TABLE OF CONTENTS




|                                            |                                                                                                |  |  |  |  |  |  | 
|------------------------------------------- | ---------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                     
|                                            | ITEM 1. BUSINESS                                                                              
|                                            | ITEM 2. PROPERTIES                                                                            
|                                            | ITEM 3. LEGAL PROCEEDINGS                                                                     
|                                            | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                   
|PART II                                    
|                                            | ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                 
|                                            | ITEM 6. SELECTED FINANCIAL DATA                                                               
|                                            | ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|                                            | ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                                            | ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                           
|                                            | ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE  
|PART III                                   
|                                            | ITEM 10. DIRECTORS AND OFFICERS                                                               
|                                            | ITEM 11. EXECUTIVE COMPENSATION                                                               
|                                            | ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                       
|                                            | ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                       
|                                            | ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K                      
|                                            | INDEPENDENT AUDITORS REPORT ON FINANCIAL STATEMENT SCHEDULE                                  
|                                            | SIGNATURES                                                                                    
|                                            | Exhibit Index                                                                                 
|Letter to Ira Leon Rennert                 
|Letter to Ira Leon Rennert                 
|Amend #2 to the Loan and Security Agreement



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##### Table of Contents



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, 2001.

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 or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                              
|1040 Pine Ave., S.E.,
Warren, Ohio                             |  | 44483-6528                          
|                                                               |  |                                     
|(Address of principal executive offices)                       |  | (Zip Code)                          

(330) 841-8302

---

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

[  ] Yes [X] No

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

The aggregate market value of the voting stock of the registrant held by
non-affiliates of the registrant at January 28, 2002 was $0.



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##### Table of Contents



WCI STEEL, INC. AND SUBSIDIARIES
FORM 10-K
INDEX

|         |                                                                                                      |  |                                                                                       |    |          |    | 
|-------- | ---------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------- | -- | -------- | -- | 
|         |                                                                                                      |  |                                                                                       |    | Page No.
|         |                                                                                                      |  |                                                                                       |    |         
|PART I   |                                                                                                      |  |                                                                                       |    |          |   
|         | Item 1.                                                                                              |  | Business                                                                              |    |          | 3  | 
|        
|        
|        
|        
|         | Item 2.                                                                                              |  | Properties                                                                            |    |          | 11 | 
|        
|        
|        
|        
|         | Item 3.                                                                                              |  | Legal Proceedings                                                                     |    |          | 12 | 
|        
|        
|        
|        
|         | Item 4.                                                                                              |  | Submission of Matters to a Vote of Security Holders                                   |    |          | 12 | 
|        
|        
|        
|        
|PART II  |                                                                                                      |  |                                                                                       |    |          |   
|        
|        
|        
|        
|         | Item 5.                                                                                              |  | Market for Registrants Common Equity and Related Stockholder
Matters                 |    |          | 13 | 
|        
|        
|        
|        
|         | Item 6.                                                                                              |  | Selected Financial Data                                                               |    |          | 14 | 
|        
|        
|        
|        
|         | Item 7.                                                                                              |  | Managements Discussion and Analysis of Financial Condition and
Results of Operations |    |          | 15 | 
|        
|        
|        
|        
|         | Item 7A                                                                                              |  | Quantitative and Qualitative Disclosures About Market Risk                            |    |          | 21 | 
|        
|        
|        
|        
|         | Item 8.                                                                                              |  | Financial Statements and Supplementary Data                                           |    |          | 22 | 
|        
|        
|        
|        
|         | 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                                                                |    |          | 43 | 
|        
|        
|        
|        
|         | Item 12.                                                                                             |  | Security Ownership of Certain Beneficial Owners and Management                        |    |          | 45 | 
|        
|        
|        
|        
|         | Item 13.                                                                                             |  | Certain Relationships and Related Transactions                                        |    |          | 46 | 
|        
|        
|        
|        
|PART IV  |                                                                                                      |  |                                                                                       |    |          |   
|        
|        
|        
|        
|         | Item 14.                                                                                             |  | Exhibits, Financial Statement Schedule, and Reports on Form 8-K                       |    |          | 48 | 
|        
|        
|        
|        
|         | Financial Statement Schedule (including Independent Auditors Report on
Financial Statement Schedule) |  |                                                                                       | 49 |         
|        
|        
|        
|        
|         | Signatures                                                                                           |  |                                                                                       |    |          | 51 | 
|        
|        
|        
|        
|         | Exhibit Index                                                                                        |  |                                                                                       |    |          | 52 | 

2



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PART I




ITEM 1. BUSINESS

General

WCI Steel, Inc. (WCI or Company), a niche oriented integrated producer of
value-added, custom steel products, was incorporated in Ohio in 1988 and
commenced operations on September 1, 1988. WCIs primary facility covers
approximately 1,100 acres in Warren, Ohio, with additional facilities owned by
subsidiaries located in Niles and Youngstown, Ohio, all of which are situated
between Cleveland and Pittsburgh. WCI currently produces approximately 185
grades of flat rolled custom and commodity steel products. Total shipments
were 1,041,209 tons in fiscal 2001 and 1,265,895 tons in fiscal 2000. Custom
flat rolled products, which include high carbon, alloy, ultra high strength,
silicon electrical and heavy gauge galvanize steel, constituted approximately
51.5% of net tons shipped during fiscal 2001 and 52.1% during fiscal 2000 (see
Overview below for a discussion of custom products). Major users of WCI
products are steel converters, steel service centers, construction product
companies, electrical equipment manufacturers and, to a lesser extent,
automobile and automotive parts manufacturers.

Products

Overview

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

WCIs commodity steel product sales consist principally of hot and cold
rolled low carbon sheet steel, other high strength applications and light gauge
galvanize products. Export sales were approximately 2% of net sales during the
last three fiscal years.

The table below shows the Companys product mix for the last three years.

|                         |                 |  |                   |         |                   |  |           |         |      |  |           |         |      |  |       |      |   |  |       |      |   |  |       |      |  
|------------------------ | --------------- |  | ----------------- | ------- | ----------------- |  | --------- | ------- | ---- |  | --------- | ------- | ---- |  | ----- | ---- | - |  | ----- | ---- | - |  | ----- | ---- | -
|                         |                 |  | Net Tons Shipped  |         | Percent of Total 
|                         |                 |  |                   |         |                  
|                         |                 |  | Fiscal Year Ended |         | Fiscal Year Ended
|                         |                 |  | October 31,       |         | October 31,      
|                         |                 |  |                   |         |                  
|                         |                 |  | 2001              |         | 2000              |  | 1999      |         | 2001 |  | 2000      |         | 1999
|                         |                 |  |                   |         |                   |  |           |         |      |  |           |         |     
|CUSTOM PRODUCTS:         |                 |  |                   |         |                   |  |           |         |      |  |           |         |      |  |       |      |   |  |       |      |   |  |       |     
|                        
|                        
|                        
|                        
|                         | Hot Rolled      |  |                   | 302,389 |                   |  |           | 394,213 |      |  |           | 403,535 |      |  |       | 29.0 | % |  |       | 31.1 | % |  |       | 33.3 | %
|                        
|                        
|                        
|                        
|                         | Cold Rolled     |  |                   | 19,450  |                   |  |           | 19,929  |      |  |           | 13,902  |      |  |       | 1.9  | % |  |       | 1.6  | % |  |       | 1.1  | %
|                        
|                        
|                        
|                        
|                         | Coated products |  |                   | 214,460 |                   |  |           | 245,969 |      |  |           | 268,994 |      |  |       | 20.6 | % |  |       | 19.4 | % |  |       | 22.2 | %
|                         |                 |  |                   |         |                   |  |           |         |      |  |           |         |      |  |       |      |   |  |       |      |   |  |       |     
|Total Custom Products    |                 |  | 536,299           |         |                   |  | 660,111   |         |      |  | 686,431   |         |      |  | 51.5  | %    |   |  | 52.1  | %    |   |  | 56.6  | %   
|                        
|                        
|                        
|                        
|Total Commodity Products |                 |  | 504,910           |         |                   |  | 605,784   |         |      |  | 525,828   |         |      |  | 48.5  | %    |   |  | 47.9  | %    |   |  | 43.4  | %   
|                         |                 |  |                   |         |                   |  |           |         |      |  |           |         |      |  |       |      |   |  |       |      |   |  |       |     
|Total Steel Products     |                 |  | 1,041,209         |         |                   |  | 1,265,895 |         |      |  | 1,212,259 |         |      |  | 100.0 | %    |   |  | 100.0 | %    |   |  | 100.0 | %   
|                         |                 |  |                   |         |                   |  |           |         |      |  |           |         |      |  |       |      |   |  |       |      |   |  |       |     

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Custom Products

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

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

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

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

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

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

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

Commodity Products

In fiscal 2001, WCI shipped 504,910 tons in the aggregate of sheet and
strip products consisting of hot and cold rolled low carbon, other high
strength and light gauge galvanize steel, which represented approximately 49%
of the Companys net tons shipped. Hot rolled low carbon and high strength
sheet is sold to steel service centers or manufacturers producing a broad array
of products, including tubing, stampings and roll formed parts. Cold rolled
low carbon and light gauge galvanize sheet and strip is purchased by service
centers, container manufacturers, and the automotive and appliance industries.
In these commodity steel markets, WCI competes with all major integrated
producers, minimills, and independent producers.

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Marketing

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

WCI Sales is responsible for developing and implementing a sales and
marketing strategy aimed at increasing the sales of custom steel products and
building the strategic customer base. WCI Sales employs a direct sales force
covering approximately 250 active accounts and other potential steel accounts
within WCIs geographic market. Over 50% of WCI Sales shipments are to
customers within 200 miles of the Warren facility, and as a result of this
concentration of active and potential customers in its service area, WCI Sales
believes that it has a competitive advantage over competitors located farther
away.

Sales outside WCIs geographic market are made through independent sales
representatives on a commission basis. Although transportation costs can be
prohibitive at extreme distances from the Warren facility, select custom
products are competitively priced outside WCI Sales normal target markets. WCI
Sales believes that independent sales representatives provide the most
cost-effective method to access these customers. Approximately 3.8% of WCI
Sales volume in fiscal 2001 was sold through the independent sales
representatives.

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

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

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

Customers

WCIs customer base is dominated by steel converters and steel service
centers, which in fiscal 2001 represented 70.5% of shipments. The remaining
shipments were directly to end-users.

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

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|                  |                                 |      |                   |      |   |      |             |      |   |  |       |      |  
|----------------- | ------------------------------- | ---- | ----------------- | ---- | - | ---- | ----------- | ---- | - |  | ----- | ---- | -
|                  |                                 |      | Fiscal Year Ended
|                  |                                 |      |                   |      |   |      | October 31, |      |   |  |      
|                  |                                 |     
|Customer Category |                                 | 2001 |                   | 2000 |   | 1999
|                  |                                 |      |                   |      |   |     
|                  | Conversion / further processing |      |                   | 51.8 | % |      |             | 49.2 | % |  |       | 47.4 | %
|                 
|                 
|                 
|                 
|                  | Steel service centers           |      |                   | 18.7 | % |      |             | 24.8 | % |  |       | 23.0 | %
|                 
|                 
|                 
|                 
|                  | Construction                    |      |                   | 15.1 | % |      |             | 12.0 | % |  |       | 13.3 | %
|                 
|                 
|                 
|                 
|                  | Electrical equipment            |      |                   | 4.5  | % |      |             | 5.0  | % |  |       | 6.1  | %
|                 
|                 
|                 
|                 
|                  | Direct automotive               |      |                   | 5.1  | % |      |             | 4.9  | % |  |       | 5.7  | %
|                 
|                 
|                 
|                 
|                  | Other                           |      |                   | 4.8  | % |      |             | 4.1  | % |  |       | 4.5  | %
|                  |                                 |      |                   |      |   |      |             |      |   |  |       |     
|Total             |                                 |      | 100.0             | %    |   |      | 100.0       | %    |   |  | 100.0 | %   
|                  |                                 |      |                   |      |   |      |             |      |   |  |       |     

In fiscal years 2001, 2000 and 1999, WCIs twenty largest customers
represented approximately 62%, 62% and 59%, respectively, of net sales. The
Companys largest customer, Worthington Industries, represented approximately
9.8%, 10.1% and 11.3% of net sales in fiscal 2001, 2000 and 1999, respectively.

Backlog

On October 31, 2001, WCIs order backlog was approximately 135,000 net
tons with an approximate value of $52 million compared to approximately 144,000
net tons with an approximate value of $64 million at October 31, 2000, 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, 2001
backlog by March 31, 2002. Although customers may cancel orders included in
the backlog, such cancellations have been negligible in the past.

Competition

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

In the United States WCI competes with many other integrated producers and
minimills in most of its custom products. Minimills are generally smaller
volume steel producers that use ferrous scrap metals as their basic raw
material in an electric furnace production process. Compared to integrated
producers, minimills, which rely on less capital-intensive hot metal sources,
have certain production cost advantages. Because minimills typically are not
unionized, they have more flexible work rules, which have resulted in lower
employment costs per net ton shipped. Through the use of various higher
quality raw materials and the development of thin slab casting technology,
electric furnace producers are able to compete directly with producers of
higher value products, including high carbon, alloy and coated products. The
penetration of the minimills into the high carbon and alloy product markets has
resulted from the distortion of steel supply created by the surge of imports in
flat rolled steel products into the United States and the lower demand for
steel products due to the slumping economy. This penetration has influenced
the pricing structure of these products and has reduced the premium WCI is
currently able to receive on these products compared to commodity products.

During 2001, the domestic steel market continued to compete with a high
level of imports of foreign produced flat rolled steel that saw significant
increases beginning in 1998. From 1993 to 1997 imported steel supplied between
18.7% and 24.8% of domestic steel demand. However, the domestic

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market share
of imported steel increased in 1998, 1999, and 2000 to 30.0%, 26.2%, and 28.3%,
respectively, and is estimated to have been 25% in 2001. This significant
increase in imported steel during the last four years has adversely affected
shipping volume and has resulted in a depressed pricing environment. Over the
past several years, WCI and the steel industry have filed various trade cases
against hot-rolled and cold-rolled carbon steel flat products from various
countries, certain of which are pending before the International Trade
Commission (ITC). While various duties have been imposed on these products
from certain countries, to date they have been ineffective in reducing overall
steel imports into the U.S.

In June 2001 the U.S. Trade Representative, at the direction of President
Bush, requested an investigation by the ITC under Section 201 of the Trade Act
of 1974 to determine whether steel is being imported into the U.S. in such
quantities as to be a substantial cause of serious injury to the U.S. steel
industry. This request included the investigation of carbon and alloy flat
rolled products among other products. On October 22, 2001 the ITC determined
that the requisite injury had been demonstrated related to carbon and alloy
slabs, hot-rolled, cold-rolled and coated products. These determinations
pertain to imports from all countries except Canada.

On December 19, 2001 the ITC forwarded its remedy recommendations to
President Bush. These recommendations included a tariff rate quota on carbon
and alloy slabs of 20% in excess of 7.0 million tons per year adjusting over a
four year period to 11% on imports in excess of 8.5 million tons and a 20%
tariff on hot-rolled, cold-rolled and coated sheet and strip declining over a
four year period to 11%. President Bush is expected to make his remedy
determination by early March 2002. President Bush may, in his sole discretion,
grant or withhold relief and determine the extent of relief.

In addition to the Section 201 investigation discussed above, the U.S.
Trade Representative is engaged in multilateral trade discussions with 40
countries aimed at removing impediments to the elimination of excess and
inefficient steel capacity. This includes an examination of each governments
policy related to the steel industry. The talks currently are focused on
self-examinations of domestic steel capacity situations and both steel specific
and non-steel specific policies that have inhibited the steel market from
working efficiently and, thus, prevented inefficient excess steel capacity from
leaving the market. Ultimately, the reduction of global steel capacity will be
determined by individual companies and countries with the outcome of the
multilateral discussions and their effect on capacity unclear at this time.

