RENCO STEEL HOLDINGS INC, 10-K405, 2000-01-21

RENCO STEEL HOLDINGS INC
10-K405, 2000-01-21
STEEL WORKS, BLAST FURNACES & ROLLING MILLS (COKE OVENS)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

/ X / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1999.

/ / 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: 333-48245
---------
RENCO STEEL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)

OHIO 34-1854775
(State of incorporation) (I.R.S. Employer Identification No.)

1040 PINE AVE., S.E., WARREN, OHIO 44483-6528
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (330) 399-6884

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

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

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

None.

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

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

The aggregate market value of the voting stock of the registrant held by
non-affiliates of the registrant at January 21, 2000 was $0.

The number of shares of Common Stock (no par value, $.01 stated value) of the
registrant outstanding as of January 21, 2000 was 100.

DOCUMENTS INCORPORATED BY REFERENCE

None.

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<PAGE>

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

------------------------------------------

<S> <C> <C>
PART I Page No.

- ------------------------------------------------------------------
Item 1. Business 3

Item 2. Properties 11

Item 3. Legal Proceedings 11

Item 4. Submission of Matters to a Vote of Security Holders 11

PART II
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Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 12

Item 6. Selected Financial Data 13

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 of the Company 23

Financial Statements and Supplementary Data of WCI 44

Item 9. Changes in and disagreements with Accountants
on Accounting and Financial Disclosure 62

PART III
- ------------------------------------------------------------------
Item 10. Directors and Executive Officers of the Registrant 62

Item 11. Executive Compensation 63

Item 12. Security Ownership of Certain Beneficial Owners
and Management 63

Item 13. Certain Relationships and Related Transactions 64

PART IV
- ------------------------------------------------------------------
Item 14. Exhibits, Financial Statement Schedule,
and Reports on Form 8-K 66

Financial Statement Schedule
(including Independent Auditors Report on Financial
Statement Schedule) 67

Signatures 69
Exhibit Index 70
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</TABLE>

<PAGE>

PART I

ITEM 1. BUSINESS

GENERAL

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

WCI, a niche oriented integrated producer of value-added, custom steel products,
was incorporated in Ohio in 1988 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 1,212,259 tons in fiscal 1999 and 1,412,490 tons
in fiscal 1998 (77,244 tons of which were semi-finished). Custom flat rolled
products, which include high carbon, alloy, high strength, silicon electrical
and galvanized steel, constituted approximately 65.5% of net tons shipped during
fiscal 1999 and 62.4% during fiscal 1998 (66.0% excluding semi-finished steel
shipments). Major users of WCI products are steel converters, steel service
centers, construction product companies, electrical equipment manufacturers and,
to a lesser extent, automobile and automotive parts manufacturers. Shipping
volume was adversely affected in the first fiscal quarter of 1999 and, to a
lesser extent, the fourth fiscal quarter of 1998 by a significant increase in
imports of foreign produced flat rolled steel. See "Competition" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

PRODUCTS

OVERVIEW

WCI produces a wide range of custom flat rolled steel products, including high
carbon, alloy, high strength, silicon electrical and galvanized steel. WCI's
custom products are characterized by small order quantities, specialized
chemistries, narrow widths and value added processing, with an emphasis on
customer specific quality requirements and delivery performance. WCI's commodity
steel product sales consist principally of hot and cold rolled low carbon sheet
steel. Export sales were approximately 2% of net sales during the last three
fiscal years.

<TABLE>
<CAPTION>
Net Tons Shipped Percent of Total
Fiscal Year Ended Fiscal Year Ended
October 31, October 31,
1999 1998 1997 1999 1998 1997
<S> <C> <C> <C> <C> <C> <C>
Custom Products:
Hot and Cold
Rolled............. 466,076 502,149 481,740 38.4 35.5 36.2
Coated............. 328,129 379,045 416,854 27.1 26.9 31.4
------- ------- ------- ---- ---- ----
Total Custom Products 794,205 881,194 898,594 65.5 62.4 67.6
Total Commodity...... 418,054 531,296 430,337 34.5 37.6 32.4
------- ------- ------- ---- ---- ----
Total Steel
Products........... 1,212,259 1,412,490 1,328,931 100.0% 100.0% 100.0%
========= ========= ========= ===== ===== =====

</TABLE>

<PAGE>

CUSTOM PRODUCTS

High Carbon, Alloy, High Strength---WCI has developed markets for high carbon,
alloy and high strength steel products that are sold to strip converters, steel
service centers, and automobile and automotive parts manufacturers. Products
required by the strip converter customers are characterized by small order
quantities, relatively narrow 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 market, WCI competes with several other domestic
integrated producers, as well as various steel producers in Canada, Europe and
Japan. In the high strength market, WCI competes with several major integrated
producers and minimills.

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

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

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

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

COMMODITY PRODUCTS

In fiscal 1999, WCI shipped 418,054 tons in the aggregate of hot and cold rolled
low carbon, sheet and strip which represented approximately 34.5% of WCI's net
tons shipped. Hot rolled low carbon sheet is sold to steel service centers or
manufacturers producing a broad array of products, including tubing, stampings
and roll formed parts. Cold rolled sheet and strip is purchased by service
centers, container manufacturers, and the automotive and appliance industries.
In these commodity steel markets, WCI competes with all major integrated
producers and several minimills.

<PAGE>

MARKETING

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

WCI Sales is responsible for developing and implementing a sales and marketing
strategy aimed at increasing the sales of custom steel products and building the
strategic customer base. WCI Sales employs a direct sales force covering
approximately 300 active accounts and other potential steel accounts within
WCI's geographic market. Over 50% of WCI Sales' shipments are to customers
within 200 miles of the Warren facility, and as a result of this concentration
of active and potential customers in its service area, WCI Sales believes that
it has a competitive advantage over competitors located farther away.

Sales outside WCI's geographic market are made through independent sales
representatives on a commission basis. Although transportation costs can be
prohibitive at extreme distances from the Warren facility, select custom
products are competitively priced outside WCI Sales normal target markets. WCI
Sales believes that independent sales representatives provide the most cost
effective method to access these customers. Approximately 4.5% of WCI Sales'
volume in fiscal 1999 was sold through the independent sales representatives.

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

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

WCI Production Services provides order entry 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 1999 represented 70.4% of shipments. The remaining shipments
were directly to end users.

<PAGE>

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

<TABLE>
<CAPTION>
Fiscal Year Ended
October 31,
1999 1998 1997
<S> <C> <C> <C>
Customer Category
Conversion/further processing...... 47.4% 47.6% 42.5%
Steel service centers.............. 23.0 24.4 23.3
Construction....................... 13.3 12.1 15.8
Electrical equipment............... 6.1 6.2 7.3
Direct automotive.................. 5.7 4.7 6.3
Other.............................. 4.5 5.0 4.8
------ ------ ------
Total............................ 100.0% 100.0% 100.0%
====== ====== ======

</TABLE>

In fiscal years 1999, 1998 and 1997, WCI's twenty largest customers
represented approximately 59%, 57% and 57%, respectively, of net sales. The
Company's largest customer, Worthington Industries, represented approximately
11.3% of net sales in fiscal 1999. No customer accounted for as much as 10%
of net sales in fiscal 1998 or 1997.

BACKLOG

On October 31, 1999, WCI's order backlog was approximately 283,000 net tons with
an approximate value of $121 million compared to approximately 155,000 net tons
with an approximate value of $76 million at October 31, 1998, 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, 1999 backlog by January
31, 2000. Although customers may cancel orders included in the backlog, such
cancellations have been negligible in the past.

COMPETITION

The domestic steel industry is highly competitive. Despite significant
reductions in raw steel production capacity by major domestic producers in the
1980's and increasing domestic demand in the 1990's, the domestic industry
continues to be adversely affected by excess world capacity.

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

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

<PAGE>

During 1998, the domestic steel market experienced significant increases in
imports of foreign produced flat rolled steel and, while steel imports were
lower in 1999, they remain above historical levels. The relative strength of the
U.S. dollar and economy versus the strength of foreign currencies and economies
can significantly affect the import/export trade balance for flat rolled steel.
In the third calendar quarter of 1998, there was an unprecedented increase in
imports of flat rolled steel which caused significant price decreases in the
domestic steel market. The increase in imported product offerings adversely
affected the supply-demand balance and resulted in a significant reduction in
production levels and shipping volume in late 1998 and early 1999 and continues
to adversely affect prices for domestic producers. Certain domestic steel
producers filed unfair trade cases with the U.S. International Trade Commission
in September 1998 claiming that hot rolled steel, and in June 1999 claiming that
cold rolled steel, was being illegally exported to the United States from
various countries at prices below the producers' cost. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

In addition to competition from domestic and foreign steel producers, materials
such as aluminum, cement, composites, glass and plastics compete as substitutes
for steel in many markets.

MANUFACTURING PROCESS

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

RAW MATERIALS

WCI's steelmaking operations are dependent on reliable supplies of various raw
materials, principally iron ore pellets, coke and energy. WCI believes 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 72.1%
of WCI's iron requirements in fiscal 1999, while WCI's sinter plant provided the
balance. 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

<PAGE>

immediately preceding the winter months, due to the curtailment of vendor
shipments during the winter as a result of the freezing of the Great Lakes.

Coke

Coke is the principal fuel used to produce liquid iron and is an essential
ingredient in steelmaking. WCI has contracts with two integrated steel producers
for its estimated coke requirements through fiscal 2003. WCI's coke requirements
are approximately 600,000 tons per year. The domestic supply of coke has
decreased significantly over the last decade and may decrease further in the
future due to the requirements of the Clean Air Act. As WCI does not own a coke
battery, it is dependent upon commercially available domestic or imported coke
to sustain its operations. Although WCI believes that there will be adequate
supplies of domestic or imported coke available for its purposes after the
expiration of its contracts in 2003, there can be no assurance to such effect.

Energy and Gases

WCI's steel operation consumes large amounts of electricity, natural gas, oxygen
and other industrial gases. WCI purchases its electrical power requirements
under a contract that extends to 2002 from a local utility. WCI can generate
approximately 20% of its own electrical needs. Natural gas is also purchased
pursuant to a supply contract that extends through August 2000. Oxygen is
delivered, under a contract that extends to 2002, from supplier-owned plants
located at the Warren facility. Pursuant to a contract entered into in 1988, WCI
is required to purchase all coke oven gas produced at an adjoining coke plant,
which is usable by WCI, at a price based upon, but at a discount to, natural gas
prices.

ENVIRONMENTAL MATTERS

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

WCI is subject to consent decrees as a result of two civil actions instituted by
the Department of Justice (DOJ) on behalf of the Environmental Protection Agency
(EPA). These consent decrees require WCI to complete certain supplemental
environmental projects estimated to cost between $1.7 million and $2.2 million
that will be expended over two years. The largest of the projects to be
undertaken as part of the settlement involves sediment removal from the Mahoning
River at an estimated cost of $750,000 but not to exceed $1 million. The consent
decrees also provide for stipulated penalties in the event of noncompliance
which WCI does not believe will be material.

<PAGE>

management permit related to WCI's management of alleged hazardous waste in
surface impoundments at the Warren, Ohio facility. The action alleged that from
September 1988 to the present, WCI operated hazardous waste management units at
the Warren facility without the proper permits and not in compliance with RCRA.
This action sought a civil penalty of not more than the statutory maximum of
$25,000 per day per violation ($27,500 per day per violation for violations
since January 30, 1997) and also an injunction requiring closure of the surface
impoundments and other compliance measures under RCRA. A trial in the RCRA
action was completed in June 1999 and the court rendered its decision in October
1999. The court's decision requires WCI to pay a $1 million cash penalty and
denies the United States request for injunctive relief. In November 1999, the
U.S. filed a motion for the court to reconsider its decision regarding
injunctive relief which was denied. The court's decision is subject to appeal.

As a condition of a previous RCRA operating permit, WCI is required to undertake
a corrective action program with respect to historical material handling
practices at the Warren facility. WCI is currently undertaking the first
investigation step of the corrective action program, the RCRA Facility
Investigation (RFI), the initial phase of which is expected to be completed in
2000. 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, WCI is
unable at this time to estimate the final cost of the corrective action program
or the period over which such costs may be incurred and there can be no
assurance that any such corrective action program would not have a material
adverse effect on the operating results or financial condition of WCI.

WCI 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 the present 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 recycling
most of the remaining contents over an extended period at the sinter plant in
Youngstown, Ohio operated by WCI's subsidiary, Youngstown Sinter Company, and
disposing of any non-salable or non-recyclable material in the new lined
landfill. Youngstown Sinter Company is presently exploring modifications to
sulfur dioxide emission regulations applicable to the sinter plant to facilitate
compliance with sulfur dioxide emission limits, as well as allow faster
recycling of the present landfill contents. WCI does not believe that this
matter will result in any material expenditures. The new lined landfill
construction and existing landfill closure, if pursued, is expected to be
completed in seven consecutive phases. The estimated cost through Phase I is
approximately $2.7 million to $3.7 million expended over three years and the
estimated cost for Phase II is approximately $2.0 million expended over two
years. Engineering related to the new landfill is expected to begin during
fiscal 2000.

EMPLOYEES

As of October 31, 1999, WCI had 506 salaried employees and 1,548 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.

<PAGE>

BENEFIT PLANS

Hourly Profit Sharing Plan

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

Salaried Variable Compensation Plan

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

Pension Plans

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

WCI has a defined benefit floor offset pension plan which covers substantially
all hourly employees at the Warren facility. The plan, when combined with
benefits from WCI's defined contribution plan which was frozen effective
September 1, 1999 and benefits from a predecessor company's defined benefit
pension plan, will provide a minimum level of pension benefits for eligible
employees. Benefits are based on age and years of service, but not compensation.
Under this plan, employees will receive upon retirement a monthly benefit equal
to $35 (Benefit Multiplier) times the number of years of service with WCI or its
predecessors. As a result of the collective bargaining agreement effective
September 1, 1999, the Benefit Multiplier will increase to $52.50 for years of
service up to 30 and $70 for years of service in excess of 30 on September 1,
2001 and will further increase to $56.25 and $75, respectively, effective
September 1, 2003. If the employee has at least 30 years of service at
retirement, the monthly benefit is subject to certain minimums based on age at
retirement. No named executive officer is eligible to participate in this plan.

