WEIRTON STEEL CORP - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended September 30, 2003.

or

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from -------------- to
---------------

COMMISSION FILE NUMBER 1-10244

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

DELAWARE 06-1075442
(State or other jurisdiction of (IRS employer Identification #)
incorporation or organization)

400 THREE SPRINGS DRIVE, WEIRTON, WEST VIRGINIA 26062-4989
(Address of principal executive offices) (Zip Code)

(304) 797-2000
Registrant's telephone number, including area code:

Indicate by checkmark 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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [X]

The number of shares of Common Stock ($.01 par value) of the registrant
outstanding as of October 31, 2003 was 42,077,309.

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TABLE OF CONTENTS

ITEM

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

WEIRTON STEEL CORPORATION
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The accompanying notes are an integral part of these statements.

3

WEIRTON STEEL CORPORATION
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

The accompanying notes are an integral part of these statements.

4

WEIRTON STEEL CORPORATION
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

The accompanying notes are an integral part of these statements.

5

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

NOTE 1

BASIS OF PRESENTATION

The Consolidated Condensed Financial Statements presented herein are
unaudited. The Consolidated Condensed Balance Sheet as of December 31, 2002 has
been derived from the audited balance sheet included in the Company's 2002
Annual Report on Form 10-K. Unless context otherwise requires, the terms
"Weirton Steel," "Weirton," the "Company," "we," "us" and "our" refer to Weirton
Steel Corporation and its consolidated subsidiaries. Entities of which the
Company owns a controlling interest are consolidated; entities of which the
Company owns a less than controlling interest are not consolidated and are
reflected in the consolidated condensed financial statements using the equity
method of accounting. All material intercompany accounts and transactions with
consolidated subsidiaries have been eliminated in consolidation.

Certain information and footnote disclosures normally prepared in
accordance with accounting principles generally accepted in the United States
have been either condensed or omitted pursuant to the rules and regulations of
the Securities and Exchange Commission. Although the Company believes that all
adjustments necessary for a fair presentation have been made, interim periods
are not necessarily indicative of the financial results of operations for a full
year. As such, these financial statements should be read in conjunction with the
audited financial statements and notes thereto included or incorporated by
reference in the Company's 2002 Annual Report on Form 10-K.

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. Actual results could differ from those estimates.

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

At September 30, 2003, the Company had two stock-based employee
compensation plans. 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.

6

NOTE 2

BANKRUPTCY REORGANIZATION

On May 19, 2003, Weirton Steel Corporation filed a voluntary petition for
reorganization under Chapter 11 of the Bankruptcy Code in the United States
Bankruptcy Court for the Northern District of West Virginia (the "Court").
Weirton continues to manage its business as a debtor-in-possession. As a
debtor-in-possession, management is authorized to operate the business, but may
not engage in transactions outside the ordinary course of business without Court
approval. In connection with the filing of the Chapter 11 petition, Weirton has
obtained Court orders that authorize us to pay certain pre-petition liabilities
(such as employee wages and benefits and certain of the Company's senior secured
indebtedness) and take certain actions intended to preserve the going concern
value of the business and enhance the prospects of reorganization.

These financial statements have been prepared on a going concern basis,
which contemplates continuity of operations, realization of assets, and payment
of liabilities in the ordinary course of business. As a result of the Chapter 11
filing, there is no assurance that the carrying amounts of assets will be
realized or that liabilities will be settled for amounts recorded. On October 7,
2003, Weirton filed a plan of reorganization to emerge from bankruptcy as a
stand alone company and on November 13, 2003, the Company filed a modified plan
of reorganization. The plan, which calls for the Company to emerge from
bankruptcy by December 31, 2003, is subject to numerous conditions and
uncertainties, including, among other things, approval of its terms by the Court
and creditors, achieving new labor contracts with the Company's unions, and
obtaining requisite financing. On November 13, 2003, the Emergency Steel Loan
Guarantee Board announced that it has approved with certain conditions a
guarantee to Fleet Capital Corporation with respect to a loan of $145 million to
Weirton Steel Corporation. There can be no assurance that Weirton will be able
to implement the reorganization plan as filed, or any other reorganization plan.
Reorganization could change the amounts reported in the financial statements and
cause a material change in the carrying amount of assets and liabilities. These
financial statements have been prepared in accordance with the AICPA's Statement
of Position 90-7, "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code" ("SOP 90-7"). SOP 90-7 requires segregating pre-petition
liabilities that are subject to compromise, identifying all transactions and
events that are directly associated with the reorganization of the Company and
discontinuing interest accruals on any unsecured or undersecured debt.

Under the Bankruptcy Code and related rules, the Company is required to
file certain information and reports with the Court. During the quarter ended
September 30, 2003, the Company filed with the Court its required Monthly
Operating Reports in a form prescribed by the United States Trustee for the
Northern District of West Virginia. Monthly Operating Reports are unaudited and
prepared in a format prescribed by applicable bankruptcy rules. Those rules are
not necessarily in accordance with Generally Accepted Accounting Principles or
with requirements under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").

Under bankruptcy law, actions by creditors to collect pre-petition
indebtedness owed by Weirton at the filing date are stayed, and other
pre-petition contractual obligations may not be enforced against Weirton. In
addition, Weirton has the right, subject to Court approval and other conditions,
to assume or reject any pre-petition executory contracts and unexpired leases.
Parties affected by these rejections may file claims with the Court. The amounts
of claims filed by creditors could be significantly different from their
recorded amounts. Due to material uncertainties, it is not possible to predict
the length of time Weirton will operate under Chapter 11 protection, the outcome
of the proceedings in general, whether Weirton will continue to operate under
its current organizational structure, the effect of the proceedings on Weirton's
business or the amount or nature of any recovery by creditors and equity holders
of Weirton.

