WEIRTON STEEL CORP - 10-K Annual Report

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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 DECEMBER 31, 2002

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO .

COMMISSION FILE NO. 1-10244

WEIRTON STEEL CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE 06-1075442
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 THREE SPRINGS DRIVE,
WEIRTON, WEST VIRGINIA 26062
(Address of principal executive offices) (Zip code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 304-797-2000

SECURITIES REGISTERED UNDER SECTION 12(b) OF THE ACT:

SECURITIES REGISTERED UNDER SECTION 12(G) OF THE ACT:

Common Stock, Par Value $0.01 Per Share OTC Bulletin Board
Preferred Stock, Series C Convertible OTC Bulletin Board
Redeemable, Par Value $0.10 Per Share
10% Senior Secured Notes due 2008 OTC Bulletin Board

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 past 90 days. Yes X No: ___

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of 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. ___

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes ___ No X

Based on the closing price as of June 28, 2002 the aggregate market value of
the voting stock held by nonaffiliates of the Registrant was $33,968,154. (The
foregoing calculation includes shares allocated under the Registrant's 1984 and
1989 Employee Stock Ownership Plans to the accounts of employees who are not
otherwise affiliates.)

The number of shares of Common Stock ($.01 par value) of the Registrant
outstanding as of June 28, 2002 was 41,935,992.

DOCUMENTS INCORPORATED BY REFERENCE:

Certain portions of the Registrant's definitive Proxy Statement filed
pursuant to Regulation 14A (filed within 120 days after the end of the fiscal
year covered hereby) in connection with the Registrant's 2003 Annual Meeting of
Stockholders are incorporated by reference into Part III of this Annual Report
on Form 10-K to the extent provided herein.

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TABLE OF CONTENTS
ITEM

FORWARD LOOKING STATEMENTS

Weirton Steel Corporation from time to time makes forward-looking
statements in reports filed with the Securities and Exchange Commission (the
"SEC"). These forward-looking statements may extend to matters such as
statements concerning its projected levels of sales, shipments and income, cash
flows, pricing trends, anticipated cost-reductions, product mix, anticipated
capital expenditures and other future plans and strategies. Weirton Steel
Corporation and/or Weirton Steel Corporation together with its consolidated
subsidiaries are hereafter referred to as the "Company," "Weirton," "we," "us"
and "our."

As permitted by the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, Weirton is identifying in this report important
factors that could cause Weirton's actual results to differ materially from
those projected in these forward-looking statements. These factors include, but
are not necessarily limited to:

- Weirton's highly leveraged capital structure and its ability to obtain
new capital at reasonable costs and terms;

- employment matters, including costs and uncertainties associated with
Weirton's collective bargaining agreements, and employee postemployement
and retirement obligations;

- whether we will be able to achieve up to $120 million in annual savings
as part of our current five part cost improvement program;

- the high capital requirements associated with integrated steel
facilities;

- availability, prices and terms associated with raw materials, supplies,
utilities and other services and items required by Weirton's operations;

- the sensitivity of Weirton's results to relatively small changes in the
prices it obtains for its products;

- intense competition due to excess global steel capacity, low-cost
domestic steel producers, imports (especially unfairly-traded imports)
and substitute materials;

- whether Weirton will continue to operate under its current organizational
structure;

- whether there will be a major steel industry consolidation effort and
whether it will be successful;

- changes in customer spending patterns, supplier choices and demand for
steel products;

- the effect of planned and unplanned outages on Weirton's operations;

- the potential impact of strikes or work stoppages at facilities of
Weirton's customers and suppliers;

- the consolidation of many of Weirton's customers and suppliers;

- the significant costs associated with environmental controls and
remediation expenditures and the uncertainty of future environmental
control requirements;

- the effect of possible future closure or exit of businesses; and

- the effect of existing and possible future lawsuits filed against
Weirton.

The forward-looking statements included in this document are based on
information available to Weirton as of the date of this report. Weirton does not
undertake to update any forward-looking statements that may be made from time to
time by Weirton or its representatives.

PART I

ITEM 1. BUSINESS

STEEL INDUSTRY OVERVIEW

Emerging from an import driven crisis of 2001, the U.S. steel industry
operated in a state of economic turmoil throughout 2002. Recessionary conditions
continued to prevail in the marketplace, and although operating losses for
domestic integrated producers decreased from the record levels of 2001, the
financial condition of domestic integrated producers generally continued to
weaken in 2002. This resulted in additional bankruptcies during 2002, including
that of National Steel Corporation ("National"), the third largest domestic
integrated producer, which filed for Chapter 11 protection in March 2002, and
three smaller producers, Geneva Steel LLC, Huntco Inc. and Calumet Steel Co.,
which filed for bankruptcy protection during the first quarter of 2002.

Since the beginning of the steel import crisis in 1998, domestic companies
and unions lobbied Congress and the White House for action to deal with the
record surge of foreign imports, especially those that violated U.S. trade laws.
Among these efforts, in January 2002, a steel industry executive group made
recommendations for governmental steps believed necessary to deal with the
continuing industry crisis and to encourage industry consolidation and capacity
rationalization. This included trade measures, such as tariffs, and legislative
and regulatory relief from the industry's legacy issues, specifically its
liabilities for accrued, unfunded pensions and retiree healthcare benefits. In
March 2002, the Bush Administration initiated a three-year, stepped tariff
program providing a substantial level of trade relief. Subsequent to the
imposition of the tariffs, however, a large number of tariff exclusion
applications were filed. Of the exclusions granted through March 28, 2003, none
have had any significant effect on Weirton. Furthermore, no changes have been
made to address the industry's legacy issues. As a result, the domestic steel
industry has been left to deal with consolidation prospects and legacy
liabilities primarily through a largely unpredictable bankruptcy process, and in
some instances, through financial restructurings outside bankruptcy. The Pension
Benefit Guaranty Corporation (the "PBGC"), the federal agency insuring pension
benefits, generally has moved to terminate the underfunded plans of bankrupt
companies relieving them of future accruals for pension service.

A pattern has now emerged in the domestic steel industry whereby
steelmaking assets of bankrupt producers are being acquired free of legacy
liabilities in connection with the liquidation, instead of reorganization, of
those bankrupt companies, with the result that the acquirer can operate at a
lower cost than other domestic producers. In February 2002, a new entity,
International Steel Group ("ISG"), purchased substantially all the integrated
production facilities of bankrupt LTV Steel Corp. in a Chapter 7 liquidation
auction. ISG subsequently restarted a portion of those facilities in addition to
purchasing and restarting the idled assets of another bankrupt company, Acme
Steel. On March 13, 2003, ISG entered into a signed definitive agreement with
Bethlehem Steel Corp. ("Bethlehem") to purchase substantially all of the assets
of Bethlehem, the second largest integrated steelmaker, which filed for Chapter
11 bankruptcy protection in 2001. With the acquisition of the Bethlehem
facilities, ISG will be the largest domestic steelmaker as the result of its
acquisition of three bankrupt steel producers. In addition to operating without
the burden of predecessor legacy costs, ISG has forged an innovative agreement
with the United Steelworkers of America. The new agreement contains higher
productivity benchmarks, incentives linked to company profits and major changes
to work rules, pay classifications and general operating language. This may
leave steel companies with traditional contract language at a significant
competitive disadvantage.

Other consolidations in 2002 included the purchase of Birmingham Steel
Corp. and the idled assets of bankrupt Trico Steel Co. by Nucor Corp., idled
Qualitech Steel SBQ by Steel Dynamics, Inc., and bankrupt Heartland Steel Co. by
Brazilian steelmaker CSN. In January 2003, both United States Steel Corp. and AK
Steel Corp., two of the major integrated steelmakers, made competing offers to
purchase National's assets in bankruptcy. On February 6, 2003, AK Steel was
approved by the bankruptcy court as lead bidder with a total offer of $1.125
billion for substantially all of National's assets. Whether either bidder is
ultimately successful in acquiring National's assets, which depends primarily on
the successful negotiation of labor contracts, or National manages a
"stand-alone" reorganization, is subject to the further outcome of the
bankruptcy process.

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OUR BUSINESS

We are a major integrated producer of flat-rolled carbon steel with
principal product lines consisting of tin mill products and sheet products. Tin
mill products include tin plate, chrome coated and black plate steels and are
consumed principally by the container and packaging industry for food cans,
general line cans and closure applications, such as caps and lids. Tin mill
products accounted for 46% of revenue and 35% of tons shipped in 2002 compared
to 49% of revenue and 36% of tons shipped in 2001 and 39% of revenue and 30% of
tons shipped in 2000. Sheet products include hot and cold rolled and both
hot-dipped and electrolytic galvanized steel and are used in numerous end-use
applications, including among others the construction, appliance and automotive
industries. Sheet products accounted for 54% of revenue and 65% of tons shipped
in 2002 and 51% of revenue and 64% of tons shipped in 2001 compared to 61% of
revenue and 70% of tons shipped in 2000. In addition, we currently are providing
tolling services at our hot strip mill for a major stainless steel producer,
which accounts for almost 20% of the overall capacity of our hot strip mill.

We are a Delaware corporation formed in 1982 with our offices and
production facilities located in Weirton, West Virginia. We and our predecessor
companies have been in the business of making and finishing steel products for
over 90 years. From 1929 to 1984, our business was operated as the Weirton Steel
Division of National. We acquired our principal operating assets from National
in January 1984 and became a publicly traded company in June 1989.

As an integrated steel producer, we produce carbon steel slabs in our
primary steel making operations from raw materials to industry and customer
specifications. In primary steel making, iron ore pellets, coke, limestone and
other raw materials are consumed in blast furnaces to produce molten iron or
"hot metal." We then convert the hot metal into liquid steel through basic
oxygen furnaces where impurities are removed, recyclable scrap is added and the
metallurgy of the product is customized and tested. Our basic oxygen process, or
"BOP," shop is one of the largest in North America, employing two vessels, each
with a steel making capacity of 360 tons per heat. Liquid steel from the BOP
shop is then formed into slabs through our multi-strand continuous caster. The
slabs are then reheated, reduced and finished into coils at our recently
re-built hot strip mill and, in many cases, further cold reduced, plated or
coated at our downstream finishing operations. Our hot strip mill is one of the
best in North America for the production of tin mill product substrate and one
of the few in the industry that is capable of rolling both carbon and stainless
steel substrate. See "Properties."

The following flow chart illustrates both our primary steel making and
downstream operations:

[PROCESS FLOW GRAPHIC]

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From primary steel making through finishing operations, our assets are
focused on the production of tin plate, which is typically light gauge, narrow
width strip. We believe that our rolling and finishing equipment is near "best
in class" in the production of light gauge strip used in the manufacture of tin
mill products and other value-added products. Although, as a result of its 48"
strip width limitation, Weirton is not a full line supplier of sheet products to
certain markets such as automotive and appliance, our narrower strip capacity
allows us to produce light gauge products more efficiently than larger
integrated producers with rolling mills up to 80" in width. Consumers of light
gauge, narrow width sheet products recognize our commitment to these products
and our reliability of supply, which enhances the stability of our customer
base. In addition, our wide range of coatings, including galvanized, galvanneal,
electro and galfan, is designed to meet the needs of our demanding and diverse
customer base.

The characteristics of the tin mill product and sheet product markets, when
coupled with the comparative advantages of Weirton's steel making facilities,
are the drivers behind our strategic plan, which is to continue to expand our
more competitive tin mill business through strategic acquisitions, as well as to
further penetrate niche markets in narrow width zinc coated applications that
take advantage of our recent galvanizing upgrades and multiple coatings
capability. See "Our Competitive Advantages."

OUR STRATEGIC OBJECTIVES

With the industry consolidation following a pattern of reducing employment
legacy liabilities and modifying current benefit costs, often through the
bankruptcy process, the Company finds itself at an estimated $35 per ton cost
disadvantage to those mills that have been able to eliminate their legacy
liabilities. To reposition itself to be more cost competitive, in early January
2003, the Company's management team initiated a five part cost improvement
program aimed at achieving annual savings of up to approximately $120 million.

Employee Costs. In January 2003 the Company renegotiated, and in February
2003 its unionized employees approved, replacement labor agreements providing
for five percent wage reductions, the elimination of planned wage increases,
vacation pay deferrals, and a freeze on further benefit accruals under our
defined benefit pension plan. Together with comparable measures applied to
non-represented employees, these changes are anticipated to generate
approximately $38 million in annual savings. Additionally, the Company is
seeking from its pre-age 65 retirees, and then from its active employees,
reductions of healthcare costs through medical plan design changes involving
increased contributions and co-pays. Finally, as the cost structures and
competitiveness of the revived mills are further assessed, the Company and its
unions have agreed to bargain in good faith over additional necessary employment
cost savings. In exchange for the employee related savings, the Company has
agreed to issue to an employee trust, which may be one of our ESOPs, shares of a
new series of preferred stock. The Company's goal is to obtain approximately an
additional $34 million in annual savings from these measures.

Since 1984, the Company, in common with most of its domestic competitors,
has maintained a defined benefit pension plan covering substantially all
employees and providing pensions based on earnings and years of service.
Although the Company has consistently funded its plan in excess of minimum
funding requirements under federal law, in recent years, accrued pension
liabilities have continued to accelerate while poor market conditions have
eroded asset values in the pension trust. As a result, the Company faces a large
drain on its liquidity to make future pension contributions over the next few
years. That drain seriously threatens the Company's solvency. To mitigate the
effect of the pension contributions, we applied to the Internal Revenue Service
for a waiver of our obligation to make those contributions for plan years 2002
and 2003, which would defer our funding over five year periods. Those
applications are still pending. We believe that our actions to freeze further
benefit accruals will improve our prospects of obtaining funding relief, and,
assuming no further significant deterioration in plan asset performance, allow
us to fund our plan in accordance with the deferred timetable we are seeking. We
believe that these measures should allow us to maintain our plan without
termination intervention by the PBGC, as has been the case with our bankrupt
competitors.

Operational Savings. The Company has developed a cost improvement plan
which is expected to reduce its annual operating costs approximately $18 million
by improving yields, reducing spending and reducing downtime.

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Raw Materials and Energy Savings. The Company targeted key raw materials
and logistic suppliers and has entered into negotiations to obtain more
favorable terms with these suppliers. This initiative is expected to generate
approximately $17 million in annual cost savings.

Margin Improvement. The Company has developed new reporting systems, which
should allow it to optimize its output resulting in an anticipated increase in
its margin of approximately $11 million through customer and product mix
enhancements.

Sales, General and Administrative Savings. Cost savings of approximately
$2 million are expected to be realized in the areas of dues, travel and
entertainment, and costs and services for our board of directors.

We cannot give assurances that our cost improvement plan will be fully
realized or, even if it is, that it will be sufficient to meet our long term
needs in light of changing industry patterns and market conditions. However, our
plans and goal attainment methods have been designed to be achieved by voluntary
actions, and, thus far, we believe we have made significant progress in
achieving our plan. The only other alternative, as demonstrated by the industry
pattern, has been bankruptcy and liquidation.

OUR COMPETITIVE ADVANTAGES

In pursuing our strategic objectives, we believe that we have a number of
competitive advantages, including:

- MARKET LEADER. We are the second largest United States producer of tin
mill products, with a 24% market share of domestic shipments, and we
enjoy strategic partnerships with many of our largest tin mill products
customers. Over one-third of our shipments go to customers that have
located facilities either directly on or contiguous to our property in
order to maximize the benefits of these strategic relationships. We also
enjoy a leadership position in the production of other light gauge coated
products for use in the residential construction market.

- MARKET INNOVATOR. We have a long history, through our WEIRTEC(TM) unit,
of technological innovation in the manufacture of tin mill products. For
example, we have developed innovations in can manufacturing processes
which have benefited our customers in the can manufacturing industry and
which we believe have promoted the continued use of our tin mill products
by customers in that industry. We also use our expertise in handling
critical specifications to market our light gauge, narrow width products
to potential coated sheet steel customers.

- STABILITY OF THE TIN MILL PRODUCT MARKET. Demand for tin mill products
is generally stable over the typical business cycle as compared to the
markets for sheet products used in the construction, appliance and
automotive industries due to a more stable end market for canned food,
aerosol and other consumer products. Our tin mill product shipments are
sold under contracts that extend a minimum of one year and are,
therefore, less subject to price volatility than spot market sales. The
number of domestic producers of tin mill products is relatively limited,
and there are significant barriers to entry by new competitors.

- HIGH QUALITY AND COMPETITIVE FACILITIES. We have an integrated, single
site facility, including a number of rebuilt or modernized high quality
finishing facilities, most of which have a maximum 48" strip width
capacity. We believe that our state-of-the-art facilities are best
configured for the production of narrow width value-added products,
positioning us as a competitive producer of high quality tin mill
products and other higher margin value-added sheet products, particularly
as compared to other United States integrated steel producers with
facilities more closely tailored to the production of broader width sheet
steel.

Over the past 15 years, we have invested approximately $1 billion in
modernizing and upgrading our equipment, as a result of which we expect
that only modest capital expenditures will be required through 2004. Of
that $1 billion, approximately $500 million was expended on improvements
to our continuous caster, hot strip mill and No. 9 Tandem Mill. We
believe that this has enabled us to continue to produce superior quality
steel substrate and, consequently, to maintain the high quality of our
tin mill and other value-added products. Our recently rebuilt hot strip
mill is one of the few in the industry that is capable of rolling both
carbon and stainless steel substrate. Our No. 9 Tandem Mill is one of the
most modern in the United States and can supply nearly one million tons
per year of substrate to our four tin platers which are

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rated, on average, the most productive in the domestic industry, as
compared to other full-range tin mill product suppliers. Also, the recent
addition of temper mills and tension leveling equipment to both our No. 3
and No. 5 galvanizing lines has significantly improved strip surface and
flatness, allowing production of substrate suitable for pre-paint and
other critical applications.

- DIVERSIFIED ASSET, PRODUCT AND CUSTOMER BASE. We have a diversified
asset base, including primary steel making facilities and downstream
finishing operations. Our product diversification is best among our
competitors serving the markets for tin mill and other coated products.
Our customer base includes food and general line can manufacturers, oil
filter manufacturers, residential entry and garage door manufacturers,
residential framing manufacturers, appliance manufacturers, automotive
stampers and various other customers.

- HUMAN RESOURCE ADVANTAGE. We believe our employees are among the most
motivated in the industry and have demonstrated their commitment to our
long term success. In response to deteriorating performance and
competitive changes in the industry, we renegotiated our union labor
agreements in February 2003. The new agreements, together with comparable
provisions for non unionized employees, are expected to provide $38
million in annual cost savings, principally through wage reductions and
the freezing of additional benefit accruals under our pension plan. We
are also seeking additional cost savings from active and retired
employees, including those relating to healthcare coverages. Our
principal union is an independent union representing substantially all
our unionized workforce but no employees of any other steel producer.
Finally, our employees, both unionized and non unionized, were an
integral part of our commencing operations as an independent company in
1984 and have held significant equity ownership stakes in our company
through our ESOPs ever since. As a result, we have never experienced a
strike or other significant work stoppage.

PRINCIPAL PRODUCTS AND MARKETS

We have two principal product lines consisting of tin mill products and
sheet steel products. Recently, we have also entered into a long-term tolling
agreement with a major stainless steel producer to convert stainless slabs into
stainless coils at our hot strip mill. The percentages of our total revenues
(excluding tolling revenues, which are not material to total revenue and have
historically been reported as a reduction of cost of sales) derived from the
sale of tin mill products and sheet steel products for each year in the
five-year period ended December 31, 2002 are shown on the following table. Total
revenues include the sale of "secondary" products, which principally include
those products not meeting prime specifications.

As illustrated by the following table, our shipments have historically been
concentrated within five major markets: steel service centers, containers, pipe
and tube manufacturers, construction and converters. Our overall

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participation in the container market substantially exceeds the industry
average, and our reliance on automotive shipments is substantially less than the
industry average.

PERCENT OF TOTAL TONS SHIPPED

Service Centers. Our shipments to steel service centers are heavily
concentrated in the areas of hot rolled and hot dipped galvanized coils. Due to
the increased in-house costs to steel companies during the 1980's for processing
services such as slitting, shearing and blanking, steel service centers have
become a major factor in the distribution of steel products to ultimate end
users. In addition, steel service centers have become an efficient provider of
first stage manufacturing. Many manufacturers focusing on core competencies have
outsourced basic forming and stamping operations.

Containers/Packaging. The vast majority of our shipments to the container
market are concentrated in tin mill products, which are utilized extensively in
the manufacture of food, aerosol and general line cans. Shipments in the
container industry are directly to the can manufacturers who provide engineered
cans for soup, vegetables, pet food, seafood, paint and other packaging
requirements.