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

Manufacturing Process

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

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Finished products are
usually shipped to customers in the form of coils. WCI has linked its
steelmaking and rolling equipment with a computer based integrated
manufacturing control system to coordinate production and sales activities.

Raw Materials

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

Iron Ore Pellets

WCI has a contract with a major supplier of iron ore pellets for its
requirements through fiscal 2004. Iron ore pellets satisfied approximately
73.8% of WCIs iron requirements for the blast furnace in fiscal 2001, while
WCIs sinter plant provided the balance until its indefinite idling on July 15,
2001. The iron ore pellet contract requires WCI to purchase all of its iron
ore pellet requirements through 2004 from the contracting vendor. WCI carries
an increased level of iron ore pellet inventory immediately preceding the
winter months, due to the curtailment of vendor shipments during the winter as
a result of the freezing of the Great Lakes.

Coke

Coke is the principal fuel used to produce liquid iron and is an essential
ingredient in steelmaking. WCI has a contract with an integrated steel
producer for a majority of its estimated coke requirements through fiscal 2003.
WCIs coke requirements are approximately 670,000 tons per year. The domestic
supply of coke has decreased significantly over the last decade and may
decrease further in the future due to the requirements of the Clean Air Act and
the financial condition of certain producers. As 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 2003, there can be no assurance to
such effect.

Scrap

WCI uses scrap steel to supplement the liquid iron produced at the blast
furnace for the steel making process. Scrap steel accounted for approximately
23.5% of the Companys liquid steel production in fiscal 2001. Scrap steel is
readily available and is purchased on an as-needed basis.

Energy and Gases

WCIs steel operation consumes large amounts of electricity, natural gas,
oxygen and other industrial gases. WCI purchases its electrical power
requirements under a contract that extends through March 2002 from a local
utility. WCI can generate approximately 20% of its own electrical needs.
Natural gas is also purchased pursuant to supply contracts, certain of which
extend through March 2003. Oxygen is delivered, under a contract that extends
through March 2002, from supplier-owned plants located at the Warren facility.
A new oxygen supply agreement was entered into with the same supplier for a
fifteen (15) year period commencing upon the completion of a new supplier-owned
facility also to be located at the Warren facility. The facility is expected
to be complete by May 2002. 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. The

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adjoining coke plant is currently idle. If the plant were
permanently idled, WCI would use natural gas to replace coke oven gas. This
would not materially affect WCIs operation or financial results.

Environmental Matters

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

The Company is subject to a consent decree as a result of a civil action
instituted by the Department of Justice (DOJ), on behalf of the Environmental
Protection Agency (EPA). The consent decree requires the Company to complete
certain supplemental environmental projects estimated to cost approximately
$2.4 million which will be expended by late 2002. These projects include
sediment removal from the Mahoning River at an estimated remaining cost of $0.9
million and the installation of a liner for a surface impoundment estimated to
cost $1.5 million. The consent decree also provides for stipulated penalties
in the event of noncompliance which the Company does not believe will be
material.

As a condition of a previous Resource Conservation and Recovery Act (RCRA)
operating permit, the Company is required to undertake a corrective action
program with respect to historical material handling practices at the Warren
facility. The Company has completed the initial phase of the first
investigation step of the corrective action program, the RCRA Facility
Investigation (RFI), and has submitted its report to the EPA. The Company and
the EPA agreed that additional sampling would be required to complete a full
RFI which is expected to be completed by the end of 2003. The RFI workplan
identifies thirteen historical solid waste management units to be investigated.
The final scope of corrective action required to remediate any contamination
that may be present at or emanating from the Warren facility is dependent upon
the completion and findings of the RFI and the development and approval of a
corrective action program. Accordingly, the Company is unable at this time to
estimate the final cost of the corrective action program or the period over
which such costs may be incurred and there can be no assurance that any such
corrective action program would not have a material adverse effect on the
operating results or financial condition of the Company.

The Company operates a landfill at its Warren facility, which receives
waste materials from the iron and steel-making operations. The Ohio EPA has
issued a permit to install a new lined landfill to replace this landfill. The
plan involves closure by removal of the present landfill by providing
approximately one-third of its contents to established markets for construction
materials and disposing of any non-salable or non-recyclable material in the
new lined landfill. The new lined landfill construction and existing landfill
closure is expected to be completed in seven consecutive phases. The estimated
cost through Phase I is approximately $4.4 million to be completed during the
first fiscal quarter of 2002 and the estimated cost for Phase II is
approximately $2.0 million expended over two years. Construction of the new
landfill began during fiscal 2001. On October 27, 2000, the Company received
notice that the Ohio EPA was seeking an administrative settlement of certain
alleged violations relating to the operation of the existing landfill. The
Ohio EPA seeks to require the Company to make changes in the lateral and/or
vertical limits of the waste in the landfill, or obtain approved modifications
to allow the existing

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lateral and vertical limits of waste. In addition, Ohio
EPA is seeking an administrative penalty in the amount of $109,500. The
Company believes that it has significant defenses to the alleged violations,
and is attempting to negotiate a settlement of the matter with Ohio EPA.

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

Employees

As of October 31, 2001, WCI had 463 salaried employees and 1,398 hourly
employees. Most of the employees are located at the Warren facility with most
of the hourly employees being represented by the United Steelworkers of America
(USWA) with which WCI has a five-year collective bargaining agreement that
expires October 31, 2004.

Benefit Plans

Hourly Profit Sharing Plan

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

Salaried Variable Compensation Plan

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

Pension Plans

WCI has a defined contribution retirement plan that covers substantially
all salaried employees. WCI funds contributions to this plan as earned on a
monthly basis. Company contributions to the plan are based on employee age 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 which was
frozen effective September 1, 1999 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 who retired on or before August
31, 1999 receive a monthly benefit equal to $35 (Benefit Multiplier) times the
number of years of service with WCI or its predecessors. Effective September
1, 2000 for retirements on or after September 1, 1999, the Benefit Multiplier
increased from $35 to $52.50

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for years of service up to 30 and $70 for years of
service in excess of 30. On September 1, 2002 for retirements on or after
September 1, 1999, the Benefit Multiplier will further increase to $56.25 for
years of service up to 30 and $75 for years of service in excess of 30. If the
employee has at least 30 years of service at retirement, the monthly benefit is
subject to certain minimums based on age at retirement. No named executive
officer is eligible to participate in this plan.

Postretirement Benefit Plans

WCI provides postretirement health care and life insurance benefits to
substantially all employees who retire upon meeting certain age and length of
service eligibility requirements. 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. As a result of the
collective bargaining agreement effective September 1, 1999, the Company was
permitted to pay current claims up to $8.8 million from a trust. That limit was
reached during the three months ended July 31, 2001 which thereafter requires
the Company to pay claims from corporate assets. Claims paid by the Company or
trust totaled $5.4 million, $4.4 million and $3.4 million during fiscal years
2001, 2000, and 1999, respectively.




ITEM 2. PROPERTIES

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

Youngstown Sinter Company (YSC), a wholly owned subsidiary of WCI, owns a
sinter plant located in Youngstown, Ohio on 51 acres. YSC idled its plant
indefinitely effective July 15, 2001. YSC had been in operation since 1991
producing a clinker-type material (Sinter) from steelmaking by-products such as
slag and ore fines. The sinter was then used as a substitute feed stock in
WCIs blast furnace facility located in Warren, Ohio. WCI recorded a charge
of $3.9 million during the three months ended April 30, 2001 to reflect plant
idling costs, of which $3.0 million represents the recognition of an impairment
in the value of the assets of the facility. The sinter plant may be restarted
in the future if economically advantageous.

Niles Properties, Inc., a subsidiary of the Company, is located
approximately five miles from the Warren facility, and has approximately
525,000 square feet of building space with two long-term tenants occupying 19%
of the facility.

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

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

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ITEM 3. LEGAL PROCEEDINGS

On January 23, 1996, two retired employees instituted an action against
the Company and the United Steelworkers of America (USWA) in the United States
District Court for the Northern District of Ohio alleging in substance that
certain distributions made by the Company to employees and benefit plans
violated certain agreements, the Employee Retirement Income Security Act
(ERISA), the National Labor Relations Act (NLRA) 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 filed an appeal
regarding the courts decision to dismiss, which was heard in June 1998. In
March 1999, the appellate court upheld the dismissal of the claims under ERISA
and common law, but reversed the dismissal of the NLRA claim and remanded to
the district court for further proceedings. On October 9, 2000 the court
granted the Companys motion to dismiss this action and entered judgement in
favor of the Company and the USWA. The plaintiffs filed an appeal regarding
the courts decision to dismiss. All briefs have been filed in the Federal
Appeals Court but no decision has yet been rendered.

In addition to the above matters, the Company is contingently liable with
respect to lawsuits and other claims incidental to the ordinary course of its
business.




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, 2001.

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##### Table of Contents






PART II




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

The Company is a direct wholly owned subsidiary of Renco Steel Holdings,
Inc. (Renco Steel) and an indirect wholly owned subsidiary of The Renco Group,
Inc. (Renco). There is no established public trading market for the Companys
common stock. Since December 1996, the Company has had one shareholder. The
Company did not pay dividends during fiscal year 2001 and paid cash dividends
twice during fiscal year 2000 totaling $9,200,000. See Part II, Item 8, Note 4
to the Consolidated Financial Statements for limitations on dividends.

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ITEM 6. SELECTED FINANCIAL DATA

|                              |                                                                                      |  |                                                         |           |      |  |          |         |      |  |          |         |   |  |   |         |   |  |   |         |  
|----------------------------- | ------------------------------------------------------------------------------------ |  | ------------------------------------------------------- | --------- | ---- |  | -------- | ------- | ---- |  | -------- | ------- | - |  | - | ------- | - |  | - | ------- | -
|                              |                                                                                      |  | Fiscal Year Ended October 31                           
|                              |                                                                                      |  |                                                        
|                              |                                                                                      |  | 2001                                                    |           | 2000 |  | 1999 (1) |         | 1998 |  | 1997 (2)
|                              |                                                                                      |  |                                                         |           |      |  |          |         |      |  |         
|                              |                                                                                      |  | (Dollars and tons in thousands, except per ton amounts)
|Statement of Operations Data: |                                                                                      |  |                                                         |           |      |  |          |         |      |  |          |         |   |  |   |         |   |  |   |        
|                             
|                             
|                             
|                             
|                              | Net sales                                                                            |  | $                                                       | 413,108   |      |  | $        | 560,689 |      |  | $        | 531,669 |   |  | $ | 665,741 |   |  | $ | 668,470 |  
|                             
|                             
|                             
|                             
|                              | Cost of products sold                                                                |  |                                                         | 430,991   |      |  |          | 487,477 |      |  |          | 468,170 |   |  |   | 560,951 |   |  |   | 547,545 |  
|                              |                                                                                      |  |                                                         |           |      |  |          |         |      |  |          |         |   |  |   |         |   |  |   |        
|                              | Gross margin (loss)                                                                  |  |                                                         | (17,883   | )    |  |          | 73,212  |      |  |          | 63,499  |   |  |   | 104,790 |   |  |   | 120,925 |  
|                             
|                             
|                             
|                             
|                              | Depreciation and amortization                                                        |  |                                                         | 20,870    |      |  |          | 23,254  |      |  |          | 23,334  |   |  |   | 25,240  |   |  |   | 23,174  |  
|                             
|                             
|                             
|                             
|                              | Selling, general and administrative
expenses                                         |  |                                                         | 16,833    |      |  |          | 15,770  |      |  |          | 14,613  |   |  |   | 17,343  |   |  |   | 29,355  |  
|                             
|                             
|                             
|                             
|                              | Unusual charges                                                                      |  |                                                         | 5,631     |      |  |          |        |      |  |          |        |   |  |   |        |   |  |   |        |  
|                              |                                                                                      |  |                                                         |           |      |  |          |         |      |  |          |         |   |  |   |         |   |  |   |        
|                              | Operating income (loss)                                                              |  |                                                         | (61,217   | )    |  |          | 34,188  |      |  |          | 25,552  |   |  |   | 62,207  |   |  |   | 68,396  |  
|                             
|                             
|                             
|                             
|                              | Interest expense                                                                     |  |                                                         | 31,980    |      |  |          | 31,940  |      |  |          | 32,030  |   |  |   | 32,057  |   |  |   | 31,690  |  
|                             
|                             
|                             
|                             
|                              | Interest and other income (expense)                                                  |  |                                                         | (7,608    | )    |  |          | 8,054   |      |  |          | 8,062   |   |  |   | 2,308   |   |  |   | 1,239   |  
|                              |                                                                                      |  |                                                         |           |      |  |          |         |      |  |          |         |   |  |   |         |   |  |   |        
|                              | Income (loss) before income taxes
and extraordinary loss on early
retirement of debt |  |                                                         | (100,805  | )    |  |          | 10,302  |      |  |          | 1,584   |   |  |   | 32,458  |   |  |   | 37,945  |  
|                             
|                             
|                             
|                             
|                              | Income taxes                                                                         |  |                                                         |          |      |  |          |        |      |  |          | (4,279  | ) |  |   | 12,365  |   |  |   | 14,482  |  
|                              |                                                                                      |  |                                                         |           |      |  |          |         |      |  |          |         |   |  |   |         |   |  |   |        
|                              | Income (loss) before extraordinary
loss on early retirement of debt                  |  |                                                         | ($100,805 | )    |  | $        | 10,302  |      |  | $        | 5,863   |   |  | $ | 20,093  |   |  | $ | 23,463  |  
|                              |                                                                                      |  |                                                         |           |      |  |          |         |      |  |          |         |   |  |   |         |   |  |   |        
|Other Operating Data:         |                                                                                      |  |                                                         |           |      |  |          |         |      |  |          |         |   |  |   |         |   |  |   |        
|                             
|                             
|                             
|                             
|                              | Net tons shipped                                                                     |  |                                                         | 1,041     |      |  |          | 1,266   |      |  |          | 1,212   |   |  |   | 1,412   |   |  |   | 1,329   |  
|                             
|                             
|                             
|                             
|                              | Percent custom products                                                              |  |                                                         | 51.5      | %    |  |          | 52.1    | %    |  |          | 56.6    | % |  |   | 52.7    | % |  |   | 55.5    | %
|                             
|                             
|                             
|                             
|                              | Average selling price per net ton
shipped                                            |  | $                                                       | 397       |      |  | $        | 443     |      |  | $        | 439     |   |  | $ | 471     |   |  | $ | 503     |  
|                             
|                             
|                             
|                             
|                              | Average cost per net ton shipped                                                     |  |                                                         | 414       |      |  |          | 385     |      |  |          | 386     |   |  |   | 397     |   |  |   | 412     |  
|                             
|                             
|                             
|                             
|                              | Average gross margin (loss) per net
ton shipped                                      |  |                                                         | (17       | )    |  |          | 58      |      |  |          | 52      |   |  |   | 74      |   |  |   | 91      |  
|                             
|                             
|                             
|                             
|                              | Average operating income (loss) per
net ton shipped                                  |  |                                                         | (59       | )    |  |          | 27      |      |  |          | 21      |   |  |   | 44      |   |  |   | 51      |  
|                             
|                             
|                             
|                             
|Balance Sheet Data:           |                                                                                      |  |                                                         |           |      |  |          |         |      |  |          |         |   |  |   |         |   |  |   |        
|                             
|                             
|                             
|                             
|                              | Cash & cash equivalents                                                              |  | $                                                       | 32,244    |      |  | $        | 89,478  |      |  | $        | 76,349  |   |  | $ | 62,195  |   |  | $ | 18,989  |  
|                             
|                             
|                             
|                             
|                              | Working capital (excluding cash,
cash equivalents and short-term
investments)        |  |                                                         | 12,845    |      |  |          | 46,946  |      |  |          | 39,113  |   |  |   | 45,645  |   |  |   | 66,913  |  
|                             
|                             
|                             
|                             
|                              | Property, plant and equipment, net                                                   |  |                                                         | 193,453   |      |  |          | 202,578 |      |  |          | 208,477 |   |  |   | 217,624 |   |  |   | 224,620 |  
|                             
|                             
|                             
|                             
|                              | Total assets                                                                         |  |                                                         | 406,613   |      |  |          | 478,176 |      |  |          | 479,944 |   |  |   | 460,286 |   |  |   | 470,751 |  
|                             
|                             
|                             
|                             
|                              | Total debt (including current portion)                                               |  |                                                         | 301,647   |      |  |          | 301,380 |      |  |          | 301,502 |   |  |   | 301,618 |   |  |   | 302,937 |  
|                             
|                             
|                             
|                             
|                              | Shareholders equity (deficit)                                                       |  |                                                         | (181,434  | )    |  |          | (80,629 | )    |  |          | (81,731 | ) |  |   | (84,873 | ) |  |   | (90,866 | )



---

|(1) |  | Fiscal 1999 statement of income reflects an income tax benefit of $4.3 million resulting from the
subchapter S election described in Note 1(g), a gain of $5.0 million resulting from an agreement
with the USWA permitting the Company to pay certain medical benefits from assets in a trust
previously restricted for other benefits and a benefit of $7.5 million resulting from the LIFO
inventory valuation method.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Fiscal 1997 statement of income reflects $8.6 million of compensation expenses related to the
debt refinancing and equity redemption transactions effected in November 1997.                                                                                                                                                                                                                                             

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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 2001 Compared to Fiscal 2000

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

Gross margin (loss) (sales less cost of products sold)was ($17.9) million
in 2001 compared to gross margin of $73.2 million in 2000. The decrease in
gross margin reflects the lower shipping volume and transaction prices
discussed above and higher per ton production costs resulting from
significantly lower production volume and its effect on fixed operating costs
per ton. Production volume in 2001 was approximately 74% of operating
capacity compared to approximately 89% in 2000. In addition, the Company
recorded inventory valuation charges totaling $2.6 million in the fourth
quarter of 2001 compared to $1.2 million in the fourth quarter of 2000.

