V Water Division Director requested information pursuant to the Clean Water
Act from the Company relating to the Warren facility, including information
as to the effect of a prohibition against federal procurement of the
Company's products on the Company's business.  The Company responded to the
EPA's request on December 2, 1996.  The Company has not been notified that
the EPA will seek a federal procurement prohibition based on alleged permit
violations.  However, there can be no assurance that a federal procurement
prohibition will not be imposed.  The Company is negotiating with the EPA
toward a settlement of these matters.  If the Company is unable to reach a
negotiated settlement and if a substantial penalty similar to the  
statutory maximum penalty or federal procurement prohibition were imposed, it
could have a material adverse effect on the operating results or financial
condition of the Company, the extent of which the Company is unable to
estimate at this time.  These actions are in discovery.  The Clean Air Act
civil action has a trial date scheduled for May 1998.  No trial date has been
established for the Clean Water Act civil action.    


<PAGE>   10

WCI has obtained a storage permit under the Resource Conservation and
Recovery Act (RCRA), for waste pickle liquor at its Warren facility acid
regeneration plant.  As a provision of the permit, the Company will be
required to undertake a corrective action program with respect to historical
material handling practices at the Warren facility.  In April 1997, the
Company received notice from the EPA that it had approved a workplan for the
first investigation step of the corrective action program, the RCRA Facility
Investigation (RFI), which is expected to be completed in 1999.  The workplan
identifies thirteen historical solid waste management units which are subject
to the RFI.  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 findings of the RFI and the development
and approval of the 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 it would not have a material adverse effect on the
financial condition of the Company.

WCI received from the EPA a formal request dated April 1, 1994 for
information pursuant to Section 3007 of the 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 Company has
submitted a plan to state environmental authorities to replace this landfill
with a new lined 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.  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.  The estimated cost for Phase II is approximately
$1.5 million expended over six years, and the estimated cost for Phase III is
approximately $1.6 million expended over ten years.  Construction is expected
to begin during fiscal 1998.


<PAGE>   11

During 1997, the EPA proposed 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.  These standards have been the
subject of significant discussion throughout federal and state governments,
and changes to the standards or the implementation date may be made prior to
final approval.  Like much of the steel, utilities and other industries,
WCI's current operations are not expected to comply with these proposed
standards.  WCI cannot currently assess the impact of these proposed
standards on its results of operations or financial condition.


EMPLOYEES

As of October 31, 1997, WCI had 550 salaried employees and 1,701 hourly
employees.  Most of the employees are located at the Warren facility with the
hourly employees being represented by the United Steelworkers of America
(USWA) with which WCI has a four-year collective bargaining agreement that
expires August 31, 1999.  


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

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. 

<PAGE>   12

Monthly benefits under the defined benefit plan are reduced by the benefit
payable from the Company's defined contribution plan (as an annuity
equivalent) and benefits payable from a defined benefit pension plan of
certain predecessor companies.  No named executive officer is eligible to
participate in this plan.


     Postretirement Health Care

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.  


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 anneal 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
29% in fiscal 1997.

WCI's Niles Properties, Inc. is located approximately five miles from the
Warren facility, and has approximately 600,000 square feet of building space. 
Presently, four steel users are tenants at the Niles facility, using 52% of
the space.  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 (ERISA), 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.

<PAGE>   13

On April 5, 1996, an employee instituted an action for damages against the
Company in the Court of Common Pleas, Trumbull County, Ohio alleging that,
under Ohio common law, her privacy rights were violated and that she has been
subjected to sexual harassment.  On April 28, 1997 the plaintiff filed for
summary judgement. The Company denies plaintiff's allegations of liability
and has opposed the plaintiff's motion for summary judgement on which the
court has yet to rule.  The court has set a trial date in February 1998.
         
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, 1997.










































<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 The Renco Group, Inc.
(Renco).  There is no established public trading market for the Company's
common stock.  As of December 12, 1997, the Company had one shareholder.  The
Company paid cash dividends three times during fiscal 1996 aggregating
$6,567,000 and three times during fiscal 1997 aggregating $118,000,000.  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, 
                                   1993      1994(1)    1995(2)    1996(3)    1997(4)
                                (Dollars and tons in thousands, except per ton amounts)
<S>                              <C>        <C>        <C>         <C>        <C>
Statement of Income Data:
 Net Sales.....................  $578,639   $709,363   $630,990    $660,801   $668,470
 Cost of products sold.........   492,000    574,610    544,789     550,609    547,545
                                 --------   --------   --------    --------   --------
 Gross margin..................    86,639    134,753     86,201     110,192    120,925
 Depreciation and amortization.    20,978     19,868     21,178      22,547     23,174
 Selling, general and
  administrative expenses......    19,144     34,889     19,675      22,074     29,355
                                 --------   --------   --------    --------   --------
 Operating income..............    46,517     79,996     45,348      65,571     68,396
 Interest expense..............    23,182     28,709     25,787      24,968     31,690
 Interest and other income.....       301      1,505      6,212       6,545      1,239
                                 --------   --------   --------    --------   --------
 Income before income taxes,
  extraordinary losses on
  early retirement of debt
  and cumulative effect of
  change in accounting
  principle....................    23,636     52,792     25,773      47,148     37,945
 Income taxes..................     9,485     21,939     10,313      19,108     14,482
                                 --------   --------   --------    --------   --------
 Income before extraordinary
  losses on early retirement
  of debt and cumulative effect
  of change in accounting 
  principle....................  $ 14,151   $ 30,853   $ 15,460    $ 28,040   $ 23,463
                                 ========   ========   ========    ========   ========
Other Operating Data:
 Net tons shipped..............     1,302      1,468      1,222       1,397      1,329
 Percent custom products.......      53.9%      56.9%      59.4%       57.9%      67.6%
 Average selling price per net
  ton shipped..................  $    445   $    483   $    516    $    473   $    503 
 Average cost per net ton
  shipped......................       378        391        446         394        412
 Average gross margin per
  net ton shipped..............        67         92         71          79         91
 Average operating income per
  net ton shipped..............        36         54         37          47         51

Balance Sheet Data:
 Cash, cash equivalents and
  short-term investments.......     9,366     71,426    106,548     139,541     18,989
 Working capital (excluding
  cash, cash equivalents and
  short-term investments)......    49,510     69,193     61,881      42,093     66,913
 Property, plant and equipment,
  net..........................   206,951    196,212    189,733     205,121    224,620
 Total assets..................   396,342    481,596    519,159     567,453    470,751
 Total debt (including current
  portion).....................   136,858    216,108    213,854     211,506    302,937
 Shareholder's equity (deficit)    69,168     43,877     59,495      79,880    (90,866)

<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 Transactions described in Management's Discussion and Analysis of         
       Financial Condition and Results of Operations.
</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.