Postretirement Health Care Plans

WCI provides postretirement health care benefits to employees who retire while
meeting certain age and service eligibility requirements. WCI has established a
trust to hold contributions to fund future postretirement health care and life
insurance obligations related to the hourly workforce. This trust holds liens on
certain assets of WCI and one of its subsidiaries to secure WCI's obligation for
postretirement health care benefits. As a result of the collective bargaining
agreement effective September 1, 1999, WCI is permitted to pay current claims up
to $8.5 million from the trust, after which time WCI will be required to pay
claims from corporate assets.

<PAGE>

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 relined
during 1995 as part of its planned maintenance, a procedure which is performed
on a routine basis every six to eight years.

Youngstown Sinter Company, a subsidiary of WCI, owns and operates a sinter plant
located in Youngstown, Ohio on 51 acres. The sinter plant converts plant waste
dusts and iron ore into resources useable in the blast furnace, reducing WCI's
iron ore pellet feed requirements by approximately 27.9% in fiscal 1999.

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

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

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

ITEM 3. LEGAL PROCEEDINGS

On January 23, 1996, two retired employees instituted an action against WCI and
the USWA in the United States District Court for the Northern District of Ohio
alleging in substance that certain distributions made by WCI 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 WCI's motion to dismiss this action and entered
judgement in favor of WCI 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. Plaintiffs have filed an amended complaint seeking,
among other things, unspecified damages, punitive damages and attorney's fees.

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

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

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

No matters were submitted to a vote of security holders during the quarter ended
October 31, 1999.

<PAGE>

PART II

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

Renco Steel is a direct wholly-owned subsidiary of Renco. There is no
established public trading market for Renco Steel's common stock. Since its
inception in January, 1998, Renco Steel has had one shareholder. The Company
paid cash dividends to Renco in fiscal 1998 of $105,300,000, consisting of a
$100,000,000 dividend by Renco Steel in relation to the issuance of $120.0
million 10 7/8% Senior Secured Notes due 2005, (Senior Secured Notes), and a
$5,300,000 dividend by WCI prior to the formation of Renco Steel. Renco Steel
was permitted to pay $3.4 million for dividends at October 31, 1999 under the
terms of the Senior Secured Notes indenture. See Note 4 to the Consolidated
Financial Statements, Part II, Item 8 for limitations on dividends.

<PAGE>

ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>

Fiscal Year Ended October 31,
1995(1) 1996(2) 1997(3) 1998 1999(4)
(Dollars and tons in thousands, except per ton amounts)

<S> <C> <C> <C> <C> <C>
Statement of Income Data:
Net Sales..................... $630,990 $660,801 $668,470 $665,741 $531,669
Cost of products sold......... 544,789 550,609 547,545 560,686 467,905
-------- -------- -------- -------- --------
Gross margin.................. 86,201 110,192 120,925 105,055 63,764
Depreciation and amortization. 21,178 22,547 26,777 28,844 26,939
Selling, general and
administrative expenses...... 19,675 22,067 29,355 17,358 14,836
-------- -------- -------- -------- --------
Operating income.............. 45,348 65,578 64,793 58,853 21,989
Interest expense.............. 25,787 24,968 31,690 42,236 45,674
Interest and other income..... 6,212 6,545 1,239 2,778 11,167
Minority interest............. 2,465 2,944 423 - -
-------- -------- -------- -------- --------
Income (loss) before income
taxes and extraordinary
losses on early retirement
of debt ..................... 23,308 44,211 33,919 19,395 (12,518)
Income taxes.................. 10,313 19,108 13,251 7,755 (21,210)
-------- -------- -------- -------- --------
Income before extraordinary
losses on early retirement
of debt ..................... $ 12,995 $ 25,103 $ 20,668 $ 11,640 $ 8,692
======== ======== ======== ======== ========
Other Operating Data:
Net tons shipped.............. 1,222 1,397 1,329 1,412 1,212
Percent custom products....... 59.4% 57.9% 67.6% 62.4% 65.5%
Average selling price per net
ton shipped.................. $ 516 $ 473 $ 503 $ 471 $ 439
Average cost per net ton
shipped...................... 446 394 412 397 386
Average gross margin per
net ton shipped.............. 71 79 91 74 52
Average operating income per
net ton shipped.............. 37 47 49 42 18

Balance Sheet Data:
Cash and cash equivalents..... - - - 4,957 3,830
Restricted cash, cash
equivalents and short-term
investments.................. 106,548 139,541 18,989 62,195 76,174
Other investments............. - - - 15,774 10,238
Working capital (excluding
cash, cash equivalents and
short term investments)...... 61,881 42,093 67,983 43,423 36,488
Property, plant and
equipment, net............... 189,733 205,121 276,684 266,625 254,416
Total assets.................. 519,159 567,459 532,592 542,800 551,753
Total debt (including current
portion)..................... 213,854 211,506 302,937 421,230 421,176
Shareholder's equity (deficit) 50,030 67,478 (49,129) (142,788) (133,817)

</TABLE>

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

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

<PAGE>

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

(4) Fiscal 1999 statement of income reflects $11.0 million of
production idling costs as a result of start up delays at the
blast furnace after completion of planned maintenance, a gain
of $5.0 million resulting from an agreement with the USWA
permitting WCI to pay certain medical benefits from assets in
a trust previously restricted for other benefits, a benefit of
$7.5 million resulting from the LIFO inventory valuation
method, and an income tax benefit of $21.2 million resulting
from the subchapter S election described in Note 1(i) to the
Consolidated Financial Statements.

<PAGE>

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.

During calendar year 1998, the United States experienced a significant increase
in imports of steel products and in the third calendar quarter of 1998, steel
imports reached record levels and reflected an increase of 56% over the
comparable period of 1997. These imports totaled approximately 30.0% of domestic
demand in calendar year 1998 compared to approximately 23.8% in calendar year
1997. While steel imports have been lower in calendar year 1999, they remain
above historical levels and have totaled approximately 25.9% of domestic demand.
On September 30, 1998, several domestic producers filed unfair trade cases
against Japan, Russia and Brazil seeking anti-dumping duties on hot rolled steel
imports. From April 1999 through July 1999 the U.S. Department of Commerce
announced final antidumping duties and/or entered into agreements to suspend
investigations in the cases against Japan, Russia and Brazil. On June 2, 1999
several domestic producers filed unfair trade cases against twelve countries
concerning imports of cold rolled products. On July 19, 1999, the International
Trade Commission (ITC) issued its preliminary determination that the domestic
industry was being injured or threatened with injury as a result of imports from
all of the countries. In November 1999, the U.S. Department of Commerce followed
the ITC ruling by issuing preliminary antidumping duties in these cases. The
Commerce Department also found critical circumstances with respect to certain
producers and, if upheld in the final investigations, will require that duties
imposed would apply retroactively to 90 days prior to the preliminary
determination.

The unprecedented surge in imports created a supply imbalance in the domestic
steel market and resulted in significant decreases in order intake rates,
production levels and shipping volumes for domestic producers during late 1998
and early 1999, including WCI. The import surge also resulted in significant
decreases in selling prices throughout 1999. WCI believes the pricing
environment is improving and expects to realize a portion of the price increase
announced effective January 1, 2000. However, due to continuing high levels of
imports and the uncertainty created by the imports, no assurance can be given
that such price increases will be sustained.

RESULTS OF OPERATIONS

Fiscal 1999 Compared to Fiscal 1998

Net sales in 1999 were $531.7 million on 1,212,259 tons shipped, representing a
20.1% decrease in net sales and a 14.2% decrease in tons shipped compared to
1998. Shipping volume decreased in 1999 due to the surge of imports in late 1998
which adversely affected shipping volume during the first quarter of 1999 and,
to a lesser extent, the fourth quarter of 1998. In addition, shipments of 77,244
tons of lower value added semi-finished steel were made during 1998. Excluding
semi-finished steel, net sales per ton shipped decreased 9.1% to $439 in 1999
compared to $483 for 1998, primarily as a result of lower selling prices and, to
a lesser extent, changes in product mix. Excluding semi-finished steel, custom
carbon, alloy and electrical steel accounted for 65.5% of shipments in 1999
compared to 66.0% in 1998.

Gross margin (sales less cost of goods sold) was $63.8 million in 1999 compared
to $105.1 million in 1998. The decrease in gross margin reflects

<PAGE>

lower shipping volume and prices discussed above offset somewhat by lower
production costs, raw material prices, and variable compensation expense. In
addition, gross margin was adversely impacted by the low level of operations
during the first quarter of 1999 as a result of the import surge in late 1998.
During the fourth quarter, $11.0 million of excess production costs were
incurred as a result of the idling of much of the facility due to start-up
problems after completion of planned maintenance outage at the blast furnace. A
LIFO inventory valuation benefit of $7.5 million was also recorded in 1999 ($5.7
during the fourth quarter) compared to $2.7 million in 1998 ($0.8 million during
the fourth quarter).

Operating income was $22.0 million, $18 per ton, for 1999 compared to $58.9
million, $42 per ton, for 1998. The decrease in operating income in 1999
reflects the lower gross margin discussed above offset by lower depreciation
expense and a decrease in selling, general and administrative expenses in 1999
primarily due to lower variable compensation expense.

Interest expense was $45.7 million in 1999 compared to $42.2 million in 1998.
The increase was a result of a full year of interest incurred on the Senior
Secured Notes in 1999 compared to nine months incurred in 1998 following the
issuance of the Senior Secured Notes on February 3, 1998. Interest, investment
and other income, net, was $11.2 million in 1999 compared to $2.8 million in
1998. Investment and interest income increased by $3.6 million in 1999 due to a
full year of performance on Renco Steel's investments, other than in WCI (Other
Investments) and higher cash and cash equivalent balances at WCI. During the
fourth quarter of 1999, a gain of $5.0 million was recorded as a result of an
agreement with the United Steelworkers of America which permits WCI to pay
certain medical benefits from assets in a trust previously restricted for other
benefits. This will also result in an additional gain of approximately $2.9
million during the first quarter of fiscal year 2000.

As a result of the items discussed above, the Company recorded a loss before
taxes of $12.5 million in 1999 compared to income of $19.4 million in 1998.
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 and recognized an income tax benefit of $21.2 million during 1999
which includes the elimination of net deferred tax liabilities recorded as of
October 31, 1998.

Fiscal 1998 Compared to Fiscal 1997

Net sales in 1998 were $665.7 million on 1,412,490 tons shipped, representing a
0.4% decrease in net sales and a 6.3% increase in tons shipped compared to 1997.
Shipping volume increased in 1998 due to the shipment of 77,244 tons of lower
value added semi-finished steel compared with 22,642 tons in 1997. Shipments
during the fourth quarter of 1998 were 308,284 tons compared to 341,020 tons in
the comparable period in 1997. Shipments during the fourth quarter of 1998 were
adversely affected by the surge in the amount of flat roll steel exported to the
United States, as addressed above. Excluding semi-finished steel, net sales per
ton shipped decreased 4.7% to $483 in 1998 compared to $507 for 1997, primarily
as a result of lower selling prices and, to a lesser extent, changes in product
mix. Excluding semi-finished steel, custom carbon, alloy and electrical steel
accounted for 66.0% of shipments in 1998 compared to 68.8% in 1997.

Gross margin (sales less cost of goods sold) was $105.1 million in 1998 compared
to $120.9 million in 1997. The decrease in gross margin is primarily
attributable to the lower selling prices discussed above offset

<PAGE>

somewhat by lower production costs, a LIFO inventory benefit and lower variable
compensation expense in 1998.

Operating income was $58.9 million, $42 per ton, for 1998 compared to $64.8
million, $49 per ton for 1997. The operating results for 1997 include $8.6
million of compensation charges related to the debt refinancing and equity
redemption transactions effected in November 1996. Excluding the charges
incurred as a result of these transactions, operating income was $73.4 million
during 1997 or $55 per ton shipped. The decrease in operating income in 1998
reflects the lower gross margin discussed above and higher depreciation charges
as a result of the hot strip mill upgrade substantially completed in late 1997,
offset by a decrease in selling, general and administrative expenses in 1998 as
a result of lower variable compensation and legal expenses.

Interest expense was $42.2 million in 1998 compared to $31.7 million in 1997.
The increase was primarily due to Renco Steel's issuance of the Senior Secured
Notes on February 3, 1998. Interest, investment and other income, net, increased
in 1998 by $1.5 million due to interest earned on significantly higher cash and
cash equivalent balances at WCI, and investment income at Renco Steel.

As a result of the items discussed above, income before extraordinary items was
$11.6 million in 1998 compared to $20.7 million in 1997. During 1997 the Company
recognized an extraordinary loss of $19.6 million, net of income taxes, on the
early retirement of $206.1 million principal amount of 10.5% Senior Notes due
2002 of WCI (Senior Notes of WCI). As a result, the Company had net income of
$1.1 million for 1997.

LIQUIDITY AND CAPITAL RESOURCES

Renco Steel

In February 1998, Renco Steel issued $120.0 million principal amount of Senior
Secured Notes. Interest on the Senior Secured Notes is payable semi-annually in
arrears on February 1, and August 1 of each year.

Renco Steel's liquidity requirements result from its debt service obligations
related to the Senior Secured Notes, as well as to a nominal extent general
corporate overhead. Renco Steel has met these requirements through distributions
from WCI, as permitted under the terms of WCI's outstanding indebtedness. In
addition, Renco Steel has available cash and investment balances of $13.9
million at October 31, 1999. Renco may also make contributions or advances to
Renco Steel to meet its debt services obligations. Renco, however, has no
obligation to do so.

In the preceding year, a source of liquidity for Renco Steel to meet its debt
services obligations was available payments from WCI under a tax sharing
agreement. 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 designated Renco Steel and
WCI as qualified subchapter S subsidiaries. (See Note 1(i) to the Consolidated
Financial Statements Part II, Item 8 and Item 13, "Certain Relationships and
Related Transactions").