Except for fully secured debt, a vendor-financing obligation under a
capital lease, accrued wages and related payroll taxes and withholdings, all
recorded pre-petition liabilities of the Company have been classified as
liabilities subject to compromise. The Court authorized payments of certain
pre-petition wages, employee benefits and other obligations. Net changes in
pension, other postretirement benefits and certain other accrued liabilities
since May 19, 2003, are included in liabilities subject to compromise. The
Preferred Series C and Preferred Series D stock are also considered liabilities
subject to compromise. See Note 8 for further

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discussion. As of September 30, 2003, payments of approximately $3.7 million
have been made on liabilities subject to compromise. Liabilities subject to
compromise at September 30, 2003 were as follows:

Net costs resulting from reorganization of the business have been reported
separately in the unaudited consolidated condensed statement of operations as
reorganization items. For the third quarter of 2003, the following have been
incurred:

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NOTE 3

LIQUIDITY AND FINANCING ARRANGEMENTS

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(1) Included in the current portion of long-term debt at December 31, 2002, was
approximately $6.8 million in contingent interest payments. The contingent
payments were based on excess cash flow as defined in the indentures
governing the debt securities issued in connection with the 2002 exchange
offers. An extraordinary gain on early extinguishment of debt of $6.8
million was recorded in the second quarter of 2003 for contingent interest
payments that were not required to be made. Pending any changes in the terms
of the underlying debt, extraordinary gains will be recognized in the future
for any future contingent interest payments that are not required to be
made. The extraordinary gain from contingent interest would also be a
reduction in the related debt that is recorded in Liabilities Subject to
Compromise.

DIP Facility -- Senior Credit Facility

At September 30, 2003, the Company had outstanding $132.9 million under its
debtor-in-possession financing facility (the "DIP Facility"), which is presented
net of $4.4 million of all available cash from lockboxes. Additionally, the
Company utilized $0.5 million under its debtor-in-possession letter of credit
sub-facility at September 30, 2003. At December 31, 2002, the Company had
outstanding $115.1 million under its 2002 amended and restated revolving senior
financing credit facility with a syndicate of lenders (the "Senior Credit
Facility"), which is presented net of $5.8 million of all available cash from
lockboxes. At December 31, 2002, the Company also utilized an additional $0.5
million under its letter of credit sub-facility. After consideration of amounts
outstanding under its letter of credit sub-facility, the Company had $26.2
million available for additional borrowing under the DIP Facility at September
30, 2003 and $23.0 million available

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for additional borrowing under the Senior Credit Facility at December 31, 2002.
The Senior Credit Facility was terminated in connection with our bankruptcy case
and, as permitted by the Court, outstanding obligations under that facility were
satisfied.

The DIP Facility has been structured to provide the Company with up to
$225.0 million in financing during the course of its bankruptcy case. The DIP
Facility consists of a term loan of $25.0 million and a revolving loan facility
of up to $200.0 million. The borrowing base for the revolving loan facility is
determined by the Company's levels of accounts receivable and inventory in a
manner substantially similar to the Senior Credit Facility. The DIP Facility
also includes a letter of credit sub-facility of up to $5.0 million. The DIP
Facility revolving loan lenders consist of Fleet Capital Corporation, Foothill
Capital Corporation, The CIT Group/Business Credit, Inc., GMAC Commercial
Finance LLC and Transamerica Business Capital Corporation, all of whom were
lenders to Weirton under the Senior Credit Facility, and the DIP Facility term
loan lender is Manchester Securities Corporation. Fleet Capital Corporation acts
as Agent for the DIP Facility lenders. The DIP Facility is collateralized by a
senior lien on our inventories, accounts receivable, property, plant and
equipment and substantially all of our other tangible and intangible assets.
Priority in the plant, property and equipment collateral goes first to the term
loan lender and in all other collateral to the revolving loan lenders. Proceeds
from permitted sales of the respective types of collateral must be used to pay
down the related loan. In the case of revolving loans, amounts repaid may become
available for reborrowing. The DIP Facility has a term extending through the
earliest to occur of (i) November 20, 2004, (ii) the occurrence of a Default or
Event of Default (as defined in the DIP Facility), or (iii) confirmation of a
final bankruptcy reorganization plan, unless the facility is terminated earlier
as provided by its terms.

In the absence of default, the Company is required to pay interest on
outstanding amounts under the revolving portion of the DIP Facility of either
(1) the prime rate announced from time to time by Fleet Bank, plus 2.25% or (2)
LIBOR, plus 3.75%, at its option. The non-default interest rate applicable to
the term portion is 14.5% per annum. Default rates of interest on revolving
loans and the term loan under the DIP Facility are increased by 2.0% and 3.0%
per annum, respectively, over the non-default rates. To maintain the DIP
Facility, the Company is required to pay, from time to time, certain
non-refundable fees, including a facility fee, unused line fee, administrative
fee and monitoring fee. In addition, a deferred fee will be payable to the
revolving lenders upon the earliest to occur of (i) confirmation of a plan of
reorganization, (ii) sale of substantially all our assets or (iii) repayment in
full of our obligations under the DIP Facility. Optional prepayment of the term
loan under the DIP Facility also requires a prepayment fee, the size of which
varies depending on the time of payment.