RESULTS OF OPERATIONS

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.  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.  Selling prices were 
generally strong through the third quarter of 1997 but began to decline late 
in the fourth quarter of 1997 due to minimill capacity additions, a high level 
of imports, and the reentry into the market of a major integrated mill.  As a 
result of the foregoing conditions, sales prices are expected to remain lower 
in early 1998.  In addition, shipments during 1997 and 1996 included 22,642 
tons and 45,904 tons, respectively, of lower value added semi-finished steel.  
The Company expects to continue to ship semi-finished products during the 
first two quarters of 1998 while the upgrade to the hot strip mill is fully  
implemented.

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.  Charges under
the LIFO inventory valuation method amounted to $3.3 million in 1997, including
$2.1 million in the fourth quarter, compared to essentially no LIFO charge in 
1996.

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 expenses related to the Transactions (as defined below).  
Excluding the expenses incurred as a result of the Transactions, operating 
income was $77.0 million during 1997 or $58 per ton shipped.

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 

<PAGE>   18

of lower cash, cash equivalent and short-term investments in 1997 due to the 
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.


Fiscal 1996 Compared to Fiscal 1995

Net sales in 1996 were $660.8 million on 1,396,732 tons shipped, representing a
4.7% increase in net sales and a 14.3% increase in tons shipped compared to 
1995.  Net sales per ton shipped declined 8.3% to $473 compared to $516 for 
1995 due to lower prices realized in the spot market as well as a change in 
product mix.  The 1996 period included the sale of approximately 46,000 tons 
of lower value added semi-finished steel and a lower mix of custom carbon, 
alloy and electrical steel products which accounted for 57.9% of total 
shipments in 1996 compared with 59.4% in 1995.  The sales mix and volume were 
adversely affected during the first two quarters of fiscal 1996 by a labor 
contract dispute and resulting work stoppage which was concluded October 24,
1995.  During the third and fourth quarters of fiscal 1996, the Company's 
product mix returned to a more traditional mix, with sales of custom products 
accounting for 64.8% of shipments compared to 62.4% during the comparable 
period in 1995. Shipments for the three months ended October 31, 1996 were 
342,147 tons compared to 208,522 during the same period in 1995 which was 
adversely affected by the work stoppage.  

Gross margin was $110.2 million in 1996 compared to $86.2 million in 1995.  The
increase in gross margin reflects higher volume and improved per ton operating
costs, offset somewhat by the lower sales prices in 1996 and the changes in
product mix mentioned above, and a loss of $13.6 million of gross margin during
the fourth quarter of 1995 as a result of the work stoppage.

Operating income was $65.6 million, $47 per ton shipped, for 1996 compared to
$45.3 million, $37 per ton shipped, for 1995.  The results for 1996 and 1995
reflect the gross margin discussed above, higher depreciation and amortization
expense associated with the completion of a blast furnace reline in May of 1995
and higher selling, general and administrative expenses in the fourth quarter 
of 1996 compared to the same period in 1995.  Selling, general and 
administrative expenses for the fourth quarter of 1996 were $3.3 million 
higher than during the same period in 1995 due primarily to reductions in 
expense in the fourth quarter of 1995 under the Company's variable 
compensation programs as a result of the loss incurred during that period.

As a result of the items discussed above, net income increased to $28.0 million
for 1996 compared to net income of $15.5 million for 1995.





<PAGE>   19

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, 1997 consisted of cash and cash equivalents of $19.0
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, 1997, WCI had no borrowings outstanding 
under the Revolver, with a borrowing limit of $94.5 million net of $5.5 
million in outstanding letters of credit.

  Cash from Operations

Cash provided by operating activities was $39.6 million for 1997 compared to
$78.0 million and $60.7 million for 1996 and 1995, respectively.  The decrease 
in operating cash flow in 1997 compared to 1996 resulted from significantly 
higher in-process steel inventory in 1997 as a result, in part, of the hot 
strip mill upgrade and a working capital benefit experienced in 1996 following 
the resolution of a work stoppage in late 1995. 

As of October 31, 1997, at pricing then in effect, WCI had commitments under 
raw material supply contracts of approximately $33.8 million for each of 1998 
and 1999.

  Capital Expenditures

Capital expenditures were $39.9 million, $35.4 million and $26.2 million during
1997, 1996 and 1995, respectively.  Capital expenditures are estimated to be
approximately $30 million in 1998.  The higher level of capital investment in
1997 and 1996 reflect expenditures on the hot strip mill upgrade and hydrogen
anneal facility and expenditures in 1995 reflect the blast furnace reline. 
Management has funded the Company's capital expenditures in 1997, 1996 and
1995 through cash balances and cash provided by operating activities.  At
October 31, 1997, the Company had commitments for capital expenditures of
approximately $8.1 million.