As a result of such election, Renco Steel generally will not be receiving income
tax payments from WCI pursuant to the tax sharing agreement. The effect of this
is the loss of cash generated from the tax benefit, if any,

<PAGE>

derived from Renco Steel's interest expense. This may be offset by an increase
in allowable dividends payable by WCI under the terms of WCI's indenture.
Management believes that this change in tax status will not have a material
adverse effect on Renco Steel and its ability to meet its debt service
obligations.

The ability of Renco Steel to meet its debt service obligations is dependent
upon WCI's operating performance and financial results and the performance of
Renco Steel's Other Investments. WCI's operating performance and financial
results will be subject to financial, economic, political, competitive and other
factors affecting WCI, many of which are beyond the Company's control. WCI
generated a profit of $5.9 million in 1999 and paid a dividend to Renco Steel of
$3.0 million. Renco Steel expects to receive dividend distributions from WCI in
2000. WCI's ability to pay dividends to Renco Steel is restricted by the terms
of the indenture governing WCI's 10% Senior Secured Notes due 2004 (Senior
Secured Notes of WCI). At October 31, 1999, WCI had $0.2 million available for
dividends under the terms of the Senior Secured Notes of WCI. Such dividends are
generally limited to 50% of WCI's cumulative earnings since October 31, 1996.
Other than cash available for dividends, WCI's assets may not be utilized by
Renco Steel.

Renco Steel's Other Investments generally consists of investments in limited
partnerships or corporations which invest in a variety of financial assets,
including equity, debt, and derivative securities. Because of the nature of the
underlying investments, Renco Steel's Other Investments are subject to a high
degree of risk, including, but not limited to, credit risk, interest rate risk,
foreign currency exchange rate risk, and equity price risk. Renco Steel does not
have any off balance sheet risk with respect to these investments and thus its
risk is limited to the loss of its investment. Each of the limited partnerships
or corporations in which Renco Steel has invested provide liquidity for
withdrawal within 90 days of notice and accordingly, these investments have been
classified as current assets in the accompanying balance sheet as of October 31,
1999 and 1998. These investments are held for trading purposes and are recorded
at fair market value for financial reporting purposes.

The indenture governing the Senior Secured Notes contains numerous covenants and
prohibitions that limit the financial activities of Renco Steel, including,
among others, limitations on the incurrence of additional indebtedness and
additional liens. The ability of Renco Steel to comply with such covenants will
be dependent upon WCI's future performance.

Dividends

During 1999, Renco Steel did not declare or pay any dividends. Renco Steel does
not expect to pay dividends in 2000. At October 31, 1999, Renco Steel was
permitted to pay $3.4 million for dividends under the terms of the Senior
Secured Notes indenture.

Cash from Operations

Cash provided by the Company's operating activities was $15.9 million for 1999
compared to $69.9 million and $39.6 million for 1998 and 1997, respectively. The
decrease in operating cash flow in 1999 compared to 1998 resulted primarily from
a decrease in income before taxes as described previously and from changes in
working capital.

<PAGE>

WCI

WCI's liquidity requirements result from capital investments, working capital
requirements, postretirement health care and pension funding, interest expense
and, to a lesser extent, principal payments on its indebtedness. WCI has met
these requirements in each fiscal year since 1992 from cash balances and cash
provided by operating activities. WCI's primary sources of liquidity as of
October 31, 1999 consisted of cash and cash equivalents of $76.3 million and
available borrowing under its $100 million revolving credit agreement (WCI
Revolver).

The WCI Revolver has a maximum borrowing limit of $100 million, is secured by
eligible inventories and receivables, as defined therein, and expires on
December 29, 2003. As of October 31, 1999, WCI had no borrowings outstanding
under the WCI Revolver, with a borrowing limit of $91.8 million based on
eligible inventories and receivables, net of $6.1 million in outstanding letters
of credit.

The WCI Revolver and the indenture governing WCI's 10% Senior Secured Notes due
2004 (Senior Secured Notes of WCI) contain numerous covenants and prohibitions
that limit the financial activities of WCI, including requirements that WCI
satisfy certain financial ratios and limitations on the incurrence of additional
indebtedness. The ability of WCI to meet its debt service requirements and to
comply with such covenants will be dependent upon future operating performance
and financial results of WCI, which will be subject to financial, economic,
political, competitive and other factors affecting WCI, many of which are beyond
its control.

Cash from Operations

Cash provided by WCI's operating activities was $28.7 million for 1999 compared
to $74.1 million and $39.6 million for 1998 and 1997, respectively. The decrease
in operating cash flow in 1999 compared to 1998 resulted primarily from a
decrease in income before taxes as described previously and from changes in
working capital.

As of October 31, 1999, at pricing then in effect, WCI had commitments under raw
material supply contracts of approximately $11.9 million for 2000, $12.3 million
for 2001 and $3.0 million thereafter.

Capital Expenditures

Capital expenditures by WCI were $11.4 million, $15.6 million and $39.9 million
during 1999, 1998 and 1997, respectively. Subject to market and business
conditions, capital expenditures are expected to range between $20 million and
$25 million in 2000. The higher level of capital investment in 1997 reflects
expenditures on an upgrade of WCI's hot strip mill and the installation of a new
hydrogen anneal facility. Management has funded WCI's capital expenditures in
1999, 1998 and 1997 through cash balances and cash provided by operating
activities. At October 31, 1999, WCI had commitments for capital expenditures of
approximately $5.9 million.

Dividends

During 1999, WCI paid dividends to Renco Steel of $3.0 million and expects that
further dividends will be declared and paid up to the amount permitted under the
indenture governing the Senior Secured Notes of WCI. As of October 31, 1999,
$0.2 million was available for dividends under the Senior Secured Notes of WCI
indenture.

<PAGE>

Postretirement Benefit Plans

WCI provides postretirement health care and life insurance benefits to
substantially all employees who retire from WCI upon meeting certain age and
length of service eligibility requirements. Under terms of WCI's labor contract
effective September 1, 1999, WCI is permitted to pay current claims up to $8.5
million from a trust established to fund future benefits after which time WCI
will be required to pay claims from corporate assets. Claims paid by WCI totaled
$3.1 million, $3.1 million and $2.4 million during 1999, 1998 and 1997,
respectively.

WCI has a defined benefit pension plan which covers substantially all bargained
for employees. Under this plan and WCI's now frozen defined contribution plan
for hourly employees, WCI expensed $7.7 million in 1999. As a result of benefit
increases included in the collective bargaining agreement with the USWA
effective September 1, 1999, WCI expects to incur expenses under the plan of
approximately $12.5 million in 2000. WCI contributed $6.7 million and $3.1
million to the plan during 1999 and 1998, respectively, and made minimal
contributions to the plan during 1997. WCI expects to contribute approximately
$4.2 million, $7.5 million and $24.0 million to the plan during 2000, 2001 and
2002, respectively, which is expected to satisfy the minimum funding
requirements of ERISA for those periods.

Environmental Matters

WCI has incurred and, in the future, will continue to incur capital expenditures
for matters relating to environmental control and monitoring. Capital
expenditures for environmental control and monitoring were $0.4 million, $0.5
million and $0.8 million in 1999, 1998 and 1997, respectively. Operating costs
for control and monitoring equipment, excluding depreciation and amortization
expense, were $8.2 million, $9.6 million and $10.8 million for 1999, 1998 and
1997, respectively. Operating costs for fiscal 2000 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.

Year 2000 Business Matters

WCI had no significant disruption to operations or business systems during
January 2000 as a result of the transition from 1999 to 2000. WCI does not
expect any material subsequent disruption to its operations or business systems
from this transition. WCI incurred $0.4 million of incremental costs to address
year 2000 issues during 1999.

Labor Matters

Most of WCI's hourly employees are represented by the USWA, with which WCI has a
five-year collective bargaining agreement effective September 1, 1999 that
expires October 31, 2004. This contract provides for wage increases of
approximately $.50 per hour effective September 1, 1999, $1 per hour effective
September 1, 2001 and $1 per hour effective March 1, 2003.

<PAGE>

This contract also provides for changes to WCI's defined benefit and defined
contribution plans for hourly employees as previously described.

Accounting Standards

In March 1998, the American Institute of Certified Public Accountants issued its
Statement of Position No. 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 provides
guidelines for companies to capitalize or expense costs incurred to develop or
obtain internal-use software. The Company adopted SOP 98-1 effective November 1,
1998. The adoption of SOP 98-1 did not have a material impact on the Company's
results for the year ended October 31, 1999.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities." This new standard requires recognition of all
derivatives as either assets or liabilities at fair value. The Company does not
believe adoption of the standard will have a material effect on either financial
position or results of operations. The Company plans to adopt the standard
effective November 1, 2000, as required.

Forward-Looking Statements

This report includes "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 which involve known and unknown
risks, uncertainties and other important factors that could cause the actual
results, performance or achievements of the Company to differ materially from
any future results, performance or achievements expressed or implied by such
forward-looking statements. Such risks, uncertainties and other important
factors include, among others: general economic and business conditions;
increasing industry capacity and levels of imports of steel or steel products;
industry trends, including product pricing; competition; currency fluctuations;
the loss of any significant customers; availability of qualified personnel;
effects of future collective bargaining agreements; major equipment failures;
changes in, or the failure or inability to comply with, government regulation,
including, without limitation, environmental regulations; the outcome of pending
environmental and other legal matters; the performance of the Other Investments
and unanticipated problems encountered in the year 2000 readiness program. 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

Renco Steel's Other Investments consists of an investment in a limited
partnership which invests in a variety of financial assets, including, equity,
debt, commodity contracts, futures and derivative securities. Because of the
speculative nature of the underlying investments, Renco Steel's investment is
subject to a high degree of market risk, including, but not limited to, interest
rate risk, foreign currency exchange rate risk, commodity price risk and equity
price risk. In addition, as the limited partnership's portfolio of securities
may not represent a broad diversification of investments among particular
issuers, industries or types of securities, Renco Steel's investment is subject
to a high degree of

<PAGE>

concentration of credit risk. While the objectives of the limited partnership is
to maximize risk adjusted total return and/or grow and preserve capital, the
limited partnership may engage in various combinations of investments, including
various ranges of investment types and quality of securities.

Renco Steel does not have any off-balance sheet risk with respect to these
investments and thus, its risk is limited to the loss of its investment. The
limited partnership in which Renco Steel has invested provides a right of
withdrawal at the end of a calendar quarter, upon 30 days notice and
accordingly, this investment has been classified as a current asset in the
accompanying consolidated balance sheet as of October 31, 1999. The limited
partnerships that were held on October 31, 1998 were also classified as current
assets. These investments are held for trading purposes and are recorded at fair
market value for financial reporting purposes. The fair market value of these
assets at October 31, 1999 was $10.2 million, including $2.0 million of
unrealized gains which were reflected in the Company's consolidated statement of
income for the twelve months ended October 31, 1999.

At October 31, 1999, Renco Steel also held $3.7 million in short term securities
including U.S. Treasuries and a variety of money market securities, which have
been classified as cash and cash equivalents in the accompanying consolidated
balance sheet as of October 31, 1999.

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>

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

October 31,
--------------------------
1999 1998
--------- ---------
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents...................... $ 3,830 $ 4,957
Restricted cash and cash equivalents .......... 76,174 62,195
Other investments.............................. 10,238 15,774
Accounts receivable, less allowances for
doubtful accounts of $874 and $904,
respectively................................. 57,846 48,724
Inventories.................................... 84,174 88,138
Deferred income taxes.......................... - 8,462
Prepaid expenses............................... 6,236 1,144
--------- ---------
Total current assets...................... 238,498 229,394
Property, plant and equipment, net............... 254,416 266,625
Excess of cost over acquired net assets, net..... 11,898 12,439
Intangible pension asset, net.................... 28,192 10,984
Other assets, net................................ 18,749 23,358
--------- ---------
Total assets.............................. $ 551,753 $ 542,800
========= =========
LIABILITIES and SHAREHOLDER'S DEFICIT
Current liabilities
Current portion of long-term debt.............. $ 122 $ 116
Accounts payable............................... 59,730 46,620
Accrued liabilities............................ 51,916 56,309
--------- ---------
Total current liabilities................. 111,768 103,045

Long-term debt, excluding current portion........ 421,054 421,114
Deferred income taxes............................ - 30,393
Postretirement health care benefits.............. 100,301 93,378
Pension benefits, excluding current portion...... 38,709 23,604
Other liabilities................................ 13,738 14,054
--------- ---------
Total liabilities......................... 685,570 685,588
--------- ---------
Shareholder's deficit
Common stock, no par value, stated value
$.01 per share, 850 shares authorized,
100 shares issued and outstanding ........... - -
Additional paid-in capital..................... 280 1
Accumulated deficit............................ (134,097) (142,789)
--------- ---------
Total shareholder's deficit............... (133,817) (142,788)
Commitments and contingencies.................... - -
Total liabilities and
shareholder's deficit................ $ 551,753 $ 542,800
========= =========

</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

RENCO STEEL HOLDINGS, INC. AND SUBSIDIARIES
AND PREDECESS0R

CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands)

Years ended October 31,
--------------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Net sales....................................... $ 531,669 $ 665,741 $ 668,470
Operating costs and expenses
Cost of products sold......................... 467,905 560,686 547,545
Depreciation and amortization................. 26,939 28,844 26,777
Selling, general and administrative expenses.. 14,836 17,358 29,355
--------- --------- ---------
509,680 606,888 603,677
--------- --------- ---------
Operating income........................... 21,989 58,853 64,793
--------- --------- ---------
Other income (expense)
Interest expense.............................. (45,674) (42,236) (31,690)
Interest, investment and other income, net.... 11,167 2,778 1,239
Minority interest............................. - - (423)
--------- --------- ---------
(34,507) (39,458) (30,874)
--------- --------- ---------
(Loss) income before income taxes and
extraordinary loss......................... (12,518) 19,395 33,919
Income tax (benefit) expense.................... (21,210) 7,755 13,251
--------- --------- ---------
Income before extraordinary loss............. 8,692 11,640 20,668