Pipe and Tube. Shipments to the pipe and tube sector consist primarily of
hot rolled coils for manufacture into welded pipe and tube. These products are
used for automotive applications, structural components for commercial and
residential construction and consumer products such as appliances and furniture.

Construction. Our shipments to the construction industry are significantly
influenced by residential and commercial construction in the United States. We
serve several segments of the construction industry including Heating,
Ventilation and Air Conditioning ("HVAC"), residential and commercial garage and
entry doors, roofing panels and structural components. Shipments in this sector
consist primarily of electro- and hot dipped galvanized coils.

Converters. This sector consumes full hard cold rolled substrate for
conversion to hot dipped galvanized. Over the last decade, numerous independent
galvanized lines were started to service growth in coated steel demand.

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The following chart shows our product mix based on tons shipped in 2001 and
2002.

(1) Includes secondary products.

Our products are sold primarily to customers within the eastern half of the
United States. A substantial portion of our revenues is derived from long-time
customers, although we actively seek new customers and new markets for our
products. Over the past five years, our largest 10 customers (including steel
service centers and strip converters) accounted for approximately 40% of our
sales in each year. Most of our service center and converter business eventually
serves the construction market (doors and roof panels), furniture and appliance
markets and some automotive markets.

Total revenue from sales of tin and sheet products to customers in the
United States was $1,009.6 million, $922.7 million and $1,060.5 million in 2002,
2001 and 2000, respectively. We derive a portion of our tin mill product
shipments from exports, primarily to Canada and Mexico. Revenue from export
sales totaled $26.4 million, $37.7 million and $57.2 million in 2002, 2001 and
2000, respectively. This amounts to 5%, 8% and 13% of total tin mill revenue and
3%, 4% and 5% of total revenue in 2002, 2001 and 2000, respectively. We have not
exported sheet products during the last three years.

Our backlog of unfilled orders at March 21, 2003 was 440,000 net tons, most
of which we expect to be filled within the year, as compared to 500,000 net tons
and 400,000 net tons at December 31, 2002 and 2001, respectively.

In addition to utilizing manufacturing service centers for sales, we sell
our products through our direct mill sales force of approximately 16 persons.
Our products are primarily sold through salaried employees who operate from
corporate headquarters and regional locations. The sales organization is closely
linked with our technical service personnel who assist in product engineering
and development. We believe that our sales organization plays an important role
in identifying and achieving a more favorable strategic market mix for Weirton.
To supplement our traditional sales force, since October 1996, we have sold
non-prime products over the Internet.

TIN MILL PRODUCTS

Tin mill products represent a significant share of our total sales. In
2002, tin mill products represented 46% of total sales as compared to 49% in
2001 and 39% in 2000. Increases in sales of value-added tin mill products as a
result of continued investment and strategic acquisitions represents an
opportunity for growth in our business. During 2002, our market share decreased
slightly to approximately 24% from 25%. While selling prices and

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order rates for sheet products improved during 2002, the Company's tin product
sales were temporarily adversely affected by manpower movements within the plant
as a result of the Company's strategic restructuring plan. We believe that our
market share is sustainable and that our excess production capacity can meet
additional customer demand. We enjoy a reputation as a high quality producer of
tin mill products.

Our tin mill products comprise a full range of light gauge coated steels,
including black plate, tin coated steel and electrolytic chromium coated steel.
The tin mill products market is primarily directed at sanitary food, aerosol and
general line cans, and the demand for tin mill products in the United States is
approximately 4.0 million tons per year. Annual domestic production capacity is
approximately 4.0 million tons. The number of domestic producers of tin mill
products is relatively limited. Significant capital requirements and product
qualifications established by customers represent barriers to entry by new
producers. Worldwide, almost all tin plate is produced using the basic oxygen
furnace process due to critical metallurgical constraints.

The following table provides information concerning our shipment of tin
mill products relative to the domestic industry for the periods shown,
reflecting the latest available market share data.

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(1) Includes secondary products.

In 2002, over 80% of our tin mill product sales were to can manufacturing
and packaging companies, most of which establish in advance by contract a
substantial amount of their annual requirements. The balance of our tin mill
product sales is to manufacturers of caps and closures and specialty products
ranging from film cartridges, oil filters and battery jackets to cookie sheets
and ceiling grids. Our facilities are located near many of our major customers,
with over one-third of our output delivered to customers whose facilities are on
or contiguous to our property in Weirton, West Virginia. Representative
customers of our tin mill products include: Crown Cork & Seal, Ball Corp.,
United States Can, B-Way Corp., Impress USA Inc., Seneca Foods, Steel
Technologies, Sonoco Products, and Friskies Petcare Co.

Demand for tin mill products generally remains stable over the typical
business cycle due to the nature of the can manufacturing industry as compared
to the more volatile markets for sheet products used in the automotive,
appliance and construction industries. All of our tin mill product shipments are
sold under contracts that extend a minimum of one year and are, therefore, less
subject to price volatility than spot market sales. However these arrangements
also mean that we are slower to realize price increases as well as declines in
our tin mill products business.

Relatively modest declines in tin mill products prices that have occurred
between 1998-2000 are attributable to ongoing consolidation among can
manufacturing and packaging companies, which we believe is now largely complete,
and foreign imports of tin mill products. Relatively modest increases have
occurred since 2001. In August 2000, the federal government assessed duties for
five years against imports of Japanese tin mill products. On March 5, 2002,
President Bush imposed tariffs on flat-rolled products including tin mill
products, over a three-year period.

SHEET PRODUCTS

Our sheet steel products consist of hot rolled, cold rolled and galvanized
hot-dipped and electrolytic sheet products, most of which are commodity type
items. In general, commodity sheet products are produced and sold in high
volume, in standard dimensions and specifications, and have lower margins than
tin mill products. Over the past several years, domestic flat-rolled sheet steel
prices have declined significantly to 20-year lows. Commodity flat-rolled sheet
prices, which have experienced significant volatility, have declined almost 30%
since the first half of 1998.

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Hot rolled coils are sold directly from the hot strip mill as "hot bands,"
our least processed product, or are further finished using hydrochloric acid and
temper passed to improve surface and are sold as "hot rolled pickled" or "hot
rolled tempered passed." Hot roll is used for unexposed parts in machinery,
construction products and other durable goods. Most of our sales of hot rolled
products have been to steel service centers, pipe and tube manufacturers and
converters. In 2002, we shipped 681,000 tons of hot rolled sheet, which
accounted for 20% of our total revenues, as compared to 584,000 tons in 2001, or
15% of total revenues. Representative customers of our hot roll sheet include
Steel Technologies, Wheatland Tube, Sharon Tube, Vanex, Bull Moose Tube and
Gibraltar.

Cold rolled sheet requires further processing, including additional
rolling, annealing and tempering, to enhance ductility and surface
characteristics. Cold rolled is used in the construction, commercial equipment
and container markets, primarily for exposed parts where appearance and surface
quality are important considerations. In addition, converters purchase
significant quantities of cold rolled substrate for processing into corrosion-
resistant coated products such as hot dipped and electrogalvanized sheet. In
2002, we shipped 213,000 tons of cold rolled sheet, which accounted for 7% of
our total revenues, as compared to 212,000 tons in 2001, or 7% of total
revenues. Representative customers of our cold rolled sheet include
Wheeling-Nisshin, The Techs, Tenneco and Gibraltar.

Galvanized hot-dipped and electrolytic sheet is coated primarily with zinc
compounds to provide extended anti-corrosive properties. Galvanized sheet is
sold to the electrical, construction, automotive, container, appliance and steel
service center markets. In 2002, we shipped 595,000 tons of galvanized products,
which accounted for 27% of our total revenues, as compared to 636,000 tons in
2001, or 29% of total revenues. Representative customers of our galvanized
hot-dipped and electrolytic sheet include Midwest Manufacturing, Arrow Truline,
Cooper B-Line, Thomas and Betts, New Process Steel and USG Industries.

Our strategy for development of our sheet business focuses on increasing
the mix of cold roll and galvanized products while identifying and serving
customers and markets that require narrow, thin gauge products that we can
competitively supply. We have also concentrated on enhancing the range of
coatings, chemistries, and other product attributes that we can offer. The
relative strength of markets for individual product offerings has a strong
influence on the mix of products we ship in any given period.

The following table sets forth our shipments of sheet products relative to
the domestic industry. As our overall market share has decreased for sheet
products since 1998 to 2.8% at December 31, 2002, our management has focused on
increasing the percentage of coated products it ships compared to lower margin
flat-rolled sheet steel.

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

(1) Includes secondary products.

TOLLING ARRANGEMENTS

In February 2001, we entered into a long-term tolling agreement with J&L
Specialty Steel ("J&L"), a domestic stainless steel producer that is owned by a
major foreign steel producer, to convert stainless slabs into stainless coils on
our hot strip mill. Under this agreement, which expires on January 31, 2006, we
are required to process stainless slabs for a fee based on the grade and size of
stainless coil to be produced. Future escalation is based upon natural gas
pricing and the producer price index. In addition, the agreement contains both a
bonus clause and a penalty clause based on our quality performance. We may
terminate the tolling agreement and may be entitled to liquidated damages under
the agreement, if during given periods specified in the agreement we are not
offered for processing a sufficient volume of slabs as specified in the
agreement. J&L is entitled to terminate the agreement under certain
circumstances. For example, including if it purchases or invests in another hot
strip

9

mill, or ceases production of stainless steel slabs, in which case we may also
be entitled to liquidated damages under the agreement.

Because stainless is rolled at slower rates than carbon steels, this
agreement accounts for nearly 20% of the overall capacity of our hot strip mill
and provides higher, more stable profit margins than potential carbon slab
conversion opportunities.

RAW MATERIALS AND ENERGY

We have a contract with a subsidiary of Cleveland-Cliffs Inc. to purchase
100% of our standard and flux grade iron ore pellet requirements. This contract
provides for the supply of a minimum annual tonnage of pellets based on mine
production capacity, with pricing primarily dependent on mine production costs.
The balance of the pricing for our requirements fluctuates based on world pellet
market prices.

We have entered into a Memorandum of Understanding with U.S. Steel to
provide us with approximately 750,000 and 850,000 net tons of coke in each of
2003 and 2004, with the option to buy incremental volume under which the price
of coke fluctuates on an annual basis depending on the market price for coke. In
addition, we have negotiated a contract for 360,000 net tons of coke per year
from another supplier for additional requirements with pricing also based on
market. We anticipate obtaining any further requirements from domestic or
overseas sources. We continually evaluate potential new sources for coke and
processes for utilizing coke more efficiently in our steel making facilities. We
obtain our limestone, tin, zinc, scrap metal and other raw materials
requirements from multiple sources.

The primary sources of energy other than coke that we use in our steel
manufacturing processes are natural gas and electricity. We have been able to
reduce our natural gas consumption through the use of alternative operating
configurations and fuels. In 2002, gas prices averaged $4.00 per mcf. As of
March 21, 2003, the Company has fixed approximately 10% of its additional
natural gas requirements through the end of May 2003. The Company has fixed no
gas prices after May 2003. Prices under current forward contracts for delivery
of natural gas in 2003 range from $4.58 to $6.66 per mcf. We also have a
contract, expiring in 2011, for the supply of our industrial gas requirements.
This agreement significantly reduced our oxygen and nitrogen supply costs
compared to prior arrangements.

Weirton has the internal capacity to generate a significant amount of
electricity and steam for its processing operations from a mixture of blast
furnace gas and natural gas. We have in effect through 2003 a power generation
deferral agreement with our outside electric utility, which permits us to
purchase outside power at reduced rates in exchange for limiting our internal
power generation. Also, under our sale and leaseback arrangements involving the
Foster-Wheeler Steam Generating Plant and related electricity generating
equipment, if proper market conditions exist, we have the ability to sell
electric power in excess of our energy needs through a subsidiary of our outside
electric utility and to use any net energy payments we receive as a result to
prepay our obligations under those arrangements through 2012.

EMPLOYEES

As of December 31, 2002, we had 3,646 active employees, of whom 2,832 were
engaged in the manufacture of steel products, 446 in support services, 76 in
sales and marketing activities and 292 in management and administration. The
Independent Steelworkers Union ("ISU"), represents our production and
maintenance workers, clerical workers and nurses. In addition, the Independent
Guard Union ("IGU") represents our security personnel. We consider our labor
relations to be very good and have never experienced a strike. Recently, we re-
negotiated our union collective bargaining agreements as explained in more
detail under "Our Strategic Objectives". The new agreements will expire no
earlier than March 31, 2004.

COMPETITION AND IMPORTS

Weirton faces significant competition in the sale of its steel products
from domestic competitors. See "Steel Industry Overview." We are the second
largest domestic manufacturer of tin mill products, with a 24% market share of
domestic shipments in 2002. Our primary competitors in sheet products consist of
most domestic and

10

international integrated steel producers and mini-mills. Domestic tin mill
products competitors include U.S. Steel, USS-POSCO Industries Corporation, ISG,
National and Ohio Coatings (owned 50% by Wheeling-Pittsburgh Steel). However,
imports have increasingly penetrated this market. A number of Weirton's
competitors, including three integrated steel producers, Bethlehem, National and
Wheeling-Pittsburgh Steel, have sought protection in bankruptcy. In February
2002, ISG was formed and purchased nearly all of the integrated assets of
bankrupt LTV and Acme Steel. On March 13, 2003, Bethlehem signed a definitive
agreement to sell substantially all of its assets to ISG. Both U.S. Steel and AK
Steel have made offers to purchase National.

Integrated steel makers also face strong competition from mini-mills, which
are efficient, low-cost producers that generally produce steel by melting scrap
in electric arc furnaces, utilize new technologies, have lower employment costs
and target regional markets. Mini-mills historically have produced lower margin
commodity grade long products, such as bars, rods and wire and other
commodity-type steel products not produced by us. However, thin slab technology
has allowed mini-mills to enter sheet markets traditionally supplied by
integrated producers, including the hot rolled, cold rolled and galvanized
markets. Mini-mills generally continue to have a cost advantage over integrated
steel producers, particularly for labor and especially during periods of weak
demand when scrap prices are low. Although most new capacity in the domestic
industry has resulted from growth in mini-mill operations, there has also been a
significant increase in both cold rolling and galvanizing capacity at
independent processors.

We also face increasing competition from foreign steelmakers over a wide
range of products. Competition in the industry is influenced increasingly by
global trade patterns and currency fluctuations. Total imports as a percentage
of apparent consumption have remained near historic highs, amounting to 26%, 24%
and 27% in 2002, 2001 and 2000, respectively. Tin mill product imports decreased
approximately 28% in 2002 as compared to 2001 and approximately 5% in 2001 as
compared to 2000 due to government tariffs against Japanese tin mill imports. As
a percentage of domestic consumption in 2002, 2001, and 2000 imports amounted to
14%, 19% and 18%, respectively. According to U.S. Census Bureau data, all steel
imports decreased from 2.9 million to 2.4 million net tons for December 2002
actual and January 2003 preliminary, respectively, and increased from 2.2
million to 2.7 million net tons for December 2001 actual and January 2002
actual, respectively, in particular imported tin mill products increased by 5%
and 55%, respectively, over the same period.

In June 2001, the Bush Administration initiated a trade investigation by
the International Trade Commission ("ITC") under Section 201 of the Trade
Practices Act of 1974 regarding the illegal dumping of steel by foreign
competitors. On October 22, 2001, the ITC found that 12 steel product lines,
representing 74% of the imports under investigation, sustained serious injury
because of foreign imports. These product lines included hot rolled, cold
rolled, galvanized sheet and coil, and tin mill products. On March 5, 2002,
President Bush decided to impose tariffs on flat-rolled products over a
three-year period at 30% in year one, 24% in year two and 18% in year three, in
addition to tariff relief with respect to other products. The President excluded
Canada, Mexico and 30 developing countries from his tariff program, subject to
further revisions if import surges from these nations undermine relief.
Recently, the Company and five other domestic steel producers requested that the
President include Mexico and the developing countries in the tariff program
citing significant imports from these countries since March 5, 2002. In
addition, the ITC is expected to conduct a mid-term review of the tariff program
in September 2003 and issue a report to the President. The President then has
the option to continue or terminate the program. All our flat-rolled product
lines, including tin mill, hot rolled and cold rolled sheet and galvanized
products, have benefited and should continue to benefit from the imposition of
tariffs. In addition, imported steel slabs are subject to an increasing annual
quota of at least 5.4 million tons, subject to the imposition of tariffs if the
tonnage exceeds the quota limit, excluding steel slabs from Mexico and Canada.

From June 2002 through August 2002, the Office of the U.S. Trade
Representative granted 747 tariff exclusions. The majority of these exclusions
covered steel products not produced in the United States. The next round of
exclusion requests began in December 2002 and continued through January 2003. A
decision on the exclusions will be made in March 2003.

A number of countries have objected to the tariffs and have filed appeals
with the World Trade Organization ("WTO"). Although the Administration maintains
its investigation and decision conform with WTO regulations,

11

if the complainants are successful, the scope, duration and effectiveness of the
tariffs could be affected in a manner adverse to us.

The Company believes that the imposition of tariffs under the Section 201
order had the effect of moderately restricting steel imports to the United
States for 2002, and selling prices and shipment volumes improved from what the
Company otherwise would have realized without the imposition of tariffs. The
Company also believes that the improvements in selling prices and shipment
volumes were influenced by availability of supply. Some flat rolled product
capacity was restarted during the year, and the Company anticipates further
capacity may restart in the near future. If the economy does not recover from
its current state and capacity rationalizations in flat rolled products do not
happen, these improvements may be in jeopardy. In September 2002, the U.S. Court
of International Trade ruled against several Japanese steel companies attempting
to overturn the Administration's tariff on tin mill products and that tariff
remains in effect.

In another ruling, the same court vacated an August 2000 ITC affirmative
ruling against dumped imports of Japanese tin mill products. The commission had
ruled to affix duties of 95% for five years on certain Japanese tin producers.
The Company and the ITC have appealed the decision. The case is pending before a
federal appeals court in Washington, D.C.

RESEARCH AND DEVELOPMENT

Weirton engages in research and development for the improvement of existing
products and processes in addition to the development of new products and
product applications. During 2002, 2001 and 2000, we spent approximately $0.9
million, $1.0 million and $2.7 million, respectively, for research and
development activities.

WEIRTEC, our research and development center, is the industry leader in the
advancement of steel can making technology, maintaining prototype steel
packaging manufacturing facilities and computer simulation systems in Weirton,
West Virginia. WEIRTEC assists customers in the development of new products and
collaborates with the American Iron and Steel Institute in the development of
new product lines and production techniques to increase the use and quality of
steel as a material of choice.

Our longer-term research projects include polymer to steel lamination and
the application of galvanized steel products to the residential and commercial
construction industry. We believe that WEIRTEC scientists, engineers,
technicians and facilities enhance Weirton's technical excellence, product
quality and customer service.

We own a number of patents that relate to a wide variety of products and
applications and steel manufacturing processes, have pending a number of patent
applications, and have access to other technology through agreements with other
companies. We also own a number of registered trademarks related to our
products. We believe that none of our patents or licenses, which expire from
time to time, or any group of patents or licenses relating to a particular
product or process, or any of our trademarks, is of material importance to our
overall business.

ENVIRONMENTAL MATTERS

We are subject to extensive federal, state and local laws and regulations
governing discharges into the air and water, as well as the handling and
disposal of solid and hazardous wastes. We also are subject to federal and state
requirements governing the remediation of environmental contamination associated
with past releases of hazardous substances. In recent years, environmental
regulations have been marked by increasingly strict compliance standards.
Violators of these regulations may be subject to civil or criminal penalties,
injunctions or both. Third parties also may have the right to enforce
compliance. Capital expenditures for pollution control capital projects were
approximately, $1.4 million in 2002, $1.9 million in 2001 and $0.9 million in
2000. As of December 31, 2002, we had accrued approximately $9.0 million for
environmental cleanup costs.

In the past, Weirton has resolved environmental compliance issues through
negotiated consent orders and decrees with environmental authorities, pursuant
to which it has paid civil penalties. Although we believe that Weirton is in
substantial compliance with its environmental control consent orders and
decrees, we provide below a summary of our more significant outstanding
environmental issues.