  Debt and Equity Transactions

On November 27, 1996 WCI Steel Holdings, Inc., a wholly-owned subsidiary of 
Renco, completed a tender offer in which it purchased substantially all the
outstanding shares of common stock of the Company not held by Renco (Equity
Tender Offer).  Following the completion of the Equity Tender Offer, WCI Steel
Holdings, Inc. was merged with and into the Company with the Company surviving 
as a wholly-owned subsidiary of Renco.  The total consideration paid for the 
common stock tendered and to non-tendering shareholders pursuant to the merger
of WCI Steel Holdings, Inc. with and into the Company was approximately
$56,934,000, including related expenses.
<PAGE>   20

On the same date, the Company completed the sale of $300,000,000 Senior Secured
Notes.  The proceeds from the Senior Secured Notes, with existing cash balances
of the Company, were used to complete the Equity Tender Offer, complete a 
tender offer in which the Company acquired $206,120,000 of the $206,400,000
aggregate principal amount of the then outstanding Senior Notes at a rate of
$1,125.00 per $1,000 principal amount outstanding plus accrued interest, pay a
$108,000,000 dividend to Renco, make contractual compensation payments to
certain executives of the Company and pay related transaction costs
(Transactions).  As a result of these Transactions, the Company  recognized an
extraordinary loss of $19,606,000, net of taxes, and compensation expenses of
$8,577,000 in the first quarter of 1997.  The Company's liquidity was
significantly reduced and its debt service requirements significantly increased
as a result of these Transactions.  Management anticipates that cash flow from
operations and availability under the Revolver will be sufficient to finance 
the Company's liquidity needs for the foreseeable future.

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.

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 $2.4 million, $1.7 million and $0.5 million during 
1997, 1996 and 1995, respectively.  

The Company has a defined benefit pension plan which covers substantially all
bargained for employees and provides a minimum level of pension benefits based 
on age and years of service when combined with benefits provided under the 
Company's defined contribution plan and a predecessor company's defined 
benefit plan.  The Company made minimal contributions to the plan during 1997. 
Under the minimum funding requirements of ERISA, the Company is required to 
contribute approximately $1.1 million in 1998 and $8.1 million in 1999 to this 
plan.

 





<PAGE>   21

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 $0.8 
million, $0.3 million and $2.3 million in 1997, 1996, and 1995, 
respectively.

Future environmental capital expenditures may be dependent in part upon the
outcome of certain pending environmental matters.  Operating costs for control 
and monitoring equipment, excluding depreciation and amortization expense, were
$10.8 million, $9.6 million and $8.9 million for 1997, 1996 and 1995,
respectively.  Operating costs for fiscal 1998 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 1997, the EPA proposed 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.
These standards have been the subject of significant discussion throughout 
federal and state governments, and changes to the standards or the 
implementation date may be made prior to final approval.  Like much of the 
steel, utilities and other industries, WCI's current operations are not 
expected to comply with these proposed standards.  WCI cannot currently assess 
the impact of these proposed 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
compliant.  The Company has a thorough plan to achieve year 2000 compliance
with respect to its business systems, including systems and user testing
scheduled to commence in 1998.  The Company does not currently expect year
2000 issues related to its business systems to have any material effect on
the Company's costs or to cause any significant disruption in operations. 
The Company has initiated a program to assess its process control environment
for year 2000 compliance, which is expected to be completed by May 31, 1998,
and intends to make the necessary modifications to prevent disruption to its
operations.  The Company is unable at this time to estimate the cost or
potential effect on its operations of achieving year 2000 compliance in its
process control environment.  







<PAGE>   22

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
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 customers; availability of
qualified personnel; and major equipment failures.  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>   23

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,
                                                    ------------------------
                                                       1997          1996
                                                    ---------      ---------
<S>                                                 <C>            <C>
ASSETS
Current assets
  Cash and cash equivalents.........................$  18,989      $  90,395
  Short-term investments............................        -         49,146   
  Accounts receivable, less allowances for doubtful
    accounts of $1,627 and $1,600, respectively.....   65,202         65,869         
  Inventories.......................................  106,293         96,675 
  Recoverable income taxes..........................    4,273              -   
  Deferred income taxes.............................    8,188         10,637
  Prepaid expenses..................................    1,640          1,244     
                                                    ---------      ---------
       Total current assets.........................  204,585        313,966     
Property, plant and equipment, net..................  224,620        205,121        
Intangible pension asset............................   20,982         27,505        
Other assets, net...................................   20,564         20,861    
                                                    ---------      ---------
            Total assets............................$ 470,751      $ 567,453      
                                                    =========      =========
LIABILITIES and SHAREHOLDER'S EQUITY
Current liabilities
  Current portion of long-term debt.................$   1,319          2,448
  Accounts payable..................................   64,123         79,138
  Accrued liabilities...............................   51,504         40,697
  Income taxes......................................    1,737         10,049
                                                    ---------      ---------
  Total current liabilities.........................  118,683        132,332    

Long-term debt, excluding current portion...........  301,618        209,058 
Deferred income taxes...............................    7,497          4,365     
Postretirement health care benefits.................   85,755         81,795         
Pension benefits....................................   31,489         34,011         
Other liabilities...................................   16,575         26,012    
                                                    ---------      ---------
            Total liabilities.......................  561,617        487,573 
                                                    ---------      --------- 
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 $.01 per
    share, 40,000,000 shares authorized, 100 and
    36,623,700 shares issued at October 31, 1997
    and 1996, respectively..........................        -            366
  Additional paid-in capital........................        -            570
  Retained earnings (deficit).......................  (90,866)        80,144  
  Treasury stock at cost, 222,300 shares at October
    31,1996. .......................................        -         (1,200)
                                                    ---------      ---------
           Total shareholder's equity (deficit).....  (90,866)        79,880         
Commitments and contingencies.......................        -              -
            Total liabilities and                   ---------      ---------
            shareholder's equity (deficit)..........$ 470,751      $ 567,453      
                                                    =========      =========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>