The DIP Facility contains certain representations and warranties about
Weirton and its business, affirmative and negative covenants requiring or
restricting Weirton's ability to engage in specified transactions and
activities, and Events of Default, many of which have been derived from similar
provisions in our former Senior Credit Facility and others that we believe are
customary for a facility of this type. As under the prior Senior Credit
Facility, amounts available for revolving borrowings depend on Weirton's
borrowing base of eligible receivables and inventory and are subject to certain
limitations and reserves. Under the DIP Facility, we are required to maintain
minimum initial availability of $10.0 million. This "availability block"
increases over time to a $20.0 million level by July 31, 2004. The required
increase in availability may be offset by asset sale proceeds, which increases
effective borrowing capacity. The DIP Facility also contains certain performance
covenants focused on meeting financial objectives and complying with budgetary
limitations, and the failure to observe these covenants could result in one or
more Events of Default. Among other things, these covenants require Weirton to
attain increasing amounts of cumulative EBITDAR (earnings before interest
expense, income taxes, depreciation and Restructuring Expenses, as defined in
the DIP Facility) for specified periods during the term of the DIP Facility and
minimum monthly EBITDAR during the last five months of the term. In addition,
Weirton may not permit Restructuring Expenses to exceed monthly budgeted amounts
by more than 10% overall and by more than 15% on a categorical basis. The
Company is not permitted to allow consolidated accounts payable at the end of
any month to be less than 50% of the projected budgeted amount for that date.

The DIP Facility Events of Default encompass a wide range of occurrences,
including, among other things: failure to pay obligations in a timely manner;
breaches of representations, warranties and covenants
10

(subject, in some cases, to cure periods); business disruptions and other
factors producing a Material Adverse Effect (as defined in the DIP Facility) on
Weirton's business, assets, financial condition or income (other than as
contemplated in our budget); material uninsured losses to collateral; changes in
control and executive management; defaults on other indebtedness in excess of
$0.5 million in the aggregate; and a number of events potentially affecting our
bankruptcy case adversely, including our failure to file a plan of
reorganization within 270 days of the petition filing date, the filing of
reorganization plans unacceptable to any DIP Facility lender, the conversion of
our case into a Chapter 7 (liquidation) proceeding, the filing of certain
bankruptcy pleadings, the granting of authority to Weirton to incur certain
impermissible liens or impermissible debt, the appointment of a bankruptcy
trustee with enlarged powers, or the issuance of an order lifting the automatic
stay in bankruptcy to allow persons to proceed against any of Weirton's material
property.

The DIP Facility replaced the Senior Credit Facility, of which
approximately $154.6 million was outstanding on the petition filing date.
Subsequently, the DIP term loan facility of $25.0 million was drawn down to
repay a portion of the outstanding amounts under the revolving credit portion of
the DIP Facility.

The description of the DIP Facility provided in this report is qualified by
the full text of that document filed as Exhibit 10.1 to the Company's March 31,
2003 Form 10-Q.

NOTE 4

PENSIONS

During February 2003, the Company's unionized employees ratified new labor
agreements, which, among other things, provided for a freeze of further benefit
accruals under the Company's defined benefit pension plan as of April 30, 2003.
The Company applied the same freeze to its non-unionized workforce. In
accordance with SFAS No. 88, "Employers' Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination Benefits," the
Company recognized a pension curtailment charge of $38.8 million. The
curtailment charge reflects the full recognition of the unrecognized prior
service cost and transition obligation, since all benefit accrual associated
with expected future years of service has been eliminated. Because the pension
plan freeze constituted a significant event, the Company re-measured its pension
plan assets and liabilities as of February 28, 2003. The accounting rules
provide that if, at any plan measurement date, 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 plan assets. The liability must be offset by the recognition of an
intangible asset and/or a charge against stockholders' deficit. Even though the
freeze operates to moderate the Company's long term funding burden with respect
to the plan, because the Company was required to recognize all prior service
cost and transition obligation with the pension curtailment, the difference
between the ABO and plan assets at February 28, 2003 was taken as a direct
charge of $15.3 million to stockholders' deficit.

During 2002, the Company applied to the Internal Revenue Service (the
"IRS") for waivers regarding its pension plan funding obligations for 2002 and
2003. In April 2003, the IRS granted the Company contingent funding waivers for
the 2002 plan year and the first quarterly 2003 plan year contributions. The
effect of the waivers would have been to allow Weirton to stretch out its
required funding for the plan over a five-year period. The waivers were granted
contingent upon the Company providing "adequate security" for its rescheduled
obligations within 90 days of issuance. The DIP Facility and Court orders
applicable to the Company in connection with its bankruptcy case prevented the
Company from providing security to the PBGC. As a result of the Company's
inability to satisfy the security requirements of the pension funding waivers
granted by the IRS in April 2003, an aggregate of $47.6 million in pension
obligations retroactively became due. As with all pension liabilities, the $47.6
million is classified as liabilities subject to compromise.

On October 21, 2003, the Pension Benefit Guaranty Corporation ("PBGC")
filed a complaint in the federal district court to terminate, as of that date,
the Company's qualified defined benefit pension plan and assume responsibility
for pension benefits affecting approximately 9,200 plan participants, including
active, retired and former employees of the Company. According to the PBGC, the
Weirton Steel Corporation Retirement Plan is 39% funded, with approximately $530
million in assets to cover approximately $1.35 billion in benefit liabilities.
Calculation of benefit liabilities relative to assets and levels of insured
benefits provided

11

through the PBGC, which are limited by the year of plan termination, the type of
benefit involved and personal circumstances of participants, remain to be
determined. On November 7, 2003, the Company consented to the termination of its
pension plan and is negotiating with the PBGC, regarding the resolution of the
related liabilities. The Company's proposed plan of reorganization does not
include provision for a replacement defined benefit pension plan.