Extraordinary loss on early retirement of
debt, net of income taxes..................... - - 19,606
--------- --------- ---------
Net income .................................. $ 8,692 $ 11,640 $ 1,062
========= ========= =========

</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

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

Years ended October 31, 1999, 1998 and 1997
-----------------------------------------------------------------
Total
Share-
Additional Retained holder's
Preferred Common Paid-In Earnings Treasury Equity
Stock Stock Capital (Deficit) Stock (Deficit)
--------- ------ ------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1996....... - $ 366 $ 570 $ 67,742 $ (1,200) $ 67,478
Net income........................ - - - 1,062 - 1,062
Dividends paid on Common Stock.... - - - (118,000) - (118,000)
Repurchase of minority interest in
subsidiary....................... - (366) (901) 67 1,200 -
Other............................. - - 331 - - 331
-------- ------ ------ --------- -------- ---------
Balance at October 31, 1997....... - - - (49,129) - (49,129)
Issuance of Common Stock at
inception of the Company......... - - 1 - - 1
Net income........................ - - - 11,640 - 11,640
Dividends paid on Common Stock.... - - - (105,300) - (105,300)
-------- ------ ------ --------- -------- ---------
Balance at October 31, 1998....... - - 1 (142,789) - (142,788)
Net income........................ - - - 8,692 - 8,692
Capital contribution.............. - - 279 - - 279
-------- ------ ------ --------- -------- ---------
Balance at October 31, 1999 - - $ 280 $(134,097) - $(133,817)
======== ====== ====== ========= ======== =========

</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

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

Years ended October 31,
------------------------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ........................................... $ 8,692 $ 11,640 $ 1,062
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization....................... 24,005 25,913 23,846
Amortization of deferred maintenance costs.......... 2,934 2,931 2,931
Amortization of financing costs and bond discount... 1,924 1,785 1,435
Postretirement health care benefits................. 6,923 6,937 3,960
Pension benefits.................................... (2,493) 1,292 5,101
Provision for losses on accounts receivable......... (84) (475) 27
Deferred income taxes............................... (21,689) 3,290 4,350
Extraordinary loss.................................. - - 32,786
Minority interest in earnings of WCI................ - - 423
Gain on other investments........................... (2,954) (401) -
Other............................................... 430 142 350
Cash provided (used) by changes in certain
assets and liabilities, net of acquisition
of minority interest
Accounts receivable............................... (9,038) 16,953 640
Inventories....................................... 3,965 19,225 (9,618)
Prepaid expenses and other assets................. (5,280) (3,077) (389)
Accounts payable.................................. 13,110 (17,503) (15,015)
Accrued liabilities............................... (4,246) 3,803 (2,878)
Other liabilities................................. (317) (2,521) (9,437)
-------- -------- --------
Net cash provided by operating activities .......... 15,882 69,934 39,574
-------- ---------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment........... (11,403) (15,565) (39,902)
Gross proceeds from the sale of assets............... - 110 135
Purchase of minority interest in WCI................. - - (56,934)
Proceeds from sale of short-term and other
investments......................................... 13,489 - 49,146
Purchase of other investments........................ (5,000) (15,373) -
-------- -------- --------
Net cash used by investing activities................ (2,914) (30,828) (47,555)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of Senior
Secured Notes...................................... - 115,675 -
Net proceeds from issuance of Senior
Secured Notes of WCI.............................. - - 290,103
Repurchase of Senior Notes of WCI................... - - (233,085)
Principal payments on other long-term debt.......... (116) (1,319) (2,449)
Dividends paid...................................... - (105,300) (118,000)
Issuance of common stock of the Company............. - 1 -
-------- -------- --------
Net cash (used) provided by
financing activities.............................. (116) 9,057 (63,431)
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents......................................... 12,852 48,163 (71,412)
Total cash and cash equivalents at
beginning of period................................. 67,152 18,989 90,401
-------- -------- --------
Total cash and cash equivalents
at end of period.................................... $ 80,004 $ 67,152 $ 18,989
======== ======== ========
Supplemental disclosure of cash flow information
Cash paid for interest.............................. $ 43,757 $ 37,216 $ 21,412
Cash paid for income taxes.......................... 522 65 8,306

</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

RENCO STEEL HOLDINGS, INC. AND SUBSIDIARIES
AND PREDECESSOR

Notes to Consolidated Financial Statements

(1) Summary of Significant Accounting Policies

(a) Basis of Presentation

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

The Company's consolidated financial statements have been prepared as a
reorganization of companies under common control in a manner similar to a
pooling of interests. Renco's investment in WCI included the effects of certain
purchase accounting adjustments related to the acquisition of treasury stock by
WCI that were not reflected in the financial statements of WCI.

Accordingly the Company's consolidated financial statements include the
accounts of WCI and reflect purchase accounting adjustments of $44.1 million in
the aggregate relating to the purchase of minority interest in WCI in fiscal
1997 (see note 4). The purchase accounting adjustments reflect differences in
the basis of accounting for certain assets and liabilities in Renco Steel's
financial statements as compared to WCI's financial statements and affect the
valuation of inventories, property, plant and equipment, intangible pension
assets, excess of cost over net assets acquired, deferred income taxes,
postretirement health care benefits and the related depreciation and
amortization. All significant intercompany profits, transactions, and balances
have been eliminated in consolidation.

(b) Nature of Operations

In addition to being the parent company of WCI, Renco Steel's
operations include the management of its investment portfolio.

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

During 1999, WCI's largest customer accounted for 11.3% of sales.
During 1998 and 1997, no single customer accounted for 10% or more of net sales.
Concentration of credit risk related to trade receivables is limited due to the
large number of customers in a variety of industries. Approximately 50% of WCI's
shipments are to customers within 200 miles of its primary facility.

<PAGE>

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

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) Other Investments

Renco Steel does not have any off-balance sheet risk with respect to
these investments and thus, its risk is limited to the loss of its investment.
The limited partnership in which Renco Steel has invested, provides a right of
withdrawal at the end of a calendar quarter, upon 30 days notice and
accordingly, this investment has been classified as a current asset in the
accompanying consolidated balance sheet as of October 31, 1999. The limited
partnerships that were held on October 31, 1998 were also classified as current
assets. These investments are held for trading purposes and are recorded at fair
market value for financial reporting purposes. The fair market value of these
assets at October 31, 1999 was $10.2 million, including $2.0 million of
unrealized gains which were reflected in the Company's consolidated statement of
income for the twelve months ended October 31, 1999.

(e) Inventories

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

(f) Property, Plant and Equipment

Property, plant and equipment is recorded at cost. Depreciation is
calculated on the straight-line method over the estimated useful lives of the
assets (buildings 20 to 30 years and machinery and equipment 4 to 25 years with
a weighted average of 17 years). Expenditures for normal repairs and maintenance
are charged to expense as incurred.

<PAGE>

(g) Excess of Cost Over Acquired Net Assets

Cost in excess of net assets acquired represents the excess of cost
over the fair value of net assets resulting from WCI's tender offer in November
1996, of the 15.53% of WCI's common stock not owned by Renco. It is being
amortized on the straight line method over 25 years. The Company periodically
monitors the asset value by assessing whether the asset can be recovered over
its remaining useful life through undiscounted cash flows generated by the
underlying business.

(h) Other Assets

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

(i) Income Taxes

On January 15, 1999, Renco filed an election with the consent of its
shareholders with the Internal Revenue Service to change its taxable status from
that of a subchapter C corporation to that of a subchapter S corporation,
effective November 1, 1998. At the same time, Renco elected for the Company to
be treated as a qualified subchapter S subsidiary (QSSS). Most states in which
the Company operates will follow similar tax treatment. QSSS status requires the
ultimate shareholders to include their pro rata share of the Company's income or
loss in their individual tax returns. The Company 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, federal and state
taxes may become payable and would be charged to the Company's statement of
income. Such taxes are measured by the excess of the fair market value of assets
over their tax basis on the effective date of the subchapter S subsidiary
election if the associated assets are disposed of within the ten-year
post-election period. With the exception of the Company's Other Investments,
which are held for trading purposes, it is not management's present intention to
trigger any taxes under the built-in-gain provisions of the tax law.

(j) Environmental Compliance Costs

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

<PAGE>

(k) 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.

(l) Reclassifications

Certain items in the consolidated financial statements for 1998 and
1997 have been reclassified to conform to the 1999 presentation.

(2) Inventories

- -------------------------------------------------------------------
Inventories consist of the following:
<TABLE>
<CAPTION>

October 31,
1999 1998
------------------------
(Dollars in thousands)
<S> <C> <C>
Raw materials........................... $ 33,811 $ 36,259
Finished and semi-finished product...... 49,386 58,332
Supplies................................ 50 86
-------- --------
83,247 94,677
Less LIFO reserve....................... (927) 6,539
-------- --------
$ 84,174 $ 88,138
======== ========
</TABLE>

(3) Property, Plant and Equipment

- -------------------------------------------------------------------
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>

October 31,
1999 1998
-------------------------
(Dollars in thousands)
<S> <C> <C>
Land and improvements................... $ 435 $ 435
Buildings............................... 27,449 27,445
Machinery and equipment................. 387,447 382,480
Construction in progress................ 5,379 3,821
--------- ---------
420,710 414,181
Less accumulated depreciation........... 166,294 147,556
--------- ---------
$ 254,416 $ 266,625
========= =========

</TABLE>

<PAGE>

(4) Long-Term Debt

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

October 31,
1999 1998

------------------------------------
(Dollars in thousands)
<S> <C> <C>
Senior Secured Notes (net of unamortized discount of $326 and $388,
respectively) with interest at 10.875%, payable semi-annually,
due 2005............................................................... $ 119,674 $ 119,612
Senior Secured Notes of WCI with interest at 10% payable semi-annually,
due 2004............................................................... 300,000 300,000
Revolving Credit Facility of WCI (WCI Revolver) with interest at prime
plus 0.5% (8.25% at
October 31, 1999) payable monthly...................................... - -
Other.................................................................... 1,502 1,618
--------- ---------
421,176 421,230
Less current portion of long-term debt................................... 122 116
--------- ---------
$ 421,054 $ 421,114
========= =========

</TABLE>

In February 1998, Renco Steel issued $120.0 million principal amount of
10 7/8% Senior Secured Notes due 2005 (Senior Secured Notes). The Senior Secured
Notes are secured by a pledge of all the outstanding capital stock of WCI. Renco
Steel intends to meet its debt service obligations from its cash and investment
balances which were $13.9 million at October 31, 1999 and earnings thereon and
through distributions from WCI, as permitted under the terms of WCI's
outstanding indebtedness as described below. Under WCI's agreements, $175,000
was available for dividends and other transactions with affiliates at October
31, 1999. Accordingly, other than as described above, WCI's assets may not be
utilized by Renco Steel. Cash and cash equivalent balances of WCI of $76.2
million and $62.2 million at October 31, 1999 and 1998 respectively, have been
classified as "Restricted Cash and Cash Equivalents" on the financial
statements.

Renco Steel's Senior Secured Notes contain covenants which limit the
incurrence of additional indebtedness, payments to shareholders, sale of assets,
change of control, transactions with affiliates and impairment of security
interest. Renco Steel is generally permitted to declare and pay dividends and
make other transactions with affiliates provided no condition of default exists
or will exist and the accumulated amount of such transactions is not greater
than fifty percent (50%) of the net income, as defined, which definition
excludes the earnings of subsidiaries unless actually received in cash by Renco
Steel, as a dividend, (less 100% of any net loss) earned for periods subsequent
to January 31, 1998 when taken as a single accounting period. At October 31,
1999, Renco Steel was permitted to pay $3.4 million for dividends under the
terms of its indebtedness.

WCI's $300 million 10% Senior Secured Notes due 2004 (Senior Secured
Notes of WCI) are secured by a second priority lien on substantially all of the
existing property, plant and equipment of WCI which will become a first priority
lien if all of WCI's 10.5% Senior Notes due 2002 (Senior Notes of WCI) are
extinguished ($0.3 million currently outstanding). A Voluntary

<PAGE>

Employee Beneficiaries Association trust fund, established to hold WCI
contributions to fund postretirement health care and life insurance obligations
for the benefit of hourly employees, also holds a second priority lien on the
security for the Senior Secured Notes of WCI, which lien will remain a second
priority lien even if the lien in favor of the Senior Secured Notes of WCI
becomes a first priority lien.

WCI has a $100,000,000 Revolving Credit Facility (WCI Revolver) secured
by and subject to eligible inventories and receivables as defined, reduced by
any outstanding letters of credit. The WCI Revolver is subject to a monthly
service fee of $15,000, and an annual commitment fee of 0.5% of the unused
balance up to $60,000,000 payable monthly. There were no borrowings outstanding
under the WCI Revolver as of or during the year ended October 31, 1999. The WCI
Revolver, which expires December 29, 2003, also provides for up to an aggregate
amount of $20,000,000 in letters of credit. WCI had a borrowing limit of
$91,817,000 based on eligible inventory and receivables net of $6,070,000 in
letters of credit outstanding at October 31, 1999. The WCI Revolver is subject
to a penalty of $500,000 if terminated without being refinanced with the same
lender, prior to December 29,2001 and $250,000 thereafter if terminated before
October 31, 2003.

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

The WCI Revolver and Senior Secured Notes of WCI contain certain
financial and other covenants, including maintenance of specified levels of net
worth as defined, 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 WCI's assets. WCI is permitted to declare and pay
dividends, and make other transactions with affiliates provided no condition of
default exists or will exist, and the accumulated amount of such transactions is
no greater than fifty percent (50%) of the consolidated net income, as defined
(less 100% of any consolidated net loss) earned for periods subsequent to
October 31, 1996 when taken as a single accounting period less management fees
paid to Renco in excess of $1,200,000 annually for the same period. Under these
agreements $175,000 was available for dividends and other transactions with
affiliates at October 31,1999.