<PAGE>   24
<TABLE>
<CAPTION>
                              WCI STEEL, INC. AND SUBSIDIARIES
                              CONSOLIDATED STATEMENTS OF INCOME
                                  (Dollars in thousands)
                                                       Years ended October 31,  
                                                  -------------------------------  
                                                     1997       1996       1995  
                                                  ---------  ---------  ---------
  <S>                                             <C>        <C>        <C>       
  Net sales.......................................$ 668,470  $ 660,801  $ 630,990  
  Operating costs and expenses
   Cost of products sold..........................  547,545    550,609    544,789
   Depreciation and amortization..................   23,174     22,547     21,178
   Selling, general and administrative expenses...   29,355     22,074     19,675
                                                  ---------  ---------  ---------
                                                    600,074    595,230    585,642    
                                                  ---------  ---------  ---------
  Operating income................................   68,396     65,571     45,348     
                                                  ---------  ---------  ---------
  Other income (expense)
   Interest expense...............................  (31,690)   (24,968)   (25,787)   
   Interest and other income, net.................    1,239      6,545      6,212      
                                                  ---------  ---------  ---------
                                                    (30,451)   (18,423)   (19,575)   
                                                  ---------  ---------  ---------
     Income before income taxes and 
       extraordinary loss.........................   37,945     47,148     25,773     
  Income tax expense..............................   14,482     19,108     10,313     
                                                  ---------  ---------  ---------         
     Income before extraordinary loss.............   23,463     28,040     15,460     
  Extraordinary loss on early retirement of 
    debt, net of income taxes.....................   19,606          -          -     
                                                  ---------  ---------  ---------
  Net income......................................$   3,857  $  28,040  $  15,460  
                                                  =========  =========  =========
 








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



















<PAGE>   25
<TABLE>
<CAPTION>
                               WCI STEEL, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY (DEFICIT)
                                    (Dollars in thousands)

                                          Years ended October 31, 1997, 1996, and 1995
                                  ------------------------------------------------------------- 
                                                                                      Total
                                                    Additional Retained            Shareholder'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, 1994.......$      -  $    366  $   300  $ 43,211  $      -    $ 43,877
Net income........................       -         -        -    15,460         -      15,460
Other.............................       -         -      158         -         -         158
                                  --------  --------  -------  --------  --------    --------
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)
                                  ========  ========  =======  ========  ========    ========



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



























<PAGE>   26
<TABLE>
<CAPTION>
                            WCI STEEL, INC. AND SUBSIDIARIES
                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (Dollars in thousands)

                                                   Years ended October 31,  
                                               --------------------------------  
                                                  1997       1996       1995  
                                                ---------  ---------  ---------
<S>                                            <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.....................................$   3,857  $  28,040  $  15,460 
Adjustments to reconcile net income to net
 cash provided by operating activities  
  Depreciation and amortization................   20,243     19,617     19,713 
  Amortization of deferred blast furnace
    maintenance costs..........................    2,931      2,930      1,465       
  Amortization of financing costs..............    1,435      2,180      2,180   
  Postretirement health care benefits..........    3,960      5,508     10,066   
  Pension benefits.............................    5,101      6,507          -             
  Provision for losses on accounts receivable..       27       (658)       117      
  Deferred income taxes........................    5,581     (5,537)     3,118   
  Extraordinary loss...........................   32,786          -          -  
  Other........................................      356         (6)      (836)    
  Cash provided (used) by changes in certain 
   assets and liabilities
    Accounts receivable........................      640    (31,595)    39,696     
    Inventories................................   (9,618)     4,414      7,334    
    Prepaid expenses and other assets..........     (389)      (132)    (1,031)     
    Accounts payable...........................  (15,015)    31,398    (25,209) 
    Accrued liabilities........................    9,707      1,113     (4,823)
    Income taxes payable and recoverable, net..  (12,585)    14,398    (11,275)   
    Other liabilities..........................   (9,437)      (182)     4,756   
                                               ---------  ---------  ---------
Net cash provided by operating activities......   39,580     77,995     60,731 
                                               ---------  ---------  ---------
CASH FLOWS FROM INVESTING ACTIVITIES
  Additions to property, plant and equipment...  (39,902)   (35,384)   (14,575)    
  Deferred blast furnace maintenance costs.....        -          -    (11,598)    
  Gross proceeds from the sale of assets.......      135        497      2,818          
  Short-term investments, net..................   49,146    (36,864)   (12,282)         
                                               ---------  ---------  ---------
Net cash provided (used) by investing 
  activities...................................    9,379    (71,751)   (35,637)   
                                               ---------  ---------  ---------
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............................... (118,000)    (6,567)         -          
  Principal payments on other long-term debt...   (2,449)    (2,348)    (2,254)  
  Purchases of treasury stock..................        -     (1,200)         -             
                                               ---------  ---------  ---------
  Net cash used by financing activities........ (120,365)   (10,115)    (2,254) 
                                               ---------  ---------  ---------
  Net (decrease) increase in cash and cash   
    equivalents................................  (71,406)    (3,871)    22,840 
  Cash and cash equivalents at beginning 
    of year....................................   90,395     94,266     71,426  
                                               ---------  ---------  ---------
  Cash and cash equivalents at end of year.....$  18,989  $  90,395  $  94,266  
                                               =========  =========  =========









<PAGE>   27

  Supplemental disclosure of cash flow 
   information
      Cash paid for interest...................$  21,412  $  22,888  $  23,718  
      Cash paid for income taxes ..............    8,306     10,247     18,471  

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




















































<PAGE>   28

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

(1) Summary of Significant Accounting Policies
-----------------------------------------------------------------------------
    The Company is a wholly-owned subsidiary of The Renco Group, Inc. (Renco
    or Parent).

    (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 and high strength, silicon electrical and galvanized 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 U.S.

    During 1997 and 1996, no single customer accounted for 10% or more
    of net sales.  During 1995, sales to the Company's largest customer
    accounted for 10.0% 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 and geographic locations.

    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)  Short-term Investments

    Short-term investments consist of United States government or agency
    issues which have maturities of less than one year but greater than
    three months when purchased.  These investments are stated at cost plus
    accrued interest which approximates market value.

    (e)  Inventories

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

    (f)  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 


<PAGE>   29

    4 to 25 years with a weighted average of 18 years). Expenditures for      
    normal repairs and maintenance are charged to expense as incurred.

    (g)  Other Assets

    Other assets include deferred financing costs which are amortized using
    the effective yield method over the term of the related financing and
    deferred blast furnace maintenance costs which are amortized using the
    straight-line method over a six-year period.

    (h)  Income Taxes

    The Company is included in the consolidated income tax return of Renco.
    Under the terms of the tax sharing agreement with Renco, income taxes are
    allocated to the Company on a separate return basis, except that
    transactions between the Company, its subsidiaries, Renco and Renco's
    other subsidiaries are accounted for on a cash basis and the Company does
    not receive the benefit of net operating tax loss carryforwards, unless
    such tax losses were a result of timing differences between the Company's
    accounting for tax and financial reporting purposes.