Operating income (loss) was ($61.2) million, or ($59) per ton, in 2001
compared to operating income of $34.2 million, or $27 per ton, in 2000. The
decrease in operating income for the 2001 period reflects the lower gross
margin discussed above along with a charge of $3.9 million associated with
YSCs indefinite idling of its operating facility on July 15, 2001 (See Note
14: Unusual Charges), a charge of $2.1 million to establish a reserve for
amounts due from a financially distressed steel company (See Note 13: Other
Matters) and a charge of $1.7 million to write-off costs incurred in an
unsuccessful attempt to acquire another steel maker (See Note 14: Unusual
Charges). Excluding these charges, the operating loss was ($53.5) million, or
($51) per ton for fiscal year 2001.

Interest income and other income (expense), net was ($7.6) million in 2001
compared to $8.1 million in 2000. In the 2001 period WCI recorded a charge of
$10.5 million to write down the carrying value of Acme Metals, Inc. 10.875%
Senior Unsecured Notes owned by WCI. In the 2000 period, the Company recorded
a gain of $2.8 million as a result of an agreement with the United
Steelworkers, which permitted the Company to pay certain medical benefits from
assets in a trust previously restricted for other benefits. Interest income was
$2.7 million in 2001 compared to interest income of $4.8 million for 2000. The
decrease in interest income was due primarily to lower cash balances and lower
interest rates in the 2001 period compared to the 2000 period.

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As a result of the items discussed above, the Company had a loss before
taxes of $100.8 million in 2001 compared to income before taxes of $10.3
million in 2000.

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

Fiscal 2000 Compared to Fiscal 1999

Net sales in 2000 were $560.7 million on 1,265,895 tons shipped ($122.6
million and 281,195 tons shipped for the fourth quarter), representing a 5.5%
increase in net sales and a 4.4% increase in tons shipped compared to 1999.
Net sales per ton shipped increased 0.9% to $443 in 2000 compared to $439 in
1999. Net sales per ton shipped increased $14 as a result of price increases,
which became effective January 1, 2000 and, to a lesser extent, April 1, 2000,
offset by $10 per ton due to a lower custom product mix. Net sales per ton
shipped for the fourth quarter of 2000 were $436 compared to $456 for the third
quarter of 2000 and $431 for the fourth quarter of 1999. The decrease in net
sales per ton in the fourth quarter compared to the third quarter resulted from
lower steel prices and reflects the high level of imported steel, high
inventory levels at customers and slowing domestic economic conditions.
Shipments of custom carbon, alloy and electrical steels accounted for 52.1% of
total shipments in 2000 compared to 56.6% in 1999.

Gross margin (sales less cost of goods sold) was $73.2 million in 2000
compared to $63.5 million in 1999. The increase in gross margin reflects the
higher shipping volume and prices discussed above. While production costs
during fiscal year 2000 were flat compared to fiscal year 1999, production
costs during the fourth quarter of 2000 were significantly higher than the
fourth quarter of 1999 due to a reduction in production volume of 19% compared
to the same period in 1999 and a 16% reduction in production volume compared to
the third quarter of 2000. In addition, during the fourth quarter of 1999, the
Company incurred $11.0 million of excess production costs as a result of idling
much of the facility due to start-up problems after completion of a planned
maintenance outage at the blast furnace. The Company also recorded a LIFO
inventory valuation charge of $2.1 million during the fourth quarter of 2000
compared to a benefit of $5.7 million during the fourth quarter of 1999.

Operating income was $34.2 million, or $27 per ton, in 2000 compared to
operating income of $25.6 million, or $21 per ton, in 1999. The increased
operating income in 2000 reflects the higher gross margin discussed above
partially offset by increased selling, general and administrative expenses
primarily due to higher variable compensation costs. Operating income (loss)
for the fourth quarter was ($1.1) million, ($4) per ton compared to $4.5
million, $14 per ton for the comparable period in 1999.

Interest and other income, net was $8.1 million in each of 2000 and 1999.
During the first quarter of 2000 and the fourth quarter of 1999 the Company
recorded a gain of $2.8 million and $5.0 million, respectively, as a result of
an agreement with the United Steelworkers of America, which permitted the
Company to pay certain medical benefits from assets in a trust previously
restricted for other benefits. In addition, interest income increased $1.8
million due primarily to higher cash balances in 2000 compared to 1999.

As a result of the items discussed above, the Company had income before
taxes of $10.3 million in 2000 compared to $1.6 million in 1999.

Effective November 1, 1998, the Company was designated as a qualified
subchapter S subsidiary by Renco. Accordingly, the Company is generally not
subject to income taxes. For the 1999 period, the Company recognized an income
tax benefit of $4.3 million which included the elimination of net deferred tax
liabilities recorded as of October 31, 1998.

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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. The
Companys primary sources of liquidity as of October 31, 2001 consisted of cash
and cash equivalents of $32.2 million and available borrowing under its $100
million revolving credit agreement (Revolver).

The Revolver has a maximum borrowing limit of $100 million, is secured by
inventories and receivables and subject to eligibility requirements, as defined
therein, and expires on December 29, 2003. As of October 31, 2001, WCI had no
borrowings outstanding under the Revolver, with a borrowing limit of $75.2
million based on eligible inventories and receivables, net of $14.3 million in
letters of credit outstanding or committed. As of December 31, 2001 WCI had
liquidity (cash and availability under Revolver) of
$45.9 million, after deducting a $25 million minimum
availability requirement under the Revolver amendment
as discussed below, and after reduction for letters of credit outstanding or
committed of $14.9 million.

Cash
from Operations

Cash provided (used) by operating activities was ($44.1) million for 2001
compared to $38.1 million and $28.7 million for 2000 and 1999, respectively.
The decreased operating cash flow in 2001 compared to 2000 resulted primarily
from a decrease in income before taxes excluding non-cash charges offset
somewhat by changes in working capital.

As of October 31, 2001, at pricing then in effect, WCI had commitments
under raw material supply contracts of approximately $10.9 million for 2002,
$0.3 million for 2003 and nothing thereafter.

Capital
Expenditures

Capital expenditures were $13.6 million, $15.6 million and $11.4 million
during 2001, 2000 and 1999, respectively. Capital expenditures are expected to
be approximately $9 million for all of fiscal 2002. WCI has deferred the
previously scheduled reline of its blast furnace. The Company has the blast
furnace on a regular maintenance program to extend the life of the furnace
lining, and the Company will continue to monitor the condition of the lining.
The reline of the blast furnace has not yet been rescheduled. Management has
funded the Companys capital expenditures in 2001, 2000 and 1999 through cash
balances and cash provided by operating activities. At October 31, 2001, the
Company had commitments for capital expenditures of approximately $4.3 million.

Debt
Transactions

Renco Steel is a holding company formed by Renco in January 1998, which
owns all the outstanding shares of capital stock of the Company. In February
1998, Renco Steel issued $120 million principal amount 10.875% Senior Secured
Notes due 2005. These notes are secured by a pledge of all the outstanding
capital stock of the Company. Historically, Renco Steel has met its debt
service obligations from its cash balances and earnings thereon, through
distributions from the Company as permitted under the Companys outstanding
indebtedness as described in Note 4 and from cash infusions from Renco. The
Company does not expect to be permitted to pay dividends or make other
distributions for the foreseeable future.

The Revolver and the indenture governing WCIs 10% Senior Secured Notes
due 2004 contain numerous covenants and prohibitions that limit the financial
activities of the Company, including

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requirements that the Company satisfy
certain financial ratios and limitations on the incurrence of additional
indebtedness. On January 25, 2002 the Company and its lenders under the
Revolver agreed to amend the loan agreement to require the Company to maintain
a minimum net worth, as defined, of not less than the following for each period
indicated: negative $225 million through January 31, 2002, negative $240
million from February 1, 2002 through April 30, 2002,
negative $255 million from May 1,
2002 through July 31, 2002, and negative $260 million on August 1, 2002 and
thereafter. In addition, the Company is required to maintain minimum
availability under the Revolver of $25 million. The ability of the Company to
meet its debt service requirements and to comply with such covenants will be
dependent upon future operating performance and financial results of the
Company, which will be subject to financial, economic, political, competitive
and other factors affecting the Company, many of which are beyond its control.

Dividends

The Company paid no dividends and was not permitted to do so under the
Senior Secured Notes indenture during fiscal year 2001. The Company does not
expect to be permitted to pay dividends for the foreseeable future based on
limitations under the Senior Secured Notes indenture.

Postretirement
Benefit Plans

WCI provides postretirement health care and life insurance benefits to
substantially all employees who retire upon meeting certain age and length of
service eligibility requirements. 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. As a result of the
collective bargaining agreement effective September 1, 1999, the Company was
permitted to pay current claims up to $8.8 million from a trust. That limit was
reached during the three months ended July 31, 2001 which thereafter required
the Company to pay claims from corporate assets. Claims paid by the Company or
trust totaled $5.4 million, $4.4 million and $3.4 million during fiscal years
2001, 2000, and 1999, respectively.

The Company has a defined benefit pension plan (DBP) which covers
substantially all bargained for employees. The Company expects to contribute
approximately $26.6 million, $19.3 million and $16.8 million to the DBP during
2002, 2003 and 2004, respectively, which is expected to satisfy the minimum
funding requirements of ERISA for those periods. The Company contributed $7.2
million, $4.2 million and $6.7 million to the DBP during the fiscal years ended
October 31, 2001, 2000 and 1999, respectively.

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 $2.6
million, $0.7 million and $0.4 million in 2001, 2000 and 1999, respectively.
Operating costs for control and monitoring equipment, excluding depreciation
and amortization expense, were $8.9 million, $9.3 million and $8.2 million for
2001, 2000 and 1999, respectively. Operating costs for fiscal 2002 for control
and monitoring equipment are not expected to increase significantly from the
prior periods.

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

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Labor
Matters

Most of the Companys hourly employees are represented by the USWA, with
which the Company has a five-year collective bargaining agreement effective
September 1, 1999 that expires October 31, 2004. This contract provides for
wage increases of $1 per hour that became effective September 1, 2001 and $1
per hour effective March 1, 2003.

Accounting
Standards

In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement No. 141, Business Combinations, and Statement No. 142, Goodwill and
Other Intangible Assets. Statement 141 requires that the purchase method of
accounting be used for all business combinations initiated after June 30, 2001
as well as all purchase method business combinations completed after June 30,
2001. Statement 142 will require that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead tested for
impairment at least annually in accordance with the provisions of Statement
142. The Company is required to adopt the provisions of Statement 141
immediately, and adopted Statement 142 effective November 1, 2001. The
adoption of Statement 141 and Statement 142 will not have a material effect on
either financial position or results of operation.

In August 2001, the FASB issued Statement No. 143, Accounting for Asset
Retirement Obligations. Statement 143 applies to legal obligations associated
with the retirement of certain long-lived assets. It requires companies to
record the fair value of the liability for an asset retirement obligation in
the period in which it is incurred. When the liability is initially recorded,
the company capitalizes a cost by increasing the carrying amount of the related
long-lived asset. Over time, the liability is accreted to its present value
each period, and the capitalized cost is depreciated over the useful life of
the related asset. Upon settlement of the liability, the company either
settles the obligation for its recorded amount or incurs a gain or loss upon
settlement. Statement 143 is required to be adopted in fiscal years beginning
after June 15, 2002. WCI has not yet determined the effect, if any, that
adopting Statement 143 will have on future earnings and financial position.

In August 2001, the FASB issued Statement No. 144, Accounting for
Impairment or Disposal of Long-Lived Assets. This statement establishes a
single accounting model for long-lived assets to be disposed of by sale and
provides additional implementation guidance for assets to be held and used and
assets to be disposed of other than by sale. There will be no financial
implication related to the adoption of Statement No. 144, and the guidance will
be applied on a prospective basis. WCI will adopt the Statement effective
November 1, 2001.

Outlook

During the past several years the domestic steel market has been
significantly impacted by the high level of steel imports to the U.S. The
domestic market share of imported steel is estimated to have been approximately 25% for
calendar 2001 and was 28.3%, 26.2% and 30.0% during calendar years 2000, 1999
and 1998, respectively while imports from calendar years 1993 to 1997 supplied
between 18.7% and 24.8%. This significant increase in imported steel during
the last four years has adversely affected shipping volume and has contributed
significantly to the depressed pricing environment in the current market.
During this period, WCI and the steel industry have filed various trade cases
against hot-rolled and cold-rolled carbon steel flat products from various
countries (certain of which are pending before the ITC) in response to this
increase in imports. While various duties have been imposed on these products

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from certain countries, to date these duties have been ineffective in reducing
overall steel imports to the U.S.

As a result of the distortion of steel supply created by the surge of
imports of flat rolled steel products and the lower demand for steel products
due to the slumping economy, competition has intensified in the Companys high
carbon and alloy product markets, particularly from minimills. This increased
competition has influenced the pricing structure of these products and has
reduced the premium WCI is currently able to receive on these products compared
to commodity products.

In response to the surging imports, in June 2001 the U.S. Trade
Representative, at the direction of President Bush, requested an investigation
by the International Trade Commission under Section 201 of the Trade Act of
1974 to determine whether steel is being imported into the U.S. in such
quantities as to be a substantial cause of serious injury to the U.S. steel
industry. This request included the investigation of carbon and alloy flat
rolled products among other products. On October 22, 2001 the ITC determined
that the requisite injury had been demonstrated related to carbon and alloy
slabs, hot-rolled, cold-rolled and coated products. These determinations
pertain to imports from all countries except Canada.

On December 19, 2001 the ITC forwarded its remedy recommendations to
President Bush. These recommendations included a tariff rate quota on carbon
and alloy slabs of 20% in excess of 7.0 million tons per year adjusting over a
four year period to 11% on imports in excess of 8.5 million tons and a 20%
tariff on hot-rolled, cold-rolled and coated sheet and strip declining over a
four year period to 11%. President Bush is expected to make his remedy
determination by early March 2002. President Bush may, in his sole discretion,
grant or withhold relief and determine the extent of relief.