12

Current Compliance Issues

In 1996, following a multi-media audit of our operations, we entered into a
consent decree with the United States Environmental Protection Agency, ("EPA"),
the United States Department of Justice, ("DOJ"), and the West Virginia Division
of Environmental Protection, ("DEP"). The consent decree required us to
implement certain changes to ensure compliance with water, air and waste-related
regulations, the majority of which have been completed. We do not anticipate
that any additional capital expenditure will be needed to meet the remaining
requirements under the consent decree. The consent decree provides for
stipulated penalties for violations of the decree and for violations of various
regulatory agreements. Such penalties are paid in response to a joint demand
from the federal and state agencies. We do not believe that our liability for
such potential penalty demands or increased costs associated with meeting the
remaining requirements under the consent decree will be material to our results
of operations.

In 1996, EPA also issued a Resource Conservation and Recovery Act ("RCRA")
corrective action order that required us to conduct investigative activities to
determine the extent to which hazardous substances are located on our property
and to evaluate, propose and implement corrective measures that are needed to
abate any unacceptable risks. As part of the evaluation phase, we divided our
property into twelve areas. At this time, we have only conducted investigations
on the two highest priority areas. Consequently, we have not evaluated a
majority of our property and it is not possible at the present time to estimate
the ultimate cost to comply with the order or to conduct any required remedial
activity.

West Virginia Water Quality Standards generally require that a public water
supply be protected by prohibiting the discharge of any pollutants in excess of
drinking water standards for one-half mile upstream of a public water supply
intake. The standard is known as the "half mile rule." We currently discharge
wastewater at a point on the Ohio River that is less than one half-mile upstream
from our own water supply intake. Because of the proximity of our discharge and
intake, our wastewater discharge permit requires our discharge at that one
location to meet drinking water standards. At the same time it issued the
permit, DEP issued a consent order deferring those requirements until we had
time to upgrade our facilities (both the discharge and the filtration plant at
the point of intake). Under a recent extension, we have until September 1, 2004
to meet the standard, and we have secured, until the same deadline, a temporary
waiver from the application of the half mile rule.

We currently are reviewing several options for resolving this issue
permanently, such as through a rule change or permanent exemption. In the event
that such a rule change or exemption is not obtained, we may incur some capital
costs, such as for installing a connection to the municipal water supply for our
plant drinking water, or moving our water intake. We do not believe that costs,
including associated ongoing expenses, would be material to our results of
operations.

We have operated with a socio-economic variance from certain state water
discharge limitations with respect to our discharge to Harmon Creek, which has
been renewed/modified several times since 1986. The current variance expires in
June of 2004. We are preparing to approach the West Virginia Environmental
Quality Board to request a renewal of the variance.

Potential Compliance Issues and Proposed Regulations

On October 17, 2002 the EPA published final revised effluent limitation
guidelines for iron and steelmaking operations and finishing operations that set
forth technology requirements and wastewater discharge limitations for Weirton's
operations. Based on a review of the new regulations, compliance with the
revised guidelines, which became effective on November 18, 2002, will not
require any significant capital expenditures for upgrading Weirton's existing
wastewater treatment facilities.

Environmental Claims

In May 1992 and in October 2001, the property owner of a former
non-hazardous waste disposal site known as the Hanover Site received notice from
the Pennsylvania Department of Environmental Protection that it was considering
a closure and post-closure plan for a solid waste landfill facility where we and
our predecessors

13

disposed of solid wastes. At this time, definitive closure and post-closure
plans have not been adopted, but we do not anticipate that closure costs will
exceed $1 million.

ACCESS TO INFORMATION

The Company's Annual Report on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and all amendments to those reports, as well as
proxy and information statements to our stockholders are made available, free of
charge, on our Web site at www.weirton.com, as soon as reasonably practicable
after such reports have been filed with or furnished to the SEC.

EXECUTIVE OFFICERS OF THE COMPANY

The executive officers of the Company as of March 21, 2003 were as follows:

John H. Walker was named Chief Executive Officer effective January 2001. He
has been President and Chief Operating Officer since March 2000. Mr. Walker was
employed by Kaiser Aluminum Corporation as Corporate Vice President and
President -- Flat Rolled Products from July 1997 to March 2000. Mr. Walker was
elected as a director in March 2000.

Mark E. Kaplan was appointed Senior Vice President -- Finance and
Administration in December 2001. He has been Chief Financial Officer since July
2000. He had been Vice President since July 2000. He had been Vice
President -- Information Technology since March 1999 and Controller since
September 1995. Mr. Kaplan was elected as a director in December 2002.

William R. Kiefer was appointed General Counsel in January 2002. He has
been Secretary since May 1990. He had been Vice President -- Law since May 1990.

Edward L. Scram was appointed Vice President -- Manufacturing in December
2001. He had been named Vice President -- Operations since April 2000. Prior to
that appointment, Mr. Scram served as General Manager of Operations since 1996.

Michael J. Scott was appointed Vice President -- Sales, Product Development
and Marketing in January 2002. He had been named Vice President -- Sales and
Marketing since March 2000. Mr. Scott was employed by National Steel Corporation
from 1997 through 1999 as General Manager -- Construction Sales Group.

Our success will depend, in large part, on the efforts, abilities and
experience of our senior management and other key employees. Executive
compensation for our key employees has been restrained by our weak financial
performance, and options and other stock-based incentive compensation currently
have minimal or no value. In light of our current financial position and
uncertain prospects, key employees, including members of senior management, may
not have an incentive to stay with us. The loss of the services of one or more
such individuals could adversely affect our business, financial condition,
results of operations or prospects.

ITEM 2. PROPERTIES

Weirton owns approximately 2,700 acres in the Weirton, West Virginia area
that are devoted to the production and finishing of steel products, as well as
research and development, storage, support services, and administration
facilities. We own trackage and railroad rolling stock for materials movement,
watercraft for barge

14

docking and a variety of heavy industrial equipment. We have no material leases
for real property except that under our vendor financing programs we are leasing
the Foster-Wheeler Steam Generating Plant and related electricity generating
assets. Our mill and related facilities are accessible by water, rail and road
transportation. We believe that our facilities are suitable to our needs and are
adequately maintained.

Over approximately the last 15 years, we have invested approximately $1
billion in modernizing and upgrading our equipment, including approximately $500
million on our continuous caster, hot strip mill, and No. 9 Tandem Mill. We
believe this has enabled us to continue to produce a superior quality steel
substrate, and, consequently, to maintain the high quality of our tin mill and
other value-added products.

Our primary steel making facilities include two blast furnaces, a two
vessel basic oxygen process shop, a CAS-OB facility, two RH degassers, and a
four strand continuous caster with an annual slab production capacity of up to
3.0 million tons. Our downstream operations include a hot strip mill with a
practical capacity of 3.2 million tons per year, two continuous picklers, three
tandem cold reduction mills, three hot dip galvanize lines, one
electro-galvanize line, two tin platers, one chrome plater, one bi-metallic
chrome/tin plating line and various annealing, temper rolling, shearing,
cleaning and edge slitting lines, together with packaging, storage and shipping
and receiving facilities.

The name and area of each of our primary steel making facilities and
principal downstream manufacturing facilities, all of which are located in
Weirton, West Virginia, together with the principal products that they are
equipped to produce as of December 31, 2002, are as follows:

Blast Furnaces Nos. 1 and 4. Iron ore pellets, iron ore, coke, limestone
and other raw materials are consumed in our blast furnaces to produce molten
iron or "hot metal."

Basic Oxygen Furnaces. In the basic oxygen furnaces, impurities are
removed, scrap is added to the hot metal, and the metallurgy of the product is
customized and tested to ensure conformity to customer specifications. Although
the resulting product is all molten steel, metallurgical determinations with
respect to use are determined on a batch by batch basis. Our basic oxygen shop
is one of the largest in North America. It employs two vessels, each with a
capacity of 360 tons per heat.

Multi-Strand Continuous Caster. Molten steel is poured into the
multi-strand continuous caster where it is formed into steel slabs measuring up
to 48" wide, 400" long and 9" thick. These slabs are then transferred to the hot
strip mill for rolling.

Hot Strip Mill. Our hot strip mill is an integral part of our downstream
steel processing operations and one of the few of its kind in the industry. It
is an energy efficient, low-cost mill capable of rolling both carbon and
stainless steel substrate into thin gauge, narrow width sheet. In addition to
rolling our own slabs, we are capable of rolling purchased slabs and slabs
supplied by other steel manufacturers and have entered into a long-term

15

tolling agreement with a major stainless steel producer to convert stainless
slabs into stainless coils, which currently accounts for almost 20% of our hot
strip mill overall capacity. Hot roll is used for unexposed parts in machinery,
construction products and other durable goods. Our hot strip mill was totally
rebuilt beginning in 1988, with the major portion completed by 1994, at a cost
of $360 million. Hot strip mill assets include: walking beam reheat furnaces,
hydraulic seals breaker, reversing roughing mill, R-5 roughing stand, heat
retention covers, rotary crop shear, finishing mill, laminar flow cooling
system, downcoilers and mill automation system.

Continuous Pickling Plant. In our continuous pickling plant, hot bands are
processed through a hydrochloric acid bath to remove surface scale and are sold
as "hot rolled pickled" or further processed into higher value-added products at
our downstream facilities.

Tandem Mills. Our Tandem Mills include one four and two five stand cold
reduction rolling mills which cold reduce heavy gauge hot bands into light gauge
cold roll and black plate product. The No. 9 Tandem Mill is a continuous
operation and was completely rebuilt in 1994 and is dedicated to our tin mill
product lines.

Tin Finishing and Plating Assets. Our tin assets consist of two cleaning
lines, three continuous annealing lines, a batch anneal facility consisting of
twelve furnaces, four double reduction/temper mills, and four electrolytic tin
plate/tin free steel plating lines. We also have a number of coil prep and
trimming lines, as well as a wide variety of material handling, packaging and
maintenance equipment to support our operations. Our plant is the largest tin
plating facility in North America.

In both of our continuous and batch annealing operations, cold rolled
substrate is processed through an annealing furnace to enhance the ductility of
the steel for further forming and drawing. The continuous annealing lines also
clean the strip. For batch annealed product, the strip is processed through one
of our cleaning lines. Our facilities are capable of most specified tempers.

We have two similarly designed 2-stand, 4-high as well as two similarly
designed 2-stand 2-high rolling mills which cold reduce black plate steel from
the Tandem Mills to required tin mill product gauges. Both annealing and cold
reduction requirements are a function of end use customers' ductility and
hardness specifications.

We have four electrolytic tin lines that apply a coating of either tin or
chrome to black plate steel substrate through the use of electricity and
chemicals. All lines are capable of making most tin mill product gauges and
coating weights at very high speeds.

Electrolytic tin plate (ETP), a black plate steel product with a precisely
controlled electrolytically applied coating of tin, is one of the industry's
most widely used products, the primary advantages of which are excellent
corrosion resistance, exceptional durability and a bright, attractive surface
finish.

Tin plate is well suited for a variety of forming operations and can be
welded, soldered, bonded, drawn, stamped and embossed. Additionally, in drawn
and ironed canmaking operations, the tin coating acts as a solid lubricant.

Weirchrome, or tin free steel, is black plate that has been
electrolytically plated with metallic chromium and chromium oxides. Weirchrome
offers superior acceptance of organic coatings (paints, lacquers, inks).
Formability, strength, superior surface finish and cost effectiveness are among
the other advantages that Weirchrome has to offer.

Galvanizing Lines. We have one electrolytic galvanizing line that applies
a coating of zinc to black plate steel through an electroplating process. The
product processed through this line is generally light gauge with narrow widths
and is used predominantly in the construction market. We also have three
hot-dipped galvanizing lines that apply a coating of zinc to cold rolled steel
by submerging the substrate through a bath of hot zinc. These lines are capable
of a variety of coating weights, gauges, and widths (up to 48") as well as
coating and annealing requirements (galvanized, galvannealed and galfan).
Weirton's galvanized sheet steel products provide superior protection in many
corrosive environments and are appropriate for almost any application that calls
for formability, strength, corrosion protection and cost efficiency.

16

Finished products are packaged as required to provide superior protection
from the elements and from handling damage.

The lenders under our senior secured credit facility currently have a first
priority lien on our hot strip mill, No. 9 Tandem Mill and tin mill assets. The
holders of our senior secured notes due 2008 and the new secured series 2002
bonds hold a second priority lien in these assets. The Steelworks Community
Federal Credit Union currently holds a first priority lien on our General
Office, Research and Development Facility and our railroad rolling stock.

Our integrated operations depend upon critical equipment, such as blast
furnaces, basic oxygen furnaces, our continuous caster, our hot strip mill and
other rolling and finishing facilities to support our business, that may
occasionally be out of service due to routine scheduled maintenance or equipment
failures. Any unplanned unavailability of critical equipment could interrupt our
production capabilities and reduce our sales and profitability. We have
experienced unscheduled equipment outages in the past, and we could have
material shutdowns in the future.

ITEM 3. LEGAL PROCEEDINGS

From time to time, a number of lawsuits, claims and proceedings have been
or may be asserted against us relating to the conduct of our business, including
those pertaining to commercial, labor, employment and employee benefits matters.
While the outcome of litigation cannot be predicted with certainty, and some of
these lawsuits, claims or proceedings may be determined adversely to us, we do
not believe that the disposition of any such pending matters is likely to
materially affect us.

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

We held an Annual Meeting of Stockholders on December 11, 2002 and the
following indicates the outcome of the four proposals presented for action.

Election of Directors:

With respect to Proposal 1, Messrs. Wendell W. Wood, Ronald C. Whitaker,
and Mark E. Kaplan received a plurality of the votes cast and were elected as
Class II Directors of the Company. Messrs. John H. Walker, Robert J.
D'Anniballe, Jr., and Mark G. Glyptis received a plurality of the votes cast and
were elected as Class III Directors of the Company, as follows:

In addition, Michael Bozic, Richard R. Burt and Thomas R. Sturges continued
as directors after the annual meeting.

Amendment to Article FIFTH of the Restated Certificate of Incorporation and
related By-Laws Change:

With respect to Proposal 2, the Amendment to Article FIFTH of the Restated
Certificate of Incorporation, as amended, and a related change to the By-laws,
to reduce the size of the Board of Directors from 14 persons to nine persons
consisting of five independent directors, two management directors and two union
directors, received the requisite amount of votes cast and was approved, as
follows:

17

Contingent Charter Changes:

With respect to Proposal 3, contingent changes to the Restated Certificate
of Incorporation which required an affirmative vote of at least 80% of all of
the outstanding voting power, this proposal failed to be approved as follows:

(a) To adopt a new Restated Certificate of Incorporation in its
entirety;

(b) To increase the Company's authorized common stock to 250,000,000
shares and authorized preferred stock to 25,000,000 shares;

(c) To establish a single class of directors, to provide flexibility
in determining both number and qualifications of directors,
provided that two or at least 20% of the directors are designated
by the unions; and

(d) To provide that stockholder approval for fundamental changes and
transactions conform to Delaware General Corporation Law.

Approval of Independent Accountants:

With respect to Proposal 4, ratification of the appointment of KPMG LLP as
independent accountants to the Company for the fiscal year ending December 31,
2002, this proposal was approved, as follows:

18

PART II

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

As of March 21, 2003, there were 42,104,478 shares of common stock, $.01
par value ("Common Stock"), outstanding held by 3,978 stockholders of record.

Prior to 1989, Weirton was owned entirely by its employees through an
employee stock ownership plan, or the 1984 ESOP. In June 1989, we commenced
trading of our common stock on the New York Stock Exchange following an
underwritten public offering by the 1984 ESOP. In September 2001 our common
stock was delisted and currently trades over-the-counter.

In connection with our 1989 public offering, Weirton established a second
employee stock ownership plan, or the 1989 ESOP, and funded it with the Series A
Convertible Voting Preferred Stock ("Series A"). Substantially all of our
employees participate in the 1984 ESOP and the 1989 ESOP, which as of December
31, 2002 owned approximately 17% of the issued and outstanding shares of our
common stock and substantially all of the issued and outstanding shares of our
Series A, collectively representing approximately 36% of the voting power of our
voting capital stock. In 1991 we issued 500,000 shares of Series B Preferred
Stock, and we redeemed all of those shares in 1994. In 2002 we issued 1,934,874
shares of Series C Convertible Redeemable Preferred Stock ("Series C") with a
mandatory redemption in 2014 of $48.4 million.

Subject to any preferences of outstanding preferred stock, holders of
Common Stock are entitled to receive ratably such dividends as may be declared
by the board of directors out of legally available funds. Currently we have no
source for dividend payments under Delaware law. Moreover, under our current
senior credit facility, we are not allowed to pay dividends or make
distributions on our stock (with exception only for our 1989 ESOP put
obligations) except in stock.

As of March 21, 2003, 7,081,433 shares of Common Stock, or 17% of the
outstanding shares of Common Stock, were held by one stockholder of record,
United National Bank -- North, as Trustee of the 1984 ESOP. As of that date, the
1984 ESOP had approximately 4,800 participants who were active or former
employees of the Company. In addition, as of March 21, 2003 there were 1,462,234
shares of Series A outstanding. As of that date, United National Bank -- North,
as Trustee of the 1989 ESOP, was the record owner of 1,363,157 shares of the
Series A, or over 93% of the outstanding shares of Series A, subject to the
terms and conditions of the 1989 ESOP. As of that date, the 1989 ESOP had
approximately 5,600 participants who were active or former employees of the
Company. The Series A is not listed for trading on any exchange. The Series A
has a liquidation preference of $5 per share and is convertible into one share
of Common Stock, subject to adjustment. Each share of Series A is entitled to 10
votes in all matters presented to the stockholders for approval. Participants in
the Company's two ESOPs have full voting rights over all shares allocated to
their accounts. See "Employees" under Item 1.

If the Company's capital structure is amended to permit the issuance of
additional shares of common stock, the Company will have the option to redeem
all of the outstanding shares of Series C at any time prior to April 1, 2013 by
delivering to the holders of Series C shares of common stock having a value
equal to the then current aggregate redemption price for all outstanding shares
of Series C. The Series C is not convertible at the option of the holders of the
stock. However, the Company has the option of causing the conversion of the
Series C into shares of its common stock prior to April 1, 2006 in connection
with a significant transaction. A significant transaction is any transaction in
which either an entity acquires more than 50% of the voting power of the
Company's capital stock or the Company enters into a merger or other business
combination in which it is not the surviving entity. The Series C is not
entitled to vote on all stockholder matters and it is not entitled to receive
dividends.

19

The following table sets forth, for the periods indicated, the high and low
sales prices of the Common Stock as reported in the consolidated transaction
reporting system.

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

(1) First Quarter 2003 through March 21, 2003.

ITEM 6. SELECTED FINANCIAL DATA

The following data, insofar as it relates to each of the years 1998 through
2002, has been derived from our audited financial statements and should be read
together with "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the audited historical consolidated financial
statements. The years 2002 (filed herewith) and 2001 included a report with an
explanatory paragraph with respect to the uncertainty regarding the Company's
ability to continue as a going concern.

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

(1) In accordance with Emerging Issues Task Force Issue 00-01, "Accounting for
Shipping and Handling Fees and Costs," shipping and handling costs were
reclassed from net sales to cost of sales.

(2) The provision for employee profit sharing is calculated in accordance with
the profit sharing plan agreement. The provision is based upon 33 1/3% of
net income.

(3) The asset impairment charge is associated with the write down of a slab
sizing press to fair value.

(4) The gain on sale of investment relates to the sale of a portion of our
investment in MetalSite, L.P.

(5) Interest expense has been reduced by capitalized interest of $0.2 million
for 2000 and $0.4 million for 1998. There was no capitalized interest
expense applicable to facilities under construction for the years 2002,
2001 or 1999.

(6) Amounts were non-cash charges as these contributions were returned to
Weirton in the form of payments on loans from Weirton to the 1984 and 1989
ESOPs.

(7) In the second quarter of 2001, a non-cash charge was recorded to fully
reserve our deferred tax assets which include the deferred tax assets
related to approximately $400 million of net operating loss carryforwards.
It was determined that our cumulative financial losses had reached the
point that fully reserving the deferred tax assets was required. However,
to the extent that we generate taxable income prior to the expiration of
the net operating loss carryforwards, we may be able to utilize them to
help offset our tax liabilities. There are certain significant limitations
that may apply to our use of such loss carryovers which depend on future
changes of ownership of our stock, including additional shares of our stock
issued in the future.

(8) Reflects certain gains and losses incurred in connection with the early
extinguishment of debt.