    (i)  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.

    (j)  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.


(2)  Inventories
-----------------------------------------------------------------------------
    Inventories consist of the following:
                                                October 31,
                                         ------------------------    
                                            1997           1996
                                          (Dollars in thousands)
    Raw materials........................$  33,725      $  40,828 
    Finished and semi-finished product...   82,216         62,340 
    Supplies.............................      561            393 
                                         ---------      ---------
                                           116,502        103,561 
    Less LIFO reserve....................   10,209          6,886 
                                         ---------      ---------
                                         $ 106,293      $  96,675      
                                         =========      ========= 
 <PAGE>   30
 
(3) Property, Plant and Equipment
-----------------------------------------------------------------------------
    Property, plant and equipment is comprised of the following:

                                                  October 31,
                                           ------------------------    
                                              1997          1996
                                            (Dollars in thousands)
    Land and improvements................ $     463     $     493
    Buildings............................    27,433        25,641
    Machinery and equipment..............   313,628       254,118 
    Construction in progress.............     6,265        32,558  
                                          ---------     ---------
                                            347,789       312,810 
    Less accumulated depreciation........   123,169       107,689 
                                          ---------     ---------
                                          $ 224,620     $ 205,121 
                                          =========     ========= 
(4)  Long-Term Debt
-----------------------------------------------------------------------------
     Long-term debt consists of the following:
                                                 October 31,
                                          -----------------------    
                                             1997         1996
                                           (Dollars in thousands)
    Senior Secured Notes with interest
      at 10% payable semi-annually,
      due 2004..........................$ 300,000     $       -
    Senior Notes with interest at 10.5%
      payable semi-annually, due 2002...      280       206,400
    Revolving Credit Facility(Revolver) 
      with interest at prime plus 0.5%
      (9.00% at October 31, 1997)
      payable monthly...................        -             -
    Other...............................    2,657         5,106  
                                        ---------     ---------
                                          302,937       211,506      
    Less current portion of long-term
      debt..............................    1,319         2,448 
                                        ---------     ---------
                                        $ 301,618     $ 209,058 
                                        =========     =========
                                           

    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, 1997.  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 approximately
    $5,536,000 in letters of credit outstanding at October 31, 1997.  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 WCI Steel Holdings, Inc., a wholly-owned subsidiary
    of The Renco Group, Inc., completed a tender offer in which it purchased
    substantially all the outstanding shares of Common Stock of the Company
    not held by Renco (Equity Tender Offer).  Following the completion of the 
<PAGE>   31    

    Equity Tender Offer, WCI Steel Holdings, Inc. was merged with and into    
    the Company with the Company surviving as a wholly-owned subsidiary of    
    Renco.  The total consideration paid for the common stock tendered and    
    the common stock reacquired as a result of the merger of WCI Steel        
    Holdings, Inc. with and into the Company was approximately $56,934,000,   
    including related expenses.

    On the same date, the Company completed the sale of $300,000,000 10%
    senior secured notes (Senior Secured Notes) due 2004.  The proceeds 
    from the Senior Secured Notes, with existing cash balances of the
    Company, were used to complete the Equity Tender Offer, a tender offer in 
    which the Company acquired $206,120,000 of the $206,400,000 aggregate     
    principal amount of the then outstanding Senior Notes at a rate of        
    $1,125 per $1,000 principal amount outstanding plus accrued interest,     
    pay a $108,000,000 dividend to Renco, make contractual compensation       
    payments to certain executives of the Company and pay related transaction 
    costs (Transactions).  As a result of these Transactions, the Company     
    recognized an extraordinary loss of $19,606,000, net of income tax        
    benefits of $13,180,000, and compensation expenses of approximately       
    $8,577,000 in the first quarter of fiscal 1997.

    The 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 Senior
    Notes are extinguished.  The second priority lien is shared with a lien   
    held by the VEBA Trust discussed in Note 8.

    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 $4,296,000 was available for dividends and other
    transactions with affiliates at October 31, 1997.

    Aggregate principal payments on long-term debt for the five years
    subsequent to October 31, 1997 are as follows: $1,319,000 in 1998,        
    $116,000 in 1999, $122,000 in 2000, $128,000 in 2001, and $415,000
    in 2002.

    As of October 31, 1997, the fair value of the Senior Secured Notes was    
    $313,500,000 based on the quoted market price.  

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

    Accrued liabilities included employment related costs of $28,442,000 and
    $26,026,000 and interest of $12,555,000 and $3,712,000 at October 31,     
    1997 and 1996, 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
<PAGE>   32 

    plans is based on the Company's income as defined under each plan.  Total
    expense under the plans was $24,588,000, $14,000,000, and $11,093,000     
    for the years ended October 31, 1997, 1996, and 1995, respectively.  
    Certain amounts under these plans represent deferred compensation.

(7)   Pension Plans
-----------------------------------------------------------------------------
    The Company has defined contribution retirement plans that cover
    substantially all employees.  The Company funds these retirement plan     
    contributions as accrued. The Company's contributions to the plans are    
    based on employee age, length of service and compensation.  Company       
    contributions, paid or accrued, aggregated approximately $5,929,000,      
    $5,376,000 and $4,988,000 for the years ended October 31, 1997, 1996, and 
    1995, respectively.

    The Company sponsors a defined benefit pension plan which covers          
    substantially all bargained-for employees, provides minimum pension
    benefits based on age, years of service and benefits provided under the
    Company's defined contribution plan and a predecessor company's defined
    benefit plan.  The Company intends to make future contributions to the
    plan in amounts that meet or exceed the minimum funding requirements of   
    ERISA.