For the longer term, the shipping levels and realized selling prices of
WCI products will be influenced by the levels of imported steel, the strength
of the manufacturing sector of the domestic economy and production capacity
changes by domestic competitors. Domestic flat rolled steel production
capacity has been reduced by the closing of seven producers during the past two
years with total hot strip mill capacity of 16.7 million tons. This has yet to
have a significant impact on the market due to the levels of imports and the
depressed manufacturing sector of the economy. In addition, any future impact
of this closed capacity may be reversed if the facilities are restarted as has
frequently happened with idled steel capacity in the past.

Shipments during the first quarter of 2002 are expected to be
approximately 245,000 tons, or 14% lower than the fourth quarter of 2001. Net
sales per ton are expected to be approximately $367 in the first quarter 2002
and cost of products sold per ton is expected to be flat in the first quarter
2002 compared to the fourth quarter 2001. As a result, the Company expects its
net loss in the first quarter 2002 to approximate that of the fourth quarter
2001, excluding unusual charges.

WCI has experienced a significant increase in its order intake rate and
backlog during December 2001 and January 2002 which has resulted from the
expectation of lower imports due to the pending Section 201 investigation, the
recent closure of a competitor, a conclusion to inventory reductions by
customers and the beginning of an economic recovery. With the increasing order
entry rate and backlog, the Company and most other flat rolled steel producers
announced price increases effective February 2002 of $20 per ton on hot-rolled
products and effective March 2002 an additional $10 per ton on hot-rolled
products and $20 per ton on cold-rolled products. Due to these factors, the
Company expects shipping volume in the second quarter 2002 to increase
approximately 25% to 310,000 tons compared to the first quarter 2002 with net
sales per ton shipped increasing to $381. WCI expects further increases in
shipping volume and sales prices through the second half of fiscal 2002 as the
steel market and economy continue to recover. Based only on sustaining the
expected second quarter 2002 net sales per ton price of $381 and shipping
volume of 310,000 tons over the last two quarters of 2002, WCI would incur a
significant net

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loss during fiscal 2002 for which WCI believes it has adequate availability of cash
resources to maintain operations through at least fiscal
2002. However, if the volume or price increases expected to be
realized during the second quarter of fiscal 2002 are not sustained for the
balance of fiscal 2002, it is likely that WCI will not have adequate
availability under its existing financing arrangements and will require
additional sources of financing. WCI cannot assure that it has the ability to
obtain such additional financing, or what the terms of any additional financing
might be. Failure to obtain additional financing in these circumstances would
likely have a material adverse effect on WCIs operations. For periods beyond
fiscal 2002, further price and volume improvements will be necessary for the
Company to have sufficient cash resources to maintain its operations.

As discussed in Note 13 to the Consolidated Financial Statements, WCI
supplies steam to an LTV Steel Company coke plant adjacent to WCIs facility.
LTV Corporation filed for reorganization under Chapter 11 of the United States
Bankruptcy Code on December 29, 2000. The coke plant was recently idled by LTV
and is expected to be permanently idled by the end of January 2002 unless the
plant is purchased by a third party. If the plant is permanently idled, it is
estimated that WCIs results would be reduced by approximately $5 million on an
annual basis.

Forward-Looking Statements

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




ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to commodity price risk with respect to natural gas
and zinc. The Company uses forward purchase contracts to manage the volatility
related to the exposure. No contracts are entered into for speculative
purposes. Based on the Companys commodity hedge exposure at October 31, 2001
and 2000, a hypothetical 10 percent change in market rates applied to the fair
value of the contracts would have no material impact on our earnings, cash
flow, or financial position.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

|                                          |                                                                                                                          |                                                      |         |             |          |      |         |         |         |  
|----------------------------------------- | ------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------- | ------- | ----------- | -------- | ---- | ------- | ------- | ------- | -
|                                          |                                                                                                                          |                                                      |         | October 31,
|                                          |                                                                                                                          |                                                      |         |            
|                                          |                                                                                                                          |                                                      |         | 2001        |          | 2000
|                                          |                                                                                                                          |                                                      |         |             |          |     
|ASSETS                                    |                                                                                                                          |                                                      |         |             |          |      |         |        
|                                         
|                                         
|                                         
|                                         
|Current assets                            |                                                                                                                          |                                                      |         |             |          |      |         |        
|                                         
|                                         
|                                         
|                                         
|                                          | Cash and cash equivalents                                                                                                |                                                      | $       | 32,244      |          |      | $       | 89,478  |        
|                                         
|                                         
|                                         
|                                         
|                                          | Accounts receivable, less allowances for doubtful
accounts of $3,100 and $750, respectively                              |                                                      |         | 48,875      |          |      |         | 47,599  |        
|                                         
|                                         
|                                         
|                                         
|                                          | Inventories                                                                                                              |                                                      |         | 87,075      |          |      |         | 96,171  |        
|                                         
|                                         
|                                         
|                                         
|                                          | Prepaid expenses and other current assets                                                                                |                                                      |         | 1,049       |          |      |         | 1,076   |        
|                                          |                                                                                                                          |                                                      |         |             |          |      |         |        
|                                          |                                                                                                                          | Total current assets                                 |         |             | 169,243  |      |         |         | 234,324 |  
|                                         
|                                         
|                                         
|                                         
|Property, plant and equipment, net        |                                                                                                                          |                                                      | 193,453 |             |          |      | 202,578 |        
|                                         
|                                         
|                                         
|                                         
|Intangible pension asset, net             |                                                                                                                          |                                                      | 39,556  |             |          |      | 25,677  |        
|                                         
|                                         
|                                         
|                                         
|Other assets, net                         |                                                                                                                          |                                                      | 4,361   |             |          |      | 15,597  |        
|                                          |                                                                                                                          |                                                      |         |             |          |      |         |        
|                                          |                                                                                                                          | Total assets                                         |         | $           | 406,613  |      |         | $       | 478,176 |  
|                                          |                                                                                                                          |                                                      |         |             |          |      |         |        
|LIABILITIES and SHAREHOLDERS EQUITY      |                                                                                                                          |                                                      |         |             |          |      |         |        
|                                         
|                                         
|                                         
|                                         
|Current liabilities                       |                                                                                                                          |                                                      |         |             |          |      |         |        
|                                         
|                                         
|                                         
|                                         
|                                          | Current portion of long-term debt                                                                                        |                                                      | $       | 536         |          |      | $       | 128     |        
|                                         
|                                         
|                                         
|                                         
|                                          | Accounts payable                                                                                                         |                                                      |         | 45,939      |          |      |         | 47,201  |        
|                                         
|                                         
|                                         
|                                         
|                                          | Accrued liabilities                                                                                                      |                                                      |         | 77,679      |          |      |         | 50,571  |        
|                                          |                                                                                                                          |                                                      |         |             |          |      |         |        
|                                          |                                                                                                                          | Total current liabilities                            |         |             | 124,154  |      |         |         | 97,900  |  
|                                         
|                                         
|                                         
|                                         
|Long-term debt, excluding current portion |                                                                                                                          |                                                      | 301,111 |             |          |      | 301,252 |        
|                                         
|                                         
|                                         
|                                         
|Postretirement health care benefits       |                                                                                                                          |                                                      | 117,719 |             |          |      | 111,584 |        
|                                         
|                                         
|                                         
|                                         
|Pension benefits                          |                                                                                                                          |                                                      | 35,000  |             |          |      | 36,313  |        
|                                         
|                                         
|                                         
|                                         
|Other liabilities                         |                                                                                                                          |                                                      | 10,063  |             |          |      | 11,756  |        
|                                          |                                                                                                                          |                                                      |         |             |          |      |         |        
|                                          |                                                                                                                          | Total liabilities                                    |         |             | 588,047  |      |         |         | 558,805 |  
|                                         
|                                         
|                                         
|                                         
|Shareholders equity (deficit)            |                                                                                                                          |                                                      |         |             |          |      |         |        
|                                         
|                                         
|                                         
|                                         
|                                          | Preferred stock, par value $1,000 per share, 5,000
shares authorized, none issued                                        |                                                      |         |            |          |      |         |        |        
|                                         
|                                         
|                                         
|                                         
|                                          | Common stock, no par value, stated value $.01 per
share, 40,000,000 shares authorized, 100 shares
issued and outstanding |                                                      |         |            |          |      |         |        |        
|                                         
|                                         
|                                         
|                                         
|                                          | Additional paid-in capital                                                                                               |                                                      |         | 279         |          |      |         | 279     |        
|                                         
|                                         
|                                         
|                                         
|                                          | Accumulated deficit                                                                                                      |                                                      |         | (181,713    | )        |      |         | (80,908 | )      
|                                          |                                                                                                                          |                                                      |         |             |          |      |         |        
|                                          |                                                                                                                          | Total shareholders equity (deficit)                 |         |             | (181,434 | )    |         |         | (80,629 | )
|                                         
|                                         
|                                         
|                                         
|Commitments and contingencies             |                                                                                                                          |                                                      |        |             |          |      |        |        
|                                          |                                                                                                                          |                                                      |         |             |          |      |         |        
|                                          |                                                                                                                          | Total liabilities and shareholders equity (deficit) |         | $           | 406,613  |      |         | $       | 478,176 |  
|                                          |                                                                                                                          |                                                      |         |             |          |      |         |        

See accompanying notes to consolidated financial statements.

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

|                                  |                              |                                              |          |                         |        |      |         |         |        |   |         |         |        | 
|--------------------------------- | ---------------------------- | -------------------------------------------- | -------- | ----------------------- | ------ | ---- | ------- | ------- | ------ | - | ------- | ------- | ------ | 
|                                  |                              |                                              |          | Years ended October 31,
|                                  |                              |                                              |          |                        
|                                  |                              |                                              |          | 2001                    |        | 2000 |         | 1999   
|                                  |                              |                                              |          |                         |        |      |         |        
|                                  | Net sales                    |                                              | $        | 413,108                 |        |      | $       | 560,689 |        |   | $       | 531,669 |       
|                                 
|                                 
|                                 
|                                 
|                                  | Operating costs and expenses |                                              |          |                         |        |      |         |         |        |   |         |         |       
|                                 
|                                 
|                                 
|                                 
|                                  |                              | Cost of products sold                        |          | 430,991                 |        |      |         | 487,477 |        |   |         | 468,170 |       
|                                 
|                                 
|                                 
|                                 
|                                  |                              | Depreciation and amortization                |          |                         | 20,870 |      |         |         | 23,254 |   |         |         | 23,334 | 
|                                 
|                                 
|                                 
|                                 
|                                  |                              | Selling, general and administrative expenses |          |                         | 16,833 |      |         |         | 15,770 |   |         |         | 14,613 | 
|                                 
|                                 
|                                 
|                                 
|                                  |                              | Unusual charges                              |          |                         | 5,631  |      |         |         |       |   |         |         |       | 
|                                  |                              |                                              |          |                         |        |      |         |         |        |   |         |        
|                                  |                              |                                              | 474,325  |                         |        |      | 526,501 |         |        |   | 506,117 |        
|                                  |                              |                                              |          |                         |        |      |         |         |        |   |         |        
|Operating income (loss)           |                              |                                              | (61,217  | )                       |        |      | 34,188  |         |        |   | 25,552  |        
|                                  |                              |                                              |          |                         |        |      |         |         |        |   |         |        
|Other income (expense)            |                              |                                              |          |                         |        |      |         |         |        |   |         |        
|                                 
|                                 
|                                 
|                                 
|                                  |                              | Interest expense                             |          | (31,980                 | )      |      |         | (31,940 | )      |   |         | (32,030 | )     
|                                 
|                                 
|                                 
|                                 
|                                  |                              | Interest and other income (expense), net     |          |                         | (7,608 | )    |         |         | 8,054  |   |         |         | 8,062  | 
|                                  |                              |                                              |          |                         |        |      |         |         |        |   |         |        
|                                  |                              |                                              | (39,588  | )                       |        |      | (23,886 | )       |        |   | (23,968 | )      
|                                  |                              |                                              |          |                         |        |      |         |         |        |   |         |        
|Income (loss) before income taxes |                              |                                              | (100,805 | )                       |        |      | 10,302  |         |        |   | 1,584   |        
|                                 
|                                 
|                                 
|                                 
|Income tax (benefit) expense      |                              |                                              |         |                         |        |      |        |         |        |   | (4,279  | )      
|                                  |                              |                                              |          |                         |        |      |         |         |        |   |         |        
|Net income (loss)                 |                              | $                                            | (100,805 | )                       |        | $    | 10,302  |         |        | $ | 5,863   |        
|                                  |                              |                                              |          |                         |        |      |         |         |        |   |         |        

See accompanying notes to consolidated financial statements.

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

|                            |                                |   |        |   |         |   |             |     |           |   |          |          |               |   |          |          |  
|--------------------------- | ------------------------------ | - | ------ | - | ------- | - | ----------- | --- | --------- | - | -------- | -------- | ------------- | - | -------- | -------- | -
|                            |                                |   |        |   |         |   |             |     |           |   |          |          |               |   | Total   
|                            |                                |   |        |   |         |   | Additional  |     |           |   |          |          | Shareholder's
|                            |                                |   | Common |   | Paid-In |   | Accumulated |     | Equity   
|                            |                                |   | Stock  |   | Capital |   | Deficit     |     | (Deficit)
|                            |                                |   |        |   |         |   |             |     |          
|Balance at October 31, 1998 |                                | $ |       |   |         | $ |            |     |           | $ | (84,873  | )        |               | $ | (84,873  | )       
|                           
|                           
|                           
|                           
|                            | Net income                     |   |        |  |         |   |             |    |           |   |          | 5,863    |               |   |          | 5,863    |  
|                           
|                           
|                           
|                           
|                            | Capital contribution           |   |        |  |         |   |             | 279 |           |   |          |         |               |   |          | 279      |  
|                           
|                           
|                           
|                           
|                            | Dividends paid on common stock |   |        |  |         |   |             |    |           |   |          | (3,000   | )             |   |          | (3,000   | )
|                            |                                |   |        |   |         |   |             |     |           |   |          |          |               |   |          |         
|Balance at October 31, 1999 |                                |   |       |   |         |   | 279         |     |           |   | (82,010  | )        |               |   | (81,731  | )       
|                            |                                |   |        |   |         |   |             |     |           |   |          |          |               |   |          |         
|                            | Net income                     |   |        |  |         |   |             |    |           |   |          | 10,302   |               |   |          | 10,302   |  
|                           
|                           
|                           
|                           
|                            | Dividends paid on common stock |   |        |  |         |   |             |    |           |   |          | (9,200   | )             |   |          | (9,200   | )
|                            |                                |   |        |   |         |   |             |     |           |   |          |          |               |   |          |         
|Balance at October 31, 2000 |                                |   |       |   |         |   | 279         |     |           |   | (80,908  | )        |               |   | (80,629  | )       
|                            |                                |   |        |   |         |   |             |     |           |   |          |          |               |   |          |         
|                            | Net loss                       |   |        |  |         |   |             |    |           |   |          | (100,805 | )             |   |          | (100,805 | )
|                            |                                |   |        |   |         |   |             |     |           |   |          |          |               |   |          |         
|Balance at October 31, 2001 |                                | $ |       |   |         | $ | 279         |     |           | $ | (181,713 | )        |               | $ | (181,434 | )       
|                            |                                |   |        |   |         |   |             |     |           |   |          |          |               |   |          |         

See accompanying notes to consolidated financial statements.