(9) Long-term debt (including current portion) does not include amounts
utilized under our prior accounts receivable securitization program. Under
our accounts receivable securitization program, we obtained proceeds by
selling participation interests in our accounts receivable as opposed to
borrowing money using accounts receivable as collateral. As a result of
this structure, proceeds received were accounted for as a

21

reduction of our accounts receivable balance. We had sold participation
interests in our accounts receivable of $25.0 million and $35.0 million at
December 31, 2000 and 1999, respectively. We terminated our accounts
receivable securitization program when we entered into our senior credit
facility in October 26, 2001.

(10) Reflects the historical cost of the Series A at $14.50 per share at the
time of its original issuance. The outstanding shares of Series A are
subject to redemption at a price equal to the appraised value at the
redemption date. At December 31, 2002, the shares had an appraised fair
value of $0.30 per share. In any given year, we are only required to
repurchase those shares put to us by a limited number of former ESOP
participants who have retired or otherwise separated from service. Also
included at December 31, 2002 in redeemable preferred stock is the Series C
valued at $48.4 million.

(11) Net cash provided by (used for) operating activities includes amounts
utilized under our accounts receivable securitization program. Utilization
of the accounts receivable securitization program is treated as a sale of
accounts receivable rather than long-term debt. As a result, the cash flows
related to the program are operating cash flows. Cash flows from the
accounts receivable securitization program accounted for $35.0 million in
cash flows provided by operations in 1999, $10.0 million used by operations
in 2000 and $25.0 million used by operations in 2001.

(12) Cash flows from investing activities include $170.1 million in proceeds
from the sale of a portion of our investment in MetalSite L.P. in 1999.

(13) Our working capital ratio is calculated by dividing our total current
assets by our total current liabilities.

(14) As a result of the operating cost savings program, we recorded a
restructuring charge of $129 million in the fourth quarter of 2001. The
restructuring charge included an increase in pension and other post
retirement obligations of approximately $119 million, an $8 million
increase in other long term liabilities and $2 million in other short term
costs, including severance payments. This restructuring provided for the
permanent elimination of a minimum of 372 production and maintenance jobs,
a minimum of 78 office, clerical and technical jobs and a reduction of 100
management positions. Also in 2001, the Company implemented the 2001
Workforce Downsizing Program. The program reduced non-represented staff
employees by approximately 10%. As a result, the Company recorded a first
quarter 2001 restructuring charge of $12.3 million.

(15) Because the Company's accumulated benefit obligation exceeded the fair
value of its pension plan assets, the Company was required to record an
additional minimum pension liability, a portion of which was recorded in
comprehensive loss.

(16) Under its senior credit facility, the Company is required to utilize all
available cash to pay down amounts outstanding under the facility. Amounts
received from customers and held in blocked accounts pending transfer to
pay down amounts outstanding under the senior credit facility are shown as
a reduction to the facility.

22

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

The following discussion should be read in conjunction with, and is
qualified in its entirety by reference to, the audited consolidated financial
statements and notes thereto.

OVERVIEW

General. We are a major integrated producer of flat rolled carbon steel
with principal product lines consisting of tin mill products and sheet products.
Tin mill products include tin plate, chrome coated and black plate steels and
are consumed principally by the container and packaging industry for food cans,
general line cans and closure applications, such as caps and lids. Tin mill
products accounted for 46% of our revenues and 35% of tons shipped in 2002.
Sheet products include hot and cold rolled and both hot-dipped and electrolytic
galvanized steels and are used in numerous end-use applications, including among
others the construction, appliance and automotive industries. Sheet products
accounted for 54% of our revenues and 65% of tons shipped in 2002. In addition,
we currently are providing tolling services at our hot strip mill for a major
stainless steel producer, which accounts for almost 20% of the overall capacity
of our hot strip mill.

We seek to strengthen our position as a leading domestic full range
producer of higher margin tin mill products by further shifting our product mix
toward higher margin value-added tin mill products and away from lower margin,
commodity flat-rolled sheet products.

In general, commodity sheet products are produced and sold in high volume
in standard dimensions and specifications, while our tin mill and other
value-added products require further processing, generally command higher profit
margins and typically are less affected by imports and domestic competition. The
market for tin mill products generally remains stable over the typical business
cycle as compared to more volatile markets for sheet steel products. Domestic
supply of tin mill products has been limited by the relatively small number of
domestic producers, recent facility rationalizations, and the anti-dumping
determination made by the ITC in August 2000. In addition, all of our tin mill
products sales are based upon contracts of one year or more and are, therefore,
less subject to price volatility than spot market sales.

Weirton, like most United States integrated steel producers, has sustained
significant operating losses and a decrease of liquidity as a result of adverse
market conditions due to the continued recessionary economy and depressed
selling prices caused in substantial part by dramatic increases in imported
steel. See "Item I, Business -- Steel Industry Overview" and also "Item I,
Business -- Our Strategic Plan."

LIQUIDITY AND CAPITAL RESOURCES

Total liquidity from cash and financing facilities amounted to $29.0
million at December 31, 2002, as compared to $33.6 million at December 31, 2001.
Our liquidity has continued to decline primarily as a result of operating losses
from prolonged adverse market conditions. To mitigate the effects of these
prevailing adverse conditions, we have initiated a cost improvement program to
position ourselves to become more cost competitive.

At December 31, 2002, we had cash and equivalents of $0.2 million compared
to $1.4 million as of December 31, 2001. Our liquidity at March 21, 2003 was
$20.9 million. Our consolidated statements of cash flows at December 31 are
summarized below:

23

The $27.7 million net cash outflow from operating activities resulted from
adverse market conditions prevailing in the domestic steel industry. To help
offset the difficult market conditions, we undertook various measures during
2002 and 2001 to enhance our operating cash flow by reducing overall operating
costs and net working capital investment. During the fourth quarter of 2002,
these measures were partially offset as we built inventory in anticipation of a
planned hot mill outage for the first quarter of 2003. Inventory has also
increased since the No. 4 blast furnace has been back to full production during
2002 compared to its limited production in 2001. The increase in accounts
payable is associated with the increase in inventory. We have no significant
past due payables.

At current production and shipment levels, we anticipate sustaining our
normal levels of working capital investment. We continue to pursue strategies to
reduce our working capital investment, but opportunities for further reductions
are substantially less than those already achieved. Should the markets for our
products improve, we may increase our working capital investment. Such an
increase could be funded in part by additional amounts available under our
senior credit facility.

Net cash used by investing activities primarily includes $10.3 million and
$10.4 million of capital expenditures for the years ended December 31, 2002 and
2001, respectively. Our new senior credit facility places limits on our ability
to make certain future capital expenditures to $34.5 million in 2003, subject to
increase to $40.0 million in 2003 if we meet certain financial tests.

The $35.8 million in net cash provided by financing activities in 2002
consisted of $27.3 million in borrowings under our senior credit facility and
$16.3 million in cash received under our vendor financing arrangements. The cash
provided by these two facilities was offset by the deferred debt issuance costs
that had been paid in connection with our June 2002 debt exchange offers. As of
December 31, 2001, cash provided by financing activities consisted of $87.8
million in borrowings under our senior credit facility and $11.5 million in cash
received under our vendor financing arrangements. The cash provided by these two
facilities was offset by the deferred debt issuance costs spent to establish the
facilities as well as the cost of preparing an offer to exchange our existing
senior notes.

Our senior credit facility was established on October 26, 2001 (and was
amended and restated on May 3, 2002) under a loan and security agreement with
Fleet Capital Corporation, as agent for itself and other lenders, Foothill
Capital Corporation, as syndication agent, The CIT Group/Business Credit, Inc.
and GMAC Business Credit LLC, which serve as co-documentation agents for the
facility, and Transamerican Business Capital Corporation. At December 31, 2002
and 2001, we had borrowed $121.0 million and $92.1 million, respectively, under
the senior credit facility, which is presented in our consolidated balance
sheets net of $5.8 million and $4.3 million, respectively, of all cash from
lockboxes. At December 31, 2002 and 2001 we had utilized an additional $0.5
million and $9.5 million, respectively, under the letter of credit subfacility.
Taking into account outstanding letters of credit, we had $23.0 million and
$27.9 million available for additional borrowing under the facility at December
31, 2002 and 2001, respectively. Additional borrowing available under the senior
credit facility at March 21, 2003 was $20.4 million. Under the senior credit
facility we are allowed to make scheduled semi-annual cash interest payments on
the senior secured notes, senior notes, secured series 2002 bonds and series
1989 bonds, provided that these cash payments are reserved against availability
under the facility.

Beginning in late October 2001, we also obtained assistance from certain
key vendors and others through our vendor financing programs to improve our near
term liquidity. As of December 31, 2002, we had received approximately $27.9
million in proceeds related to the sale and leaseback of the Foster-Wheeler
Steam Generating Plant and related financing programs. During the third quarter
of 2002, the Company received an additional $3.0 million from a secured loan
involving the Company's General Office, Research and Development Facility, and
railroad rolling stock.

In the second quarter of 2002, as part of our announced strategic
restructuring plan, the Company completed an offer to exchange its outstanding
11 3/8% Senior Notes due 2004 and its outstanding 10 3/4% Senior Notes due 2005
(collectively the "senior notes") for new 10% Senior Secured Notes due 2008
("senior secured notes") and new Series C Convertible Redeemable Preferred Stock
("Series C preferred stock"). At the Company's request, the City of Weirton also
completed an offer to exchange its 8 5/8% Pollution Control Bonds due 2014
("series 1989 bonds") for new 2002 Secured Pollution Control Revenue Refunding
Bonds ("secured series 2002 bonds").
24

The Company's liquidity will be enhanced through a reduction in debt service
cost of up to approximately $27 million per year in 2003 and 2004, approximately
$23 million in 2005 and approximately $18 million in 2006, provided the Company
is not required to make contingent interest payments on the senior secured notes
or the secured series 2002 bonds. We do not believe that the Company will
generate "excess cash flow" as defined in the indentures governing the senior
secured notes and secured series 2002 bonds, in the near term, as a result of
which, it is unlikely we will be required to make the $6.0 million in contingent
interest payments included in the current portion of long-term debt at December
31, 2002.

At December 31, 2002, we had $426.4 million in net deferred tax assets
which were fully reserved with a valuation allowance of the same amount. These
assets, although they are fully reserved for financial accounting purposes, are
available to offset future income tax liabilities should we generate taxable
income. We have been required in the past, and may be required in the future, to
make payments under federal alternative minimum tax regulation.

At December 31, 2002, we had an accrued pension liability of $408.0
million. During 2002, we made a voluntary pension contribution of $1.2 million.
Under minimum funding rules, substantial contributions to the pension plan
averaging approximately $70 million per year are likely to be required in each
of 2003 through 2007. These amounts arise to a great extent from the performance
of the financial markets and continued declines in interest rates used to
calculate our liabilities over the last three years (see "Current Developments"
discussion).

At December 31, 2002, we had an accrued liability for other postemployment
benefits of $356.3 million. Notwithstanding the ultimate success of our campaign
for voluntary healthcare contributions from certain retirees, we anticipate that
payments for other postemployment benefits will increase in future years from
the $31.6 million we paid in 2002 due to an increase in the number of retirees
receiving benefits, as well as increases in per capita health care costs.

We expect pension contributions and payments for postretirement benefits
will require a substantial amount of liquidity over the next five years.
Payments of these legacy costs may significantly affect the liquidity available
for other purposes, including capital expenditures and other operating,
investing and financing activities.

To address the issues created by these legacy cash requirements, the
Company has taken several steps, including:

- Requesting funding waivers from the Internal Revenue Service. Funding
waivers, if granted, would allow the Company to fund required pension
contributions, for select plan years, over five year periods.

- Seeking changes to our existing retirement benefit plans (pension and
postretirement medical benefits) which we believe will be necessary for
us to remain competitive in light of benefit changes taking place as the
steel industry is restructured. In February 2003, we agreed with our
unions to freeze future accrued benefits under our pension plan. The
Company is currently asking retirees under the age of 65 to contribute to
their healthcare costs.

- Supporting the lobbying efforts of several organizations, including the
American Benefits Council Retirement Task Force. The focus of this group
has been to provide funding relief by allowing pension plan sponsors to
spread required contributions over a longer period of time.

Although the Company is addressing the issue created by the legacy cash
requirements, there can be no assurance that our efforts will be successful. In
the event our efforts are successful, a significant amount of cash may still be
required in the future.

A charge to shareholders' deficit of $146.7 million and an intangible asset
of $40.4 million were recorded at December 31, 2002 to reflect increased pension
obligations relative to their supporting assets. Under accounting principles
generally accepted in the United States, changes in the market value of the
assets held in trust for pension purposes can result in significant changes in
the sponsor's balance sheet. The accounting rules provide that if, at any plan
measurement date (which in our case is generally December 31 of each year), the
fair value of plan assets is less than the plan's accumulated benefit obligation
("ABO"), the sponsor must establish a liability at least equal to the amount by
which the ABO exceeds the fair value of the plan assets, and any prepaid pension
25

assets must be removed from the balance sheet. The sum of the liability and
prepaid pension assets must be offset by the recognition of an intangible asset
and/or as a direct charge against shareholders' deficit. These adjustments have
no direct impact on earnings per share or cash. As of December 31, 2002, the
fair value of plan assets for our pension plan was $528.7 million.

LIQUIDITY OUTLOOK

The following table sets forth the timing of our liquidity requirements in
regard to contractual obligations and commercial commitments (see "Current
Developments" discussion below):

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

(1) The exchanges that resulted in the issuance of the senior secured notes and
secured series 2002 bonds were accounted for as troubled debt restructurings
in accordance with SFAS 15. As a result of this accounting treatment, future
interest payments are included in the carrying value of the liability. The
payments reflected in the table assume the maximum future cash flows
associated with the senior secured notes and secured series 2002 bonds. This
includes all contingent interest based on excess cash flow as defined in the
indentures governing the securities. Management currently does not believe
that the Company will generate excess cash flow. As a result, the cash
payments on long-term debt in each of the years 2 and 3 would be reduced by
$27.1 million if, as expected, we do not pay contingent interest.

(2) The capital lease obligation arises from the sale and leaseback of the
Company's steam generating facilities as part of our vendor financing
programs. The payments reflect the scheduled principal payments on the $29.0
million obligation that had been incurred as of December 31, 2002. The
Company is not required to make payments on the obligation until the first
quarter of 2003, at which time quarterly payments commenced. The payments
will include both principal and interest. If the interest portion of the
payment had been included in the chart above, the totals would have
increased from $1.6 million to $5.0 million in less than one year, from $3.8
million to $9.9 million in two to three years, from $4.9 million to $9.9
million in four to five years and from $18.7 million to $27.2 million after
five years.

(3) We have entered into conditional purchase arrangements for a portion of our
coke and pellet requirements and some of our energy requirements. In
general, those requirements provide for us to purchase a minimum quantity of
material at a variable or negotiated price that approximates the market
price for those commodities. Because those purchases are conditioned on
future purchase levels and changes in market price, they are not included in
the above table.

(4) Includes required reimbursements to National for induced retirements of
Company employees also covered by the National Pension plan. Based on the
benefit enhancements granted to date, we will make the reimbursement
payments indicated. In March 2002, National filed for protection under
federal bankruptcy law. On December 6, 2002, the PBGC filed action with the
U.S. District Court of Northern Illinois seeking to terminate all seven of
National's pension plans, including the Weirton Retirement Program (Plan
056) which covers the Company's employees for pre-1984 service. The court
has yet to rule in this matter. Pension
26

reimbursement payments to National have been suspended pending resolution of
this matter and the outcome of other National liability issues related to
its bankruptcy.

(5) Redeemable Stock includes the maximum redemption value of the Series C
preferred stock which the Company is required to redeem in 2013. The Company
has the option to redeem the stock earlier for lesser amounts. The
redeemable stock does not include any amounts for Series A preferred stock.
Distributees of Series A preferred stock from the 1989 Employee Stock
Ownership Plan can require the Company to repurchase the shares for cash at
market value within specified windows of time after receiving their shares.
Series A preferred stock may also be converted into common stock or continue
to be held by the distributees after the mandatory repurchase periods. As a
result, it is not possible to know the amount and timing of redemption of
the Series A preferred stock, and it has not been included. No inclusion has
been made in the table for the new series of redeemable preferred stock the
Company authorized in February 2003 to issue to employees in connection with
its new labor agreements (see "Current Developments" discussion).

(6) The Company has filed a pension waiver application for the 2002 and 2003
plan years with the Internal Revenue Service, which, if granted, would allow
us to fund our pension obligations for those plan years over five year
periods. In February 2003, we agreed with our unions to freeze future
accrued benefits under our pension plan, effective April 30, 2003, which
will significantly reduce our necessary contributions. Additional reductions
will be realized if our funding waiver applications are granted. As of
December 31, 2002, the Company included a $78.2 million accrued pension
obligation in current liabilities based on the minimum funding rules without
effect for the granting of the funding waivers requested or the plan freeze
(see "Current Developments" discussion).

In the absence of significant new debt or equity financing, the Company's
future liquidity remains largely dependent upon its ability to obtain (i) a
significant amount of the planned $120 million cost savings program, (ii) the
requested pension funding waivers, and (iii) forecasted cash flows from
operations, which is closely related to business conditions in the domestic
steel industry. Based upon the foregoing, the Company believes that cash flows
generated from operating activities and other available sources will be
sufficient to meet its short-term cash needs.

If actual results of operations differ materially from those forecasted and
the Company is not successful in implementing other liquidity improvement
strategies, the Company's liquidity will be adversely affected and may not be
sufficient to meet its needs.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

The net loss for 2002 was $117.4 million, or $2.80 per diluted share.
Results for 2002 included an extraordinary gain of $0.2 million on the early
extinguishment of debt, the sale of excess NOx allowances for $4.4 million, the
sale of Prudential common stock for $3.2 million as a result of Prudential's
demutualization, a tax refund of $3.5 million and a legal settlement of $1.9
million. The net loss for 2001 was $533.3 million or $12.85 per diluted share,
which included a non-cash charge of $153.8 million to fully reserve the deferred
tax assets, restructuring charges of $129.0 million related to fourth quarter
2001 workforce reductions, $12.3 million for an involuntary first quarter 2001
reduction program for non-represented employees, the write-off of our remaining
interests in certain joint ventures totaling $18.0 million and an extraordinary
loss on the early extinguishment of debt of $1.0 million.

Net sales for 2002 were $1,036.2 million, an increase of $75.8 million or
8% from 2001. Total shipments for 2002 were 2.3 million tons, an increase of 0.1
million tons, or 5%, compared to 2001 shipments of 2.2 million tons. The
increase in revenue reflects the effects of the tariffs on imported steel and
the temporary curtailment of domestic production capacity during the first half
of 2002. In addition to the impact of the increase in shipment volume, our
revenues were positively impacted by higher selling prices on sheet products.
Average flat rolled sheet steel prices were higher by $34 per ton, or 10%,
during 2002 compared to 2001.

27

Tin mill product net sales for 2002 were $481.7 million, an increase of
$8.8 million from 2001. Shipments of tin mill products in 2002 were 808,000 tons
compared to 799,000 tons for 2001. The increase in revenue resulted from an
increase in shipments and a change in product mix.

Sheet product net sales for 2002 were $554.5 million, an increase of $66.7
million from 2001. Shipments of sheet product in 2002 were 1.5 million tons
compared to 1.4 million tons in 2001. The increase in revenue resulted from both
an increase in shipments of approximately 4% and an increase in selling prices.

Costs of sales for 2002 were $1,046.7 million, or $456 per ton, compared to
$1,041.5 million, or $467 per ton, for 2001. The decrease in cost of sales per
ton was attributable to our cost reduction efforts and the increase in shipments
as we gained certain economies of scale.

Selling, general and administrative expenses for 2002 were $26.6 million, a
decrease of $7.9 million from 2001. The Company has significantly reduced its
management workforce, resulting in lower selling, general and administrative
expenses.

In the fourth quarter of 2001, our management negotiated new labor
agreements with the ISU and IGU that became effective in late October 2001. The
agreements provided for the permanent elimination of a minimum of 372 production
and maintenance jobs and a minimum of 78 office, clerical and technical jobs. We
also streamlined our management structure by elimination of non-core and
redundant activities resulting in a reduction of 100 management positions. As a
result of the workforce reductions, we recorded a fourth quarter 2001
restructuring charge of $129.0 million.

In March 2001, we implemented our 2001 Workforce Downsizing Program. The
program reduced non-represented staff employees by approximately 10%. As a
result, we recorded a first quarter 2001 restructuring charge of $12.3 million.

The Company's income from unconsolidated subsidiaries during 2002 is
related to WeBCo. WeBCo's increased profitability during 2002 is due to the
success of its new venture in selling excess and secondary sheet products.