NOTE 5

INVENTORIES

Inventories consisted of the following:

NOTE 6

EARNINGS PER SHARE

For the three months ended September 30, 2003, basic and diluted loss per
share was $0.88. Basic and diluted loss per share for the three months ended
September 30, 2002 was $0.30. For the three months ended September 30, 2003 and
2002, Series A Preferred securities totaling 1,463,720 and 1,488,147,
respectively, were excluded from both the basic and diluted earnings per share
calculations due to their anti-dilutive effect. For the nine months ended
September 30, 2003, basic and diluted loss per share was $3.71. Basic and
diluted loss per share for the nine months ended September 30, 2002 was $2.22.
For the nine months ended September 30, 2003 and 2002, Series A Preferred
securities totaling 1,463,726 and 1,491,856, respectively, were excluded from
both the basic and diluted earnings per share calculations due to their
anti-dilutive effect.

For the three months ended September 30, 2003 and 2002, there were an
additional 1,599,612 and 1,900,136 options, respectively, outstanding for which
the exercise price was greater than the average market price, that were excluded
from both the basic and diluted earnings per share calculations due to their
anti-dilutive effect. For the nine months ended September 30, 2003 and 2002,
there were an additional 1,596,166 and 1,851,270 options, respectively,
outstanding for which the exercise price was greater than the average market
price, that were excluded from both the basic and diluted earnings per share
calculations due to their anti-dilutive effect.

NOTE 7

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 the first nine months of 2003:

Beginning Balance at December 31, 2002:..................... $ 4,521
Additions to Reserve...................................... 12,465
Settled Claims............................................ (11,474)
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Ending Balance at September 30, 2003:....................... $ 5,512
========

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NOTE 8

FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY

In May 2003, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity." The provisions of SFAS No. 150 were effective as of the first interim
period beginning after June 15, 2003. A mandatorily redeemable financial
instrument must be classified as a liability unless the redemption is required
to occur only upon the liquidation or termination of the reporting entity. A
financial instrument issued in the form of shares is mandatorily redeemable if
it embodies an unconditional obligation requiring the issuer to redeem the
instrument by transferring its assets at a specified or determinable date (or
dates) or upon an event certain to occur.

In 2002, the Company authorized 2,196,000 and issued 1,934,874 shares of
Series C Convertible Redeemable Preferred Stock $0.10 par value per share. The
Series C Preferred Stock is mandatorily redeemable by April 1, 2013, at $25 per
share or $48.4 million. In the first quarter of 2003, the Company authorized
500,000 and on May 16, 2003 issued to its 1989 ESOP 380,000 shares of Series D
Exchangeable Redeemable Preferred Stock, $0.10 par value per share. The Series D
Preferred, is redeemable at the Company's option at $20 per share prior to
February 28, 2005 and at $40 per share thereafter. The Series D Preferred Stock
is mandatorily redeemable on March 1, 2015, at $40 per share or $15.2 million.
The Preferred Series D has a liquidation value of $100 per share and, by its
terms, can not be redeemed prior to the Senior Secured Debt. In accordance with
SFAS No 150, both the Preferred Series C and Preferred Series D stocks have been
reclassified from redeemable preferred stock to liabilities subject to
compromise during the third quarter of 2003.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with and is qualified in its
entirety by the unaudited consolidated condensed financial statements of the
Company and notes thereto. The unaudited consolidated condensed financial
statements of Weirton Steel Corporation include the accounts of its wholly and
majority owned subsidiaries. Unless context otherwise requires, the terms
"Weirton," "the Company," "we," "us" and "our" refer to Weirton Steel
Corporation and its consolidated subsidiaries.

INDUSTRY OVERVIEW

Since the beginning of the steel import crisis in 1998, domestic companies
and unions have sought action from the federal government 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. These included trade measures, such as tariffs, and legislative
and regulatory relief from the industry's legacy issues, specifically its
surging liabilities for accrued, unfunded pensions and retiree healthcare
benefits. In March 2002, the Bush Administration initiated a three-year, stepped
tariff program providing substantial trade relief. However, subsequent to the
imposition of the tariffs, a large number of tariff exclusion applications were
filed. The tariff program is in the midst of a mid-term review, and a decision
is expected from President Bush to extend, terminate or modify the program by
the end of this year. Furthermore, no legislative changes have been implemented
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. The
Pension Benefit Guaranty Corporation ("PBGC"), a federal corporation that
insures pension benefits, generally has moved to terminate the underfunded plans
of bankrupt companies relieving them of future accruals for pension service.

The domestic steel industry continues to restructure through
consolidations. Steelmaking assets of bankrupt producers are being acquired free
of legacy liabilities, with the result that the acquiror can operate at a
substantially lower cost than other producers with on-going legacy costs. In
February 2002, a new entity,
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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. In addition to operating without the burden of predecessor legacy costs,
ISG forged an innovative agreement with the United Steelworkers of America (the
"USWA") that represented a significant departure from the traditional USWA
contract. The structure of this type of agreement could leave steel companies
with traditional contract language at a significant competitive disadvantage. On
May 7, 2003, ISG acquired substantially all the assets of Bethlehem Steel
Corporation ("Bethlehem"), the second largest integrated steelmaker, which had
filed for Chapter 11 bankruptcy protection in October 2001. Similar to these
other integrated steelmakers, on May 19, 2003, Weirton Steel Corporation filed a
voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code.

On May 20, 2003, United States Steel Corporation ("US Steel") completed the
acquisition of substantially all the integrated steel making assets of National
Steel Corporation ("National"), which had filed for Chapter 11 bankruptcy
protection in March 2002. Similar to the ISG situation, the acquired National
assets are operating with no predecessor legacy liabilities. Furthermore, US
Steel may achieve greater synergies not only from the acquired assets, but also
from the application of a broad USWA labor agreement it had reached in
connection with the National acquisition of its other facilities. Nucor
Corporation is the largest domestic steel producers in the United States. With
the acquisition of the National and Bethlehem assets, US Steel and ISG,
respectively, have become the second-largest and third-largest domestic steel
producers. In tin mill products, where Weirton is a major competitor with the
second-largest market share of approximately 26%, US Steel's acquisition of
National's tin mill facilities (following its acquisition of the former LTV
Steel tin operations in 2001) will result in US Steel having an estimated tin
market share of approximately 41%.