Aggregate principal payments on long-term debt for the five years
subsequent to October 31, 1999 are as follows: $122,000 in 2000, $128,000 in
2001, $415,000 in 2002, $838,000 in 2003, and $300,000,000 in 2004.

As of October 31, 1999, based on the quoted market price, the fair
value of the Senior Secured Notes was $96,900,000 and the fair value of the
Senior Secured Notes of WCI was $292,500,000.

<PAGE>

(5) Accrued Liabilities

- -------------------------------------------------------------------

Accrued liabilities included employment related costs of $25,722,000 and
$28,941,000 and interest of $15,785,000 and $15,790,000 at October 31, 1999 and
1998, respectively.

(6) Employee Compensation Plans

- -------------------------------------------------------------------

WCI has variable compensation plans for the benefit of substantially all
employees. The amount of compensation due under these plans is based on WCI's
income as defined under each plan. Total expense under the plans was $2,670,000,
$11,761,000, and $24,588,000, for the years ended October 31, 1999, 1998, and
1997, respectively. Certain amounts under these plans represent deferred
compensation.

(7) Pension Plans

- -------------------------------------------------------------------
WCI has defined contribution retirement plans under which it expensed
approximately $5,223,000, $5,684,000, and $5,929,000 for the years ended October
31, 1999, 1998, and 1997, respectively.

WCI also has a defined benefit pension plan for substantially all hourly
employees which provides minimum pension benefits based on age, years of
service, and benefits provided under WCI's frozen defined contribution plan and
a predecessor company's defined benefit plan. As a result of the collective
bargaining agremeent effective September 1, 1999 with the USWA, the plan was
amended to provide an increase in pension benefits. The following table sets
forth the actuarial present value of benefit obligations and funded status of
WCI's defined benefit pension plan:

October 31,
1999 1998
----------------------------------
(Dollars in thousands)
<S> <C> <C>
Projected benefit obligation............ $ 69,196 $ 47,839
Plan assets at fair value............... 25,909 19,015
--------- ---------
Projected benefit obligation in
excess of plan assets................. 43,287 28,824
Unrecognized net gain from past
experience different from that
assumed and effects of changes
in assumptions........................ 24,181 14,260
Unrecognized prior service cost......... (52,703) (25,826)
Additional minimum liability............ 28,192 10,984
--------- ---------
Accrued pension cost.................... 42,957 28,242
Less pension liability due
within one year....................... 4,248 4,638
--------- ---------
Long-term pension liability............. $ 38,709 $ 23,604
========= =========

</TABLE>

An assumed discount rate of 7.5% and 7.0%, and an expected return on
plan assets of 9.0% and 8.5% in 1999 and 1998, respectively, were used for
purposes of valuing the benefits under the defined benefit pension plan.

<PAGE>

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

1999 1998
------------------------------------
(Dollars in thousands)
<S> <C> <C>
Projected benefit obligation at
beginning of year................ $ 47,839 $ 49,077
Service cost....................... 96 (430)
Interest cost...................... 3,107 3,237
Plan amendment..................... 30,230 -
Actuarial gains.................... (10,224) (2,578)
Benefits paid...................... (1,852) (1,467)
--------- ---------
Projected benefit obligation
at end of year................... $ 69,196 $ 47,839
========= =========

</TABLE>

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

1999 1998
-----------------------------------
(Dollars in thousands)

<S> <C> <C>
Plan assets at beginning of year... $ 19,015 $ 15,930
Actual return on assets............ 2,046 1,452
Employer contributions............. 6,700 3,100
Benefits paid...................... (1,852) (1,467)
--------- ---------
Plan assets at end of year......... $ 25,909 $ 19,015
========= =========

</TABLE>

The following table sets forth the components of pension expense:

Years Ended October 31,
1999 1998 1997
-------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Service cost....................... $ 96 $ (430) $ (332)
Interest cost...................... 3,107 3,237 3,404
Expected return on plan assets..... (1,400) (963) (932)
Amortization of unrecognized:
Prior service cost............... 3,652 3,353 3,756
Actuarial gain and losses, net... (1,248) (805) (770)
-------- -------- --------
$ 4,207 $ 4,392 $ 5,126
======== ======== ========

</TABLE>

<PAGE>

(8) Postretirement Health Care Benefits

- ------------------------------------------------------------------

The following table sets forth the accumulated postretirement benefit
obligation (APBO) of WCI's postretirement health care and life insurance plans:
<TABLE>
<CAPTION>

Years Ended October 31,
1999 1998
----------------------------------
(Dollars in thousands)
<S> <C> <C>
APBO............................... $ 124,535 $ 130,821
Plan assets at fair value.......... 18,090 12,953
--------- ---------
APBO in excess of plan
assets........................... 106,445 117,868
Unrecognized prior service
cost resulting from plan
amendments....................... (3,472) (4,828)
Unrecognized net loss from past
experience different from that
assumed and from changes in
assumptions....................... (2,672) (19,662)
--------- ---------
Accrued postretirement benefit
cost............................. $ 100,301 $ 93,378
========= =========
</TABLE>

The APBO was determined using a discount rate of 7.5% and 7.0% and an
expected return on plan assets of 9.0% and 8.5% in 1999 and 1998, respectively,
and an assumed health care cost trend rate of 7% in 2000, gradually declining to
5% after 2003. Assuming a 1% increase in the health care cost trend rate, the
APBO at October 31, 1999 would increase by $20,539,000 along with an increase in
the 1999 service and interest cost components of $2,294,000. Assuming a 1%
decrease in the health care cost trend rates, the APBO at October 31, 1999 would
decrease by $16,245,000 along with a decrease in the 1999 service and interest
cost components of $1,784,000.

The following table sets forth a reconciliation of the beginning and
end of year APBO:
<TABLE>
<CAPTION>

1999 1998
-----------------------------------
(Dollars in thousands)

<S> <C> <C>
APBO at beginning of year.......... $ 130,821 $ 108,998
Service cost........................ 3,357 3,068
Interest cost....................... 8,670 8,441
Actuarial (gains) and losses, net... (14,937) 13,369
Benefits paid....................... (3,376) (3,055)
--------- ---------
APBO at end of year................. $ 124,535 $ 130,821
========= =========

</TABLE>

<PAGE>

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

<TABLE>
<CAPTION>
1999 1998
----------------------------------
(Dollars in thousands)
<S> <C> <C>
Plan assets at beginning of year..... $ 12,953 $ 8,485
Actual return on assets.............. 3,078 1,912
Employer contributions............... 2,324 2,556
Benefits paid........................ (265) -
-------- --------
Plan assets at end of year........... $ 18,090 $ 12,953
======== ========
</TABLE>

Net periodic postretirement benefit costs included the following
components:

<TABLE>
<CAPTION>
Years Ended October 31,
1999 1998 1997
-------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Service cost........................ $ 3,357 $ 3,068 $ 2,232
Interest cost....................... 8,670 8,441 7,260
Expected return on plan assets...... (1,281) (804) (333)
Amortization of unrecognized:
Prior service cost................ 1,355 1,355 1,400
Actuarial loss (gain)............. 257 488 (317)
------- -------- --------
Net periodic postretirement
benefit cost...................... $ 12,358 $ 12,548 $ 10,242
======== ======== ========
</TABLE>

(9) Income Taxes

- -------------------------------------------------------------------
As a result of the change in tax status described in Note 1(i), the
Company recognized an income tax benefit of $21,210,000 during 1999, the
majority of which is the elimination of net deferred tax liabilities recorded as
of October 31, 1998. As of October 31, 1999, the Company's book basis in its
assets and liabilities exceeded its tax basis by approximately $10,950,000.

The provision for income tax expense for the years ended October 31,
1998 and 1997 consists of the following:

<TABLE>
<CAPTION>
1998 1997
----------------------------------
(Dollars in thousands)
<S> <C> <C>
Federal income taxes
Current............................. $ 4,000 $ 8,301
Deferred............................ 3,066 3,476
State income taxes
Current............................. 465 600
Deferred............................ 224 874
------- --------
Provision for
income taxes........................ $ 7,755 $ 13,251
======= ========
</TABLE>

36
<PAGE>

In addition to the above income taxes, WCI recognized $13,180,000 of
current income tax benefits in 1997 related to the extraordinary loss on the
early retirement of debt (see Note 4).

A reconciliation between income tax expense reported and income tax
expense computed by applying the federal statutory rate to income before income
taxes and extraordinary loss for the years ended October 31, 1998 and 1997
follows:

<TABLE>
<CAPTION>
1998 1997
-----------------------------------
(Dollars in thousands)
<S> <C> <C>
Income taxes at federal
statutory rate........................ $ 6,788 $ 12,020
State income taxes, net of
federal income tax benefit............ 448 958
Other................................... 519 273
------- --------
$ 7,755 $ 13,251
======= ========
</TABLE>

Deferred income taxes result from temporary differences in the
financial basis and tax basis of assets and liabilities. Total deferred tax
assets amounted to approximately $53,536,000 as of October 31, 1998; the most
significant items comprising the deferred tax assets were postretirement
benefits of $33,034,000, and compensation accruals of $5,965,000. Total deferred
tax liabilities amounted to approximately $75,467,000 as of October 31, 1998,
consisting primarily of deferred taxes on inventory of $3,466,000, and fixed
assets of $71,736,000. The Company had no valuation allowance for realization of
deferred tax assets as of October 31, 1998.

(10) Leases

- -------------------------------------------------------------------
WCI leases a portion of its operating and data processing equipment.
Minimum future lease payments under noncancellable operating leases are
$1,875,000, $1,392,000, $675,000, $403,000, $458,000 and $61,000 for the years
ending October 31, 2000, 2001, 2002, 2003, 2004 and thereafter, respectively.
Rent expense for noncancellable operating leases amounted to approximately
$1,873,000, $1,811,000, and $1,386,000, for the years ended October 31, 1999,
1998 and 1997, respectively.

(11) Related Party Transactions

- -------------------------------------------------------------------
WCI has a management services agreement with Renco under which Renco
provides certain management services to WCI. Under terms of this agreement, WCI
is charged a monthly fee of $100,000. The term of this agreement extends to
October 31, 2001. Total expense for management services fees amounted to
$1,200,000 for each of the years ended October 31, 1999, 1998 and 1997.

37
<PAGE>

believes that its insurance costs under this program were less than it would
have incurred if it had obtained its insurance directly.

(12) Commitments and Contingencies

- -------------------------------------------------------------------
At October 31, 1999, WCI had commitments to purchase data processing
services of approximately $13,985,000 in the aggregate over the remaining 2.5
years of its management information systems agreement and purchased services of
approximately $5,627,000, $5,458,000 and $5,463,000 in 1999, 1998 and 1997,
respectively, under the agreement. At October 31, 1999, at pricing then in
effect, WCI had firm commitments for the purchase of raw materials and gases of
approximately $11,918,000 in 2000, $12,278,000 in 2001 and $2,994,000
thereafter. In addition, at October 31, 1999 WCI had commitments for capital
expenditures of approximately $5,901,000.

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

WCI is subject to consent decrees as a result of two civil actions
instituted by the Department of Justice (DOJ), on behalf of the Environmental
Protection Agency (EPA). These consent decrees require WCI to complete certain
supplemental environmental projects estimated to cost between $1.7 million and
$2.2 million that will be expended over two years. The largest of the projects
to be undertaken as part of the settlement involves sediment removal from the
Mahoning River at an estimated cost of $750,000 but not to exceed $1 million.
The consent decrees also provide for stipulated penalties in the event of
noncompliance which WCI does not believe will be material.

WCI was the defendant in an action instituted by DOJ on May 11, 1998
under the Resource Conservation and Recovery Act (RCRA), which alleged
violations of RCRA, the Ohio Administrative Code (OAC) and WCI's hazardous waste
management permit related to WCI's management of alleged hazardous waste in
surface impoundments at the Warren, Ohio facility. The action alleged that from
September 1988 to the present, WCI operated hazardous waste management units at
the Warren facility without the proper permits and not in compliance with RCRA.
This action sought a civil penalty of not more than the statutory maximum of
$25,000 per day per violation ($27,500 per day per violation for violations
since January 30, 1997) and also an injunction requiring closure of the surface
impoundments and other compliance measures under RCRA. A trial in the RCRA
action was completed in June 1999 and the court rendered its decision in October
1999. The court's decision requires WCI to pay a $1 million cash penalty and
denies the United States request for injunctive relief. In November 1999, the
U.S. filed a motion for the court to reconsider its decision regarding
injunctive relief which was denied. The court's decision is subject to appeal.

<PAGE>

first investigation step of the corrective action program, the RCRA Facility
Investigation (RFI), the initial phase of which is expected to be completed in
2000. 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, WCI is
unable at this time to estimate the final cost of the corrective action program
or the period over which such costs may be incurred and there can be no
assurance that any such corrective action program would not have a material
adverse effect on the operating results or financial condition of WCI.

On January 23, 1996, two retired employees instituted an action against
WCI and the USWA in the United States District Court for the Northern District
of Ohio alleging in substance that certain distributions made by WCI 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 WCI's motion to dismiss this action and
entered judgement in favor of WCI 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. Plaintiffs have filed an amended
complaint seeking, among other things, unspecified damages, punitive damages and
attorney's fees.

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

<PAGE>

(13) Segment Reporting

- -------------------------------------------------------------------

Effective for the year ended October 31, 1999, the Company adopted
Statement of Financial Accounting Standards No. 131, "Disclosures About Segments
of an Enterprise and Related Information," requiring that companies disclose
segment data based on how management makes resource allocation decisions and
evaluates segment operating performance.

In applying the Statement, the Company considered its operating and
management structure and the types of information subject to regular review by
its "chief operating decision maker." On this basis, the Company's only
reportable segment is WCI. The segment disclosures are presented on this new
basis for fiscal year 1999, as well as retroactively.