During the first quarter of 2001, we recorded an $18.1 million charge to
loss from unconsolidated subsidiary as a result of writing-off our investments
in MetalSite and GalvPro.

Interest expense decreased $6.4 million in 2002 when compared to the same
period in 2001. The decrease is a result of our successful exchange offers. The
current market conditions have caused interest rates to be lowered
substantially, which resulted in a decrease in our interest expense even though
we had an increase in our borrowings during 2002. At December 31, 2002 and 2001,
we had borrowed $115.1 million and $87.8 million, respectively, under our senior
credit facility.

Other income increased $9.2 million from 2001 to 2002. During 2002, the
Company received proceeds from a legal settlement of $1.9 million. As required
by Section 126 of the Clean Air Act, limitations have been implemented to
control the NOx emissions from industrial boilers. Because the Company does not
use coal in its boilers and has taken steps to improve energy efficiency in its
operations, the Company was able to sell a portion of its NOx allowances in June
2002 for $4.4 million. In addition, during the first quarter of 2002, the
Company received approximately $3.2 million from the sale of Prudential
Financial stock it had received upon the demutualization of Prudential and $0.5
million related to import tariffs.

In June 2002, the Company received an income tax refund of $3.5 million in
accordance with the Job Creation and Worker Assistance Act of 2002 signed by
President Bush on March 9, 2002. This new act provides for an expansion of the
carryback of NOLs from two years to five years for NOLs arising in 2001 and
2002. The Company was able to carryback its loss recorded in 2001 to the 1997
through 1999 tax years when it paid an alternative minimum tax. This carryback
allowed the Company to recover the entire amount of alternative minimum taxes
paid during those prior taxable years. Continuing losses have raised doubts
about the Company's ability to realize additional deferred tax assets in the
future, such as operating loss carryforwards, prior to their expiration. During
2001, a non-cash charge of $153.8 million was recorded to fully reserve the
Company's deferred tax assets. The net deferred tax assets generated in 2002 and
2001 were approximately $66 million

28

(including $57.2 million related to the recognition of a minimum pension
liability discussed in the second succeeding paragraph) and $144 million,
respectively, and were fully offset by valuation allowances.

In the second quarter of 2002, the Company recognized an extraordinary gain
from the early extinguishment of debt related to the exchange offers. The 2001
extraordinary loss on early extinguishment of debt of $1.0 million pertains to
costs incurred in the closing of the inventory facility.

During 2002, the Company was required to record an additional minimum
pension liability. Because the additional minimum pension liability exceeded
unrecognized prior service costs, the Company was required to record $146.7
million as a component of comprehensive loss and $40.4 million as an intangible
pension asset.

YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

Net loss for 2001 was $533.3 million, or $12.85 per diluted share, which
included a non-cash charge of $153.8 million to fully reserve the deferred tax
assets, restructuring charges of $129.0 million related to fourth quarter
workforce reductions associated with our strategic plan, $12.3 million for an
involuntary first quarter reduction program for non-represented employees, the
write-off of our remaining interests in certain joint ventures totaling $18.1
million and an extraordinary loss on the early extinguishment of debt of $1.0
million. Net loss for 2000 was $85.1 million, or $2.06 per diluted share.

Net sales for 2001 were $960.4 million, a decrease of $157.5 million or 14%
from 2000. Total shipments for 2001 were 2.2 million tons, a decrease of 0.2
million tons, or 9%, compared to 2000 shipments of 2.4 million tons. The
decrease in revenue reflects the extremely adverse market conditions that have
troubled the domestic steel industry since 1998 and have significantly worsened
over the past 18 months ended December 31, 2001. In addition to the impact of
the decrease in shipment volume, our revenues were negatively affected by lower
selling prices on all products. Average tin mill product prices were down
approximately $6 per ton, or approximately 1%, during 2001 compared to 2000.
Average flat rolled sheet steel prices were lower by $51, or 13%, over the same
period. Partially offsetting the impact of lower selling prices and volumes was
a shift to a higher value-added product mix with a notable increase in tin plate
shipments as a percentage of total shipments.

Tin mill product net sales for 2001 were $472.8 million, an increase of
$34.5 million from 2000. Shipments of tin mill products in 2001 were 799
thousand tons compared to 736 thousand tons for 2000. The increase in revenue
resulted from a 9% increase in shipments which was partially offset by a modest
decrease in selling prices.

Sheet product net sales for 2001 were $487.6 million, a decrease of $192.0
million from 2000. Shipments of sheet product in 2001 were 1.4 million tons
compared to 1.7 million tons in 2000. The decrease in revenue resulted from both
a decline in shipments of approximately 16% and a substantial decline in selling
prices.

Costs of sales for 2001 were $1,041.5 million, or $467 per ton, compared to
$1,052.9 million, or $430 per ton, for 2000. The increase in cost of sales per
ton was attributable to higher energy costs, greater pension expense and a shift
to a higher value-added product mix. The decrease in shipments also contributed
to the higher cost of sales per ton as we lost certain economies of scale.

For 2001, we incurred a negative gross margin as cost of sales exceeded
sales by $81.1 million. Severe weakness in the domestic steel industry depressed
sheet product prices to the point where our sheet product revenues were not
enough to exceed the direct cost of production and indirect overhead costs.
Depressed market conditions resulted in lower shipment and production levels and
the loss of certain economies of scale. Additionally, higher energy costs have
negatively influenced our operating results. Gross margin on our tin mill
products were positive during the period, but not enough to offset the negative
margins on sheet products. We will continue to compete in the sheet products
market to utilize our productive assets as efficiently as possible, but as part
of our strategic plan, we will make efforts to transition more of our shipments
from sheet products to tin products.

In the fourth quarter of 2001, we began implementation of an operating cost
reduction program. We negotiated new labor agreements with the ISU that became
effective in late October 2001. The agreements provided for the permanent
elimination of a minimum of 372 production and maintenance jobs and a minimum of

29

78 office, clerical and technical jobs. We also streamlined our management
structure by elimination of non-core and redundant activities resulting in a
reduction of 100 management positions.

As a result of the workforce reductions, we recorded a fourth quarter
restructuring charge of $129.0 million, consisting in part of a $90.0 million
increase in our accrued pension cost and a $28.6 million increase in our
liability for other post-retirement benefits. Also as part of the fourth quarter
restructuring charge, we recorded a $7.7 million liability to reimburse National
for Weirton employees. As part of the agreement under which we acquired our
assets from National Steel in 1984, National agreed to assume responsibility for
pension benefits related to our employees' service prior to the acquisition.
However, under the same agreement, we are required to partially reimburse
National Steel for those same Weirton employees if our employees are induced
into retiring early. The remaining $2.7 million of the fourth quarter
restructuring charge was related to other separation and severance benefits
provided to the affected employees and was reflected in current liabilities at
December 31, 2001.

In March 2001, prior to the implementation of our strategic plan, we
implemented our 2001 Workforce Downsizing Program. The program reduced
non-represented staff employees by approximately 10%. As a result, we recorded a
first quarter restructuring charge of $12.3 million consisting of an increase in
accrued pension cost of $5.4 million and an increase in our liability for other
post retirement benefits of $3.9 million. The remaining $3.0 million consisted
of a $0.6 million liability to reimburse the National for Weirton employees and
$2.4 million of other separation and severance benefits provided to the affected
employees. As of December 31, 2001, we had paid an aggregate of $1.1 million
related to the restructuring charges.

During the first quarter of 2001, we recorded an $18.1 million charge to
loss from unconsolidated subsidiaries writing-off our investments in MetalSite
and GalvPro. During 2000, losses from these two unconsolidated subsidiaries
accounted for a majority of the total loss from unconsolidated subsidiaries.

Interest expense increased $3.8 million in 2001 as a result of greater
utilization of our working capital facilities. At December 31, 2001, we had
borrowed $87.8 million under our senior credit facility.

Other income declined $4.1 million from 2000 to 2001. The decline resulted
from lower interest income on cash investments due to a lower average cash
balance and the expense associated with amounts utilized under our accounts
receivable securitization program.

During the second quarter of 2001, we recorded a non-cash charge of $153.8
million to fully reserve our deferred tax assets (which included approximately
$400 million of net operating losses at that time). It was determined that our
cumulative financial losses had reached the point that fully reserving the
deferred tax assets was required. In the absence of specific favorable factors,
application of Statement of Financial Accounting Standard No. 109 and its
subsequent interpretations requires a 100% valuation allowance for deferred tax
assets when cumulative financial losses over several years or other factors
raise significant doubt about the realizability of deferred tax assets. We will
continue to provide a 100% valuation allowance for deferred income taxes until
an appropriate level of cumulative financial accounting income or other factors
relieve doubts about our ability to utilize our deferred tax assets.

The extraordinary loss on early extinguishment of debt of $1.0 million
pertains to costs incurred in termination of the inventory facility.

CURRENT DEVELOPMENTS

On February 19, 2003, the Company's unions ratified new labor agreements.
The agreements included a 5% wage reduction, cancellation of a wage increase
scheduled for April 2003, a freeze on benefit accruals under the Company's
defined benefit pension plan, and vacation pay deferrals. A 5% wage reduction, a
pension plan freeze and a cancellation of a wage increase scheduled for April
2003 also extended to non-union employees.

In exchange for the employee related savings, the Company agreed to issue,
to an employee trust, up to 500,000 shares (each with a liquidation preference
of $100) of a new series of non-voting preferred stock. The stock is to be
redeemable or exchangeable at varying prices in cash, subordinated debt or
common stock, at the

30

Company's option, on or before March 1, 2015. Under its senior credit facility,
the Company is not permitted to make payments or other distributions on stock in
a form other than stock.

Effective April 30, 2003, the Company's Pension Plan will freeze future
accrued benefits, which will significantly reduce our required contributions.
Over the next five years, our pension funding requirements will decrease by
approximately $16 million per year, and our pension expense will decrease by
approximately $33 million per year. As a result of the freeze, the Company is
required to record a charge to operations to write-off its intangible pension
asset of $40.4 million during the first quarter of 2003.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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 financial statements and the reported amounts of revenues and expenses
during the reporting period. The Company believes the accounting principles
chosen are appropriate under the circumstances, and that the estimates,
judgments and assumptions involved in its financial reporting are reasonable.
Actual results could differ from those estimates.

Management believes that the following are the more significant judgments
and estimates used in the preparation of the financial statements.

Reserves and Valuation Allowances: The Company evaluates its significant
reserves and valuation allowances and makes revisions to the estimates as
required. The ultimate cost or loss to the Company changes as additional
information becomes available. The Company uses the following policies to
establish its reserves:

- Accounts Receivable -- Management analyzes accounts receivable balances
on an ongoing basis, including historical bad debt and customer claims
information, customer creditworthiness and current economic trends, to
evaluate the adequacy of the allowances for accounts receivable. The
Company records appropriate provision for loss whenever reasonable doubt
exists as to the collectibility of customer accounts receivable.

- Deferred Tax Assets -- On a quarterly basis, the Company considers the
likelihood of its ability to realize the future benefit of its deferred
tax assets given the uncertainty of the domestic steel market. The
Company utilizes information regarding historical and projected financial
performance and other factors relating to the generation of taxable
income as a basis for its estimates. During 2001, the Company determined
that a valuation allowance was necessary for all of its net deferred tax
assets. The Company will continue to evaluate the need for a valuation
allowance on a quarterly basis.

- Environmental Matters -- Environmental matters are evaluated on an
individual occurrence basis. The Company works closely with its
environmental consultants and government agencies to estimate the cost of
environmental matters. Estimates are adjusted as information becomes
available to support such changes.

Pensions and Other Postemployment Benefits: Pension and other
postemployment benefit ("OPEB") expenses are based on, among other things,
assumptions of the discount rate, estimated return on plan assets, wage and
salary increases, the mortality of participants, and the current level and
escalation of health care costs in the future. On an annual basis, management
determines the assumptions to be used to compute pension and OPEB expense and
pension contributions based on discussions with the Company's actuaries and
other advisors. Changes in the factors discussed above and differences between
actual and assumed changes in the present value of liabilities or assets could
cause annual expense or contributions to increase or decrease materially from
year to year.

Asset Impairments: Based on its recent operating losses, the Company has
made estimates of the undiscounted future cash flow over the remaining useful
lives of its operating assets to determine if the assets are impaired. As of
December 31, 2002, the Company determined that no impairment existed. Estimates
of future cash flows in volatile market conditions are inherently subjective and
these estimates of future expected cash flows may change by a material amount in
the future.

31

Inventory: Inventories are stated at the lower of cost or market, cost
being determined by the first-in, first-out method. The Company records an
appropriate provision for net realizable value which is based on, among other
things, estimated future selling prices.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2002, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure; Amendment of FASB Statement
123." SFAS No. 148 provides alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends the disclosure requirements of
SFAS 123 to provide more frequent and more prominent disclosure. The Company has
adopted the annual disclosure provisions and will adopt the interim disclosure
provisions of SFAS No. 148 effective with the first quarter 2003. The Company is
not changing to the fair value based method of accounting for stock-based
employee compensation. Therefore, the transition provisions are not applicable.

In November 2002 the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Guarantees of
Indebtedness of Others" ("FIN 45"). FIN 45 elaborates on the disclosures and
clarifies the accounting related to a guarantor's obligation in issuing a
guarantee. The disclosures required by FIN 45 are included in Note 18 to the
Company's consolidated financial statements. The adoption of FIN 45 is not
expected to have a material effect on the financial position or results of
operations of the Company.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." This statement addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force ("EITF") issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." The provisions
of this Statement are effective for exit and disposal activities that are
initiated after December 31, 2002, with early application encouraged. The
adoption of SFAS 146 could have a material effect on the Company's financial
statements to the extent that significant exit or disposal activities occur
subsequent to adoption.

In April 2002, SFAS No. 145, "Rescission of FASB Statements 4, 44, and 64,
Amendment of FASB Statement 13, and Technical Corrections," was issued. Among
other amendments to previous statements, which have already taken effect, a
provision in the Statement, requiring certain gains and losses from the
extinguishment of debt to be reclassified from extraordinary items, is effective
January 1, 2003.

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations." SFAS No. 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. It applies to legal obligations associated
with the retirement of long-lived assets that result from the acquisition,
construction, development and/or the normal operation of a long-lived asset. The
Company will adopt SFAS 143 in 2003, but does not believe adoption will have a
material effect on its financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our operations consume large amounts of natural gas and blast furnace coke.
Global demand for coke is high. China, the largest exporter of coke, is
producing less and consuming more coke, resulting in a 3.0 million ton reduction
in exports. Domestic coke has a 3.0 million ton deficit (demand is greater than
supply) caused by recent blast furnace start-ups and coke plant closures.
Domestic coke prices have risen over $3 per ton from 2001 to 2002. At normal
consumption levels, a $1.00 per ton change in our coke costs would result in an
estimated $1.1 million change in our annual operating costs. Domestic natural
gas prices increased from an average of $2.95 per mcf in 1999 to an average of
$4.00 per mcf in 2002. At normal consumption levels, a $1.00 per mcf change in
domestic natural gas prices would result in an estimated $17 million change in
our normal operating costs.

32

A primary source of energy used by the Company in its steel manufacturing
process is natural gas. For the year ended December 31, 2002 and 2001, the
average price of natural gas consumed by the Company was $4.00/mcf and
$5.39/mcf, respectively, for a total cost of $69.0 million and $71.1 million,
respectively. A hypothetical 10% change in the Company's natural gas prices
would result in a change in the Company's pretax income of approximately $6.9
million.

The fair values of cash and cash equivalents, receivables and accounts
payable approximated carrying values and were relatively insensitive to changes
in interest rates at December 31, 2002 due to the short term maturity of these
instruments.

We had the following financial liabilities (where fair value differed from
carrying value) as of December 31, 2002:

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

(1) Includes maximum future cash outflows associated with our debt exchange in
accordance with SFAS No. 15, "Accounting by Debtors and Creditors for
Troubled Debt Restructurings."

Our market risk strategy has generally been to obtain competitive prices
for our products and services and allow operating results to reflect market
price movements dictated by supply and demand for our products.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

33

INDEPENDENT AUDITORS' REPORT

THE BOARD OF DIRECTORS
WEIRTON STEEL CORPORATION:

We have audited the accompanying consolidated balance sheet of Weirton
Steel Corporation and subsidiaries as of December 31, 2002 and the related
consolidated statements of operations and comprehensive loss, changes in
stockholders' equity (deficit), and cash flows. 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 audit. The accompanying December 31, 2001 consolidated
balance sheet and December 31, 2001 and 2000 consolidated statements of
operations and comprehensive loss, changes in stockholders' equity (deficit),
and cash flows were audited by other auditors who have ceased operations. Those
auditors' report, dated January 24, 2002, on those consolidated financial
statements was unqualified and included an explanatory paragraph that indicated
there was substantial doubt about the Company's ability to continue as a going
concern.

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

In our opinion, the 2002 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Weirton Steel Corporation and subsidiaries as of December 31, 2002 and the
results of their operations and their cash flows for the year then ended in
conformity with accounting principles generally accepted in the United States of
America.

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

/s/ KPMG LLP
--------------------------------------
KPMG LLP
Pittsburgh, Pennsylvania
January 30, 2003

34

WEIRTON STEEL CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

The accompanying notes are an integral part of these statements.
35

WEIRTON STEEL CORPORATION
CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these statements.
36

WEIRTON STEEL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

NONCASH FINANCING ACTIVITIES:

The Company issued $118.2 million in face amount of new Senior Secured
Notes and 1.9 million shares of Series C Redeemable Preferred Stock with a
mandatory redemption of $48.4 million in 2013 in exchange for $215.0 million in
Senior Notes. The City of Weirton issued $27.3 million in principal amount of
new Series 2002 Secured Pollution Control Revenue Refunding Bonds in exchange
for $45.6 million Series 1989 Bonds, which the Company is obligated to pay under
the terms of a related loan agreement.
The accompanying notes are an integral part of these statements.
37

WEIRTON STEEL CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The accompanying notes are an integral part of these statements.
38

39

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS, OR IN MILLIONS OF DOLLARS
WHERE INDICATED

NOTE 1

BASIS OF PRESENTATION

The financial statements herein include the accounts of Weirton Steel
Corporation and its consolidated subsidiaries. Entities of which the Company
owns a majority interest and controls are consolidated; entities of which the
Company owns a less than majority interest and does not control are not
consolidated and are reflected in the consolidated financial statements using
the equity method of accounting. All intercompany accounts and transactions with
consolidated subsidiaries have been eliminated in consolidation. Weirton Steel
Corporation and/or Weirton Steel Corporation together with its consolidated
subsidiaries are hereafter referred to as the "Company," "we," "us" and "our."

The Company operates a single segment, the making and finishing of carbon
steel products, including tin mill and sheet products.

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

Certain reclassifications have been made to prior year amounts to conform
with current year presentation.

NOTE 2

ORGANIZATION AND BACKGROUND

Background

The Company and its predecessor companies have been in the business of
making and finishing steel products for over 90 years. From November 1929 to
January 1984, the Company's business was operated as either a subsidiary or a
division of National Steel Corporation ("National"). Incorporated in Delaware in
November 1982, the Company acquired the principal assets of National's former
Weirton Steel Division in January 1984.

The Company's authorized capital consists of 50.0 million shares of Common
Stock, par value $0.01 per share, and 7.5 million shares of Preferred Stock, par
value $0.10 per share, issuable in series, as designated by the Company's Board
of Directors. The Company has 3.5 million shares of Preferred Stock that is
authorized, unissued and undesignated.

Prior to 1989, the Company was owned entirely by its employees through an
Employee Stock Ownership Plan (the "1984 ESOP"). In June 1989, the Company's
Common Stock commenced trading publicly on the New York Stock Exchange following
an underwritten secondary offering from the 1984 ESOP. In connection with that
offering, the Company established a second Employee Stock Ownership Plan (the
"1989 ESOP") and funded it with 1.8 million shares of Convertible Voting
Preferred Stock, Series A (the "Series A Preferred").

Current Conditions and Management's Plans

Emerging from the crisis of 2001, the United States steel industry operated
in a state of turmoil that continued through the end of 2002. Although operating
losses by the integrated producers decreased from the record highs of 2001, the
bankruptcy crisis continued with National, the third largest domestic integrated
producer, filing for Chapter 11 protection in March 2002. Also in the first
quarter of 2002 were bankruptcy filings by three smaller producers, Geneva
Steel, Huntco Steel and Calument Steel.