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

    
   
                                                             October 31,
                                                       ---------------------
                                                         1997          1996
                                                       (Dollars in thousands) 
        Accumulated benefit obligation, including
          vested benefits of $32,833 and $31,912,
          respectively............................... $ 48,519      $ 47,947
                                                      ========      ========
        Projected benefit obligation................. $ 49,077      $ 48,498
        Plan assets at fair value....................   15,930        13,936
                                                      --------      --------
        Projected benefit obligation in excess
          of plan assets.............................   33,147        34,562 
        Unrecognized net gain from past experience
          different from that assumed and effects
          of changes in assumptions..................   13,697        10,937
        Unrecognized prior service cost..............  (35,237)      (38,993)
        Additional minimum liability.................   20,982        27,505
                                                      --------      --------
        Accrued pension cost.........................   32,589        34,011
        Less pension liability due within one year...    1,100             -
                                                      --------      --------
        Long-term pension liability.................. $ 31,489      $ 34,011 
                                                      ========      ========

    Plan assets consist primarily of listed domestic and foreign common       
    stocks and corporate and government bonds.  An assumed discount rate of   
    7.25% and 7.5% in 1997 and 1996, 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>   33    


    The following table sets forth the components of pension expense: 

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

        Service cost...........................   $  (332)     $  (213)
        Interest cost..........................     3,404        3,477
        Actual return on plan assets...........    (3,188)        (828)
        Amortization of unrecognized:
            Prior service cost.................     3,756        3,831
            Net gain and deferral..............     1,486          290 
                                                  -------      -------
                                                  $ 5,126      $ 6,557
                                                  =======      =======

    No pension expense related to this plan was recognized during 1995 
    as a result of the plan being adopted on October 27, 1995.


(8)   Postretirement Health Care Benefits
-----------------------------------------------------------------------------
    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. 

    The following table sets forth the plan's accumulated postretirement
    benefit obligation (APBO):
                                                 Years Ended October 31,
                                                 ----------------------
                                                    1997         1996
                                                 (Dollars in thousands)
    Accumulated postretirement 
      benefit obligation
      Retirees................................   $ 23,923     $ 15,374
      Fully eligible active plan participants.     32,641       33,877
      Other active participants...............     52,434       40,294
                                                 --------     --------
                                                  108,998       89,545
    Plan assets at fair value.................      8,485        3,332 
                                                 --------     -------- 
    APBO in excess of plan assets.............    100,513       86,213
    Unrecognized prior service cost resulting
      from plan amendments....................     (6,859)      (4,356)
    Unrecognized net loss from past experience
      different from that assumed and from 
      changes in assumptions..................     (7,899)         (62) 
                                                 --------     --------
    Accrued postretirement benefit cost.......   $ 85,755     $ 81,795 
                                                 ========     ========
    
    Plan assets consist primarily of listed common stocks and corporate and   
    government bonds.  The APBO was determined using a discount rate of 7.25% 
    and 7.5% in 1997 and 1996, respectively, an expected return on plan       
    assets of 8.5%, and an assumed health care cost trend rate of 8% in 1998, 
    gradually declining to 5% after 2003. Assuming a 1% increase in the       
    health care cost trend rate, the APBO at October 31, 1997 would increase  
    by $19,099,000 along with an increase in the 1997 service and interest    
    cost components of $1,710,000.
   

 <PAGE>   34

       
    Net periodic postretirement benefit costs included the following 
    components:
                                            Years Ended October 31,
                                        ------------------------------
                                         1997        1996        1995
                                             (Dollars in thousands)           
                  
    Service cost.....................  $ 2,232     $ 2,272     $ 2,562     
    Interest cost....................    7,260       6,541       7,007 
    Actual return on plan assets.....   (1,254)       (188)          - 
    Net amortization and deferral....    2,004       1,698       1,025   
                                       -------     -------     -------
    Net periodic postretirement 
      benefit cost...................  $10,242     $10,323     $10,594 
                                       =======     =======     =======
  

    Total claims paid by the Company during the years ended October 31, 1997,
    1996 and 1995 were $2,383,000, $1,671,000 and $528,000, respectively.     
    In addition, the Company is required to contribute a minimum of $.50 per  
    hour worked by certain hourly employees to a Voluntary Employees 
    Beneficiaries Trust (VEBA Trust) established to fund future               
    postretirement health care and life insurance benefits.  Contributions to 
    the trust amounted to $3,899,000 and $3,144,000 during 1997 and 1996,     
    respectively.  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,
                                        -------------------------------
                                          1997       1996        1995         
                                            (Dollars in thousands)
    Federal income taxes
      Current.......................  $  8,301    $ 18,861    $  5,770 
      Deferred......................     4,461      (3,714)      2,662 
    State income taxes
      Current.......................       600       5,784       1,427 
      Deferred......................     1,120      (1,823)        454 
                                      --------    --------    --------
    Provision for
      income taxes..................  $ 14,482    $ 19,108    $ 10,313 
                                      ========    ========    ========
                              
    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). 
    










<PAGE>   35    
    
    
    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,
                                        -------------------------------
                                         1997        1996        1995
                                            (Dollars in thousands)
    Income taxes at federal
      statutory rate................  $ 13,282    $ 16,502    $  9,020   
    State income taxes, net of 
      federal income tax benefit....     1,118       2,574       1,223 
    Other...........................        82          32          70 
                                      --------    --------    --------
                                      $ 14,482    $ 19,108    $ 10,313 
                                      ========    ========    ========


    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 $51,492,000 and $54,719,000 as of October 31,
    1997 and 1996; the most significant items comprising the deferred tax
    assets were postretirement benefits of $30,084,000 and $27,516,000,       
    respectively, and compensation accruals of $7,137,000 and $10,968,000,    
    respectively.  Total deferred tax liabilities amounted to approximately   
    $50,801,000 and $48,447,000 as of October 31, 1997 and 1996,              
    respectively, consisting primarily of deferred taxes on inventory of      
    $3,526,000 and $2,939,000, respectively, and fixed assets of $46,810,000  
    and $45,276,000, respectively.  The Company had no valuation allowance    
    for realization of deferred tax assets as of October 31, 1997 or 1996.

    As a result of the tax sharing agreement discussed in Note 1 (h), the
    Company's recoverable income taxes of $4,273,000 at October 31, 1997 is   
    due from Renco.