On June 18, 2003, a federal bankruptcy court approved Wheeling-Pittsburgh
Corporation's ("WPC") plan to emerge from Chapter 11 bankruptcy protection.
Previously, the Emergency Steel Loan Guarantee Board ("ESLGB") approved WPC's
application for a $250 million federal steel loan guarantee covering part of its
financing to emerge from bankruptcy and fund its strategic plan. Subsequently,
WPC reached agreement with the USWA on a new labor contract consistent with
recent industry trends, and an agreement with the PBGC and others aimed at
rescinding the termination of WPC's existing defined benefit pension plan. As a
result, after over two and a half years of operating under Chapter 11, WPC
implemented a stand alone reorganization plan.

BANKRUPTCY REORGANIZATION

On May 19, 2003, Weirton Steel Corporation filed a voluntary petition for
reorganization under Chapter 11 of the Bankruptcy Code (see Note 2 in the
accompanying financial statements). Although the petition was "voluntary," the
underlying causes leading to the filing stemmed from circumstances which many
others in the steel industry, which have also sought bankruptcy protection,
face. Despite having achieved nearly $115 million in net cost reductions across
a broad front from labor and employment concessions, outside debt restructuring
and production efficiencies since the beginning of 2001, we have been unable to
overcome the injury caused by record levels of unfairly traded steel imports and
a slowing economy that have severely reduced prices, shipments and production.
Moreover, significantly higher energy prices and other cost disadvantages that
we face in the current environment compounded our problems. The resulting
sustained operating losses and negative cash flow heavily damaged our financial
condition to the point that we believed we would be unable to recover outside of
the bankruptcy process. Furthermore, the pattern of consolidation of capacity by
and into larger entities in the steel industry has frustrated our announced
strategic objectives to grow our business through targeted acquisitions. At the
same time, these developments have presented us with the prospect of competing
against reorganized capacity that will be operating, to a great extent, free of
the heavy legacy costs that we have been carrying and have been unable to reduce
without bankruptcy intervention.

The Company continues to manage its business as a "debtor-in-possession".
As a debtor-in-possession, management is authorized to operate the business, but
may not engage in transactions outside the ordinary course of business without
Court approval. In connection with the filing of the Chapter 11 petition and in
the
14

course of our proceeding, we have obtained several Court orders that authorized
us to pay certain pre-petition liabilities, which has allowed our business to
continue without significant interruption.

On October 7, 2003, Weirton filed a plan of reorganization to emerge from
bankruptcy as a stand-alone company by December 31, 2003. On November 13, 2003,
the Company filed a modified plan of reorganization. The modified plan is
subject to approval by the Court and creditors, new labor contracts with the
Company's unions, and obtaining requisite financing. The Company's DIP Facility
expires on November 19, 2004, and we are required to achieve confirmation of a
satisfactory plan of reorganization by that date. The plan calls for the Company
to continue to operate its ironmaking, steelmaking and finishing operations. The
Company expects to operate with a substantially lower cost structure by
addressing legacy costs and manpower issues as well as raw material costs.
Emergence financing guaranteed under the ESLG program, conditionally approved on
November 13, 2003, is central to the plan's success. The loan proceeds will be
used to fund the costs to emerge from bankruptcy and upgrade mill equipment. The
plan of reorganization also states that the Company could be sold to a strategic
or financial investor.

RECENT DEVELOPMENTS

The Company is required to comply with certain financial covenants under
its debtor-in-possession financing facility (DIP Facility). One of those
covenants requires Weirton to attain increasing amounts of cumulative EBITDAR
(earnings before interest expense, income taxes, depreciation and Restructuring
Expenses, as defined in the DIP Facility) for specified periods during the term
of the DIP Facility and minimum monthly EBITDAR during the last five months of
the term. To comply with this covenant the Company has expanded its cost saving
plan from the $120 million set as a goal in the first quarter 2003 to
approximately $146 million on an annualized basis. On October 21, 2003, the
Court approved a further management workforce reduction plan aimed at reducing
up to 175 of its 475 exempt positions and designed to save the Company up to $11
million annually. The Company also proposed to reduce up to 800 union
represented positions, but the Company is seeking to fix the actual number of
affected positions through ongoing collective bargaining with its principal
union, the Independent Steelworkers Union. Savings under the expanded plan
include active employees wage and benefit reductions, more favorable vendor
agreements, spending reductions, operational improvements and reduced legacy
costs. While the Company's current year projections anticipate compliance with
applicable EBITDAR covenants, those projections depend upon achieving savings
from our revised plan, which will require new collective bargaining agreements
with our unions and concessions from our vendors. Beginning in January 2004, the
Company is required to attain significantly higher EBITDAR under the existing
covenant. Because savings from our plan would phase in over time, the Company
believes that, even if the agreements and concessions are obtained, our improved
results would not comply with the current EBITDAR covenant in January 2004.
Failure to comply with that covenant, unless it were modified or waived, would
give rise to an Event of Default under the DIP Facility. See Note 3 to the
consolidated condensed financial statements relating to the DIP Facility. The
Company's plan of reorganization calls for it to emerge from bankruptcy by
December 31, 2003 with financing facilities to replace the DIP Facility. As
discussed below, the Company has accepted a commitment for those facilities
whose definitive terms remain to be negotiated. The Company anticipates that the
facilities will contain respective financial covenants whose terms would govern
in place of the EBITDAR under the DIP Facility.