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

<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
WCI................................ $ 5,863 $ 20,093 $ 3,857
Other.............................. 2,829 (8,453) (2,795)
-------- --------- ---------
Total Consolidated........ $ 8,692 $ 11,640 $ 1,062
======== ========= =========
</TABLE>

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

Interest, Investment and Other Income

<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
WCI............................... $ 8,062 $ 2,308 $ 1,239
Other............................. 3,105 470 -
--------- --------- ---------
Total Consolidated....... $ 11,167 $ 2,778 $ 1,239
========= ========= =========
</TABLE>

Interest Expense

<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
WCI............................... $ 32,030 $ 32,057 $ 31,690
Other............................. 13,644 10,179 -
--------- --------- ---------
Total Consolidated....... $ 45,674 $ 42,236 $ 31,690
========= ========= =========
</TABLE>

40
<PAGE>

Income Tax Benefit (Expense)

<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
WCI..................................... $ 4,279 $ (12,365) $ (1,302)
Other................................... 16,931 4,610 1,231
--------- --------- ---------
Total Consolidated............. $ 21,210 $ (7,755) $ (71)
========= ========= =========
</TABLE>

Depreciation and Amortization

<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
WCI..................................... $ 23,334 $ 25,240 $ 23,174
Purchase accounting adjustments
(See Note 1)........................... 3,605 3,604 3,603
--------- --------- ---------
Total Consolidated............. $ 26,939 $ 28,844 $ 26,777
========= ========= =========
</TABLE>

Assets

<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
WCI..................................... $ 479,944 $ 460,286 $ 470,751
Other................................... 71,809 82,514 63,124
--------- --------- ---------
Total Consolidated............. $ 551,753 $ 542,800 $ 533,875
========= ========= =========

</TABLE>

Other assets include investments and cash equivalents held by Renco
Steel of $13.9 million, $20.7 million and $0 in 1999, 1998 and 1997,
respectively, and the effects of the purchase accounting adjustments discussed
in Note 1.

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

41
<PAGE>

(14) Selected Quarterly Data (Unaudited)

- -------------------------------------------------------------------

The following is a summary of unaudited quarterly results for the years
ended October 31, 1999 and 1998:

Three Months Ended 1999
Jan. 31 April 30 July 31 Oct. 31

---------------------------------------------------------------
(Dollars in thousands)

<S> <C> <C> <C> <C>
Net sales.................... $110,277 $139,115 $143,086 $139,191
Gross margin................. 8,481 17,328 23,757 14,198
Net income (loss)............ 10,506 (2,129) 2,582 (2,267)

Three Months Ended 1998
Jan. 31 April 30 July 31 Oct. 31

----------------------------------------------------------------
(Dollars in thousands)

<S> <C> <C> <C> <C>
Net sales.................... $166,592 $177,860 $174,947 $146,342
Gross margin................. 24,744 28,788 30,067 21,456
Net income (loss)............ 3,580 4,286 5,072 (1,298)

</TABLE>

During the three months ended January 31, 1999, the Company recognized
an income tax benefit of $21,477,000 as a result of the subchapter S election
described in Note 1(i). During the three months ended October 31, 1999 WCI
recorded a benefit of $5,662,000 under the LIFO inventory valuation method. In
addition, WCI recorded a gain of $5,046,000 as a result of an agreement with the
USWA which permits WCI to pay certain medical benefits from assets in a trust
previously restricted for other benefits.

<PAGE>

INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying consolidated balance sheets of Renco Steel
Holdings, Inc. and subsidiaries and predecessor (a wholly-owned subsidiary of
The Renco Group, Inc.) as of October 31, 1999 and 1998, and the related
consolidated statements of income, shareholder's equity (deficit), and cash
flows for each of the years in the three-year period ended October 31, 1999.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Renco Steel
Holdings, Inc. and subsidiaries and predecessor as of October 31, 1999 and 1998,
and the results of their operations and their cash flows for each of the years
in the three-year period ended October 31, 1999, in conformity with generally
accepted accounting principles.

/S/ KPMG LLP
- -------------------------

KPMG LLP

Cleveland, Ohio
January 14, 2000

<PAGE>

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

October 31,
------------------------
1999 1998
--------- ---------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents...................... $ 76,349 $ 62,195
Accounts receivable, less allowances for
doubtful accounts of $874 and $904,
respectively................................. 57,846 48,724
Inventories.................................... 83,247 87,140
Deferred income taxes.......................... - 8,610
Prepaid expenses and other current assets...... 6,236 1,144
--------- ---------
Total current assets...................... 223,678 207,813
Property, plant and equipment, net............... 208,477 217,624
Intangible pension asset, net.................... 31,895 14,972
Other assets, net................................ 15,894 19,877
--------- ---------
Total assets......................... $ 479,944 $ 460,286
========= =========
LIABILITIES and SHAREHOLDER'S EQUITY
Current liabilities
Current portion of long-term debt.............. $ 122 $ 116
Accounts payable............................... 59,730 46,620
Accrued liabilities............................ 48,364 53,237
--------- ---------
Total current liabilities................. 108,216 99,973
Long-term debt, excluding current portion........ 301,380 301,502
Deferred income taxes............................ - 13,368
Postretirement health care benefits.............. 99,706 92,738
Pension benefits................................. 38,635 23,524
Other liabilities................................ 13,738 14,054
--------- ---------
Total liabilities.................... 561,675 545,159
--------- ---------
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 -
Accumulated deficit............................ (82,010) (84,873)
--------- ---------
Total shareholder's equity
(deficit)........................... (81,731) (84,873)

Commitments and contingencies.................... - -
Total liabilities and --------- ---------
shareholder's equity (deficit)....... $ 479,944 $ 460,286
========= =========

</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

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

Years ended October 31,
--------------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Net sales........................................ $ 531,669 $ 665,741 $ 668,470
Operating costs and expenses
Cost of products sold.......................... 468,170 560,951 547,545
Depreciation and amortization.................. 23,334 25,240 23,174
Selling, general and administrative expenses... 14,613 17,343 29,355
--------- --------- ---------
506,117 603,534 600,074
--------- --------- ---------
Operating income........................ 25,552 62,207 68,396
--------- --------- ---------
Other income (expense)
Interest expense............................... (32,030) (32,057) (31,690)
Interest and other income, net................. 8,062 2,308 1,239
--------- --------- ---------
(23,968) (29,749) (30,451)
--------- --------- ---------
Income before income taxes and
extraordinary loss.................... 1,584 32,458 37,945
Income tax (benefit) expense..................... (4,279) 12,365 14,482
--------- --------- ---------
Income before extraordinary loss........ 5,863 20,093 23,463
Extraordinary loss on early retirement of
debt, net of income taxes...................... - - 19,606
--------- --------- ---------
Net income.............................. $ 5,863 $ 20,093 $ 3,857
========= ========= =========

</TABLE>

See accompanying notes to consolidated financial statements.

45
<PAGE>

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

Years ended October 31, 1999, 1998 and 1997
---------------------------------------------------------
Total
Share-
Additional Retained holder's
Preferred Common Paid-In Earnings Treasury Equity
Stock Stock Capital (Deficit) Stock (Deficit)
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1996....... - $ 366 $ 570 $ 80,144 $ (1,200) $ 79,880
Net income........................ - - - 3,857 - 3,857
Dividends paid on Common Stock.... - - - (118,000) - (118,000)
Repurchase of Common Stock........ - (366) (901) (56,867) 1,200 (56,934)
Other............................. - - 331 - - 331
-------- -------- ------- -------- -------- --------
Balance at October 31, 1997....... - - - $(90,866) - $ (90,866)
Net income........................ - - - 20,093 - 20,093
Dividends paid on Common Stock.... - - - (14,100) - (14,100)
-------- -------- ------- -------- -------- --------
Balance at October 31, 1998....... - - - $(84,873) - $(84,873)
Net income........................ - - - 5,863 - 5,863
Dividends paid on Common Stock.... - - - (3,000) - (3,000)
Capital contribution.............. - - 279 - - 279
-------- -------- ------- -------- -------- --------
Balance at October 31, 1999....... - - 279 $(82,010) - $(81,731)
======== ======== ======= ======== ======== ========

</TABLE>

See accompanying notes to consolidated financial statements.

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

Years ended October 31,
-------------------------------
1999 1998 1997
--------- --------- ---------

CASH FLOWS FROM OPERATING ACTIVITIES

<S> <C> <C> <C>
Net income.....................................$ 5,863 $ 20,093 $ 3,857
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization................ 20,400 22,309 20,243
Amortization of deferred maintenance costs... 2,934 2,931 2,931
Amortization of financing costs.............. 1,329 1,321 1,435
Postretirement health care benefits.......... 6,968 6,983 3,960
Pension benefits............................. (2,202) 1,583 5,101
Provision for losses on accounts receivable.. (84) (475) 64
Deferred income taxes........................ (4,758) 5,449 5,581
Extraordinary loss........................... - - 32,786
Other........................................ 429 142 356
Cash provided (used) by changes in certain
assets and liabilities
Accounts receivable........................ (9,038) 16,953 603
Inventories................................ 3,893 19,153 (9,618)
Prepaid expenses and other assets.......... (5,372) (3,069) (389)
Accounts payable........................... 13,110 (17,503) (15,015)
Accrued liabilities........................ (4,483) 731 (2,878)
Other liabilities.......................... (316) (2,521) (9,437)
--------- --------- ---------
Net cash provided by operating activities...... 28,673 74,080 39,580
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment... (11,403) (15,565) (39,902)
Gross proceeds from the sale of assets....... - 110 135
Short-term investments, net.................. - - 49,146
--------- --------- ---------
Net cash (used) provided by investing
activities................................... (11,403) (15,455) 9,379
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of Senior Secured
Notes...................................... - - 290,103
Repurchase of Senior Notes................... - - (233,085)
Repurchase of Common Stock................... - - (56,934)
Dividends paid............................... (3,000) (14,100) (118,000)
Principal payments on other long-term debt... (116) (1,319) (2,449)
--------- --------- ---------
Net cash used by financing activities.......... (3,116) (15,419) (120,365)
--------- --------- ---------
Net increase (decrease) in cash and cash
equivalents.................................. 14,154 43,206 (71,406)
Cash and cash equivalents at beginning
of year...................................... 62,195 18,989 90,395
--------- --------- ---------
Cash and cash equivalents at end of year.......$ 76,349 $ 62,195 $ 18,989
========= ========= =========
Supplemental disclosure of cash flow
information
Cash paid for interest...................$ 30,707 $ 30,763 $ 21,412
Cash paid for income taxes .............. 974 2,050 8,306
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

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

(1) Summary of Significant Accounting Policies

- ----------------------------------------------------------------------------

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

(a) Nature of Operations

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

During 1999, sales to the Company's largest customer accounted for
11.3% of net sales. During 1998 and 1997, no single customer accounted for 10%
or more of net sales. Concentration of credit risk related to trade receivables
is limited due to the large number of customers in a variety of industries.
Approximately 50% of WCI's shipments are to customers within 200 miles of its
primary facility.

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

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.

<PAGE>

(e) Property, Plant and Equipment

(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 will follow similar tax treatment. QSSS status requires the
ultimate shareholders to include their pro rata share of the Company's income or
loss in their individual tax returns. The Company 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, federal and state
taxes may become payable and would be charged to the Company's statement of
income. 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-gain provisions of the tax law.

(h) Environmental Compliance Costs

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

<PAGE>

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

(j) Reclassification

Certain items in the consolidated financial statements for 1998 and
1997 have been reclassified to conform to the 1999 presentation.

(2) Inventories

- ----------------------------------------------------------------------------
Inventories consist of the following:
<TABLE>
<CAPTION>
October 31,
1999 1998
------------------------------------
(Dollars in thousands)

<S> <C> <C>
Raw materials.......................... $ 33,811 $ 36,259
Finished and semi-finished product..... 49,386 58,332
Supplies............................... 50 86
--------- ---------
83,247 94,677
Less LIFO reserve...................... - 7,537
--------- ---------
$ 83,247 $ 87,140
========= =========
</TABLE>

(3) Property, Plant and Equipment

- ----------------------------------------------------------------------------
Property, plant and equipment is comprised of the following:
<TABLE>
<CAPTION>
October 31,
1999 1998
------------------------------------
(Dollars in thousands)

<S> <C> <C>
Land and improvements............... $ 435 $ 435
Buildings........................... 27,449 27,445
Machinery and equipment............. 332,320 327,353
Construction in progress............ 5,379 3,821
--------- ---------
365,583 359,054
Less accumulated depreciation....... 157,106 141,430
--------- ---------
$ 208,477 $ 217,624
========= =========
</TABLE>

50
<PAGE>

(4) Long-Term Debt

- ----------------------------------------------------------------------------

Long-term debt consists of the following:
<TABLE>
<CAPTION>

October 31,
1999 1998
------------------------------------
(Dollars in thousands)
<S> <C> <C>
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
(8.25% at October 31, 1999)
payable monthly...................... - -
Other................................. 1,502 1,618
--------- ---------
301,502 301,618
Less current portion of long-term
debt................................. 122 116
--------- ---------
$ 301,380 $ 301,502
========= =========

</TABLE>

The $300 million 10% Senior Secured Notes due 2004 (Senior Secured
Notes) are secured by a second priority lien on substantially all of the
existing property, plant and equipment of the Company which will become a first
priority lien if all of the 10.5% Senior Notes due 2002 (Senior Notes) are
extinguished ($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 and subject to
eligible inventories and receivables 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, 1999. 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 $91,817,000 based on eligible
inventory and receivables net of $6,070,000 in letters of credit outstanding at
October 31, 1999. The Revolver is subject to a penalty of $500,000 if
terminated, without being refinanced with the same lender, prior to December 29,
2001 and $250,000 thereafter if terminated before October 31, 2003.

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

<PAGE>

make contractual compensation payments to certain executives of the Company and
pay related transaction costs.

The Company's Revolver and Senior Secured Notes contain certain
financial and other covenants, including maintenance of specified levels of net
worth as defined, working capital, and debt service and limitations on capital
expenditures. Additional covenants limit the incurrence of additional
indebtedness, payments affecting subsidiaries, transactions with affiliates,
sale/leaseback transactions, impairment of security interest, consolidations,
mergers and transfer of the Company's assets. The Company is permitted to
declare and pay dividends, and make other transactions with affiliates provided
no condition of default exists or will exist, and the accumulated amount of such
transactions is no greater than fifty percent (50%) of the consolidated net
income as defined (less 100% of any consolidated net loss) earned for periods
subsequent to October 31, 1996 when taken as a single accounting period less
management fees paid to Renco in excess of $1,200,000 annually for the same
period. Under these agreements $175,000 was available for dividends and other
transactions with affiliates at October 31, 1999.