(10)  Leases
-----------------------------------------------------------------------------
    The Company leases a portion of its operating and data processing
    equipment. Minimum future lease payments under noncancellable operating
    leases are $1,555,000, $1,257,000, $934,000, $513,000, and $7,000 for     
    the years ending October 31, 1998, 1999, 2000, 2001 and 2002,             
    respectively. Rent expense for noncancellable operating leases amounted   
    to approximately $1,386,000, $1,094,000, and $1,033,000, for the years    
    ended October 31, 1997, 1996, and 1995, respectively.

(11)  Agreement with The Renco Group, Inc.
-----------------------------------------------------------------------------
    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, 1998. Total expense for
    management services fees amounted to $1,200,000 for each of the years
    ended October 31, 1997, 1996, and 1995.  At October 31, 1996, $480,000    
    was owed to Renco for management services fees.

    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 and workers' compensation (other
<PAGE>   36    

    than Ohio for which the Company is self insured).  In fiscal 1997, 1996   
    and 1995, the Company incurred costs of approximately $1.7 million, $2.0
    million and $1.7 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.

(12)  Commitments and Contingencies
-----------------------------------------------------------------------------
    At October 31, 1997, the Company had commitments to purchase data         
    processing services of approximately $24,811,000 in the aggregate over    
    the remaining 4.5 years of its management information systems agreement   
    and purchased services of approximately $5,463,000, $5,322,000 and
    $5,573,000 in 1997, 1996 and 1995, respectively, under the agreement.
    At October 31, 1997, at pricing then in effect, the Company had           
    firm commitments for the purchase of raw materials and gases of           
    approximately $33,758,000 in 1998 and $35,591,000 thereafter.  In         
    addition, at October 31, 1997 the Company had commitments for capital     
    expenditures of approximately $8,052,000.

    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 1997 the EPA proposed 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.     
    These standards have been the subject of significant discussion           
    throughout federal and state governments, and changes to the standards or 
    the implementation date may be made prior to final approval.  Like much   
    of the steel, utilities and other industries, the Company's current       
    operations are not expected to comply with these proposed standards.  The 
    Company cannot currently assess the impact of these proposed 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.

    On June 29, 1995, the Department of Justice, on behalf of the             
    Environmental Protection Agency (EPA), instituted a civil action against  
    the Company under the Clean Water Act in the United States District Court 
    for the Northern District of Ohio.  The action alleges numerous           
    violations of the Company's National Pollution Discharge Elimination      
    System permit alleged to have occurred during the years 1989 through      
    1996, inclusive.  On March 29, 1996, the Department of Justice on behalf  
    of the EPA, instituted another civil action against the Company in the    
    same court under the Clean Air Act alleging 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.    
    Each action seeks a civil penalty not to exceed the statutory maximum of  




<PAGE>   37

    $25,000 per day per violation and also seeks an injunction against        
    continuing violations.  The Company believes that imposition of the       
    statutory maximum penalty for the alleged violations is unlikely based    
    upon past judicial penalties imposed under the Clean Water Act and the    
    Clean Air Act, and that it has defenses to liability.  By letter dated    
    November 1, 1996, EPA's Region V Water Division Director requested        
    information pursuant to the Clean Water Act from the Company relating to 
    the Warren facility, including, information as to the effect of a         
    prohibition against federal procurement of the Company's products on the  
    Company's business.  The Company responded to the EPA's request on
    December 2, 1996.  The Company has not been notified that the EPA will    
    seek a federal procurement prohibition based on alleged permit            
    violations.  However, there can be no assurance that a federal            
    procurement prohibition will not be imposed.  The Company is negotiating  
    with the EPA toward a settlement of these matters.  If the Company is     
    unable to reach a negotiated settlement, and if a substantial penalty     
    similar to the statutory maximum penalty or federal procurement           
    prohibition were imposed, it could have a material adverse effect on the  
    operating results or financial condition of the Company, the extent of    
    which the Company is unable to estimate at this time.  These actions are  
    in discovery.  The Clean Air Act civil action has a trial date scheduled  
    for May 1998.  No trial date has been established for the Clean Water     
    Act civil action.

    The Company has obtained a Resource Conservation and Recovery Act
    (RCRA) storage permit for waste pickle liquor at its Warren facility
    acid regeneration plant.  As a provision of the permit, the Company will
    be required to undertake a corrective action program with respect to
    historical material handling practices at the Warren facility.  In April  
    1997 the Company received notice from the EPA that it had approved a      
    workplan for the first investigation step of the corrective action        
    program, the RCRA Facility Investigation (RFI).  The workplan identifies  
    thirteen historical solid waste management units which are the subject of 
    the RFI.  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 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 it will not have a material   
    adverse effect on the financial condition of the Company. 
    
    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.

    On April 5, 1996, an employee instituted an action for damages against
    the Company in the Court of Common Pleas, Trumbull County, Ohio alleging
    that, under Ohio common law, her privacy rights were violated and that
    she has been subjected to sexual harassment.  On April 28, 1997 the 
    plaintiff filed for summary judgement. The Company denies plaintiff's     
    allegations of liability and has opposed the plaintiff's motion for
    summary judgement on which the court has yet to rule.  The court has set  
    a trial date in February 1998.
    
    
<PAGE>   38

    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 operations.  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, 1997 and 1996:

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
                            
Three Months Ended 1996      January 31    April 30    July 31    October 31
                         ----------------------------------------------------
                                         (Dollars in thousands)
Net sales................   $ 148,493   $ 166,959   $ 174,695   $ 170,654
Gross margin.............      22,989      26,261      29,430      31,512
Net income...............       4,788       6,194       8,130       8,928



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 Transactions.  During the three months
ended October 31, 1997 and 1996, the Company recorded a charge of $2,123,000
and a benefit of $1,042,000, respectively, under the LIFO inventory valuation
method.

<PAGE>   39

                         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 The Renco Group, Inc.) as
of October 31, 1997 and 1996, 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, 1997.  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, 1997 and 1996, and the results
of their operations and their cash flows for each of the years in 
the three-year period ended October 31, 1997, in conformity with generally
accepted accounting principles.