On August 1, 2003, the Company announced the appointment of D. Leonard Wise
as chief executive officer and Mark E. Kaplan as president and chief financial
officer, and those appointments were confirmed by the Court on August 4, 2003.

On October 21, 2003, the PBGC filed a complaint to terminate the Company's
qualified defined benefit pension plan, effective on that date, and assume
responsibility for the pension benefits of approximately 9,200 plan
participants, including active, retired and former employees of the Company. On
November 7, 2003, the Company consented to the termination of its pension plan
and is negotiating with PBGC regarding the resolution of the related
liabilities. Effective December 2002, the PBGC had terminated a defined benefit
pension plan maintained by National covering the pre-1984 pension benefits of
Company employees. Both plans are underfunded on a PBGC termination basis and
PBGC insurance benefits limitations are likely to affect a significant number of
participants.
15

Notwithstanding cost reduction and liquidity improvement steps, the
weakness in domestic markets for Weirton's products, in particular its commodity
sheet products during the third quarter 2003, resulted in depressed product
prices, shipments and order levels. The weak domestic steel market, in addition
to higher raw material and energy costs, adversely affected Weirton's operating
results and financial position. However during the third quarter of 2003,
positive signs that the manufacturing economy is slowly recovering appear to be
favorably influencing the sheet product pricing outlook for the near term. The
Company's sheet product pricing improved by $20 per ton during the third quarter
of 2003. The price increase announcements from major producers are expected to
provide an additional $10-$15 per ton increase in the fourth quarter of 2003.

On November 13, 2003, the ESLGB approved with certain conditions a
guarantee to Fleet Capital Corporation with respect to a loan of $145 million to
Weirton Steel Corporation. The ESLGB will guarantee repayments of 88% of the
principal of the loan. The Company applied to the ESLGB for a guaranty relating
to its proposed secured emergence financing in connection with its
reorganization. The ESLG program expires on December 31, 2003, unless it is
extended, which would require an act of Congress. To receive the benefit of the
guaranty, absent any modifications to the current program, the Company would
have to emerge from bankruptcy by December 31, 2003. The Company is in
discussions with the State of West Virginia and other third parties to determine
if they would agree to guarantee or fund a portion of the loan not covered by
the ESLGB guaranties.

On November 14, 2003, Weirton accepted a commitment from Fleet Capital
Corporation and Fleet Securities Inc. to provide and arrange through a syndicate
of lenders a secured revolving loan facility of up to $200 million and a
secured, guaranteed term loan facility of $145 million. The two facilities, each
with a term of five years, would serve as the Company's principal financing
sources to effect its reorganization plan, emerge from bankruptcy and provide
for its fixed and working capital needs. The commitment contemplates: (i) a
revolving facility substantially similar in terms and structure to the DIP
Facility and its predecessor Senior Credit Facility under which borrowing
capacity is determined principally, and is secured primarily, by the Company's
inventory and accounts receivable; and (ii) a term loan facility, a portion
substantially guaranteed by the ESLGB, which is secured primarily by the
Company's real estate, operating and other fixed assets. The term facility
provides for escrowing funds dedicated for specified capital projects,
amortization of amounts of principal over the term, and possible extension after
an initial maturity date. The commitment for the two loan facilities is subject
to numerous terms and conditions, including, without limitation, negotiating and
entering into satisfactory definitive loan documentation, the ESLGB and State of
West Virginia issuing the necessary guarantees, obtaining required approvals and
confirmation of a satisfactory plan of reorganization, placing the
non-guaranteed portion of the term loan, achieving necessary minimum levels of
cost savings, and completing usual and customary matters necessary to close and
fund these types of loans.

As noted, under current law, the latest date for issuance of guarantees by
the ESLGB is December 31, 2003. While the Company believes obtaining the
commitment for the facilities represents a substantial step supporting
achievement of its plan of reorganization, no assurance can be given that the
facilities can be definitively structured on the contemplated terms or that the
numerous conditions to their completion and funding can be satisfied or waived
in the available time.

LIQUIDITY AND CAPITAL RESOURCES

Total liquidity from cash and financing facilities amounted to $26.2
million at September 30, 2003, as compared to $29.0 million at December 31,
2002. These calculations are based on our DIP Facility and the then effective
Senior Credit Facility. Our liquidity has improved primarily as a result of
greater borrowing capacity under the DIP Facility and suspension of certain
payments, but has worsened as a result of poor operating results. Under
bankruptcy law, actions by creditors to collect pre-petition indebtedness owed
by the Company are stayed while the Company continues to collect pre-petition
accounts receivable and operate as a going-concern.

As of September 30, 2003, the Company had cash and equivalents of $0.4
million compared to $0.2 million as of December 31, 2002.

16

The Company's statements of cash flows for the nine months ended September
30 are summarized below:

Net cash used by operating activities was $34.9 million and $11.3 million
during the nine months ended September 30, 2003 and 2002, respectively. Although
adverse market conditions continue to prevail in the domestic steel industry, we
partially offset the difficult market conditions through the various cost
control measures we undertook during 2001, 2002 and 2003 to enhance our
operating cash flow by reducing overall operating costs and net working capital
investment.

Net cash used by investing activities primarily included $4.5 million and
$6.1 million of capital expenditures for the nine months ended September 30,
2003 and 2002, respectively.

The $38.7 million in net cash provided by financing activities during the
first nine months of 2003 primarily consisted of $132.9 million in borrowings
under our DIP Facility and $25.0 million under our DIP Term Loan, which was
offset by $115.1 million in net repayments of the Senior Credit Facility. The
$11.9 million in net cash provided by financing activities during the first nine
months of 2002 consisted of $16.1 million in cash received under vendor
financing arrangements implemented in 2001 and net borrowings of $3.6 million
under the Senior Credit Facility, which was partially offset by deferred
financing fees of $10.6 million.