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##### Table of Contents



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

|                                      |                                                                                                |                                             |                                                  |          |                         |         |      |         |         |         |   |         |        |         |  
|------------------------------------- | ---------------------------------------------------------------------------------------------- | ------------------------------------------- | ------------------------------------------------ | -------- | ----------------------- | ------- | ---- | ------- | ------- | ------- | - | ------- | ------ | ------- | -
|                                      |                                                                                                |                                             |                                                  |          | Years ended October 31,
|                                      |                                                                                                |                                             |                                                  |          |                        
|                                      |                                                                                                |                                             |                                                  |          | 2001                    |         | 2000 |         | 1999   
|                                      |                                                                                                |                                             |                                                  |          |                         |         |      |         |        
|CASH FLOWS FROM OPERATING ACTIVITIES: |                                                                                                |                                             |                                                  |          |                         |         |      |         |         |         |   |        
|                                     
|                                     
|                                     
|                                     
|                                      | Net income (loss)                                                                              |                                             | $                                                | (100,805 | )                       |         | $    | 10,302  |         |         | $ | 5,863   |       
|                                     
|                                     
|                                     
|                                     
|                                      | Adjustment to reconcile net income (loss) to net cash
provided (used) by operating activities: |                                             |                                                  |          |                         |         |      |         |         |         |   |         |       
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                                | Depreciation and amortization               |                                                  |          | 19,338                  |         |      |         | 20,311  |         |   |         | 20,400 |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                                | Amortization of deferred maintenance costs  |                                                  |          | 1,532                   |         |      |         | 2,943   |         |   |         | 2,934  |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                                | Amortization of financing costs             |                                                  |          | 1,309                   |         |      |         | 1,291   |         |   |         | 1,329  |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                                | Postretirement health care benefits         |                                                  |          | 11,735                  |         |      |         | 11,878  |         |   |         | 6,968  |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                                | Pension benefits                            |                                                  |          | 4,267                   |         |      |         | 6,820   |         |   |         | (2,202 | )      
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                                | Provision
for losses on accounts receivable |                                                  |          | 2,603                   |         |      |         | 37      |         |   |         | (84    | )      
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                                | Deferred income taxes                       |                                                  |          |                        |         |      |         |        |         |   |         | (4,758 | )      
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                                | Asset impairment and other charges          |                                                  |          | 16,115                  |         |      |         |        |         |   |         |       |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                                | Other                                       |                                                  |          | 236                     |         |      |         | 1,190   |         |   |         | 429    |        
|                                     
|                                     
|                                     
|                                     
|                                      | Cash provided (used) by changes in certain assets and
liabilities                              |                                             |                                                  |          |                         |         |      |         |         |         |   |         |       
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                                | Accounts receivable                         |                                                  |          | (3,879                  | )       |      |         | 10,210  |         |   |         | (9,038 | )      
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                                | Inventories                                 |                                                  |          | 9,096                   |         |      |         | (12,924 | )       |   |         | 3,893  |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                                | Prepaid expenses and other assets           |                                                  |          | (3,757                  | )       |      |         | 1,223   |         |   |         | (5,372 | )      
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                                | Accounts payable                            |                                                  |          | (1,262                  | )       |      |         | (12,529 | )       |   |         | 13,110 |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                                | Accrued liabilities                         |                                                  |          | 1,095                   |         |      |         | (717    | )       |   |         | (4,483 | )      
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                                | Other liabilities                           |                                                  |          | (1,693                  | )       |      |         | (1,982  | )       |   |         | (316   | )      
|                                      |                                                                                                |                                             |                                                  |          |                         |         |      |         |         |         |   |        
|                                      |                                                                                                |                                             | Net cash provided (used) by operating activities |          |                         | (44,070 | )    |         |         | 38,053  |   |         |        | 28,673  |  
|                                      |                                                                                                |                                             |                                                  |          |                         |         |      |         |         |         |   |        
|CASH FLOWS FROM INVESTING ACTIVITIES: |                                                                                                |                                             |                                                  |          |                         |         |      |         |         |         |   |        
|                                     
|                                     
|                                     
|                                     
|                                      | Additions to property, plant and equipment                                                     |                                             |                                                  | (13,567  | )                       |         |      | (15,602 | )       |         |   | (11,403 | )     
|                                     
|                                     
|                                     
|                                     
|                                      | Gross proceeds from the sale of assets                                                         |                                             |                                                  | 136      |                         |         |      |        |         |         |   |        |       
|                                      |                                                                                                |                                             |                                                  |          |                         |         |      |         |         |         |   |        
|                                      |                                                                                                |                                             | Net cash used by investing activities            |          |                         | (13,431 | )    |         |         | (15,602 | ) |         |        | (11,403 | )
|                                      |                                                                                                |                                             |                                                  |          |                         |         |      |         |         |         |   |        
|CASH FLOWS FROM FINANCING ACTIVITIES: |                                                                                                |                                             |                                                  |          |                         |         |      |         |         |         |   |        
|                                     
|                                     
|                                     
|                                     
|                                      | Net change in long-term debt                                                                   |                                             |                                                  | 267      |                         |         |      | (122    | )       |         |   | (116    | )     
|                                     
|                                     
|                                     
|                                     
|                                      | Dividends paid                                                                                 |                                             |                                                  |         |                         |         |      | (9,200  | )       |         |   | (3,000  | )     
|                                      |                                                                                                |                                             |                                                  |          |                         |         |      |         |         |         |   |        
|                                      |                                                                                                |                                             | Net cash provided (used) by financing activities |          |                         | 267     |      |         |         | (9,322  | ) |         |        | (3,116  | )
|                                      |                                                                                                |                                             |                                                  |          |                         |         |      |         |         |         |   |        
|                                      | Net increase (decrease) in cash and cash equivalents                                           |                                             |                                                  | (57,234  | )                       |         |      | 13,129  |         |         |   | 14,154  |       
|                                     
|                                     
|                                     
|                                     
|                                      | Cash and cash equivalents at beginning of year                                                 |                                             |                                                  | 89,478   |                         |         |      | 76,349  |         |         |   | 62,195  |       
|                                      |                                                                                                |                                             |                                                  |          |                         |         |      |         |         |         |   |        
|                                      | Cash and cash equivalents at end of year                                                       |                                             | $                                                | 32,244   |                         |         | $    | 89,478  |         |         | $ | 76,349  |       
|                                      |                                                                                                |                                             |                                                  |          |                         |         |      |         |         |         |   |        
|                                      | Supplemental disclosure of cash flow information                                              
|
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                                | Cash paid for interest                      |                                                  | $        | 30,673                  |         |      | $       | 30,649  |         |   | $       | 30,707 |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                                | Cash paid for income taxes                  |                                                  |          |                        |         |      |         | 21      |         |   |         | 974    |        

See accompanying notes to consolidated financial statements.

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

(1) Summary of Significant Accounting Policies

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

(a)  Nature of Operations

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

During 2001, 2000, and 1999, sales to the Companys largest customer
accounted for 9.8%, 10.1%, and 11.3%, respectively, of net sales.
Concentration of credit risk related to trade receivables is limited due to the
large number of customers in a variety of industries. Approximately 50% of
WCIs shipments are to customers within 200 miles of its primary facility.

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

(b)  Principles of Consolidation

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

(c)  Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and short-term investments
with maturities of three months or less from the date of acquisition.

(d)  Inventories

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

(e)  Property, Plant and Equipment

Property, plant and equipment are recorded at cost. Depreciation is
calculated on the straight-line method over the estimated useful lives of the
assets (buildings 20 to 30 years and machinery and equipment 2 to 30 years with
a weighted average of 18 years). Expenditures for normal repairs and
maintenance are charged to expense as incurred.

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(f)  Other Assets

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

(g)  Income Taxes

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

(h)  Environmental Compliance Costs

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

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

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

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(2) Inventories

Inventories consist of the following:

|                                   |  |                        |        |      |  |   |        | 
|---------------------------------- |  | ---------------------- | ------ | ---- |  | - | ------ | 
|                                   |  | October 31,           
|                                   |  |                       
|                                   |  | 2001                   |        | 2000
|                                   |  |                        |        |     
|                                   |  | (Dollars in Thousands)
|Raw materials                      |  | $                      | 33,542 |      |  | $ | 38,873 | 
|                                  
|                                  
|                                  
|                                  
|Finished and semi-finished product |  |                        | 53,438 |      |  |   | 60,785 | 
|                                  
|                                  
|                                  
|                                  
|Supplies                           |  |                        | 95     |      |  |   | 74     | 
|                                   |  |                        |        |      |  |   |        | 
|                                   |  |                        | 87,075 |      |  |   | 99,732 | 
|                                  
|                                  
|                                  
|                                  
|Less LIFO reserve                  |  |                        |       |      |  |   | 3,561  | 
|                                   |  |                        |        |      |  |   |        | 
|                                   |  | $                      | 87,075 |      |  | $ | 96,171 | 
|                                   |  |                        |        |      |  |   |        | 

(3) Property, Plant and Equipment

Property, plant and equipment consists of the following:

|                              |  |                        |         |      |  |   |         | 
|----------------------------- |  | ---------------------- | ------- | ---- |  | - | ------- | 
|                              |  | October 31,           
|                              |  |                       
|                              |  | 2001                   |         | 2000
|                              |  |                        |         |     
|                              |  | (Dollars in Thousands)
|Land and improvements         |  | $                      | 694     |      |  | $ | 435     | 
|                             
|                             
|                             
|                             
|Buildings                     |  |                        | 27,329  |      |  |   | 27,563  | 
|                             
|                             
|                             
|                             
|Machinery and equipment       |  |                        | 334,334 |      |  |   | 332,456 | 
|                             
|                             
|                             
|                             
|Construction in progress      |  |                        | 10,653  |      |  |   | 13,115  | 
|                              |  |                        |         |      |  |   |         | 
|                              |  |                        | 373,010 |      |  |   | 373,569 | 
|                             
|                             
|                             
|                             
|Less accumulated depreciation |  |                        | 179,557 |      |  |   | 170,991 | 
|                              |  |                        |         |      |  |   |         | 
|                              |  | $                      | 193,453 |      |  | $ | 202,578 | 
|                              |  |                        |         |      |  |   |         | 

(4) Long-Term Debt

Long-term debt consists of the following:

|                                                                                                            |  |                        |         |      |  |   |         | 
|----------------------------------------------------------------------------------------------------------- |  | ---------------------- | ------- | ---- |  | - | ------- | 
|                                                                                                            |  | October 31,           
|                                                                                                            |  |                       
|                                                                                                            |  | 2001                   |         | 2000
|                                                                                                            |  |                        |         |     
|                                                                                                            |  | (Dollars in Thousands)
|Senior Secured Notes with
interest at 10% payable semi-
annually, due 2004                                  |  | $                      | 300,000 |      |  | $ | 300,000 | 
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Revolving Credit Facility
(Revolver) with interest at
prime rate (5.5% at October
31, 2001) payable monthly |  |                        |        |      |  |   |        | 
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Other                                                                                                       |  |                        | 1,647   |      |  |   | 1,380   | 
|                                                                                                            |  |                        |         |      |  |   |         | 
|                                                                                                            |  |                        | 301,647 |      |  |   | 301,380 | 
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Less current portion of
long-term debt                                                                      |  |                        | 536     |      |  |   | 128     | 
|                                                                                                            |  |                        |         |      |  |   |         | 
|                                                                                                            |  | $                      | 301,111 |      |  | $ | 301,252 | 
|                                                                                                            |  |                        |         |      |  |   |         | 

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The $300 million 10% Senior Secured Notes due 2004 (Senior Secured Notes)
are secured by a second priority lien on substantially all of the existing
property, plant and equipment of the Company which will become a first priority
lien when all of the 10.5% Senior Notes due 2002 (Senior Notes) are
extinguished ($0.3 million currently outstanding). A Voluntary Employee
Beneficiaries Association trust fund, established to hold Company contributions
to fund postretirement health care and life insurance obligations for the
benefit of hourly employees, also holds a second priority lien on the security
for the Senior Secured Notes, which lien will remain a second priority lien
even if the lien in favor of the Senior Secured Notes becomes a first priority
lien.

The Company has a $100,000,000 Revolver secured by inventories and
receivables and subject to eligibility requirements, as defined, reduced by any
outstanding letters of credit. The Revolver is subject to a monthly service
fee of $15,000 and an annual commitment fee of 0.5% of the unused balance up to
$60,000,000 payable monthly. There were no borrowings outstanding under the
Revolver as of or during the year ended October 31, 2001. The Revolver, which
expires December 29, 2003, also provides for up to an aggregate amount of
$20,000,000 in letters of credit. The Company had a borrowing limit of
$75,152,000 based on eligible inventory and receivables net of $14,300,000 in
letters of credit outstanding or committed at October 31, 2001
and subject to a $25 million minimum eligibility requirement as
discussed below. The Revolver
is subject to a penalty of $250,000 if terminated before October 31, 2003.

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. On January 25, 2002 the Company
and its lenders under the Revolver agreed to amend the loan agreement to
require the Company to maintain a minimum net worth, as defined, of not less
than the following for each period indicated: negative $225 million through
January 31, 2002, negative $240 million from February 1, 2002 through April 30,
2002, negative $25 million from May 1, 2002 through July 31, 2002, and negative $260
million on August 1, 2002 and thereafter. In addition, the Company is required to
maintain minimum availability under the Revolver of $25 million. This
amendment also changes the interest charged to prime rate plus 1.5% which is
currently 6.25%. The Company is permitted to declare and pay dividends, and
make other transactions with affiliates provided no condition of default exists
or will exist, and the accumulated amount of such transactions is no greater
than fifty percent (50%) of the consolidated net income as defined (less 100%
of any consolidated net loss) earned for periods subsequent to October 31, 1996
when taken as a single accounting period less management fees paid to Renco in
excess of $1,200,000 annually for the same period. Under these agreements,
there are no amounts available for dividends and other transactions with
affiliates at October 31, 2001.

Aggregate principal payments on long-term debt for the five years
subsequent to October 31, 2001 are as follows: $536,000 in 2002, $955,000 in
2003, $58,000 in 2004, $300,064,000 in 2005, and $34,000 in 2006.

As of October 31, 2001, the fair value of the Senior Secured Notes was
$195,000,000 based on the quoted market price.

29



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(5) Accrued Liabilities

Accrued liabilities
consists of the following:

|                                       |  |                        |        |      |  |   |        | 
|-------------------------------------- |  | ---------------------- | ------ | ---- |  | - | ------ | 
|                                       |  | October 31,           
|                                       |  |                       
|                                       |  | 2001                   |        | 2000
|                                       |  |                        |        |     
|                                       |  | (Dollars in Thousands)
|Payroll                                |  | $                      | 3,638  |      |  | $ | 3,749  | 
|                                      
|                                      
|                                      
|                                      
|Employee benefits                      |  |                        | 18,603 |      |  |   | 18,390 | 
|                                      
|                                      
|                                      
|                                      
|Defined Benefit Pension Plan (current) |  |                        | 26,631 |      |  |   | 7,172  | 
|                                      
|                                      
|                                      
|                                      
|Retiree healthcare (current)           |  |                        | 5,600  |      |  |   |       | 
|                                      
|                                      
|                                      
|                                      
|Interest                               |  |                        | 12,520 |      |  |   | 12,521 | 
|                                      
|                                      
|                                      
|                                      
|Other                                  |  |                        | 10,687 |      |  |   | 8,739  | 
|                                       |  |                        |        |      |  |   |        | 
|                                       |  | $                      | 77,679 |      |  | $ | 50,571 | 
|                                       |  |                        |        |      |  |   |        | 

(6) Employee Compensation Plans

The Company has variable compensation plans for the benefit of
substantially all employees. The amount of compensation due under these plans
is based on the Companys income as defined under each plan. Total expense
under the plans was $685,000, $4,929,000 and $2,670,000 for the years ended
October 31, 2001, 2000 and 1999, respectively. Certain amounts under these
plans represent deferred compensation.

(7) Pension Plans

The Company has defined contribution retirement plans under which it
expensed approximately $1,859,000, $2,083,000 and $5,223,000 for the years
ended October 31, 2001, 2000 and 1999, respectively.