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

KPMG Peat Marwick LLP                

Cleveland, Ohio
December 4, 1997


















<PAGE>  40

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

         None.























































<PAGE>   41

                                  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..................  63    Chairman of the Board and Director
Edward R. Caine...................  59    President and Chief Executive Officer
Patrick T. Kenney.................  57    Vice President, Operations
Patrick G. Tatom..................  47    Vice President, Commercial
Bret W. Wise......................  37    Vice President, Finance and
                                            Chief Financial Officer


Ira Leon Rennert has been Chairman, Chief Executive Officer and
principal shareholder of WCI's 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. and AM
General Corporation, for both 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.


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.


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.


<PAGE>   42


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 1997,
       1996 and 1995:

<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)... 1997      -         -            -               -       $1,200,000
 Chairman of the       1996      -         -            -               -        1,200,000
 Board                 1995      -         -            -               -        1,200,000

Edward R. Caine....... 1997  $259,133  $100,000         -          $5,900,000   $   25,370
 President and Chief   1996   159,616   360,394     $115,625          386,945       18,977
 Executive Officer     1995      -         -            -                -            -
 (since April 1, 1996)

Patrick T. Kenney..... 1997  $132,567  $ 50,000         -          $2,360,000   $   16,413
 Vice President,       1996   132,494    50,000     $ 32,375          543,533       14,563
 Operations            1995   132,129    75,000         -                -          10,938

Patrick G. Tatom...... 1997  $131,067  $ 50,000         -          $2,360,000   $   12,501
 Vice President,       1996   130,983    50,000     $ 32,375          404,248       10,782
 Commercial            1995   130,566    75,000         -                -           7,813

Bret W. Wise.......... 1997  $142,860  $ 50,000         -          $2,360,000   $   10,164
 Vice President,       1996   142,848    50,000     $ 46,250          310,748        8,275
 Finance and Chief     1995   132,401    75,000         -                -           4,875
 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.

(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 Tender Offer. 
        See Note 4 to the consolidated financial statements for a description of the Equity Tender
        Offer.

(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.  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 
        Management Consultant Agreement.  The amounts shown as all other compensation to 


<PAGE>   43

        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 2% to 5%,
of cumulative net income, as defined, during the term of their employment. 
Assuming all of the Company's executive officers had retired at October 31, 1997
and their respective maximum percentage had vested, an aggregate of $2,723,182
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.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
          
The following table sets forth certain information as of December 12, 1997
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, 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 12, 1997
                                                                -----------------------
                                                                  Shares of
Name of Beneficial Owners and Address of 5% Beneficial Owners    Common Stock   Percent
<S>                                                                  <C>         <C>
The Renco Group, Inc.........................................        100         100.0%
 30 Rockefeller Plaza
 42nd Floor
 New York, NY 10112
Ira Leon Rennert(1)..........................................        100         100.0%
 c/o The Renco Group, Inc.
 30 Rockefeller Plaza
 42nd Floor
 New York, NY 10112
All directors and executive officers as a group (5 persons)...       100         100.0%

<PAGE>   44

--------------------
<FN>
(1)     Mr. Rennert is deemed to beneficially own the Common Stock of the Company owned
        by Renco due to the ownership by himself and trusts established by him (but
        of which he is not a trustee) 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's ownership of all the outstanding shares of Common Stock,
and Mr. Rennert's ownership of a majority of the 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, 1998 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, 1997, WCI 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 federal income tax return of Renco.  Under
the terms of the tax sharing agreement with Renco, income taxes are allocated to
WCI on a separate return basis except that transactions between WCI and Renco
and its other subsidiaries are accounted for on a cash basis and not on an
accrual basis.  WCI is not entitled to the benefit of net tax loss
carryforwards, unless such tax losses were the result of timing differences
between WCI's accounting for tax and financial reporting purposes.  As of
October 31, 1997, WCI had no net operating tax loss carryforwards.  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.  As
of October 31, 1997, WCI had recoverable income taxes of $4.3 million under this
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 and
workers' compensation (other than Ohio for which the Company is self insured). 
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 

<PAGE>   45

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 1997, the Company incurred costs of approximately $1.7 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.






           





































<PAGE 46

                                        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 4, 1997, are included in this
report for ITEM 8. and is incorporated by reference herein.

      Consolidated Balance Sheets at October 31, 1997 and 1996.

      Consolidated Statements of Income for the fiscal years ended
                      October 31, 1997, 1996 and 1995.

      Consolidated Statements of Shareholder's Equity (Deficit) for the fiscal
                      years ended October 31, 1997, 1996 and 1995.

      Consolidated Statements of Cash Flows for the fiscal years ended
                      October 31, 1997, 1996 and 1995.
 
      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>   47

              INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE



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


Under date of December 4, 1997, we reported on the consolidated balance sheets
of WCI Steel, Inc. and subsidiaries as of October 31, 1997 and 1996, 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,
1997, 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 4, 1997


























<PAGE>   48
<TABLE>
<CAPTION>

                                      WCI STEEL, INC. AND SUBSIDIARIES
                              SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
                                     ALLOWANCE FOR DOUBTFUL ACCOUNTS
                            FOR THE YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995.
                                         (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, 1997......   $1,600       $   64       $   --        $   37        $1,627
Year ended October 31, 1996......    2,258         (646)          --            12         1,600 
Year ended October 31, 1995......    2,400          117           --           259         2,258
  
-------------------------
<FN> 
(a) Allowance for doubtful accounts is shown as a reduction of accounts receivable in the            
    Company's Consolidated Financial Statements.
 
(b) Charges to expense for the provision for doubtful accounts.
 
(c) Trade receivables written-off.
</FN> 

</TABLE>
 































<PAGE>   49


                                 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
1997. 

                               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, 1997. 

      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>   50
                                          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)

10.3          --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>   51
<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.

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.

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.

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)

10.6          --Promissory Note, dated August 31, 1988, in the original principal amount of
                $5,552,000 made by the Registrant to LTV Steel Company, Inc.(1)

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>   52
<TABLE>
<CAPTION>
 EXHIBIT
   NO.                                            DESCRIPTION
----------    ----------------------------------------------------------------------------------
<C>           <S>

22            --List of Subsidiaries of Registrant.

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.

</FN>
</TABLE>