At September 30, 2003, the Company had outstanding borrowing of $132.9
million under its DIP Facility, which is presented net of $4.4 million in all
available cash from lockboxes. Additionally, the Company utilized $0.5 million
under its debtor-in-possession letter of credit sub-facility at September 30,
2003. At December 31, 2002, the Company had borrowed $115.1 million, under the
Senior Credit Facility, which is presented net of $5.8 million in available cash
from lockboxes. At December 31, 2002, the Company also utilized an additional
$0.5 million under its letter of credit sub-facility. After consideration of
amounts outstanding under its letter of credit sub-facility, the Company had
$26.2 million available for additional borrowing under the DIP Facility at
September 30, 2003 and $29.0 million available for additional borrowing under
the Senior Credit Facility at December 31, 2002.

The DIP Facility replaced the Senior Credit Facility, of which
approximately $154.6 million was outstanding on the petition filing date. As
required by the DIP Facility, the DIP term loan facility of $25.0 million was
drawn down to repay a portion of the initial revolving borrowings under the DIP
Facility.

The DIP Facility is our exclusive source of outside financing during our
bankruptcy case. Depending upon anticipated pricing improvements during the
fourth quarter, and the Company's ability to implement its expanded cost savings
plan and build satisfactory trade credit, and assuming that we remain in
compliance with our covenants, we estimate that the DIP Facility should provide
sufficient liquidity for our planned operations for the duration of our current
fiscal year. See Note 3 to the Unaudited Consolidated Condensed Financial
Statements and "Recent Developments" in this report for additional information
concerning the terms of the DIP Facility. However, we can give no assurance that
we will be able to effectively implement our expanded cost savings plan, or that
if the implementation of the expanded cost savings plan will result in the
savings contemplated by the plan, that we will succeed in building satisfactory
trade credit, that the DIP Facility will be sufficient to meet our financing
needs for the remainder of the year or that we will be able to obtain any
additional financing.

Our modified reorganization plan filed on November 13, 2003, under which
the Company seeks to emerge from bankruptcy by year end, also contemplates
financing to repay the DIP Facility and fund future operations. See "Recent
Developments."

17

THREE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 2002

In the third quarter of 2003, the Company recognized a net loss of $37.2
million or $0.88 per diluted share. Additionally, during the third quarter of
2003, the Company had $5.4 million in bankruptcy reorganization expenses. The
third quarter 2003 charges were partially offset by the sale of excess nitrogen
oxide (NOX) allowances for $1.8 million. This compares with a net loss of $12.7
million, or $0.30 per diluted share for the third quarter of 2002.

Net sales in the third quarter of 2003 were $271.2 million, a decrease of
$2.6 million, or 1%, from the third quarter of 2002. Total shipments in the
third quarter of 2003 were 626 thousand tons, an increase of 47 thousand tons,
or 8%, from the third quarter of 2002 shipments of 579 thousand tons.

Tin mill product net sales for the third quarter of 2003 were $130.6
million, an increase of $15.9 million from the third quarter of 2002. Shipments
of tin mill product in the third quarter of 2003 were 222 thousand tons,
compared to 194 thousand tons in the third quarter of 2002. The increase in tin
mill product revenue is due to an increase in our market share in higher
value-added tin products.

Sheet product net sales for the third quarter of 2003 were $140.6 million,
a decrease of $18.5 million from the third quarter of 2002. Shipments of sheet
product in the third quarter of 2003 were 404 thousand tons compared to 385
thousand tons in the third quarter of 2002. The decrease in sheet product
revenue resulted from a decrease in product selling price.

Cost of sales for the third quarter of 2003 were $280.9 million, or $449
per ton, compared to $262 million, or $453 per ton, for the third quarter of
2002. The decrease in cost of sales per ton was primarily attributable to the
Company's savings initiatives, partially offset by an increase in the Company's
raw material and energy costs in addition to higher pension costs.

Selling, general and administrative expenses for the third quarter of 2003
were $4.3 million, a decrease of $2.7 million from the third quarter of 2002. As
part of its operating cost savings plan, the Company has continued to reduced
its management workforce, resulting in lower selling, general and administrative
expenses.

The Company uses production variable depreciation to calculate depreciation
expense. During the third quarter of 2003, the Company had a scheduled hot mill
furnace outage, which reduced the production of hot bands, resulting in a
decrease in the amount of depreciation expense, taken on a unit of production
basis, by $0.3 million compared to the third quarter of 2002. In addition, we
had assets that became fully depreciated in 2002 and we have reduced our
spending on capital additions.

The Company incurred reorganization costs of $5.4 million during the third
quarter of 2003 related to its on-going Chapter 11 reorganization. The costs
consisted primarily of professional fees.

The Company's income from unconsolidated subsidiaries of $0.5 million
during the third quarter of 2003 was mainly attributable to WeBCo, which sells
excess and secondary sheet products.

Interest expense decreased $0.2 million in the third quarter of 2003 when
compared to the same period in 2002. The decrease is a result of the exchange
offers that were completed in the third quarter of 2002 and after filing for
Chapter 11 protection during the second quarter of 2003, the Company no longer
accrues for interest expense on unsecured and under-secured debt. If the Company
continued to accrue contractual interest on unsecured and under-secured debt,
interest expense would have increased by $1.0 million.

Third quarter 2003 other income was unchanged compared to the same period
in 2002. During the third quarter of 2003, the Company sold excess nitrogen
oxide (NOX) allowances for $1.8 million. During the third quarter of 2002, the
Company received a $1.9 million legal settlement from one of its suppliers.