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

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|                                                                                                                    |  |                        |         |      |  |   |         |  
|------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | ------- | ---- |  | - | ------- | -
|                                                                                                                    |  | October 31,           
|                                                                                                                    |  |                       
|                                                                                                                    |  | 2001                   |         | 2000
|                                                                                                                    |  |                        |         |     
|                                                                                                                    |  | (Dollars in Thousands)
|Projected benefit obligation                                                                                        |  | $                      | 98,682  |      |  | $ | 81,195  |  
|                                                                                                                   
|                                                                                                                   
|                                                                                                                   
|                                                                                                                   
|Plan assets at fair value                                                                                           |  |                        | 36,906  |      |  |   | 37,534  |  
|                                                                                                                    |  |                        |         |      |  |   |         |  
|Projected benefit obligation in
excess of plan assets                                                               |  |                        | 61,776  |      |  |   | 43,661  |  
|                                                                                                                   
|                                                                                                                   
|                                                                                                                   
|                                                                                                                   
|Unrecognized net gain (loss) from
past experience different from
that assumed and effects of
changes in assumptions |  |                        | 5,504   |      |  |   | 25,726  |  
|                                                                                                                   
|                                                                                                                   
|                                                                                                                   
|                                                                                                                   
|Unrecognized prior service cost                                                                                     |  |                        | (45,205 | )    |  |   | (51,579 | )
|                                                                                                                   
|                                                                                                                   
|                                                                                                                   
|                                                                                                                   
|Additional minimum liability                                                                                        |  |                        | 39,556  |      |  |   | 25,677  |  
|                                                                                                                    |  |                        |         |      |  |   |         |  
|Accrued pension cost                                                                                                |  |                        | 61,631  |      |  |   | 43,485  |  
|                                                                                                                   
|                                                                                                                   
|                                                                                                                   
|                                                                                                                   
|Less pension liability due
within one year                                                                          |  |                        | 26,631  |      |  |   | 7,172   |  
|                                                                                                                    |  |                        |         |      |  |   |         |  
|Long-term pension liability                                                                                         |  | $                      | 35,000  |      |  | $ | 36,313  |  
|                                                                                                                    |  |                        |         |      |  |   |         |  

An assumed discount rate of 7.0% and 7.5% and an expected return on plan
assets of 9.0% in 2001 and 2000, respectively were used for purposes of valuing
the benefits under the defined benefit pension plan.

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

|                                                  |  |                        |        |      |  |   |        |  
|------------------------------------------------- |  | ---------------------- | ------ | ---- |  | - | ------ | -
|                                                  |  | 2001                   |        | 2000
|                                                  |  |                        |        |     
|                                                  |  | (Dollars in Thousands)
|Projected benefit obligation at
beginning of year |  | $                      | 81,195 |      |  | $ | 69,196 |  
|                                                 
|                                                 
|                                                 
|                                                 
|Service cost                                      |  |                        | 3,500  |      |  |   | 3,971  |  
|                                                 
|                                                 
|                                                 
|                                                 
|Interest cost                                     |  |                        | 6,155  |      |  |   | 4,853  |  
|                                                 
|                                                 
|                                                 
|                                                 
|Transfer from defined
contribution component      |  |                        | 4,827  |      |  |   | 11,265 |  
|                                                 
|                                                 
|                                                 
|                                                 
|Actuarial (gains) losses, net                     |  |                        | 9,476  |      |  |   | (5,237 | )
|                                                 
|                                                 
|                                                 
|                                                 
|Benefits paid                                     |  |                        | (6,471 | )    |  |   | (2,853 | )
|                                                  |  |                        |        |      |  |   |        |  
|Projected benefit obligation at
end of year       |  | $                      | 98,682 |      |  | $ | 81,195 |  
|                                                  |  |                        |        |      |  |   |        |  

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

|                                 |  |                        |        |      |  |   |        |  
|-------------------------------- |  | ---------------------- | ------ | ---- |  | - | ------ | -
|                                 |  | 2001                   |        | 2000
|                                 |  |                        |        |     
|                                 |  | (Dollars in Thousands)
|Plan assets at beginning of year |  | $                      | 37,534 |      |  | $ | 25,909 |  
|                                
|                                
|                                
|                                
|Actual return on assets          |  |                        | (6,156 | )    |  |   | (1,035 | )
|                                
|                                
|                                
|                                
|Employer contributions           |  |                        | 7,172  |      |  |   | 4,248  |  
|                                
|                                
|                                
|                                
|Benefits paid                    |  |                        | (6,471 | )    |  |   | (2,853 | )
|                                
|                                
|                                
|                                
|Transfers from prior plans       |  |                        | 4,827  |      |  |   | 11,265 |  
|                                 |  |                        |        |      |  |   |        |  
|Plan assets at end of year       |  | $                      | 36,906 |      |  | $ | 37,534 |  
|                                 |  |                        |        |      |  |   |        |  

The following table sets forth the components of pension expense:

|                               |                                  |   |                         |        |      |   |        |        |   |   |        |        |  
|------------------------------ | -------------------------------- | - | ----------------------- | ------ | ---- | - | ------ | ------ | - | - | ------ | ------ | -
|                               |                                  |   | Years Ended October 31,
|                               |                                  |   |                        
|                               |                                  |   | 2001                    |        | 2000 |   | 1999  
|                               |                                  |   |                         |        |      |   |       
|                               |                                  |   | (Dollars in Thousands) 
|Service cost                   |                                  | $ | 3,500                   |        |      | $ | 3,971  |        |   | $ | 96     |       
|                              
|                              
|                              
|                              
|Interest cost                  |                                  |   | 6,155                   |        |      |   | 4,853  |        |   |   | 3,107  |       
|                              
|                              
|                              
|                              
|Expected return on plan assets |                                  |   | (3,254                  | )      |      |   | (2,112 | )      |   |   | (1,400 | )     
|                              
|                              
|                              
|                              
|Amortization of unrecognized:  |                                  |   |                         |        |      |   |        |        |   |   |        |       
|                              
|                              
|                              
|                              
|                               | Prior service cost               |   |                         | 6,374  |      |   |        | 6,374  |   |   |        | 4,056  |  
|                              
|                              
|                              
|                              
|                               | Actuarial (gain) and losses, net |   |                         | (1,336 | )    |   |        | (2,018 | ) |   |        | (1,361 | )
|                               |                                  |   |                         |        |      |   |        |        |   |   |        |       
|                               |                                  | $ | 11,439                  |        |      | $ | 11,068 |        |   | $ | 4,498  |       
|                               |                                  |   |                         |        |      |   |        |        |   |   |        |       

(8) Postretirement Health Care Benefits

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

|                                                                                                       |  |                         |         |      |  |   |         |  
|------------------------------------------------------------------------------------------------------ |  | ----------------------- | ------- | ---- |  | - | ------- | -
|                                                                                                       |  | Years Ended October 31,
|                                                                                                       |  |                        
|                                                                                                       |  | 2001                    |         | 2000
|                                                                                                       |  |                         |         |     
|                                                                                                       |  | (Dollars in Thousands) 
|APBO                                                                                                   |  | $                       | 154,369 |      |  | $ | 132,686 |  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Plan assets at fair value                                                                              |  |                         | 9,234   |      |  |   | 15,564  |  
|                                                                                                       |  |                         |         |      |  |   |         |  
|APBO in excess of plan assets                                                                          |  |                         | 145,135 |      |  |   | 117,122 |  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Unrecognized prior service cost
resulting from plan
amendments                                         |  |                         | (3,724  | )    |  |   | (5,521  | )
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Unrecognized net loss from past
experience different from that
assumed and from changes in
assumptions |  |                         | (18,092 | )    |  |   | (17     | )
|                                                                                                       |  |                         |         |      |  |   |         |  
|Accrued postretirement benefit
cost                                                                    |  |                         | 123,319 |      |  |   | 111,584 |  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Less portion due within one year                                                                       |  |                         | 5,600   |      |  |   |        |  
|                                                                                                       |  |                         |         |      |  |   |         |  
|                                                                                                       |  | $                       | 117,719 |      |  | $ | 111,584 |  
|                                                                                                       |  |                         |         |      |  |   |         |  

32



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The APBO was determined using a discount rate of 7.0% and 7.5% and an
expected return on plan assets of 9.0% in 2001 and 2000, respectively and an
assumed health care cost trend rate of 7.0% in 2002, gradually declining to
5.0% after 2004. Assuming a 1% increase in the health care cost trend rate,
the APBO at October 31, 2001 would increase by $24,373,000 along with an
increase in the 2001 service and interest cost components of $2,455,000.
Assuming a 1% decrease in the health care cost trend rates the APBO at October
31, 2001 would decrease by $19,415,000 along with a decrease in the 2001
service and interest cost components of $1,920,000. The following table sets
forth a reconciliation of the beginning and end of year APBO:

|                              |  |                        |         |      |  |   |         |  
|----------------------------- |  | ---------------------- | ------- | ---- |  | - | ------- | -
|                              |  | 2001                   |         | 2000
|                              |  |                        |         |     
|                              |  | (Dollars in Thousands)
|APBO at beginning of year     |  | $                      | 132,686 |      |  | $ | 124,535 |  
|                             
|                             
|                             
|                             
|Service cost                  |  |                        | 2,701   |      |  |   | 2,658   |  
|                             
|                             
|                             
|                             
|Interest cost                 |  |                        | 10,053  |      |  |   | 9,206   |  
|                             
|                             
|                             
|                             
|Actuarial (gains) losses, net |  |                        | 14,353  |      |  |   | 718     |  
|                             
|                             
|                             
|                             
|Benefits paid                 |  |                        | (5,424  | )    |  |   | (4,431  | )
|                              |  |                        |         |      |  |   |         |  
|APBO at end of year           |  | $                      | 154,369 |      |  | $ | 132,686 |  
|                              |  |                        |         |      |  |   |         |  

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

|                                 |  |                        |        |      |  |   |        |  
|-------------------------------- |  | ---------------------- | ------ | ---- |  | - | ------ | -
|                                 |  | 2001                   |        | 2000
|                                 |  |                        |        |     
|                                 |  | (Dollars in Thousands)
|Plan assets at beginning of year |  | $                      | 15,564 |      |  | $ | 18,090 |  
|                                
|                                
|                                
|                                
|Actual return on assets          |  |                        | (2,329 | )    |  |   | 1,759  |  
|                                
|                                
|                                
|                                
|Employer contributions           |  |                        |       |      |  |   | 213    |  
|                                
|                                
|                                
|                                
|Benefits paid                    |  |                        | (4,001 | )    |  |   | (4,498 | )
|                                 |  |                        |        |      |  |   |        |  
|Plan assets at end of year       |  | $                      | 9,234  |      |  | $ | 15,564 |  
|                                 |  |                        |        |      |  |   |        |  

Net periodic postretirement benefit costs included the following
components:

|                                         |                       |   |                         |       |      |   |        |       |   |   |        |       | 
|---------------------------------------- | --------------------- | - | ----------------------- | ----- | ---- | - | ------ | ----- | - | - | ------ | ----- | 
|                                         |                       |   | Years Ended October 31,
|                                         |                       |   |                        
|                                         |                       |   | 2001                    |       | 2000 |   | 1999  
|                                         |                       |   |                         |       |      |   |       
|                                         |                       |   | (Dollars in Thousands) 
|Service cost                             |                       | $ | 2,701                   |       |      | $ | 2,658  |       |   | $ | 3,357  |      
|                                        
|                                        
|                                        
|                                        
|Interest cost                            |                       |   | 10,053                  |       |      |   | 9,206  |       |   |   | 8,670  |      
|                                        
|                                        
|                                        
|                                        
|Expected return on plan assets           |                       |   | (1,184                  | )     |      |   | (1,477 | )     |   |   | (1,281 | )    
|                                        
|                                        
|                                        
|                                        
|Amortization of unrecognized:            |                       |   |                         |       |      |   |        |       |   |   |        |      
|                                        
|                                        
|                                        
|                                        
|                                         | Prior service cost    |   |                         | 1,797 |      |   |        | 1,797 |   |   |        | 1,400 | 
|                                        
|                                        
|                                        
|                                        
|                                         | Actuarial (gain) loss |   |                         | (208  | )    |   |        | (160  | ) |   |        | 258   | 
|                                         |                       |   |                         |       |      |   |        |       |   |   |        |      
|Net periodic postretirement
benefit cost |                       | $ | 13,159                  |       |      | $ | 12,024 |       |   | $ | 12,404 |      
|                                         |                       |   |                         |       |      |   |        |       |   |   |        |      

33



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##### Table of Contents



(9) Income Taxes

As a result of the change in tax status described in Note (1) (g), the
Company recognized an income tax benefit of $4,279,000 during 1999, which
includes the elimination of net deferred tax liabilities recorded as of October
31, 1998. As of October 31, 2001 and 2000, the Companys tax basis in its
assets and liabilities exceeded its book basis by approximately $19,860,000 and
$8,700,000, respectively.

(10) Leases

The Company leases a portion of its operating and data processing
equipment. Rent expense for noncancellable operating leases amounted to
approximately $1,741,000, $1,914,000 and $1,873,000, for the years ended
October 31, 2001, 2000 and 1999, respectively.

The following table is a summary of future minimum payments under
capitalized leases and under operating leases that have initial or remaining
noncancelable lease terms in excess of one year at October 31, 2001.

|                                                    |  |             |     |                        |     |   |       |   |       | 
|--------------------------------------------------- |  | ----------- | --- | ---------------------- | --- | - | ----- | - | ----- | 
|Fiscal                                              |  |             |     |                        |     |   |       |  
|year ended                                          |  | Capitalized |     | Operating             
|October 31,                                         |  | Leases      |     | Leases                
|                                                    |  |             |     |                       
|                                                    |  |             |     | (Dollars in Thousands)
|                                                    |  | 2002        |     | $                      | 149 |   |       | $ | 1,457 | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |  | 2003        |     |                        | 136 |   |       |   | 671   | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |  | 2004        |     |                        | 70  |   |       |   | 481   | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |  | 2005        |     |                        | 70  |   |       |   | 275   | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |  | 2006        |     |                        | 35  |   |       |   | 64    | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |  | Thereafter  |     |                       |     |   |       | 5 |      
|                                                    |  |             |     |                        |     |   |       |  
|Total minimum lease payments                        |  |             | 460 |                        |     | $ | 2,953 |  
|                                                    |  |             |     |                        |     |   |       |  
|Imputed interest                                    |  |             | (65 | )                      |     |   |       |  
|                                                    |  |             |     |                        |     |   |       |  
|Present value of minimum
capitalized lease payments |  |             | 395 |                        |     |   |       |  
|                                                   
|                                                   
|                                                   
|                                                   
|Less current portion                                |  |             | 121 |                        |     |   |       |  
|                                                    |  |             |     |                        |     |   |       |  
|Long-term capitalized lease
obligations             |  | $           | 274 |                        |     |   |       |  
|                                                    |  |             |     |                        |     |   |       |  

(11) Related Party Transactions

The Company has a management services agreement with Renco under which
Renco provides certain management services to the Company. Under terms of this
agreement, the Company is charged a monthly fee of $100,000. The term of this
agreement extends to October 31, 2004. Total expense for management services
fees amounted to $1,200,000 for each of the years ended October 31, 2001, 2000
and 1999.

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

34



---



##### Table of Contents



Renco programs are property, business interruption, general, product and auto
liability, workers compensation (other than Ohio for which the Company is self
insured) and casualty umbrella.

In fiscal 2001, 2000 and 1999, the Company incurred costs of approximately
$2.3 million, $2.0 million and $1.7 million, respectively, under the Renco
insurance program. Costs incurred under the Renco insurance program for 2002
are estimated to be $6.3 million due in part to severe capacity constraints and
excessive price increases by both property insurers and reinsurers following
the September 2001 terrorist attacks.

During 2001, the
Company purchased approximately $4.5 million of zinc and other alloys
from Doe Run Peru S.R. Ltd., an indirect subsidiary of Renco. The
Company believes that such purchases were on an arm's length basis at
a price no less favorable than at which the Company could obtain from
unaffiliated entities. Also during 2001, the Company sold
approximately $0.4 million of flat rolled steel products on an
arm's length basis to UNARCO Material Handling Inc., a direct
subsidiary of Renco.