In January 2002, a group of top steel company executives met and agreed on
recommendations for governmental steps needed to deal with injury to the
domestic steel industry and to encourage necessary

40

consolidation and capacity reductions necessary for the viability of the
industry. Key points included remedies and government programs to help shoulder
the industry's legacy issues. In March 2002, a program of tariffs was enacted by
President Bush. Assistance with the legacy cost issue, however, was not
forthcoming. Since that time the Pension Benefit Guaranty Corporation ("PGBC")
has terminated the LTV and Bethlehem pension plans and has commenced proceedings
to terminate the National pension plans, relieving those companies of some of
their legacy obligations.

In February 2002, International Steel Group ("ISG") was formed and
purchased nearly all of the integrated assets of bankrupt LTV in a Chapter 7
liquidation auction. ISG subsequently restarted these facilities and purchased
and restarted the idled assets of Acme Steel. ISG currently has an offer
outstanding to purchase the assets of bankrupt integrated, Bethlehem Steel.
Acquiring these assets would make ISG the largest domestic integrated steel
maker and would result in one company where formerly there were three. In
addition to operating without the burden of predecessor legacy costs, ISG has
forged an agreement with the United Steelworkers of America that provides for
higher productivity based upon the use of significantly less employees with
minimal assignment barriers and restrictions. This combination results in lower
hourly employment costs and overall costs per ton against which traditional,
unionized steel companies must compete.

Other consolidations in 2002 included the purchase of Birmingham Steel and
the idled assets of Trico by Nucor, Qualitech by Steel Dynamics, and Heartland
Steel by CSN. As the Company begins 2003, both U.S. Steel and AK have made
offers to purchase National. The net result of these transactions plus various
other smaller company closings will be some 15 fewer steel producers in the near
future.

While all of these consolidations should have a positive effect on the
state of the domestic steel industry, imports for 2002 were the fourth highest
on record, at an estimated 29.5 million tons, topping 2001 of 27.3 million tons.
While the effects of the tariffs are yet to be determined, it is certain that
more tons will be produced by fewer steel-makers many of whom have been relieved
of the burden of legacy costs going forward.

With the industry consolidation following the new model involving the
rejection of existing legacy liabilities and the modification of current benefit
structures, the Company finds itself at an estimated $35 per ton cost
disadvantage to those mills that have been able to eliminate their legacy
liabilities. To reposition itself to be more cost competitive, the Company's
management team has initiated a five part cost improvement program.

Raw Materials and Energy Savings: The Company targeted key raw materials
and logistic suppliers and has entered into negotiations. This initiative is
expected to generate approximately $17 million in annual cost savings.

Operational Savings: The Company has developed a cost improvement plan
which is expected to reduce its annual operating costs approximately $18 million
by improving yields, reducing spending and reducing downtime.

Sales General and Administrative Savings: Cost savings of approximately $2
million are expected to be realized in areas of dues, travel and entertainment
and board costs and services.

Margin Improvements: The Company has developed new reporting systems which
will allow it to optimize its output resulting in an anticipated increase in its
margin of approximately $11 million through customer and product mix
enhancements.

Employment Costs: The Company's Board of Directors directed management to
reopen its collective bargaining agreements with its represented employees.
Anticipated cost savings will be generated from both represented and
non-represented employees. Targeted areas of reduction are wage and salary
rates, medical benefits costs (via employee contributions and plan design
changes) and a freeze of the pension plan benefits. Additionally, the Company
intends to obtain from its pre-age 65 retirees a reduction of the postretirement
medical benefits via retiree contributions and plan design changes. No
significant reduction in the work force is anticipated.

There can be no assurance that this cost improvement plan will be
successful or sufficient enough to meet the Company's operating needs. In
addition, the Company expects its pension contributions will require a
substantial amount of liquidity in 2003 and beyond. If the Company's cost
improvement plan or the Company's
41

pension funding waiver requests are not successful, the Company may have to seek
bankruptcy protection or commence liquidation proceedings.

The Company, like most United States integrated steel producers, has
sustained significant losses and a decrease in liquidity as a result of
prolonged adverse market conditions and depressed selling prices caused
primarily by dramatic increases in imported steel during the period 1998 through
2002. Many industry observers believe that the severe weaknesses in the United
States steel industry will lead to a restructuring of the industry. This
observation is reinforced by the large number of domestic steel-makers now in
bankruptcy proceedings.

In June 2001, the Bush Administration initiated a trade investigation by
the International Trade Commission ("ITC") under Section 201 of the Trade
Practices Act of 1974 regarding the illegal dumping of steel by foreign
competitors. On October 22, 2001, the ITC found that 12 steel product lines,
representing 74% of the imports under investigation, sustained serious injury
because of foreign imports. These product lines include hot rolled, cold rolled,
galvanized sheet and coil, and tin mill products. On March 5, 2002, President
Bush decided to impose tariffs on flat-rolled products over a three-year period
at 30% in year one, 24% in year two and 18% in year three, in addition to tariff
relief with respect to other products. The President excluded Canada, Mexico and
30 developing countries from his tariff program, subject to further revisions if
import surges from these nations undermine relief. Recently, the Company and
five other domestic steel producers requested that the President include Mexico
and the developing countries in the tariff program citing significant imports
from these countries since March 5, 2002. In addition, the ITC will conduct a
mid-term review of the tariff program in September 2003 and issue a report to
the President. The President then has the option to continue or terminate the
program. All our flat-rolled product lines, including tin mill, hot rolled and
cold rolled sheet and galvanized products, have benefited and should continue to
benefit from the imposition of tariffs. In addition, imported steel slabs are
subject to an increasing annual quota of at least 5.4 million tons, subject to
the imposition of tariffs if the tonnage exceeds the quota limit, excluding
steel slabs from Mexico and Canada.

From June 2002 through August 2002, the Office of the U.S. Trade
Representative granted 747 tariff exclusions. The majority of these exclusions
covered steel products not produced in the United States. The next round of
exclusion requests began in December 2002 and continued through January 2003. A
decision on the exclusions will be made in March of 2003.

A number of countries have objected to the tariffs and have filed appeals
with the World Trade Organization ("WTO"). Although the Administration maintains
its investigation and decision conform with WTO regulations, if the complainants
are successful, the scope, duration and effectiveness of the tariffs could be
affected in a manner adverse to us.

The Company believes that the imposition of tariffs under the Section 201
order had the effect of moderately restricting steel imports to the United
States for 2002, and selling prices and shipment volumes improved from what the
Company otherwise would have realized without the imposition of tariffs. The
Company also believes that the improvements in selling prices and shipment
volumes were influenced by availability of supply. Some flat rolled product
capacity was restarted during the year, and the Company anticipates further
capacity may restart in the near future. If the economy does not recover from
its current state and capacity rationalizations in flat rolled products do not
happen, these improvements may be in jeopardy. In September 2002, the U.S. Court
of International Trade ruled against several Japanese steel companies attempting
to overturn the Administration's tariff on tin mill products and that tariff
remains in effect.

In another ruling, the same court vacated an August 2000 ITC affirmative
ruling against dumped imports of Japanese tin mill products. The commission had
ruled to affix duties of 95% for five years on certain Japanese tin producers.
The Company and the ITC have appealed the decision. The case is pending before a
federal appeals court in Washington, D.C.

Employees

Substantially all of the Company's employees participate in the 1984 ESOP
and the 1989 ESOP which owned approximately 17% of the issued and outstanding
common shares and substantially all the shares of the Company's Series A
preferred stock as of December 31, 2002. The shares of common stock and Series A

42

preferred stock held by the 1984 ESOP and the 1989 ESOP collectively represented
36% of the voting power of the Company's voting stock as of December 31, 2002.

In June 2001, the Company and four bargaining units covering all
represented employees ratified labor agreements which extended through September
1, 2002. The Company and the bargaining units reopened and modified the
agreements to allow for the necessary workforce reductions to implement the
Company's planned employment cost savings program. The new agreements extend
through at least March 2004. Approximately 85% of the Company's workforce is
covered under these collective bargaining agreements.

Other

On September 6, 2001, the Company was de-listed from the NYSE for failure
to maintain adequate market capitalization. Since then, the Company's common
stock has traded on the OTC Bulletin Board under the symbol WRTL.

NOTE 3

SIGNIFICANT ACCOUNTING POLICIES

Recently Adopted Accounting Policies

In November 2002 the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45
elaborates on the disclosures and clarifies the accounting related to a
guarantor's obligation in issuing a guarantee. The disclosures required by FIN
45 are included in Note 18 "Claims and Allowances."

In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-lived Assets." SFAS 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
The adoption of SFAS 144 did not have a material effect on the Company's
December 31, 2002 financial statements.

Cash

The liability representing outstanding checks drawn against a zero-balance
general disbursement bank account is included in accounts payable for financial
statement presentation. Such amounts were $5.4 million and $4.8 million as of
December 31, 2002 and 2001, respectively.

Under its senior credit facility, the Company is required to utilize all
available cash on a daily basis to pay down amounts outstanding under the
facility. Cash needs are funded by borrowing from amounts available under the
senior credit facility. Amounts received from customers and held in blocked
accounts pending transfer to pay down amounts outstanding under the senior
credit facility are shown as a reduction to the facility. See Note 6.

Inventories

Inventories are stated at the lower of cost or market, cost being
determined by the first-in, first-out method. Inventory costs include materials,
labor and manufacturing overhead.

Property, Plant and Equipment

Property, plant and equipment is valued at cost. Major additions are
capitalized, while the cost of maintenance and repairs, which do not improve or
extend the lives of the respective assets, is charged to expense in the year
incurred. Interest costs applicable to facilities under construction are
capitalized. Gains or losses on property dispositions are credited or charged to
income.

Production variable depreciation is applied by establishing production
capacity at the steel-making facility and the finishing facility. Actual
forecasted production is then used to establish a percent of peak capacity or
base capacity. The percent of peak capacity or base capacity is then applied as
an adjustment factor to the unadjusted

43

actual steel-making and finishing depreciation to arrive at the adjusted actual
steel-making and finishing depreciation. All other depreciable assets are
depreciated on a straight-line basis.

Senior Credit Facility

As discussed under the "Cash" sub-heading above, the Company's senior
credit facility is accompanied by an arrangement which requires that the Company
utilize all available cash to pay-down amounts outstanding under the senior
credit facility. Due to this arrangement, the balance outstanding under the
senior credit facility is accounted for as a current liability even though the
term of the agreement extends through March 2004.

Research and Development

The Company incurs research and development costs to improve existing
products, develop new products and develop more efficient operating techniques.
The costs are charged to expense as incurred and totaled $0.9 million, $1.0
million and $2.7 million in 2002, 2001 and 2000, respectively.

Revenue Recognition

Revenues are recognized generally when products are shipped or services are
provided to customers, the sales price is fixed and determinable, and
collectability is reasonably assured. Costs associated with revenues, including
shipping and other transportation costs, are recorded in cost of sales.

Stock Based Compensation

The Company accounts for its stock plans under Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," under which
compensation costs, if applicable, have been determined.

NOTE 4

INVENTORIES

Inventories consisted of the following:

NOTE 5

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following:

44

Capitalized interest applicable to facilities under construction for the
year ended December 31, 2000 amounted to $0.2 million. There was no capitalized
interest applicable to facilities under construction for the years ended
December 31, 2002 and 2001.

Included within construction-in-progress was $11.2 million and $11.1
million for idle equipment related to a new polymer coating process for the
years ended December 31, 2002 and 2001, respectively. Currently, the Company is
actively seeking various alternatives in order to start its polymer project,
including a strategic partnership or additional financing. The Company estimates
that an additional investment of approximately $46.3 million is needed before
the polymer project can be started. The polymer coating equipment will start
being depreciated when it is placed into production.

NOTE 6

FINANCING ARRANGEMENTS

Debt Obligations

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

(1) Included in the current portion of long-term debt at December 31, 2002 was
$6.0 million in contingent interest payments. These contingent payments are
based on excess cash flow as defined in the indentures governing the new
debt securities resulting from our 2002 exchange offers. An extraordinary
gain will be recognized for any contingent payments that are not required to
be made.

Senior Credit Facility

On May 3, 2002, our senior credit facility was amended and restated to
allow, among other things, the exchange offers to be made and to provide
additional collateral with a broader security base. The lenders under the senior
credit facility were given a first priority security interest in the Company's
hot strip mill and tin mill assets in addition to inventory, accounts receivable
and the No. 9 Tandem Mill, which served as collateral before the amendment.

The senior credit facility was established on October 26, 2001 by agreement
with Fleet Capital Corporation, as agent for itself and other lenders, Foothill
Capital Corporation, as syndication agent, the CIT Group/Business Credit, Inc.
and GMAC Business Credit LLC, which serve as co-documentation agents for the
facility, and Transamerica Business Capital Corporation. Initial borrowings
under the facility were used to refinance the existing Inventory Facility and
Receivables Participation Agreements. At December 31, 2002 and 2001, the Company
had borrowed $121.0 million and $92.1 million, respectively, under the senior
credit facility, which is presented net of $5.8 million and $4.3 million,
respectively, of all available cash from lockboxes. At

45

December 31, 2002 and 2001, the Company also utilized an additional $0.5 million
and $9.5 million, respectively, under the letter of credit sub-facility. After
consideration of amounts outstanding under the letter of credit sub-facility,
the Company had $23.0 million and $27.9 million, respectively, available for
additional borrowing under the facility as of December 31, 2002 and 2001.

The senior credit facility, which matures on March 31, 2004, consists of up
to $200.0 million of available revolving loans, including a $25.0 million letter
of credit sub-facility, all secured by a first priority lien in the Company's
inventory, accounts receivable and three major items of real property: the
Company's tin mill assets, hot strip mill assets, and the No. 9 Tandem Mill (in
each case including related fixtures and equipment). The Company is permitted,
with reasonable consent of the lenders under the facility, to enter into a sale
and leaseback or other financing involving the No. 9 Tandem Mill for amounts in
excess of $30.0 million. However, if the Company does enter into such a
financing transaction, the Company would be required to apply at least $25
million of the proceeds of such financing to pay down the senior credit
facility. The Company has no present intention to enter into a transaction
involving the No. 9 Tandem Mill.

Amounts available to the Company from time to time under the senior credit
facility are based upon the level of qualifying accounts receivable and
inventory subject to a minimum availability reserve. Borrowings under the senior
credit facility bear interest at variable rates on the basis of either LIBOR or
the prime rate announced from time to time by Fleet Capital Corporation, at the
Company's option, plus an applicable margin. At December 31, 2002, the weighted
average interest rate for the senior credit facility was 5.56%. In addition to
such interest, the Company also pays a commitment fee equal to 0.50% per annum
on unused portions of the facility.

The senior credit facility does not contain financial maintenance
covenants. However, it does contain covenants that limit, among other things,
the incurrence of additional indebtedness, the declaration and payment of
dividends and distributions on the Company's capital stock, capital spending,
investments in joint ventures, as well as mergers, consolidations, liens and
sales of certain assets. As of December 31, 2002, the Company's ability to incur
additional indebtedness, other than additional borrowings under the senior
credit facility, was limited to $5.0 million, excluding certain types of
permitted indebtedness.

Under the senior credit facility, the Company is able to make scheduled
semi-annual cash interest payments of its outstanding publicly held debt,
provided that these cash payments are reserved against availability under the
facility. The reserve, which is equal to the amount of accrued and unpaid
interest on the Company's outstanding publicly held notes and bonds, can reduce
availability by up to $1.7 million, assuming the Company is not required to pay
contingent interest.

Under blocked account arrangements required by the senior credit facility,
all available cash from lockboxes is used on a daily basis to pay down amounts
outstanding under the facility. The facility requires the cash credited to the
blocked accounts to be transferred to the agent for the lenders and used by it
to pay outstanding obligations. As a result, the Company is not able to use that
cash. The Company's cash needs are funded by daily borrowings under the senior
credit facility. Thus, applicable cash is shown as a reduction to the senior
credit facility.

The Exchange Offers

The Company and the City of Weirton, West Virginia, a local governmental
entity, completed two exchange offers in June 2002.

The principal amount of notes and bonds, originally outstanding, tendered
and remaining are as follows:

46

The Company issued $118.2 million in face amount of 10% Senior Secured
Notes due 2008 ("senior secured notes") and 1.9 million shares of Series C
Convertible Redeemable Preferred Stock ("Series C Preferred") with a mandatory
redemption in 2013 of $48.4 million in exchange for the tendered senior notes
due 2004 and 2005 ("senior notes"). The City of Weirton issued $27.3 million in
principal amount of Series 2002 Secured Pollution Control Revenue Refunding
Bonds ("secured series 2002 bonds") in exchange for the tendered 8 5/8%
Pollution Control Bonds ("series 1989 bonds"). These notes and bonds are secured
by second priority interests in our hot strip mill, our No. 9 Tandem Mill, and
our tin assets.

Through March 31, 2003, the senior secured notes will accrue and pay
interest at a rate of 0.5%. From April 1, 2003 to March 31, 2005, the senior
secured notes will accrue and pay interest at rates ranging from 0.5% to 10%.
That range includes contingent interest, which is based on the Company's "excess
cash flow" as defined in the indenture governing the senior secured notes.
Beginning April 1, 2005, the senior secured notes will accrue and pay interest
at the rate of 10%.

Through March 31, 2003, the secured series 2002 bonds will also accrue and
pay interest at a rate of 0.5%. From April 1, 2003 to March 31, 2005, the
secured series 2002 bonds will accrue and pay interest at rates ranging from
0.5% to 9%. That range includes contingent interest, which is based on the
Company's "excess cash flow" as defined in the indenture governing the secured
series 2002 bonds. Beginning April 1, 2005, the secured series 2002 bonds will
accrue and pay interest at the rate of 9%.

The indentures governing the senior secured notes and secured series 2002
bonds do not contain financial maintenance covenants. However, they do contain
covenants that limit, among other things, the incurrence of additional
indebtedness, the declaration and payment of dividends and distributions on the
Company's capital stock, investments in joint ventures, as well as mergers,
consolidations, liens and sales of certain assets. In general, the covenants
related to the senior secured notes and secured series 2002 bonds are less
restrictive than those contained in the senior credit facility. The indentures
covering the remaining senior notes and series 1989 bonds have been amended to
remove substantially all restrictive covenants.

Troubled Debt Restructuring Accounting

The new debt and preferred stock issues are accounted for in accordance
with Statement of Financial Accounting Standard ("SFAS") No. 15, "Accounting by
Debtors and Creditors for Troubled Debt Restructurings." SFAS No. 15 requires
that a comparison be made between the maximum future cash outflows associated
with the senior secured notes and Series C Preferred (including principal,
stated and contingent interest, and related costs on the senior secured notes
and the mandatory redemption of the Series C Preferred), and the recorded assets
and liabilities relating to the outstanding senior notes as of the date of the
exchange. A similar comparison was made between the cash flows associated with
the secured series 2002 bonds and the carrying amount of the series 1989 bonds.

The details of the comparison of the maximum future cash outflows
associated with the new securities issued and the recorded assets and
liabilities related to the previously outstanding senior notes and bonds are
summarized below:

Because the carrying value of assets and liabilities associated with the
senior notes tendered for exchange exceeded the maximum future cash outflows
associated with the new instruments issued, the Company recorded an
extraordinary gain of $0.2 million. The recorded liability of the senior secured
notes is the total future cash outflow associated with the new notes less the
issuance costs incurred during the exchange. Because all future cash payments
are included in the recorded value of the senior secured notes, the Company will
not record interest expense on the senior secured notes and, when future
payments occur, they will be recorded as a reduction of that liability. In the
event that the Company does not pay the full amount of contingent interest, the
liability will still be reduced by the maximum interest amount and the
difference between the maximum interest amount and the actual amount of interest
paid will be recorded as an extraordinary gain.

In the exchange of the series 1989 bonds, the maximum future cash outflows
associated with the secured series 2002 bonds exceeded the carrying value of the
assets and liabilities of the series 1989 bonds tendered for exchange.
Accordingly, no gain was recorded and the value of the secured series 2002 bonds
was initially recorded at the carrying value of the assets and liabilities
associated with the series 1989 bonds less the issuance costs incurred during
the exchange. The Company will record interest expense on the secured series
2002 bonds at a rate of 0.58%, which is imputed by comparing the maximum cash
flows associated with the secured series 2002 bonds and their initial carrying
value. In the event that the Company does not pay the full amount of contingent
interest, the difference between the maximum interest and the actual interest
paid will first reduce any accrued and unpaid interest recorded and then reduce
the recorded liability for the secured series 2002 bonds.