As of October 31, 1999, the fair value of the Senior Secured Notes was
$292,500,000 based on the quoted market price.

(5) Accrued Liabilities

- ----------------------------------------------------------------------------
Accrued liabilities included employment related costs of $25,722,000
and $28,941,000 and interest of $12,522,000 and $12,528,000 at October 31, 1999
and 1998, respectively.

(6) Employee Compensation Plans

- ----------------------------------------------------------------------------
The Company has variable compensation plans for the benefit of
substantially all employees. The amount of compensation due under these plans is
based on the Company's income as defined under each plan. Total expense under
the plans was $2,670,000, $11,761,000 and $24,588,000, for the years ended
October 31, 1999, 1998 and 1997, respectively. Certain amounts under these plans
represent deferred compensation.

(7) Pension Plans

- ----------------------------------------------------------------------------
The Company has defined contribution retirement plans under which it
expensed approximately $5,223,000, $5,684,000 and $5,929,000 for the years ended
October 31, 1999, 1998 and 1997, 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

<PAGE>

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

<TABLE>
<CAPTION>
October 31,
1999 1998
------------------------------------
(Dollars in thousands)
<S> <C> <C>
Projected benefit obligation....... $ 69,196 $ 47,839
Plan assets at fair value.......... 25,909 19,015
--------- ---------
Projected benefit obligation in
excess of plan assets............ 43,287 28,824
Unrecognized net gain from past
experience different from that
assumed and effects of changes
in assumptions................... 25,654 15,846
Unrecognized prior service cost.... (57,953) (31,480)
Additional minimum liability....... 31,895 14,972
--------- ---------
Accrued pension cost............... 42,883 28,162
Less pension liability due 4,248 4,638
--------- ---------
Long-term pension liability........ $ 38,635 $ 23,524
========= =========
</TABLE>

An assumed discount rate of 7.5% and 7.0% and an expected return on
plan assets of 9.0% and 8.5% in 1999 and 1998, 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:

<TABLE>
<CAPTION>
1999 1998
--------- ---------
(Dollars in thousands)
<S> <C> <C>

Projected benefit obligation at
beginning of year............... $ 47,839 $ 49,077
Service cost...................... 96 (430)
Interest cost..................... 3,107 3,237
Plan amendment.................... 30,230 -
Actuarial gains................... (10,224) (2,578)
Benefits paid..................... (1,852) (1,467)
--------- ---------

Projected benefit obligation at
end of year..................... $ 69,196 $ 47,839
========= =========
</TABLE>

53
<PAGE>

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

<TABLE>
<CAPTION>
1999 1998
--------- ---------
(Dollars in thousands)
<S> <C> <C>
Plan assets at beginning of year.... $ 19,015 $ 15,930
Actual return on assets............. 2,046 1,452
Employer contributions.............. 6,700 3,100
Benefits paid....................... (1,852) (1,467)
--------- ---------
Plan assets at end of year.......... $ 25,909 $ 19,015
========= =========
</TABLE>

The following table sets forth the components of pension expense:
<TABLE>
<CAPTION>

Years Ended October 31,
1999 1998 1997
-------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Service cost........................ $ 96 $ (430) $ (332)
Interest cost....................... 3,107 3,237 3,404
Expected return on plan assets...... (1,400) (963) (932)
Amortization of unrecognized:
Prior service cost................ 4,056 3,757 3,756
Actuarial gain and
losses, net ..................... (1,361) (918) (770)
-------- -------- --------
$ 4,498 $ 4,683 $ 5,126
======== ======== ========
</TABLE>

(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:

<TABLE>
<CAPTION>
Years ended October 31,
1999 1998
-----------------------------------
(Dollars in thousands)
<S> <C> <C>
APBO................................ $ 124,535 $ 130,821
Plan assets at fair value........... 18,090 12,953
--------- ---------
APBO in excess of plan assets....... 106,445 117,868
Unrecognized prior service cost
resulting from plan amendments..... (4,059) (5,459)
Unrecognized net loss from past
experience different from that
assumed and from changes in
assumptions........................ (2,680) (19,671)
--------- ---------
Accrued postretirement benefit
cost............................... $ 99,706 $ 92,738
========= =========
</TABLE>

54
<PAGE>

The APBO was determined using a discount rate of 7.5% and 7.0% and an
expected return on plan assets of 9.0% and 8.5% in 1999 and 1998, respectively,
and an assumed health care cost trend rate of 7% in 2000, gradually declining to
5% after 2003. Assuming a 1% increase in the health care cost trend rate, the
APBO at October 31, 1999 would increase by $20,539,000 along with an increase in
the 1999 service and interest cost components of $2,294,000. Assuming a 1%
decrease in the health care cost trend rates the APBO at October 31, 1999 would
decrease by $16,245,000 along with a decrease in the 1999 service and interest
cost components of $1,784,000.

The following table sets forth a reconciliation of the beginning and
end of year APBO:
<TABLE>
<CAPTION>

1999 1998
--------- ---------
(Dollars in thousands)
<S> <C> <C>
APBO at beginning of year........... $ 130,821 $ 108,998
Service cost........................ 3,357 3,068
Interest cost....................... 8,670 8,441
Actuarial (gains) losses, net....... (14,937) 13,369
Benefits paid....................... (3,376) (3,055)
--------- ---------
APBO at end of year................. $ 124,535 $ 130,821
========= =========

</TABLE>

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

1999 1998
--------- ---------
(Dollars in thousands)

<S> <C> <C>
Plan assets at beginning of year.... $ 12,953 $ 8,485
Actual return on assets............. 3,078 1,912
Employer contributions.............. 2,324 2,556
Benefits paid....................... (265) -
--------- ---------
Plan assets at end of year.......... $ 18,090 $ 12,953
========= =========
</TABLE>

Net periodic postretirement benefit costs included the following
components:

Years Ended October 31,
1999 1998 1997
---------------------------------------------
(Dollars in thousands)

<S> <C> <C> <C>
Service cost........................ $ 3,357 $ 3,068 $ 2,232
Interest cost....................... 8,670 8,441 7,260
Expected return on plan assets...... (1,281) (804) (333)
Amortization of unrecognized:
Prior service cost................. 1,400 1,400 1,400
Actuarial (gain) loss.............. 258 489 (317)
-------- -------- ---------
Net periodic postretirement
benefit cost....................... $ 12,404 $ 12,594 $ 10,242
======== ======== ========

</TABLE>

<PAGE>

(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, 1999, the Company's book bases in its assets and liabilities
exceeded its tax bases by approximately $9,000,000.

The provision for income tax expense for the years ended October 31, 1998
and 1997 is comprised of the following:

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

<S> <C> <C>
Federal income taxes
Current........................... $ 6,317 $ 8,301
Deferred.......................... 5,009 4,461
State income taxes
Current........................... 599 600
Deferred.......................... 440 1,120
--------- ---------
Provision for
income taxes...................... $ 12,365 $ 14,482
========= =========

</TABLE>

In addition to the above income taxes, the Company recognized
$13,180,000 of current income tax benefits in 1997 related to the extraordinary
loss on the early retirement of debt (see note 4). A reconciliation between
income tax expense reported and income tax expense computed by applying the
federal statutory rate to income before income taxes and extraordinary loss for
the years ended 1998 and 1997 follows:

1998 1997
--------- ---------
(Dollars in thousands)
<S> <C> <C>
Income taxes at federal
statutory rate.................... $ 11,360 $ 13,282
State income taxes, net of
federal income tax benefit........ 675 1,118
Other............................... 330 82
--------- ---------
$ 12,365 $ 14,482
========= =========

</TABLE>

Deferred income taxes result from temporary differences in the
financial basis and tax basis of assets and liabilities. Total deferred tax
assets and liabilities amounted to approximately $50,461,000 and $55,219,000 as
of October 31, 1998, respectively. The most significant items comprising the
deferred tax assets were postretirement benefits of $31,141,000 and compensation
accruals of $5,965,000 while deferred tax liabilities consist primarily of
deferred taxes on inventory of $3,065,000 and fixed assets of $52,037,000. The
Company had no valuation allowance for realization of deferred tax assets as of
October 31, 1998.

<PAGE>

(10) Leases

- ----------------------------------------------------------------------------
The Company leases a portion of its operating and data processing
equipment. Minimum future lease payments under noncancellable operating leases
are $1,875,000, $1,392,000, $675,000, $403,000, $458,000 and $61,000 for the
years ending October 31, 2000, 2001, 2002, 2003, 2004 and thereafter,
respectively. Rent expense for noncancellable operating leases amounted to
approximately $1,873,000, $1,811,000 and $1,386,000, for the years ended October
31, 1999, 1998 and 1997, respectively.

(11) Related Party Transactions

- ----------------------------------------------------------------------------
The Company has a management services agreement with Renco under which
Renco provides certain management services to the Company. Under terms of this
agreement, the Company is charged a monthly fee of $100,000. The term of this
agreement extends to October 31, 2001. Total expense for management services
fees amounted to $1,200,000 for each of the years ended October 31, 1999, 1998
and 1997.

In fiscal 1999, 1998 and 1997, the Company incurred costs of
approximately $1.7 million, $1.8 million and $1.7 million, respectively, under
the Renco insurance program. The Company believes that its insurance costs under
this program were less than it would have incurred if it had obtained its
insurance directly.

Renco Steel is a holding company formed by Renco in January 1998 which
owns all the outstanding shares of capital stock of the Company. In February
1998, Renco Steel issued $120 million principal amount 10.875% Senior Secured
Notes due 2005. These notes are secured by a pledge of all the outstanding
capital stock of the Company. Renco Steel intends to meet its debt service
obligations from its cash balances and earnings thereon and through
distributions from the Company as permitted under the Company's outstanding
indebtedness as described in Note 4.

(12) Commitments and Contingencies

- ----------------------------------------------------------------------------
At October 31, 1999, the Company had commitments to purchase data
processing services of approximately $13,985,000 in the aggregate over the
remaining 2.5 years of its management information systems agreement and
purchased services of approximately $5,627,000, $5,458,000 and $5,463,000 in
1999, 1998 and 1997, respectively, under the agreement. At October 31, 1999, at
pricing then in effect, the Company had firm commitments for the purchase of raw
materials and gases of approximately $11,918,000 in 2000, $12,278,000 in 2001
and $2,994,000 thereafter. In addition, at October 31, 1999 the Company had
commitments for capital expenditures of approximately $5,901,000.

<PAGE>

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 consent decrees as a result of two civil
actions instituted by the Department of Justice (DOJ), on behalf of the
Environmental Protection Agency (EPA). These consent decrees require the Company
to complete certain supplemental environmental projects estimated to cost
between $1.7 million and $2.2 million that will be expended over two years. The
largest of the projects to be undertaken as part of the settlement involves
sediment removal from the Mahoning River at an estimated cost of $750,000 but
not to exceed $1 million. The consent decrees also provide for stipulated
penalties in the event of noncompliance which the Company does not believe will
be material.

The Company was the defendant in an action instituted by DOJ on May 11,
1998 under the Resource Conservation and Recovery Act (RCRA), which alleged
violations of RCRA, the Ohio Administrative Code (OAC) and the Company's
hazardous waste management permit related to the Company's management of alleged
hazardous waste in surface impoundments at the Warren, Ohio facility. The action
alleged that from September 1988 to the present, the Company operated hazardous
waste management units at the Warren facility without the proper permits and in
noncompliance with RCRA. This action sought a civil penalty of not more than the
statutory maximum of $25,000 per day per violation ($27,500 per day per
violation for violations since January 30, 1997) and also an injunction
requiring closure of the surface impoundments and other compliance measures
under RCRA. A trial in the RCRA action was completed in June 1999 and the court
rendered its decision in October 1999. The court's decision requires the Company
to pay a $1 million cash penalty and denies the United States request for
injunctive relief. In November 1999, the U.S. filed a motion for the court to
reconsider its decision regarding injunctive relief which was denied. The
court's decision is subject to appeal.

As a condition of a previous 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 is currently
undertaking the first investigation step of the corrective action program, the
RCRA Facility Investigation (RFI), the initial phase of which is expected to be
completed in 2000. 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

<PAGE>

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 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.

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

(13) Selected Quarterly Data (Unaudited)

- ----------------------------------------------------------------------------
The following is a summary of unaudited quarterly results for the years
ended October 31, 1999 and 1998:

Three Months Ended 1999
Jan. 31 April 30 July 31 Oct. 31
----------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Net sales...................... $ 110,277 $ 139,115 $ 143,086 $ 139,191
Gross margin................... 8,413 17,263 23,691 14,132
Net income (loss).............. (3,383) 615 6,491 2,140

Three Months Ended 1998
Jan. 31 April 30 July 31 Oct. 31
----------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Net sales...................... $ 166,592 $ 177,860 $ 174,947 $ 146,342
Gross margin................... 24,744 28,656 30,000 21,390
Net income..................... 4,201 6,516 7,148 2,228

</TABLE>

<PAGE>

During the three months ended January 31, 1999, the Company recognized an
income tax benefit of $4,558,000 as a result of the subchapter S election
described in Note 1(g). During the three months ended October 31, 1999 the
Company recorded a benefit of $5,662,000 under the LIFO inventory valuation
method. In addition, the Company recorded a gain of $5,046,000 as a result of an
agreement with the USWA which permits the Company to pay certain medical
benefits from assets in a trust previously restricted for other benefits.

<PAGE>

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, 1999 and 1998, and the related consolidated statements of income,
shareholder's equity (deficit), and cash flows for each of the years in the
three-year period ended October 31, 1999. 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.

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, 1999 and 1998, and the results of their
operations and their cash flows for each of the years in the three-year period
ended October 31, 1999, in conformity with generally accepted accounting
principles.