Renco Steel is a holding company formed by Renco in January 1998, which
owns all the outstanding shares of capital stock of the Company. In February
1998, Renco Steel issued $120 million principal amount 10.875% Senior Secured
Notes due 2005. These notes are secured by a pledge of all the outstanding
capital stock of the Company. Historically, Renco Steel has met its debt
service obligations from its cash balances and earnings thereon, through
distributions from the Company as permitted under the Companys outstanding
indebtedness as described in Note 4 and from cash infusions from Renco. The
Company does not expect to be permitted to pay dividends for the foreseeable
future.

(12) Commitments and Contingencies

At October 31, 2001, the Company had commitments to purchase data
processing services of approximately $8,545,000 in the aggregate over the
remaining 18 months of its management information systems agreement and
purchased services of approximately $5,594,000, $5,496,000 and $5,578,000 in
2001, 2000 and 1999, respectively, under the agreement.

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

At October 31, 2001, at pricing then in effect, the Company had firm
commitments for the purchase of raw materials and gases of approximately
$38,467,000 in 2002, $9,435,000 in 2003, $5,426,000 in 2004, $5,426,000 in
2005, $5,426,000 in 2006 and $56,975,000 thereafter. In addition, at October
31, 2001 the Company had commitments for capital expenditures of approximately
$4,329,000.

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

The Company is subject to a consent decree as a result of a civil action
instituted by the Department of Justice (DOJ), on behalf of the Environmental
Protection Agency (EPA). The consent decree requires the Company to complete
certain supplemental environmental projects estimated to cost between $2.1
million and $2.5 million that will be expended by late 2002. These projects
include sediment removal from the Mahoning River at an estimated remaining cost
of $0.9 million and the installation of a liner for a surface impoundment
estimated to cost $1.5 million. The consent decree also

35



---



##### Table of Contents



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

As a condition of a previous Resource Conservation and Recovery Act (RCRA)
operating permit, the Company is required to undertake a corrective action
program with respect to historical material handling practices at the Warren
facility. The Company has completed the initial phase of the first
investigation step of the corrective action program, the RCRA Facility
Investigation (RFI), and has submitted its report to the EPA. The Company and
the EPA agreed that additional sampling would be required to complete a full
RFI which is expected to be completed by the end of 2003. The RFI workplan
identifies thirteen historical solid waste management units to be investigated.
The final scope of corrective action required to remediate any contamination
that may be present at or emanating from the Warren facility is dependent upon
the completion and findings of the RFI and the development and approval of a
corrective action program. Accordingly, the Company is unable at this time to
estimate the final cost of the corrective action program or the period over
which such costs may be incurred and there can be no assurance that any such
corrective action program would not have a material adverse effect on the
operating results or financial condition of the Company.

On January 23, 1996, two retired employees instituted an action against
the Company and the United Steelworkers of America (USWA) in the United States
District Court for the Northern District of Ohio alleging in substance that
certain distributions made by the Company to employees and benefit plans
violated certain agreements, the Employee Retirement Income Security Act
(ERISA), the National Labor Relations Act (NLRA) 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 filed an appeal
regarding the courts decision to dismiss, which was heard in June 1998. In
March 1999, the appellate court upheld the dismissal of the claims under ERISA
and common law, but reversed the dismissal of the NLRA claim and remanded to
the district court for further proceedings. On October 9, 2000 the court
granted the Companys motion to dismiss this action and entered judgement in
favor of the Company and the USWA. The plaintiffs filed an appeal regarding
the courts decision to dismiss. All briefs have been filed in the Federal
Appeals Court but no decision has yet been rendered.

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

(13) Other Matters

LTV Corporation (LTV) filed for reorganization under Chapter 11 of the
United States Bankruptcy Code on December 29, 2000. WCI supplies steam to an
LTV Steel Company coke plant adjacent to WCIs facility in Warren, Ohio. As a
result of the filing, WCI recorded a charge of $2.1 million in the first fiscal
quarter of 2001 to reduce the amounts due from LTV to estimated net realizable
value (included in Selling, general and administrative expense). The coke plant is currently idle and is expected to be permanently
idled by the end of January 2002 unless the plant is purchased by a third
party. If the plant had been permanently idled on November 1, 2000,
WCIs net loss in 2001 would have increased by approximately $5 million.

36



---



##### Table of Contents



(14) Unusual Charges

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

On September 7, 2000 WCI entered into a non-binding letter of intent with
Acme Steel Company (Acme Steel) and Acme Metals Incorporated (Acme Metals),
pursuant to which WCI would acquire substantially all of Acme Steels assets
and assume certain liabilities. Acme Steel, Acme Metals and certain of their
affiliates were debtors in a Chapter 11 case pending before the United States
Bankruptcy Court for the District of Delaware at that time. Due to the
depressed condition of the steel industry and, as a result, Acme Steels
failure to meet certain conditions in the letter of intent, WCI chose not to
consummate the acquisition of assets under the terms of the letter of intent.
Because of the poor performance of Acme Metals and the effect on the underlying
value of its assets at that time, WCI recorded a charge of $10.5 million
during the quarter ended January 31, 2001 to write down the carrying value of
Acme Metals 10.875% Senior Unsecured Notes owned by WCI (included in
Interest and other (expense), net).

WCI continued its efforts to attempt to acquire these assets into the
fourth quarter of fiscal 2001, but was unsuccessful. Accordingly, during the
fourth quarter of fiscal 2001, WCI recorded a charge of $1.7 million to
expense certain accumulated acquisition related costs (included in
Unusual charges).

(15) Selected Quarterly Data (Unaudited)

The following is a summary of unaudited quarterly results for the years
ended October 31, 2001 and 2000:

|                    |  |                         |         |          |  |         |         |            |  |   |         |   |  |   |         |  
|------------------- |  | ----------------------- | ------- | -------- |  | ------- | ------- | ---------- |  | - | ------- | - |  | - | ------- | -
|                    |  | Three Months Ended 2001
|                    |  |                        
|                    |  | January 31              |         | April 30 |  | July 31 |         | October 31
|                    |  |                         |         |          |  |         |         |           
|                    |  | (Dollars in thousands) 
|Net sales           |  | $                       | 98,191  |          |  | $       | 99,268  |            |  | $ | 109,988 |   |  | $ | 105,661 |  
|                   
|                   
|                   
|                   
|Gross margin (loss) |  |                         | (3,849  | )        |  |         | (1,758  | )          |  |   | (2,839  | ) |  |   | (9,438  | )
|                   
|                   
|                   
|                   
|Net income (loss)   |  |                         | (32,510 | )        |  |         | (22,208 | )          |  |   | (18,730 | ) |  |   | (27,357 | )

|                    |  |                         |         |          |  |         |         |            |  |   |         |  |  |   |         |  
|------------------- |  | ----------------------- | ------- | -------- |  | ------- | ------- | ---------- |  | - | ------- |  |  | - | ------- | -
|                    |  | Three Months Ended 2000
|                    |  |                        
|                    |  | January 31              |         | April 30 |  | July 31 |         | October 31
|                    |  |                         |         |          |  |         |         |           
|                    |  | (Dollars in thousands) 
|Net sales           |  | $                       | 141,212 |          |  | $       | 156,149 |            |  | $ | 140,726 |  |  | $ | 122,602 |  
|                   
|                   
|                   
|                   
|Gross margin (loss) |  |                         | 22,032  |          |  |         | 24,941  |            |  |   | 18,468  |  |  |   | 7,771   |  
|                   
|                   
|                   
|                   
|Net income (loss)   |  |                         | 7,586   |          |  |         | 8,022   |            |  |   | 2,400   |  |  |   | (7,706  | )

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

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

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##### Table of Contents



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

During the three months ended October 31, 2001 and 2000 the Company
recorded inventory valuation charges totaling $2,605,000 and $1,189,000,
respectively.

During the three months ended January 31, 2000, the Company recorded a
gain of $2,842,000 as a result of an agreement with the USWA, which permitted
the Company to pay certain medical benefits from assets in a trust previously
restricted for other benefits.

(16) Other Financial Matters (Unaudited)

WCI incurred a loss of $100.8 million in 2001 with its cash balance
decreasing by $57.2 million to $32.2 million at October 31, 2001. As of December 31, 2001 cash and availability under the Revolver
totaled $45.9 million after deducting a $25 million minimum availability
requirement.

Shipments during the first quarter of 2002 are expected to be
approximately 245,000 tons, or 14% lower than the fourth quarter of 2001. Net
sales per ton are expected to be approximately $367 in the first quarter 2002
and cost of products sold per ton is expected to be flat in the first quarter
2002 compared to the fourth quarter 2001. As a result, the Company expects its
net loss in the first quarter 2002 to approximate that of the fourth quarter
2001, excluding unusual charges.

WCI has experienced a significant increase in its order intake rate and
backlog during December 2001 and January 2002 which has resulted from the
expectation of lower imports due to the pending Section 201 investigation, the
recent closure of a competitor, a conclusion to inventory reductions by
customers and the beginning of an economic recovery. With the increasing order
entry rate and backlog, the Company and most other flat rolled steel producers
announced price increases effective February 2002 of $20 per ton on hot-rolled
products and effective March 2002 an additional $10 per ton on hot-rolled
products and $20 per ton on cold-rolled products. Due to these factors, the
Company expects shipping volume in the second quarter 2002 to increase
approximately 25% to 310,000 tons compared to the first quarter 2002 with net
sales per ton shipped increasing to $381. WCI expects further increases in
shipping volume and sales prices through the second half of fiscal 2002 as the
steel market and economy continue to recover. Based only on sustaining the
expected second quarter 2002 net sales per ton price of $381 and shipping
volume of 310,000 tons over the last two quarters of 2002, WCI would incur a
significant net loss during fiscal 2002 for which WCI believes it has adequate availability of cash
resources to maintain operations through at least fiscal
2002. However, if the volume or price increases expected to be
realized during the second quarter of fiscal 2002 are not sustained for the
balance of fiscal 2002, it is likely that WCI will not have adequate
availability under its existing financing arrangements and will require
additional sources of financing. WCI cannot assure that it has the ability to
obtain such additional financing, or what the terms of any additional financing
might be. Failure to obtain additional financing in these circumstances would
likely have a material adverse effect on WCIs operations. For periods beyond
fiscal 2002, further price and volume improvements over those
expected in fiscal 2002 will be necessary for the
Company to have sufficient cash resources to maintain its operations.

38



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INDEPENDENT AUDITORS REPORT

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

We have audited the accompanying consolidated balance sheets of WCI Steel,
Inc. and subsidiaries (a wholly owned subsidiary of Renco Steel Holdings, Inc.)
as of October 31, 2001 and 2000, and the related consolidated statements of
operations, shareholders equity (deficit), and cash flows for each of the
years in the three-year period ended October 31, 2001. These consolidated
financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of WCI Steel,
Inc. and subsidiaries as of October 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the years in the three-year period
ended October 31, 2001, in conformity with accounting principles generally
accepted in the United States of America.

/S/ KPMG LLP

KPMG LLP

Cleveland, Ohio
November 30, 2001,
Except as to Note 4 which is as of
January 25, 2002

39



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##### Table of Contents






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

None.

40



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##### Table of Contents






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  |  |     | 67 |          |  | Chairman of the Board and Director                  
|                 
|                 
|                 
|                 
|Edward R. Caine   |  |     | 63 |          |  | President and Chief Executive Officer               
|                 
|                 
|                 
|                 
|Patrick G. Tatom  |  |     | 51 |          |  | Executive Vice President and Chief Operating Officer
|                 
|                 
|                 
|                 
|David A. Howard   |  |     | 42 |          |  | Vice President, Commercial                          
|                 
|                 
|                 
|                 
|John P. Jacunski  |  |     | 36 |          |  | Vice President, Finance and Chief Financial Officer 
|                 
|                 
|                 
|                 
|Patrick T. Kenney |  |     | 61 |          |  | Vice President, Operations                          
|                 
|                 
|                 
|                 
|Brian J. Mitchell |  |     | 57 |          |  | Vice President, Environmental and Engineering       

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

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

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

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

41



---



##### Table of Contents



Patrick T. Kenney served as Vice President, Operations from June 1994
until his retirement effective January 2002 and, prior to that, as General
Superintendent of Finishing Operations of WCI since its inception.

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

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

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

42



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##### Table of Contents






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 2001, 2000 and 1999:

|                     |                                       |      |        |        |  |       |                            |             |                        |                  |         |         |      |   |           |         |  |   |           |           | 
|-------------------- | ------------------------------------- | ---- | ------ | ------ |  | ----- | -------------------------- | ----------- | ---------------------- | ---------------- | ------- | ------- | ---- | - | --------- | ------- |  | - | --------- | --------- | 
|                     |                                       |      |        |        |  |       | Summary Compensation Table
|                     |                                       |      |        |        |  |       |                           
|                     |                                       |      |        |        |  |       | Annual Compensation (1)    |             | Long Term Compensation
|                     |                                       |      |        |        |  |       |                            |             |                       
|                     |                                       |      | Fiscal |        |  |       |                            |             |                        |                  |         |         | LTIP |   | All Other
|Name and Position    |                                       | Year |        | Salary |  | Bonus |                            | Payouts (2) |                        | Compensation (3)
|                     |                                       |      |        |        |  |       |                            |             |                        |                 
|Ira Leon Rennert (4) |                                       |      | 2001   |        |  |       |                           |             |                        |                  |        |         |      |   |          |         |  | $ | 1,200,000 |          
|                    
|                    
|                    
|                    
|                     | Chairman of the Board                 |      |        | 2000   |  |       |                            |            |                        |                  |         |        |      |   |           |        |  |   |           | 1,200,000 | 
|                    
|                    
|                    
|                    
|                     |                                       |      | 1999   |        |  |       |                           |             |                        |                  |        |         |      |   |          |         |  |   | 1,200,000 |          
|                    
|                    
|                    
|                    
|Edward R. Caine      |                                       |      | 2001   |        |  | $     | 366,629                    |             |                        | $                |        |         |      | $ | 98,307    |         |  | $ | 24,500    |          
|                    
|                    
|                    
|                    
|                     | President and Chief Executive Officer |      |        | 2000   |  |       |                            | 261,883     |                        |                  |         | 100,000 |      |   |           | 378,200 |  |   |           | 19,500    | 
|                    
|                    
|                    
|                    
|                     |                                       |      | 1999   |        |  |       | 261,425                    |             |                        |                  | 100,000 |         |      |   | 107,500   |         |  |   | 20,000    |          
|                    
|                    
|                    
|                    
|Patrick G. Tatom     |                                       |      | 2001   |        |  | $     | 200,569                    |             |                        | $                |        |         |      | $ |          |         |  | $ | 20,901    |          
|                    
|                    
|                    
|                    
|                     | Executive Vice President              |      |        | 2000   |  |       |                            | 146,792     |                        |                  |         | 50,000  |      |   |           | 151,280 |  |   |           | 14,103    | 
|                    
|                    
|                    
|                    
|                     |                                       |      | 1999   |        |  |       | 131,067                    |             |                        |                  | 50,000  |         |      |   | 43,000    |         |  |   | 12,501    |          
|                    
|                    
|                    
|                    
|Dave A. Howard       |                                       |      | 2001   |        |  | $     | 182,796                    |             |                        | $                |        |         |      | $ |          |         |  | $ | 15,223    |          
|                    
|                    
|                    
|                    
|                     | Vice President, Commercial            |      |        | 2000   |  |       |                            | 130,498     |                        |                  |         | 50,000  |      |   |           | 151,280 |  |   |           | 10,938    | 
|                    
|                    
|                    
|                    
|                     |                                       |      | 1999   |        |  |       | 114,551                    |             |                        |                  | 40,000  |         |      |   | 21,500    |         |  |   | 8,253     |          
|                    
|                    
|                    
|                    
|John P. Jacunski     |                                       |      | 2001   |        |  | $     | 178,319                    |             |                        | $                |        |         |      | $ |          |         |  | $ | 12,761    |          
|                    
|                    
|                    
|                    
|                     | Vice President, Finance and Chief     |      |        | 2000   |  |       |                            | 127,317     |                        |                  |         | 50,000  |      |   |           | 151,280 |  |   |           | 7,813     | 
|                    
|                    
|                    
|                    
|                     | Financial Officer                     |      |        | 1999   |  |       |                            | 106,961     |                        |                  |         | 27,908  |      |   |           | 2,213   |  |   |           | 6,564     | 
|                    
|                    
|                    
|                    
|Patrick T. Kenney    |                                       |      | 2001   |        |  | $     | 198,741                    |             |                        | $                |        |         |      | $ |          |         |  | $ | 27,009    |          
|                    
|                    
|                    
|                    
|                     | Vice President, Operations            |      |        | 2000   |  |       |                            | 143,168     |                        |                  |         | 50,000  |      |   |           | 151,280 |  |   |           | 17,720    | 
|                    
|                    
|                    
|                    
|                     |                                       |      | 1999   |        |  |       | 132,567                    |             |                        |                  | 50,000  |         |      |   | 43,000    |         |  |   | 16,413    |          



---

|(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 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.                                                                                                                                                                                                               
|   
|   
|   
|   
|(3) |  | The other compensation shown, except for Mr. Rennert for all periods (See note 4), consists of WCI contributions
to a defined contribution pension plan.                                                                                                                                                                                                                                                                       
|   
|   
|   
|   
|(4) |  | Mr. Rennert receives no compensation directly from WCI. He is Chairman of the Board and the principal
stockholder of Renco which receives a management fee from WCI pursuant to a Management Consultant Agreement.
The amounts shown as all other compensation to Mr. Rennert are the management fees paid by WCI to Renco
for each fiscal year. See Security Ownership and Certain
Relationships and Related Transactions.