Vendor Financing Programs

The Company obtained assistance from its key vendors and others through its
vendor financing programs to improve its liquidity in 2001 through 2002. Under
the vendor financing programs, the Company negotiated arrangements with over 60
vendors, utilities and local entities in the form of purchase credits or other
concessions and improvements in terms to achieve one-time cash benefits of at
least $40 million in the aggregate. The vendor financing programs were
structured principally as a sale and leaseback transaction of the Company's
Foster-Wheeler Steam Generating Plant, including the related real property and
certain related energy generating equipment, direct advances or concessions by
certain vendors, and the transfer of a major operating lease to a public entity
(eliminating the Company's need to secure its obligations under the lease with a
letter of credit). The obligations bear an implicit interest rate of 12% through
2007 and 16% from 2008 to 2012. The Company will begin making quarterly payments
of $1.3 million in the first quarter of 2003. Based on an index of hot band
prices, the Company may be required to pre-pay up to $2.0 million of principal
in any given year. The Company will have the option to terminate the lease and
repurchase the assets in 2007 at the present value of the remaining lease
payments.

Term Loan Agreement

As permitted by its senior credit facility, on August 15, 2002 the Company
entered into a term loan agreement with Steelworks Community Federal Credit
Union under which it borrowed $3.0 million out of a maximum amount available of
$3.1 million. The loan is being amortized by equal quarterly principal payments
which commenced on September 30, 2002 and a final $1.1 million principal payment
due August 14, 2014. The
48

Company's obligations under the agreement are collateralized by its General
Office, Research and Development Facility, and railroad rolling stock. Although
the agreement imposes no independent financial maintenance covenants on the
Company, the loan contains cross default provisions linked to certain of the
default thresholds under the Company's senior credit facility.

At December 31, 2002 the Company had $8.5 million in principal payments due
in 2003, $28.4 million due in 2004, $32.3 million due in 2005, $16.3 million due
in 2006, $16.6 million due in 2007 and $192.9 million due thereafter in respect
of its debt obligations. These payment include contingent interest which is
based on the Company's "excess cash flow" as defined in the indentures governing
the senior secured notes and the secured series 2002 bonds. The contingent
interest is $6.0 million in 2003, $13.0 million in 2004 and $6.5 million in
2005. There are no contingent interest payment after the first quarter of 2005.
The vendor financing programs are included in the above amounts.

Receivables Participation Agreements

Prior to the consummation of the senior credit facility, the Company,
through its wholly-owned subsidiary, Weirton Receivables Inc. ("WRI"), was party
to two receivables facilities with a group of three banks (the "WRI Amended
Receivables Facilities"). The WRI Amended Receivables Facilities provided for a
total commitment by the banks of up to $80.0 million, including a letter of
credit subfacility of up to $25.0 million. The Company sold substantially all of
its accounts receivable as they were generated to WRI. Upon the consummation of
the senior credit facility, the WRI Amended Receivables Facilities were
terminated and accounts receivable totaling $25.0 million were repurchased and
refinanced under the senior credit facility.

For 2001 and 2000, the Company recognized $1.1 million and $0.3 million,
respectively, in discount expense from the sale of the funded participation
interest. Discount expense was recorded as a reduction to other income for
financial reporting purposes.

Inventory Facility

In November 1999, the Company entered into a working capital facility of up
to $100.0 million secured by a first priority lien on the Company's inventory
(the "Inventory Facility"). Upon the consummation of the senior credit facility,
the Inventory Facility was terminated and the amounts outstanding were
refinanced through the senior credit facility. Borrowings under the Inventory
Facility were based upon the levels and composition of the Company's inventory.
The amount available for borrowing was limited by both the Inventory Facility
and the Company's senior note indentures, which at that time limited the amount
of indebtedness that could be incurred under such working capital facilities.
During 2001, the Company incurred interest expense of $2.9 million related to
the facility. On October 26, 2001, prior to refinancing the facility, borrowings
under the facility were $47.8 million.

In 2001, the Company incurred a $1.0 million extraordinary loss on the
early extinguishment of debt pertaining to costs incurred in the closing of the
Inventory Facility.

Leases

The Company uses certain lease arrangements to supplement its financing
activities. Rental expense under operating leases was $8.3 million, $5.3 million
and $9.0 million for the years ended December 31, 2002, 2001 and 2000,
respectively. The minimum future lease payments under non-cancelable operating
leases are $7.4 million, $5.3 million, $2.6 million and $0.4 million for the
years ending 2003 through 2006, respectively, with no payments due in 2007.

49

NOTE 7

EMPLOYEE RETIREMENT BENEFITS

Pensions

The Company has maintained a noncontributory defined benefit pension plan
which covers substantially all employees (the "Pension Plan"). The Pension Plan
provides benefits that are based generally upon years of service and
compensation during a participant's final years of employment.

The Company's funding policy is influenced by its general cash requirements
but, at a minimum, has complied with the funding requirements of federal laws
and regulations. The Company contributed $1.2 million to the Pension Plan during
2002, which eliminated the PBGC variable rate premium for 2002; there were no
employer contributions during 2001 and 2000. The Pension Plan's assets are held
in trust; assets are invested primarily in common stocks, fixed income
securities and short term investments.

Under minimum funding rules, the Company estimates that contributions to
the Pension Plan averaging approximately $70 million per year are likely to be
required in each of 2003 through 2007. These amounts arise to a great extent
from the performance of the financial markets and continued declines in interest
rates used to calculate our current liabilities over the last three years. The
Company has requested a pension funding waiver for the 2002 plan year from the
Internal Revenue Service. The Company also intends to file a pension funding
waiver for the 2003 plan year and currently is in negotiations with the ISU to
freeze benefits under the Plan. The pending funding waivers, if granted, would
allow the Company to fund required contributions, for the two plan years, over
five year periods. As of December 31, 2002, the Company included a $78.2 million
accrued pension obligation in current liabilities based on the minimum funding
rules without effect for the granting of the funding waivers requested.

Benefits Other than Pensions

The Company provides healthcare and life insurance benefits to
substantially all its retirees and their dependents. The healthcare plans
contain cost-sharing features including co-payments, deductibles and lifetime
maximums. The life insurance benefits provided to retirees are generally based
upon annual base pay at retirement for salaried employees and specific amounts
for represented employees. These welfare benefits are generally paid as incurred
without pre-funding. As part of its collective bargaining with represented
employees, the Company also will be seeking to reduce its future obligations for
retiree healthcare based on the belief that reductions are necessary to remain
viable and competitive in the emerging restructured domestic steel industry.

The funded status and amounts recognized in the Company's consolidated
financial statements related to employee retirement benefits are set forth in
the following table (in thousands):

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

(1) Weighted-average rates as of December 31.

(2) Weighted-average rates used in determining net periodic benefit cost. The
weighted-average rate for 2003 is 8.25%.

The medical cost and administrative expense rates used to project
anticipated cash flows and measure the Company's postretirement benefit
obligation as of December 31, 2002, 2001 and 2000 are as follows:

A one percentage point change in the assumed health care cost trend rates
would have the following effects:

52

Other

During the year ended December 31, 2002, the Company was required to record
an additional minimum pension liability of $187.1 million. In accordance with
SFAS No. 87 "Employers Accounting for Pensions," to offset this additional
minimum pension liability, $40.4 million was recorded as an intangible asset.
Because the additional minimum pension liability exceeded unrecognized prior
service costs, the Company was required to record $146.7 million as a component
of comprehensive loss and is shown as an increase to shareholders deficit.

As a condition of the purchase of the Company's assets from National in
1984, National agreed to retain liability for pension service and the cost of
life and health insurance for employees of the Company's predecessor business
who retired through May 1, 1983. National also retained the liability for
pension service through May 1, 1983 for employees of the predecessor business
who subsequently became active employees of the Company. As required, National
established and funded its own defined benefit plan under which pension benefits
are calculated by crediting employees' service time with National (together with
subsequent Weirton service for benefit eligibility). Pension benefits payable to
Company retirees with National service time are calculated under the Pension
Plan and are then reduced by amounts paid or payable according to National's
plan.

By agreement with National, when the Company induces an employee to retire
prior to attaining age 62 by offering some form of benefit enhancement, the
Company is obligated to reimburse National on a monthly basis for all benefits
paid by the National pension plan to the time the pensioner reaches 62 years of
age. The obligation to reimburse National is recorded at the time the enhanced
benefit is granted. At December 31, 2002, the Company had accrued a total $20.6
million, of which $6.0 million was classified as current.

In March 2002, National filed for protection under federal bankruptcy law.
On December 6, 2002 the PBGC filed an action with the U.S. District Court of
Northern Illinois seeking to terminate all seven of National's pension plans,
including the Weirton Retirement Program (the 056 plan) which covers the
Company's employees. The court has yet to rule in this matter. The Plan's
fiduciary committee is ultimately responsible for interpreting Plan documents
but has not yet been asked to do so. The Company does not believe that its
Pension Plan will be liable for any benefits previously paid or payable by the
National plan if the National plan is terminated. Based on current actuarial
assumptions, if the Company's Pension Plan were to be found liable, the plans
projected benefit obligation would increase by $4.2 million, the additional
minimum liability and accumulated other comprehensive loss would increase by
$3.7 million, and net periodic pension cost for 2003 would increase by $0.6
million. Pension reimbursement payments to National have been suspended pending
resolution of this matter and the outcome of other National liability issues
related to its bankruptcy.

NOTE 8

POSTEMPLOYMENT BENEFITS

The components comprising the Company's obligations for postemployment
benefits are (i) workers' compensation; (ii) severance programs which include
medical coverage continuation; and (iii) sickness and accident protection, which
includes medical and life insurance benefits.

Actuarial assumptions and demographic data, as applicable, that were used
to measure the postemployment benefit obligation as of December 31, 2002 and
2001, were consistent with those used to measure pension and other
postretirement benefit obligations for each respective year. As of December 31,
2002 and 2001, the Company had accrued $35.8 million and $36.9 million,
respectively, for postemployment benefit obligations. The workers compensation
liability is discounted at a rate of 6.5%.

NOTE 9

RESTRUCTURING CHARGES

As part of its five part strategic restructuring plan, the Company began an
operating cost savings program in 2001. In conjunction with that program, the
Company's management and the ISU negotiated labor agreements that became
effective in late October 2001. The agreement for production and maintenance
employees provided for the permanent elimination of a minimum of 372 jobs. The
office, clerical and technical agreement provided

53

for the right to eliminate a minimum of 78 jobs. The Company also streamlined
its management structure by eliminating non-core and redundant activities
resulting in a reduction of 100 management positions.

These workforce reductions were a key component to the operating cost
savings program. The Company recorded a fourth quarter 2001 restructuring charge
of $129.0 million. The fourth quarter 2001 restructuring charge, consisted of a
$90.0 million increase in our accrued pension cost and a $28.6 million increase
in our liability for other postretirement benefits. Also, as part of the fourth
quarter 2001 restructuring charge, the Company recorded a $7.7 million liability
to reimburse National for induced retirements. The remaining $2.7 million of the
fourth quarter 2001 restructuring charge was related to other separation and
severance benefits provided to the affected employees.

In March 2001, prior to the initiation of the Company's strategic
restructuring plan, the Company established and implemented the 2001 Workforce
Downsizing Program. The program reduced non-represented staff employees by
approximately 10%. As a result, the Company recorded a first quarter 2001
restructuring charge of $12.3 million consisting of an increase in accrued
pension cost of $5.4 million and an increase in our liability for other
postretirement benefits of $3.9 million. The remaining $3.0 million consisted of
a $0.6 million liability to reimburse National for induced retirements and $2.4
million of other separation and severance benefits provided to the affected
employees.

During 2002, the Company paid $4.1 million related to amounts accrued for
salary continuance and other termination benefits for the affected employees as
well as legal, actuarial and other services provided in connection with the
headcount reduction programs.

NOTE 10

INCOME TAXES

Deferred income tax assets and liabilities are recognized reflecting the
future tax consequences of net operating loss ("NOL") and tax credit
carryforwards and differences between the tax basis and the financial reporting
basis of assets and liabilities. The components of the Company's deferred income
tax assets and liabilities were as follows:

As of December 31, 2002, the Company had available, for federal and state
income tax purposes, regular NOL carryforwards of approximately $377.2 million
expiring in 2007 through 2021; an alternative minimum tax

54

("AMT") NOL carryforward of approximately $303.5 million expiring in 2020
through 2022; an AMT credit of approximately $9.1 million; general business tax
credits of approximately $1.3 million expiring in 2003 to 2005; and a Michigan
Low-Grade Hematite Pellet credit of $1.8 million expiring in 2006.

In June 2002, the Company received an income tax refund of $3.5 million in
accordance with the Job Creation and Worker Assistance Act of 2002 signed by
President Bush on March 9, 2002. This new act provides for an expansion of the
carryback period of NOLs from two years to five years for NOLs arising in 2001
and 2002. The Company was able to carryback its AMT NOL recorded in 2001 to the
1997 through 1999 tax years when it paid an alternative minimum tax. This
carryback allowed the Company to recover the entire amount of alternative
minimum taxes paid during those prior taxable years.

In 2002, 2001 and 2000, as a result of its deferred tax attributes, the
Company did not generate any liability for regular federal income tax or
alternative minimum tax.

The Company has provided a 100% valuation allowance for its deferred tax
assets as of December 31, 2002 and 2001. During 2002, in connection with the
recognition of the additional minimum pension liability discussed in note 7, the
Company increased the valuation allowance for deferred tax assets by $57.2
million through comprehensive loss, while also recording an increase in the
valuation allowance of $9.2 million through a charge to the consolidated
statement of operations for all other components of the deferred tax assets. The
Company will continue to provide a 100% valuation allowance for deferred tax
assets until it is more likely than not that such assets can be realized. The
ultimate realization of the net deferred tax assets depends on the Company's
ability to generate sufficient taxable income in the future. If the Company is
able to generate sufficient taxable income in the future, the Company will
reduce the valuation allowance through a reduction of income tax expense
decreasing shareholders' deficit.

The elements of the Company's deferred income taxes associated with its
results for the years ended December 31, 2002, 2001 and 2000, respectively, are
as follows:

The total income tax provision (benefit) recognized by the Company for the
years ended December 31, 2002, 2001 and 2000, reconciled to that computed under
the federal statutory corporate rate follows:

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

(1) The extinguishment of debt item above is comprised of a reduction in the
Company's NOL carryforwards and interest expense payable on the new debt.

55

NOTE 11

REDEEMABLE STOCK

Series C

During 2002 the Company issued shares of Series C Preferred to the holders
of senior notes who tendered their outstanding notes in the exchange offers. The
Series C Preferred is subject to mandatory redemption on April 1, 2013 at a
redemption price of $25 per share in cash. Prior to April 1, 2013, the Company
has the option of redeeming the Series C Preferred, in whole or in part in cash,
at the end of each 12-month period beginning April 1 of each year based on the
following redemption schedule:

In addition, if the Company's capital structure is amended to permit the
issuance of additional shares of common stock, the Company will have the option
to redeem all of the outstanding shares of Series C Preferred at any time prior
to April 1, 2013 by delivering to the holders of Series C Preferred shares of
common stock having a value equal to the then current aggregate redemption price
for all outstanding shares of Series C Preferred.

The Series C Preferred is not convertible at the option of the holders of
the stock. However, the Company has the option of causing the conversion of the
Series C Preferred into shares of its common stock prior to April 1, 2006 in
connection with a significant transaction. A significant transaction is any
transaction in which either an entity acquires more than 50% of the voting power
of the Company's capital stock or the Company enters into a merger or other
business combination in which it is not the surviving entity.

The Series C Preferred is non-voting stock and it is not entitled to
receive dividends.

Series A

In June 1989, the Company sold 1.8 million shares of the Series A Preferred
to the 1989 ESOP, which has since allocated those shares to participants. Each
share of Series A Preferred is convertible at any time into one share of common
stock, subject to adjustment, is entitled to 10 times the number of votes
allotted to the common stock into which it is convertible, and has a preference
on liquidation over common stock of $5 per share. The Series A Preferred has no
preference over common stock as to dividends. The Series A Preferred is not
intended to be readily tradable on an established market. As such, participants
to whom shares of Series A Preferred are distributed from the 1989 ESOP
following termination of service are given a right, exercisable for limited
periods prescribed by law, to cause the Company to repurchase the shares at fair
value. The Company also has a right of first refusal upon proposed transfers of
distributed shares of Series A Preferred. In 1994, the 1989 ESOP was amended to
provide for recontribution to the plan by the Company for shares of Series A
Preferred reacquired for allocation among active employee participants on a per
capita basis. If not repurchased by the Company or reacquired for allocation by
the 1989 ESOP, shares of Series A Preferred automatically convert into common
stock upon transfer to a non-qualified (non-employee) holder.

NOTE 12

STOCK PLANS

The Company has two stock option plans (the "1987 Stock Option Plan" and
the "1998 Stock Option Plan"), an employee stock purchase plan (the "2000
Employee Stock Purchase Plan") and deferred and stock

56

compensation plans for nonemployee members of the board of directors (the
"Directors' Deferred Compensation Plan" and the "Directors' Stock Compensation
Policy").

1987 and 1998 Stock Option Plans

The Company may grant options for up to 750,000 shares under the 1987 Stock
Option Plan, as amended. Under the plan, the option exercise price equals the
stock's market price on the date of grant. Generally, the options granted under
the 1987 Stock Option Plan vest in one-third increments beginning on the date of
grant, with the remaining two-thirds becoming exercisable after the first and
second years. The options expire approximately 10 years from the date of grant.
No options were granted in 2002 or 2001 under the 1987 Stock Option Plan

During 2000, the 1998 Stock Option Plan was amended to increase the number
of options the Company may grant from 3,250,000 shares to 6,500,000 shares. The
option price and vesting requirements are determined by a Stock Option Committee
appointed by the board of directors. No options were granted in 2002 under the
1998 Stock Option Plan. The options granted during 2001 under the 1998 Stock
Option Plan vest in one-third increments beginning on the date of grant, with
the remaining two-thirds becoming exercisable after the first and second years.
The options expire 10 years from the date of grant. The options granted during
2000 under the 1998 Stock Option Plan vest on May 23, 2010 and expire the
following day. The options granted during 2000 are subject to accelerated
vesting based on the continued employment of the recipients and the attainment
of certain market prices for the Company's common stock. The stock prices
necessary for accelerated vesting range from $6.12 to $12.41 and must be
maintained for 20 consecutive trading days for accelerated vesting to occur.
Options that vest pursuant to the accelerated vesting provisions expire on May
24, 2010. All the options granted during 1999 and 1998 under the 1998 Stock
Option Plan had vested as of December 31, 2000 and expired on June 24, 2002.

The following is a summary of stock option activity under the 1987 and 1998
Stock Option Plans:

57

The following table represents additional information with regard to the
1987 and 1998 Stock Option Plans at December 31, 2002:

The fair value of each stock option grant is estimated on the date of the
grant using the Black-Scholes option-pricing model with the following weighted
average assumptions for grants in 2001 and 2000. No options were granted under
the 1987 Stock Option Plan in 2002 or 2001; no options were granted under the
1998 Stock Option Plan in 2002.

2000 Employee Stock Purchase Plan

In May 2000, the Company replaced the 1994 Employee Stock Purchase Plan,
which expired in 1999, with the 2000 Employee Stock Purchase Plan. The Company
reserved 1.0 million shares of its common stock to be offered over a four and a
half year period beginning July 1, 2000 to eligible employees under its 2000
Employee Stock Purchase Plan. The 2000 Employee Stock Purchase Plan provides for
participants to purchase the Company's common stock at 85% of the lesser of the
stock's closing price at the beginning or the end of each year. (For 2000, 85%
of the lesser of the stock's closing price on July 1, 2000 or December 31, 2000
was used to determine the purchase price.) As of December 31, 2002 and 2001,
199,963 and 339,976 shares, respectively, were issuable in accordance with the
2000 Employee Stock Purchase Plan.

Board of Directors' Deferred Compensation Plan

During 1991, the Company adopted a deferred compensation plan (the
"Directors' Deferred Compensation Plan") to permit nonemployee members of the
board of directors to receive shares of common stock in lieu of cash payments
for total compensation or a portion thereof for services provided in their
capacity as a member of the board of directors. The Company reserved 445,000
shares for issuance under the Directors' Deferred Compensation Plan. During
2000, the Directors' Deferred Compensation Plan was modified to allow directors
to either defer shares issuable to a non-qualified trust maintained by an
institutional trustee until such time as the

58

shares are distributed to the directors or to defer share equivalents to a
separate account maintained by the Company. The cost of the shares held in the
trust are accounted for as a reduction to equity. The liability to compensate
the directors is retained until such time as the shares are issued from the
trust. The Directors' Deferred Compensation Plan provides for the stock portion
of the directors' compensation to be valued at 90% of the lesser of the stock's
average trading price at the beginning or the end of each year. As of December
31, 2002, a total of 333,268 shares with a cost of $0.6 million were held by the
trust for future distribution. As of December 31, 2002, 92,208 shares valued at
$0.1 million were issuable and deferred by directors choosing to have shares
issued to the Company maintained trust.