/S/ KPMG LLP
- ------------

KPMG LLP

Cleveland, Ohio
December 17, 1999

<PAGE>

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

None.

PART III

ITEM 10. DIRECTORS AND OFFICERS

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

Name Age Position
Ira Leon Rennert.................. 65 Chairman of the Board and Director
James N. Chapman.................. 37 President
Roger L. Fay...................... 54 Vice President and
Chief Financial Officer

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

James N. Chapman has been President of Renco Steel since its inception and
Vice President-Investment Banking of Renco since December 1996. Prior to
joining Renco, Mr. Chapman was a Principal with the investment banking firm
of Fieldstone FPCG Services, L.P. from August 1990 through May 1996. Mr.
Chapman is a director of Coinmach Laundry Corporation.

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

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

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

Executive Officers of WCI

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

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

<PAGE>

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 since June 1, 1999 and
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 WCI since its inception in 1988, has held various positions within
WCI, 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 with the accounting and
consulting firm of KPMG LLP and had been with that firm in various capacities
from September 1988 through April 1995.

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

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.

ITEM 11. EXECUTIVE COMPENSATION

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

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

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of January 21, 2000
regarding the beneficial ownership of Common Stock by each beneficial owner of
5% or more of the Common Stock, each director and each named executive officer
of Renco Steel during the last fiscal year, and by all directors and executive
officers of Renco Steel as a group. Except as otherwise noted, the persons named
in the table below have sole voting and investment power with respect to all
shares shown as beneficially owned by them.

<PAGE>

Beneficial Ownership
as of January 21, 2000
----------------------
Shares of
Name of Beneficial Owners and Address of 5% Beneficial Owners Common Stock Percent

<S> <C> <C>
The Renco Group, Inc. ....................................... 100 100.0%
30 Rockefeller Plaza, 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

James N. Chapman ............................................ -- --

Roger L. Fay ................................................ -- --

All directors and executive officers as a group (3 persons).. 100 100.0%

</TABLE>

- --------------------

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

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

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Under a Management Consultant Agreement, effective October 1, 1992, as amended,
between Renco and WCI, WCI pays a monthly fee of $100,000 to Renco. The
Management Consultant Agreement provides that WCI shall not make any payment
thereunder which would violate any of its agreements with respect to any of its
outstanding indebtedness. The Management Consultant Agreement extends to October
31, 2001 and thereafter shall continue for additional terms of three years each
unless sooner terminated by either party by giving six months prior written
notice. In the year ended October 31, 1999, WCI incurred management fees in the
amount of $1,200,000. WCI 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 WCI could obtain
such services from unaffiliated entities.

Under the terms of Renco Steel's tax sharing agreement with Renco, income taxes
are allocated by Renco to Renco Steel on a separate return basis, consolidated
with WCI and its subsidiaries, except that transactions between Renco Steel and
its subsidiaries and Renco and its other subsidiaries are accounted for on a
cash basis and not on an accrual basis. Similarly, under the terms of WCI's tax
sharing agreement with Renco Steel, income taxes are allocated by Renco Steel to
WCI on a separate return basis, except that transactions between WCI and Renco
Steel are accounted for on a cash basis and not on an accrual basis. Neither
Renco Steel nor WCI is entitled to the

<PAGE>

benefit of net tax loss carryforwards, unless such tax losses were a result of
timing differences between their respective accounting for tax and financial
reporting purposes. Renco has agreed to indemnify WCI for any tax imposed on or
paid by it in excess of the amount payable under its tax sharing agreement. On
January 15, 1999 Renco elected subchapter S tax treatment effective November 1,
1998. At the same time, Renco elected for Renco Steel and WCI to be treated as a
qualified subchapter S subsidiaries (QSSS). While in this status, the activity
within the tax sharing agreement will be applicable only to prior years audit
adjustments and/or current and future year state filings where QSSS is not
recognized and multiple Renco subsidiaries operate.

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 WCI is self insured) and casualty
umbrella. The premiums for director and officer, fidelity, fiduciary, property,
business interruption, auto liability and casualty umbrella are allocated by
Renco substantially as indicated in the underlying policies. General and product
liability and workers' compensation 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.

In fiscal 1999, the Company incurred costs of approximately $1.7 million under
the Renco insurance program. The Company believes that its insurance costs under
this program were less than it would have incurred if it had obtained its
insurance directly.

<PAGE>

PART IV

ITEM 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K

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

1. Consolidated Financial Statements.

The consolidated financial statements listed below together with the reports
thereon of the independent auditors dated January 14, 2000 and December 23, 1999
for the Company and WCI respectively, are included in this report for ITEM 8.
and is incorporated by reference herein.

THE COMPANY

Consolidated Balance Sheets at October 31, 1999 and 1998.

Consolidated Statements of Income for the fiscal years ended October
31, 1999, 1998 and 1997.

Consolidated Statements of Shareholder's Equity (Deficit) for the
fiscal years ended October 31, 1999, 1998 and 1997.

Consolidated Statements of Cash Flows for the fiscal years ended
October 31, 1999, 1998 and 1997.

Notes to Consolidated Financial Statements.

Independent Auditors' Report.

WCI

Consolidated Balance Sheets at October 31, 1999 and 1998.

Consolidated Statements of Income for the fiscal years ended October
31, 1999, 1998 and 1997.

Consolidated Statements of Shareholder's Equity (Deficit) for the
fiscal years ended October 31, 1999, 1998 and 1997.

Consolidated Statements of Cash Flows for the fiscal years ended
October 31, 1999, 1998 and 1997.

Notes to Consolidated Financial Statements.

Independent Auditors' Report.

2. Financial Statement Schedule.

Independent Auditors' Report on Financial Statement Schedule.

Schedule II - Valuation and Qualifying Accounts.

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

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

(b) Reports on Form 8-K.

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

<PAGE>

INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE

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

Under date of January 14, 2000, we reported on the consolidated balance sheets
of Renco Steel Holdings, Inc. and subsidiaries and predecessor as of October 31,
1999 and 1998, and the related consolidated statements of income, shareholder's
equity (deficit), and cash flows for each of the years in the three-year period
ended October 31, 1999, which are contained as part of this report herein. In
connection with our audits of the aforementioned consolidated financial
statements, we also audited the related financial statement schedule (Schedule
II - Valuation and Qualifying Accounts) also contained as part of this report
herein. This financial statement schedule is the responsibility of Renco Steel
Holdings, Inc.'s management. Our responsibility is to express an opinion on the
financial statement schedule based on our audits.

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

/S/ KPMG LLP
- -------------------------

KPMG LLP

Cleveland, Ohio
January 14, 2000

<PAGE>

RENCO STEEL HOLDINGS, INC. AND SUBSIDIARIES AND PREDECESSORS
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCE FOR DOUBTFUL ACCOUNTS
FOR THE YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997.
(DOLLARS IN THOUSANDS)

ADDITIONS
BALANCE AT ------------------------ BALANCE AT
BEGINNING CHARGED TO CHARGES TO DEDUCTIONS END
CLASSIFICATION OF YEAR EXPENSE (b) OTHER (c) OF YEAR
- -------------- ----------- ----------- ---------- ---------- ---------

<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS (a):
Year ended October 31, 1999........ $ 904 $ (84) $ -- $ (54) $ 874

Year ended October 31, 1998........ 1,627 (475) -- 248 904

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

</TABLE>

- -------------------------

(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.

<PAGE>

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 21st day of January,
2000.

RENCO STEEL HOLDINGS, INC.

By: /s/ Ira Leon Rennert
---------------
Ira Leon Rennert
Chairman of the Board

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 21st day of January, 2000.

Signature Title

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

/s/ James N. Chapman
---------------
James N. Chapman President
(principal executive officer)

/s/ Roger L. Fay
------------
Roger L. Fay Vice President, Chief Financial Officer
(principal financial and accounting officer)

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

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

<PAGE>

Exhibit Index

EXHIBIT
NO. DESCRIPTION
- ----------------------------------------------------------------------------

3.1 -- Articles of Incorporation of the Registrant, filed January
20, 1998.(5)

3.2 -- Code of Regulations of the Registrant.(5)

4.1 -- Indenture, dated as of February 3, 1998, by and between the
Registrant, as issuer, and State Street Bank and Trust
Company, as trustee, relating to the 10 7/8% Senior Secured
Notes due 2005, Series A and the 10 7/8% Senior Secured
Notes due 2005, Series B of the Registrant (containing, as
exhibits, specimens of the Series A Senior Secured Notes and
Series B Senior Secured Notes).(5)

4.2 -- Indenture, dated as of December 14, 1993, among Renco Steel,
Inc. (which subsequently was merged into WCI), as issuer,
WCI, 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 WCI
containing, as exhibits, specimens of the Series A Senior
Notes and Series B Senior Notes).(2a)

4.2.1 -- First Supplemental Indenture to the indenture, dated as of
December 14, 1993, among Renco Steel, Inc. (which
subsequently was merged into WCI), as issuer, WCI as
guarantor, and Shawmut Bank Connecticut, National
Association (now known as State Street Bank and Trust
Company), 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 WCI (containing, as exhibits, specimens of the
Series A Senior Notes and Series B Senior Notes).(2b)

4.2.2 -- Second Supplemental Indenture to the indenture, dated as of
December 14, 1993, among Renco Steel, Inc. (which
subsequently was merged into WCI), as issuer, WCI as
guarantor, and Shawmut Bank Connecticut, National
Association (now known as State Street Bank and Trust
Company), 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 WCI (containing, as exhibits, specimens of the
Series A Senior Notes and Series B Senior Notes).(3)

<PAGE>

EXHIBIT
NO. DESCRIPTION
- ----------------------------------------------------------------------------
4.3 -- Indenture, dated as of November 27, 1996, between WCI as
issuer, and Fleet National Bank (now known as State Street
Bank and Trust Company), as trustee, relating to the 10%
Senior Secured Notes due 2004, Series A, and the 10% Senior
Secured Notes due 2004, Series B of WCI Steel, Inc.
(containing, as exhibits, specimens of the Series A Senior
Secured Notes and Series B Senior Secured Notes).(3b)10.1--
Second Amended and Restated Loan and Security Agreement,
dated July 30, 1999, between WCI Steel, Inc. and Congress
Financial Corporation.(6)

10.1 -- Second Amended and Restated Loan and Security Agreement,
dated July 30, 1999, between WCI Steel, Inc. and Congress
Financial Corporation.(6)

10.1.1 -- Guarantee, dated as of October 31, 1997, by WCI Steel
Production Control Services Inc., WCI Steel Metallurgical
Services Inc., WCI and Niles Properties, Inc. in favor of
Congress Financial Corporation, as lender and agent, and
BankAmerica Business Credit, Inc. as lender.(4)

10.1.2 -- Guarantee, dated as of October 31, 1997, by WCI Steel
Production Control Services Inc., WCI Steel Metallurgical
Services Inc. and Niles Properties, Inc. in favor of
Congress Financial Corporation, as lender and agent, and
BankAmerica Business Credit, Inc. as lender.(4)

10.2 -- Intercreditor Agreement, dated November 27, 1996, between
Fleet National Bank and Congress Financial Corporation.(3c)

10.3 -- Intercreditor Agreement, dated November 27, 1996, among
Fleet National Bank, Bank One Trust Company, N.A. and
WCI.(3d)

10.4 -- Indemnification Agreement, dated as of November 27, 1996,
between WCI and Bank One Trust Company, N.A.(3e)

10.5 -- Agreement, dated June 11, 1990, between the City of
Youngstown, Ohio and Youngstown Sinter Company (with UDAG
Grant Agreement).(1)

10.8 -- Pledge Agreement, dated as of February 3, 1998, by the
Registrant, as pledgor, in favor of State Street Bank and
Trust Company, as trustee.(5)

21 -- List of Subsidiaries of Registrant.(5)

27 -- Financial Data Schedule.

- --------------------
(1) Incorporated by reference to Exhibit 10.8 filed with WCI's Registration
Statement on Form S-4, as amended (File No. 33-58648), originally filed
with the Commission on February 23, 1993.

<PAGE>

Incorporated by reference to the same numbered exhibits filed with
WCI's Registration Statement on Form S-4 (File No. 33-74108),
originally filed with the Commission on January 14, 1994:

(2a) Exhibit 4.1

(2b) Exhibit 4.1.1

Incorporated by reference to the following exhibits filed with WCI's
Registration Statement on Form S-4, as amended (File No. 333-18019),
originally filed with the Commission on December 17, 1996:

(3a) Exhibit 4.1.2

(3b) Exhibit 4.2

(3c) Exhibit 10.4.11

(3d) Exhibit 10.5.1

(3e) Exhibit 10.5.2

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

(5) Incorporated by reference to the same numbered exhibit filed with the
Registrant's Registration Statement on Form S-4 (File No. 333-48245),
originally filed with the Commission on March 19, 1998.

(6) Incorporated by reference to WCI's Form 10-Q for the quarterly period
ended July 31, 1999.

<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheets at October 31, 1999 and the condensed
consolidated statements of income for the twelve months ended October 31, 1999
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> OCT-31-1999
<CASH> 80,004
<SECURITIES> 10,238
<RECEIVABLES> 58,720
<ALLOWANCES> 874
<INVENTORY> 84,174
<CURRENT-ASSETS> 238,498
<PP&E> 420,710
<DEPRECIATION> 166,294
<TOTAL-ASSETS> 551,753
<CURRENT-LIABILITIES> 111,768
<BONDS> 421,054
0
0
<COMMON> 0
<OTHER-SE> (133,817)
<TOTAL-LIABILITY-AND-EQUITY> 551,753
<SALES> 531,669
<TOTAL-REVENUES> 531,669
<CGS> 467,905
<TOTAL-COSTS> 467,905
<OTHER-EXPENSES> 41,859
<LOSS-PROVISION> (84)
<INTEREST-EXPENSE> 45,674
<INCOME-PRETAX> (12,518)
<INCOME-TAX> (21,210)
<INCOME-CONTINUING> 8,692
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,692
<EPS-BASIC> 0
<EPS-DILUTED> 0

</TABLE>