Net Worth Appreciation Agreements

The named executive officers (with the exception of Mr. Rennert) and one
other individual are each parties to Net Worth Appreciation Agreements with the
Company, pursuant to which each earns as deferred compensation a fixed
percentage, ranging from 1.25% to 5%, of cumulative net income, as defined,
during the term of their employment as executive officers (excluding the period
from August 1, 2001 to October 31, 2002). Assuming all of the Companys named
executive officers had retired at October 31, 2001 and their respective maximum
percentage had vested, an aggregate of $3,851,000 would have been payable to
such executive officers pursuant to the Net Worth Appreciation Agreements.

43



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##### Table of Contents



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.

44



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##### Table of Contents






ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of December 15, 2001
regarding the beneficial ownership of Common Stock by each beneficial owner of
5% or more of the Common Stock, each director and each named executive officer
of the Company during the last fiscal year, and by all directors and executive
officers of the Company as a group. Except as otherwise noted, and subject to
certain terms and conditions in the Renco Steel indenture and the related
pledge agreement, the persons named in the table below have sole voting and
investment power with respect to all shares shown as beneficially owned by
them.

Beneficial Ownership
as of December 15, 2001

|                                                |  |              |     |         |  |  |       |  
|----------------------------------------------- |  | ------------ | --- | ------- |  |  | ----- | -
|Name of Beneficial Owners and Address           |  | Shares of    |     |         |  | 
|of 5% Beneficial Owners                         |  | Common Stock |     | Percent
|                                                |  |              |     |        
|Renco Steel Holdings, Inc                       |  |              | 100 |         |  |  | 100.0 | %
|                                               
|                                               
|                                               
|                                               
|1040 Pine Avenue, S.E                           |  |              |     |         |  |  |       |  
|                                               
|                                               
|                                               
|                                               
|Warren, OH 44483                                |  |              |     |         |  |  |       |  
|                                               
|                                               
|                                               
|                                               
|                                               
|The Renco Group, Inc.(1)                        |  |              | 100 |         |  |  | 100.0 | %
|                                               
|                                               
|                                               
|                                               
|30 Rockefeller Plaza, Suite 4225                |  |              |     |         |  |  |       |  
|                                               
|                                               
|                                               
|                                               
|New York, NY 10112                              |  |              |     |         |  |  |       |  
|                                               
|                                               
|                                               
|                                               
|                                               
|Ira Leon Rennert (1)                            |  |              | 100 |         |  |  | 100.0 | %
|                                               
|                                               
|                                               
|                                               
|c/o The Renco Group, Inc.                       |  |              |     |         |  |  |       |  
|                                               
|                                               
|                                               
|                                               
|30 Rockefeller Plaza, Suite 4225                |  |              |     |         |  |  |       |  
|                                               
|                                               
|                                               
|                                               
|New York, NY 10112                              |  |              |     |         |  |  |       |  
|                                               
|                                               
|                                               
|                                               
|                                               
|All directors and executive officers as a group |  |              | 100 |         |  |  | 100.0 | %
|                                               
|                                               
|                                               
|                                               
|(7 persons)                                     |  |              |     |         |  |  |       |  



---

|(1) |  | Renco is deemed to beneficially own the Common Stock of the Company owned
by Renco Steel due to the ownership by Renco of all the outstanding shares
of Common Stock of Renco Steel, and Mr. Rennert is deemed to beneficially
own the Common Stock of the Company deemed owned by Renco due to the
ownership through trusts established by him for himself and members of his
family of all of the outstanding Common Stock of Renco.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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##### Table of Contents






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, 2004 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, 2001, 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.

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

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

In fiscal 2001, 2000 and 1999, the Company incurred costs of approximately
$2.3 million, $2.0 million and $1.7 million, respectively, under the Renco
insurance program. Costs incurred under the

46



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##### Table of Contents



Renco insurance program for 2002
are estimated to be $6.3 million due in part to severe capacity constraints and
excessive price increases by both property insurers and reinsurers following
the September 2001 terrorist attacks.

During 2001, the Company purchased approximately $4.5 million of zinc and
other alloys from Doe Run Peru S.R. Ltd., an indirect subsidiary of Renco. The
Company believes that such purchases were on an arms length basis at a price
no less favorable than at which the Company could obtain from unaffiliated
entities. Also during 2001, the Company sold approximately $0.4 million of
flat rolled steel products on an arms length basis to UNARCO Material Handling
Inc., a direct subsidiary of Renco.

47



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##### Table of Contents






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 November 30,
2001, except as to Note 4 which is as of January 25, 2002 are
included in this report for ITEM 8. and is incorporated by reference herein.

| |  |                                                                                                                      
| |  | ---------------------------------------------------------------------------------------------------------------------
| |  | Consolidated Statements of Operations for the fiscal years ended October 31,
2001, 2000 and 1999.                    
|
|
|
|
|
| |  | Consolidated Statements of Shareholders Equity (Deficit) for the fiscal
years ended October 31, 2001, 2000 and 1999.
|
|
|
|
|
| |  | Consolidated Statements of Cash Flows for the fiscal years ended October 31,
2001, 2000 and 1999.                    
|
|
|
|
|
| |  | 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.

| |  |      
| |  | -----
| |  | None.

48



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##### Table of Contents



INDEPENDENT AUDITORS REPORT ON FINANCIAL STATEMENT SCHEDULE




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

Under date of
November 30, 2001, except as to Note 4 which is as of
January 25, 2002 we reported on the consolidated balance
sheets of WCI Steel, Inc. and subsidiaries as of October 31, 2001 and 2000, and
the related consolidated statements of operations, shareholders equity
(deficit), and cash flows for each of the years in the three-year period ended
October 31, 2001, 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 LLP

KPMG LLP

Cleveland, Ohio
November 30, 2001

49



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##### Table of Contents



WCI STEEL, INC. AND SUBSIDIARIES
SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
Allowance for Doubtful Accounts
For the Years Ended October 31, 2001, 2000, and 1999.
(Dollars in Thousands)

|                                     |  |            |     |             |  |            |       |                |  |            |   |     |  |  |     |   |  |   |       | 
|------------------------------------ |  | ---------- | --- | ----------- |  | ---------- | ----- | -------------- |  | ---------- | - | --- |  |  | --- | - |  | - | ----- | 
|                                     |  |            |     |             |  | Additions  |       |                |  |            |   |     |  | 
|                                     |  | Balance at |     |             |  |            |       |                |  | Balance at
|                                     |  | Beginning  |     | Charged to  |  | Charges to |       |                |  |            |   | End
|CLASSIFICATION                       |  | of Year    |     | Expense (b) |  | Other      |       | Deductions (c) |  | of Year   
|                                     |  |            |     |             |  |            |       |                |  |           
|ALLOWANCE FOR DOUBTFUL ACCOUNTS (a): |  |            |     |             |  |            |       |                |  |            |   |     |  |  |     |   |  |   |       | 
|                                    
|                                    
|                                    
|                                    
|Year ended October 31, 2001          |  | $          | 750 |             |  |            | 2,603 |                |  |            |  |     |  |  | 253 |   |  | $ | 3,100 | 
|                                    
|                                    
|                                    
|                                    
|Year ended October 31, 2000          |  |            | 874 |             |  |            | 37    |                |  |            |  |     |  |  | 161 |   |  |   | 750   | 
|                                    
|                                    
|                                    
|                                    
|Year ended October 31, 1999          |  |            | 904 |             |  |            | (84   | )              |  |            |  |     |  |  | (54 | ) |  |   | 874   | 



---

|(a) |  | Allowance for doubtful accounts is shown as a reduction of accounts receivable in the
Companys Consolidated Financial Statements.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(b) |  | Charges (credits) to expense for the provision for doubtful accounts.                                                             
|   
|   
|   
|   
|(c) |  | Net of trade receivables written-off and recoveries of prior year writeoffs.                                                      

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##### Table of Contents






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 29th day of
January 2002.

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 29th day of January 2002.

|    |  |                                                    
|--- |  | ---------------------------------------------------
|/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/ |  | JOHN P. JACUNSKI                                   
|   
|    |  | John P. Jacunski                                   
|   
|   
|   
|   
|    |  | Vice President, Finance and Chief Financial Officer
|   
|   
|   
|   
|    |  | (principal financial and accounting officer)       

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

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

51



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##### Table of Contents






Exhibit Index

|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|NO.            |  | DESCRIPTION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|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.(4)                                                                                                                                                                                                                                                                                                                                       
|              
|              
|              
|              
|3.2            |  | Code of Regulations of the Registrant, as amended December
16, 1996.(5)                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|              
|              
|              
|              
|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).(2)                                     
|              
|              
|              
|              
|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).(2)
|              
|              
|              
|              
|4.1.2          |  | Second Supplemental Indenture to the indenture, dated as of
November 27, 1996, among WCI Steel, Inc., as issuer, and
Fleet National Bank (formerly known as Shawmut Bank
Connecticut, National Association) 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).(5)                                                                               
|              
|              
|              
|              
|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).(5)                                                                                                                                                            
|              
|              
|              
|              
|10.1 to 10.2.8 |  | [Intentionally Omitted]                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|              
|              
|              
|              
|10.2.9         |  | Net Worth Appreciation Agreement, effective June 1, 1999,
between the Registrant and John P. Jacunski. (7)                                                                                                                                                                                                                                                                                                                                                                                                                      
|              
|              
|              
|              
|10.2.10        |  | Amended and Restated Net Worth Appreciation Participation
Agreement, as of January 15, 1999, Between the Registrant
and Edward R. Caine.(9)                                                                                                                                                                                                                                                                                                                                                                                     
|              
|              
|              
|              
|10.2.11        |  | Amended and Restated Net Worth Appreciation Participation
Agreement, as of January 15, 1999, Between the Registrant
and Patrick G. Tatom.(9)                                                                                                                                                                                                                                                                                                                                                                                    
|              
|              
|              
|              
|10.2.12        |  | Amended and Restated Net Worth Appreciation Participation
Agreement, as of January 15, 1999, Between the Registrant
and Patrick T. Kenney.(9)                                                                                                                                                                                                                                                                                                                                                                                   
|              
|              
|              
|              
|10.2.13        |  | Amended and Restated Net Worth Appreciation Participation
Agreement, as of January 15, 1999, Between the Registrant
and Brian J. Mitchell.(9)                                                                                                                                                                                                                                                                                                                                                                                   
|              
|              
|              
|              
|10.2.14        |  | Amended and Restated Net Worth Appreciation Participation
Agreement, as of January 15, 1999, Between the Registrant
and David A. Howard.(9)                                                                                                                                                                                                                                                                                                                                                                                     
|              
|              
|              
|              
|10.2.15        |  | Amendment to Net Worth Appreciation Participation
Agreements, as of August 1, 2000, between Participants and
Registrant.                                                                                                                                                                                                                                                                                                                                                                                                        

52



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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                         
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT |  |                                                                                                                                                                                                                                                         
|NO.     |  | DESCRIPTION                                                                                                                                                                                                                                             
|        |  |                                                                                                                                                                                                                                                         
|       
|       
|       
|       
|10.2.16 |  | Amendment to Net Worth Appreciation Participation
Agreements, as of November 1, 2001, between Participants
and Registrant.                                                                                                                              
|       
|       
|       
|       
|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.(3)                                                                                                                                                                           
|       
|       
|       
|       
|10.4.11 |  | Intercreditor Agreement, dated November 27, 1996, between
Fleet National Bank and Congress Financial Corporation.(5)                                                                                                                                    
|       
|       
|       
|       
|10.4.12 |  | Second Amended and Restated Loan and Security Agreement
between Registrant, its subsidiaries and Congress Financial
Corporation dated July 30, 1999.(8)                                                                                                 
|       
|       
|       
|       
|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. (6)
|       
|       
|       
|       
|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. (6)              
|       
|       
|       
|       
|10.4.15 |  | Amendment No. 1 dated April 30, 2001 to the Second Amended
and Restated Loan and Security Agreement dated July 30,
1999. (10)                                                                                                                           
|       
|       
|       
|       
|10.4.16 |  | Amendment No. 2 dated January 25, 2002 to the Second
Amended and Restated Loan and Security Agreement dated July
30, 1999.                                                                                                                              
|       
|       
|       
|       
|10.5.1  |  | Intercreditor Agreement, dated November 27, 1996, among
Fleet National Bank, Bank One Trust Company, N.A. and the
Registrant.(5)                                                                                                                        
|       
|       
|       
|       
|10.5.2  |  | Indemnification Agreement, dated as of November 27, 1996,
between the Registrant and Bank One Trust Company, N.A. (5)                                                                                                                                   
|       
|       
|       
|       
|10.8    |  | Agreement, dated June 11, 1990, between the City of
Youngstown, Ohio and Youngstown Sinter Company (with UDAG
Grant Agreement).(1)                                                                                                                      
|       
|       
|       
|       
|21      |  | List of Subsidiaries of Registrant.(6)                                                                                                                                                                                                                  



---

|(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 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.                           
|   
|   
|   
|   
|(3) |  | 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.
|   
|   
|   
|   
|(4) |  | Incorporated by reference to the Companys Form 10-K for the fiscal
year ended October 31, 1994 (File No. 1-13028).                                                                                              
|   
|   
|   
|   
|(5) |  | Incorporated by reference to same-numbered exhibit filed with the
Companys                                                                                                                                      

53



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##### Table of Contents



|     |  | Registration Statement on Form S-4, as amended (File No.
333-18019), originally filed with the Commission on December 17, 1996.
|---- |  | -------------------------------------------------------------------------------------------------------------------------------
|    
|    
|    
|    
|(6)  |  | Incorporated by reference to the Companys Form 10-K for the fiscal
year ended October 31, 1997 (File No. 333-18019).          
|    
|    
|    
|    
|(7)  |  | Incorporated by reference to the Companys Form 10-K for the fiscal
year ended October 31, 1999 (File No. 333-18019).          
|    
|    
|    
|    
|(8)  |  | Incorporated by reference to the Companys Form 10-Q for the quarterly
period ended July 31, 1999.                             
|    
|    
|    
|    
|(9)  |  | Incorporated by reference to the Companys Form 10-Q for the quarterly
period ended April 30, 2000.                            
|    
|    
|    
|    
|(10) |  | Incorporated by reference to the Companys Form 10-Q for the quarterly
period ended April 30, 2001.                            

54