As of December 31, 2002 and 2001, there were insufficient shares authorized
for distributions under the Directors Deferred Compensation Plan. As such, the
Company invests cash in money market funds to account for the shares that would
have been issued to the trust. At December 31, 2002, the Company had a liability
to issue $0.2 million for services rendered during 2002. An additional $0.2
million was issued during 2002 for services rendered in 2001.

Board of Directors' Stock Compensation Policy

Under a stock compensation policy initiated in 1998, the Company's
non-employee directors receive a portion of their annual retainers payable in
shares of the Company's common stock. The directors may elect to defer all or a
portion of the shares under the Directors' Deferred Compensation Plan. As of
December 31, 2002, no shares were issuable to non-employee directors; all shares
otherwise attributable to retainers for 2002 were deferred under the Directors'
Deferred Compensation Plan.

NOTE 13

STOCK BASED COMPENSATION

At December 31, 2002, the Company has two stock-based employee compensation
plans, which are described more fully in Note 12. The Company accounts for those
plans under the recognition and measurement principles of APB Opinion No. 25,
"Accounting for Stock Issued to Employees." No stock-based employee compensation
cost is reflected in the Company's net loss, as all options granted under those
plans had an exercise price equal to the market value of the underlying common
stock on the date of grant. The following table illustrates the effect on the
Company's net loss and earnings per share if the Company had applied the fair
value recognition provisions of FASB Statement No. 123, "Accounting for
Stock-Based Compensation," to stock-based employee compensation.

NOTE 14

ESOP FINANCING

The purchase by the 1989 ESOP of the Series A Preferred was financed
through the issuance of a $26.1 million promissory note to the Company payable
ratably over a 10 year period. The Company's contribution to the 1989 ESOP for
the principal and interest components of debt service was immediately returned.
As such, the respective interest income and expense on the ESOP notes were
entirely offset within the

59

Company's net financing costs. As of December 31, 2002, all shares originally
financed had been allocated to participants of the 1989 ESOP, of which 1,370,395
shares (including recontributed shares) remained in the trust under the 1989
ESOP.

NOTE 15

REPURCHASES OF COMMON STOCK FOR TREASURY

During April 1998, the Company announced that it had been authorized by the
board of directors to repurchase up to 10%, or approximately 4.2 million shares,
of its outstanding common stock. In February 2000, the Company announced that it
had been authorized by the board of directors to repurchase an additional 12% of
its capital stock. Under these stock repurchase programs, the Company paid $16.0
million during 2000 to repurchase approximately 2.6 million shares of its
outstanding common stock at prices ranging from $2.38 to $9.00 per share. There
were no repurchases of outstanding common stock during 2002 or 2001 pursuant to
the stock repurchase program. Repurchased shares of common stock are held in the
Company's treasury.

The Company's current senior credit facility prohibits common stock
repurchases by the Company.

NOTE 16

EARNINGS PER SHARE

For the years ended December 31, 2002, 2001 and 2000, basic and diluted
earnings per share were the same; however, common stock equivalents totaling
3,251,234, 3,878,469 and 2,751,082, respectively, were excluded from both the
basic and diluted earnings per share calculations due to their anti-dilutive
effect.

NOTE 17

ENVIRONMENTAL COMPLIANCE, LEGAL PROCEEDINGS AND COMMITMENTS AND CONTINGENCIES

Environmental Compliance

The Company, as well as its domestic competitors, is subject to stringent
federal, state and local environmental laws and regulations concerning, among
other things, waste water discharges, air emissions and waste disposal. The
Company spent approximately $1.4 million, $1.9 million and $0.9 million for
pollution control capital projects in 2002, 2001 and 2000, respectively.

The Company continued its environmental remediation and regulatory
compliance activities required under its 1996 consent decree with federal and
state environmental authorities that had settled certain water discharge, air
emissions and waste handling enforcement issues. Under the consent decree, the
Company committed to undertake environmental upgrade and modification projects
totaling approximately $19.8 million, of which $16.3 million had been spent
through December 31, 2002.

As part of a related corrective action order, the Company also continued
its investigative activities and interim corrective measures aimed at
determining the nature and extent of hazardous substances which might be located
on its property. These activities are being accomplished on an area by area
basis and generally are at an early stage. Because the Company does not know the
nature and extent of hazardous substances which may be located on its
properties, it is not possible at this time to estimate the ultimate cost to
comply with the corrective action order.

At December 31, 2002, the Company had accrued approximately $9 million
related to the consent decree, the corrective action order, and other
environmental liabilities.

The Company believes that National is obligated to reimburse the Company
for a portion of the costs that have been and may be incurred by the Company to
comply with the corrective action order. Pursuant to the agreement whereby the
Company purchased the former Weirton Steel Division of National Steel in 1984,
National Steel retained liability for cleanup costs related to solid or
hazardous waste facilities, areas or equipment as long as such were not used by
the Company in its operations subsequent to the acquisition. As potentially
reimbursable costs are incurred, the Company has been and may continue to be
reimbursed by National.

60

In March 2002, National filed for protection under federal bankruptcy law.
The filing may affect the Company's ability to seek and obtain reimbursement or
indemnification from National for environmental remediation activity.

Legal Proceedings

The Company, in the ordinary course of business, is the subject of, or
party to, various pending or threatened legal actions. The Company believes that
any ultimate liability resulting from these actions will not have a material
adverse effect on its financial position or results of operations. On a
quarterly and annual basis, management establishes or adjusts financial
provisions and reserves for contingencies.

Commitments and Contingencies

The Company obtains insurance for automobile, general liability and
property damage. However, the Company has elected to retain a portion of
expected losses for property damage and general liability claims through the use
of deductibles.

Additionally the Company's health care and workers' compensation plans are
self insured. Provisions for losses under those programs, other than
post-retirement benefits costs, which are actuarially determined, are recorded
based on estimates (utilizing claims experience and other data), of the
aggregate liability for claims incurred and claims incurred but not reported.

The Company is an integrated producer and does not own or operate sources
of raw material supply. In October 1991, the Company entered into a supply
agreement with a subsidiary of Cleveland-Cliffs Inc. to provide the majority of
its iron ore pellet requirements beginning in 1992 and extending through 2008.
The Company has an additional contract with a subsidiary of Cleveland-Cliffs
Inc. to purchase its remaining supply of standard and flux grade iron ore pellet
requirements. The contracts provide for the supply of a minimum annual tonnage
of pellets based on mine production capacity, with pricing primarily dependent
on mine production costs and the balance of the pricing for the Company's
requirements fluctuates based on world pellet market prices.

The Company has entered into a memorandum of understanding with U.S. Steel
to provide it with a minimum of 750,000 and 850,000 net tons of coke in each of
2003 and 2004, respectively, with the option to buy incremental volume under
which the price of coke fluctuates on an annual basis based on the market price
for coke. In addition the Company has negotiated a contract for 360,000 net tons
per year from another supplier. Any additional coke needs, will be provided
through either domestic or overseas sources. The Company continually evaluates
potential new sources for coke and processes for utilizing coke more efficiently
in its steel making facilities. The Company obtains its limestone, tin, zinc,
scrap metal and other raw materials requirements from multiple sources.

NOTE 18

CLAIMS AND ALLOWANCES

The Company's policy is to fully reserve for claims that have been or may
be incurred on all products that have been shipped. The reserve is calculated
based on claims that have been submitted but not settled. The calculation also
considers anticipated claims based on historical performance. The reserve for
claims and allowances is netted against accounts receivable for financial
reporting purposes.

The following is a rollforward of the Company's claims and allowances
activity for 2002:

Beginning Balance at December 31, 2001: .................... $ 3,195
Additions to Reserve................................... 16,272
Settled Claims......................................... (14,946)
--------
Ending Balance at December 31, 2002: ....................... $ 4,521
========

61

NOTE 19

DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS AND SIGNIFICANT GROUP
CONCENTRATIONS OF CREDIT RISK

The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:

Redeemable Preferred Stock

The fair value of the Series A and Series C Preferred was determined based
upon an independent appraisal performed as of December 31, 2002 and 2001.

Long-term Debt Obligations

The fair values of the Company's long-term debt obligations are estimated
based upon quoted market prices.

The estimated fair values of the Company's financial instruments are as
follows as of December 31, 2002 and 2001, respectively:

Significant Group Concentrations of Credit Risk

One customer accounted for 15% of net sales in 2001. Two customers
accounted for 23% of our trade receivables as of December 31, 2001. There were
no significant concentrations of credit risk as of or for the year ended
December 31, 2002.

NOTE 20

SUBSIDIARIES AND JOINT VENTURES

In 2001 the Company formed FW Holdings, Inc. in connection with its sale
and leaseback of its Foster-Wheeler Steam Generating Plant. See discussion in
Note 6, "Financing Arrangements."

MetalSite

During the first quarter of 2001, MetalSite continued to incur significant
losses. Additionally, the difficulties experienced by other Internet and
e-commerce companies, as well as questions about MetalSite's capacity to obtain
additional financing, raised doubts about the Company's ability to realize its
investment in MetalSite. As such, the Company incurred equity losses, including
a charge to write its investment in MetalSite to zero, of $5.8 million during
the first quarter of 2001. The Company maintains a zero equity investment
balance related to MetalSite on its balance sheet.

GalvPro

The Company incurred equity losses, including a charge to write its
investment in GalvPro to zero, of $12.2 million during the first quarter of
2001. In August 2001, GalvPro filed for Chapter 11 bankruptcy. The Company has
no direct liability from GalvPro's filing and therefore continues to carry a
zero balance for its investment in GalvPro as of December 31, 2002.

62

WeBCo

WeBCo International LLC ("WeBCo") was formed in 1997 with the Balli Group,
plc. The primary function of WeBCo is to market and sell the partners' products
globally. As of December 31, 2002, the Company owned 50% of WeBCo, and the
carrying amount of the Company's investment in WeBCo was $3.7 million.

W&A

W&A Manufacturing LLC ("W&A") was formed in 1998 with ATAS International
for the purpose of manufacturing steel roofing products. As of December 31,
2002, the Company owned 50% of W&A, and the carrying amount of the Company's
investment in W&A was $0.4 million.

The Company accounts for its investments in WeBCo and W&A using the equity
method of accounting.

Related Party Transactions

The Company's purchases of goods and services from unconsolidated
subsidiaries totaled $8.0 million, $31.1 million and $27.4 million in 2002, 2001
and 2000, respectively. The Company's sales of steel to unconsolidated
subsidiaries totaled $35.5 million, $9.0 million and $42.8 million in 2002, 2001
and 2000, respectively. These transactions arose in the ordinary course of
business and were transacted at arms-length. Pursuant to certain service
agreements, the Company provides services to unconsolidated subsidiaries. The
Company billed for these arrangements at amounts approximating the cost to
provide the service. Such amounts were minimal in 2002, $0.5 million in 2001 and
$0.3 million in 2000. At December 31, 2002 and 2001, the Company had outstanding
trade receivables from unconsolidated subsidiaries of $1.8 million and $3.0
million respectively.

In each of 2002 and 2000, the Company received distributions of $1.0
million from WeBCo. There were no dividends or partnership distributions
received from equity affiliates in 2001.

NOTE 21 (UNAUDITED)

SELECTED QUARTERLY FINANCIAL DATA

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

(1) Includes a charge of $153.8 million to fully reserve deferred tax assets.

(2) Includes a restructuring charge of $129.0 million related to a workforce
reduction associated with the Company's strategic restructuring plan.

(3) Includes a restructuring charge of $12.3 million related to the 2001
Workforce Downsizing Program.

63

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

On June 4, 2002, the Registrant engaged KPMG LLP ("KPMG") as its
independent public accountants for the year ended December 31, 2002. The
Registrant also notified Arthur Andersen LLP ("Andersen") that it was being
dismissed as the Registrant's independent public accountant, effective
immediately. The engagement of KPMG and the dismissal of Andersen resulted from
action taken by the Registrant's Board of Directors upon recommendation of its
Audit Committee. Andersen and its predecessors had served in that position since
1984.

During the prior two fiscal years and through June 4, 2002, the Registrant
did not consult KPMG with respect to the application of accounting principles to
a specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on the Registrant's consolidated financial
statements, or any other matter or reportable events as set forth in Items 304
(a)(2)(i) and (ii) of Regulation S-K.

Andersen's reports on the Registrant's consolidated financial statements
for the years ended December 31, 2001 and 2000 did not contain any adverse
opinions or disclaimers of opinion, nor were they qualified as to uncertainty,
audit scope or accounting principle except as follows:

Andersen's report on the Registrant's consolidated financial statements for
the year ended December 31, 2001, contained a separate paragraph stating:

"The Company (Weirton Steel Corporation) has suffered recurring losses from
operations and has a Total Stockholders' Deficit that raise substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are described in Note 2. The financial statements do not
include any adjustments relating to the recoverability and classification of
asset carrying amounts or the amount and classification of liabilities that
might result should the Company be unable to continue as a going concern."

During the years ended December 31, 2001 and 2000 and through June 4, 2002,
date of termination, there were no disagreements with Andersen on any matter of
accounting principle or practice, financial statement disclosure, or auditing
scope or procedure which, if not resolved to Andersen's satisfaction, would have
caused Andersen to make reference to the subject matter in connection with its
reports on the Registrant's consolidated financial statements for such years.
Moreover, there were no reportable events as defined in Item 304(a)(1)(v) of
Regulation S-K.

The Registrant has provided Andersen with a copy of the foregoing
statements, and Andersen has provided a letter stating that it agrees with the
disclosure contained herein.

64

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this Item with respect to Directors of the
Company is incorporated herein by reference to the caption "Security Ownership
of Certain Beneficial Owners and Management" in the Company's definitive Proxy
Statement relating to its 2003 Annual Meeting of Stockholders. With the
exception of the information specifically incorporated by reference, the
definitive Proxy Statement is not deemed to be filed as part of this report for
purposes of this Item.

Information concerning Weirton's executive officers is presented in Part I
of this report under Item 1, "Executive Officers of the Company."

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item with respect to Directors of the
Company is incorporated herein by reference to the caption "Security Ownership
of Certain Beneficial Owners and Management" in the Company's definitive Proxy
Statement relating to its 2003 Annual Meeting of Stockholders. With the
exception of the information specifically incorporated by reference, the
definitive Proxy Statement is not deemed to be filed as part of this report for
purposes of this Item.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The information required by this Item with respect to Directors of the
Company is incorporated herein by reference to the caption "Security Ownership
of Certain Beneficial Owners and Management" in the Company's definitive Proxy
Statement relating to its 2003 Annual Meeting of Stockholders. With the
exception of the information specifically incorporated by reference, the
definitive Proxy Statement is not deemed to be filed as part of this report for
purposes of this Item.

The following table summarizes the equity compensation plans under which
Weirton common stock may be issued as of December 31, 2002:

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

(1) Exercise prices are determined as a percentage of the lower of trading
prices at the beginning or end of each plan year and are the same for all
plan participants.

(2) See Note 12 to the Consolidated Financial Statements for a description of
the material features and operations of these plans.

65

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.

ITEM 14. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

The Company's Chief Executive Officer and Chief Financial Officer have
evaluated the Company's disclosure controls and procedures within 90 days of the
filing of this report, and they have concluded that these controls and
procedures are effective.

CHANGES IN INTERNAL CONTROLS

There are no significant changes in internal controls or in other factors
that could significantly affect these controls subsequent to the date of their
evaluation.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) 1. The list of financial statements required to be filed by Item 8.
Financial Statements and Supplementary Data of this Annual Report on Form
10-K is as follows:

2. The list of financial statement schedules required to be filed by Item
8. Financial Statements and Supplementary Data of this Annual Report on
Form 10-K is as follows:

Report of Independent Public Accountants on Financial
Statement Schedules....................................... S-1
Schedule:
I Valuation and Qualifying Accounts............... S-2

3. Exhibits.

The response to this item is incorporated by reference to the "Exhibit
Index" hereof.

(b) Reports on Form 8-K.

The Company filed a current report on Form 8-K, relating to Items 5 and 7,
on December 11, 2002. The Company filed a current report on Form 8-K,
relating to Item 5, on February 19, 2003.

(c) The exhibits listed under Item 14(a)(3) are filed herewith or incorporated
herein by reference.

(d) The financial statement schedules listed under Item 14(a)(2) are filed
herewith.

66

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, Weirton Steel Corporation has duly caused this
Report to be signed on its behalf by the undersigned, thereunto duly authorized,
on the 27th day of March 2003.

WEIRTON STEEL CORPORATION

By: /s/ MARK E. KAPLAN
------------------------------------
Mark E. Kaplan
Senior Vice President of Finance and
Administration

Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on behalf of
Weirton Steel Corporation and in the capacities indicated on the 27th day of
March 2003.

/s/ JOHN H. WALKER
- ------------------------------------------------------
John H. Walker
Director, President and Chief Executive Officer
(principal executive officer)

/s/ MARK E. KAPLAN
- ------------------------------------------------------
Mark E. Kaplan
Senior Vice President of Finance and Administration (principal accounting and
financial officer)

/s/ MICHAEL BOZIC
- ------------------------------------------------------
Michael Bozic
Director

/s/ RICHARD R. BURT
- ------------------------------------------------------
Richard R. Burt
Chairman of the Board of Directors

/s/ ROBERT J. D'ANNIBALLE, JR.
- ------------------------------------------------------
Robert J. D'Anniballe, Jr.
Director
/s/ MARK G. GLYPTIS
- ------------------------------------------------------
Mark G. Glyptis
Director

/s/ THOMAS R. STURGES
- ------------------------------------------------------
Thomas R. Sturges
Director

/s/ RONALD C. WHITAKER
- ------------------------------------------------------
Ronald C. Whitaker
Director

- ------------------------------------------------------
Wendell W. Wood
Director

67

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER REGARDING FACTS AND
CIRCUMSTANCES RELATING TO ANNUAL REPORTS

I, John H. Walker, certify that:

1. I have reviewed this annual report on Form 10-K of Weirton Steel Corporation;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statement made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluations as of the
Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee
of the registrant's board of directors:

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employee who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officer and I have indicated in this annual
report whether or not there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.

/s/ JOHN H. WALKER
--------------------------------------
Chief Executive Officer
March 28, 2003

68

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER REGARDING FACTS AND
CIRCUMSTANCES RELATING TO ANNUAL REPORTS

I, Mark E. Kaplan, certify that:

1. I have reviewed this annual report on Form 10-K of Weirton Steel Corporation;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statement made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluations as of the
Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee
of the registrant's board of directors:

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employee who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officer and I have indicated in this annual
report whether or not there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.

/s/ MARK E. KAPLAN
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Senior Vice President of Finance and
Administration
March 28, 2003

69

EXHIBIT INDEX

74

INDEPENDENT AUDITORS' REPORT
ON FINANCIAL STATEMENT SCHEDULE

Under date of January 30, 2003, we reported on the consolidated balance
sheet of Weirton Steel Corporation and subsidiaries as of December 31, 2002 and
the related consolidated statements of operations and comprehensive loss,
changes in stockholders equity (deficit), and cash flows for the year ended
December 31, 2002 as contained in the annual report on Form 10-K for the year
ended 2002. In connection with our audit of the aforementioned consolidated
financial statements, we also audited the related consolidated financial
statement schedule as listed under Item 15(a)(2). This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion on this financial statement schedule based on our
audit.

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

The audit report on the consolidated financial statements of Weirton Steel
Corporation and subsidiaries referred to above contains an explanatory paragraph
that states the Company has sustained significant losses from operations and
also has a total stockholders' deficit that raise substantial doubt about its
ability to continue as a going concern. The financial statement schedule as
listed under Item 15(a)(2) does not include any adjustments that might result
from the outcome of this uncertainty.

/s/ KPMG LLP

Pittsburgh, Pennsylvania
January 30, 2003

S-1

WEIRTON STEEL CORPORATION
VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(DOLLARS IN THOUSANDS)

* Excludes charges, deductions and liabilities related to pensions, other
post-retirement benefit obligations, and the Company's obligation to reimburse
the National Steel Corporation pension plan for Weirton employees, the
liabilities for which are actuarially determined.

S-2