The Company recorded no income tax benefit in the third quarter of either
2003 or 2002. Continuing losses and the Company's voluntary bankruptcy petition
have raised doubts about the Company's ability to continue to realize additional
deferred tax assets in the future, such as operating loss carryforwards, prior
to

18

their expiration. Therefore, deferred tax assets generated in the third quarter
of 2003 and in the third quarter of 2002 were offset by valuation allowances.

NINE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO
NINE MONTHS ENDED SEPTEMBER 30, 2002

In the first nine months of 2003, the Company recognized a net loss of
$156.2 million, or $3.71 per diluted share, which included an extraordinary gain
related to the early extinguishment of debt of $6.8 million, or $0.16 per
diluted share. Additionally, the first nine months of 2003 included a $2.1
million charge related to the write-off of deferred financing fees, a $4.1
million charge due to the write-down of certain fixed assets, $8.0 million of
bankruptcy reorganization expenses and a pension curtailment charge of $38.8
million related to a freeze of further benefit accruals under the Company's
defined benefit pension plan. The first nine months of 2003 charges were
partially offset by an extraordinary gain on early extinguishment of debt of
$6.8 million, the sale of excess nitrogen oxide (NOX) allowances for $3.1
million, the reduction in interest expense related to the debt exchange offers
completed in 2002 and the May 19, 2003 Chapter 11 bankruptcy filing. This
compares with a net loss of $93.1 million, or $2.22 per diluted share, for the
first nine months of 2002, which included an extraordinary gain on the early
extinguishment of debt of $0.2 million, the sale of excess nitrogen oxide (NOX)
allowances for $4.4 million, the sale of stock received upon the demutualization
of an insurer for $3.2 million, a tax refund of $3.5 million, and a legal
settlement of $1.9 million. The Company also incurred an Other Comprehensive
Loss of $15.3 million in the first nine months of 2003 as a result of the
pension plan's accumulated benefit obligation exceeding plan assets

Net sales in the first nine months of 2003 were $774.1 million, a increase
of $13.3 million, or 2%, from the first nine months of 2002. Total shipments in
the first nine months of 2003 were 1,702 thousand tons, a decrease of 22
thousand tons, or 1%, from the first nine months of 2002 shipments of 1,724
thousand tons.

Tin mill product net sales for the first nine months of 2003 were $384.0
million, an increase of $33.1 million from the first nine months of 2002.
Shipments of tin mill product in the first nine months of 2003 were 649 thousand
tons, compared to 588 thousand tons in the first nine months of 2002. The
increase in tin mill product revenue is due to an increase in our market share
in higher value-added tin products.

Sheet product net sales for the first nine months of 2003 were $390.1
million, a decrease of $19.8 million from the first nine months of 2002.
Shipments of sheet product in the first nine months of 2003 were 1.05 million
tons, compared to 1.11 million tons in the first nine months of 2002. The
decrease in sheet product revenue resulted from a decrease in volume, partially
offset by an increase in sheet product selling prices.

Cost of sales for the first nine months of 2003 were $810.8 million, or
$476 per ton, compared to $773.1 million, or $448 per ton, for the first nine
months of 2002. The increase in cost of sales per ton was primarily attributable
to an increase in the Company's raw material and energy costs in addition to
higher pension costs, partially offset by the Company's savings initiatives.

Selling, general and administrative expenses for the first nine months of
2003 were $16.3 million, a decrease of $3.3 million from the first nine months
of 2002. As part of its operating cost savings plan, the Company continued to
reduce its management workforce, resulting in lower selling, general and
administrative expenses.

The Company uses production variable depreciation to calculate depreciation
expense. During the first nine months of 2003, the Company had a scheduled hot
mill furnace outage, which reduced the production of hot bands, resulting in a
decrease in the amount of depreciation expense, taken on a unit of production
basis, by $3.3 million compared to the first nine months of 2002. In addition,
we had assets that became fully depreciated in 2002 and we have reduced our
spending on capital additions.

During February 2003, the Company's unionized employees ratified new labor
agreements which, among other things, provided for a freeze of further benefit
accruals under the Company's defined benefit pension plan as of May 2003. The
Company applied the same freeze to its non-unionized workforce. In accordance
with SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of
Defined Benefit Pension
19

Plans and for Termination Benefits," the Company recognized a pension
curtailment charge of $38.8 million. The curtailment charge reflects the full
recognition of the unrecognized prior service cost and transition obligation,
because all benefit accrual associated with expected future years of service has
been eliminated. As noted elsewhere, the Company was notified in October 2003 by
the PBGC that it would seek to terminate the pension plan in question.

Because the pension plan freeze constituted a significant event, the
Company re-measured its pension plan assets and liabilities as of February 28,
2003. The accounting rules provide that if, at any plan measurement date, 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 plan assets. The liability must be
offset by the recognition of an intangible asset and/or a charge against
stockholders' deficit. Because the Company was required to recognize all prior
service cost and transition obligation with the pension curtailment, the
difference between the ABO and plan assets at February 28, 2003 is a direct
charge to stockholders' deficit and is shown as a component of other
comprehensive income in the statement of operations and comprehensive loss.

The Company incurred reorganization costs of $8.0 million during the first
nine months of 2003, consisting primarily of professional fees related to its
on-going Chapter 11 reorganization.

The Company's loss from unconsolidated subsidiaries of $0.1 million during
the first nine months of 2003 was mainly attributable to WeBCo, which sells
excess and secondary sheet products.

Interest expense decreased $10.9 million in the first nine months of 2003,
compared to the same period in 2002. The decrease is a result of the exchange
offers that were completed in the third quarter of 2002 and, after filing for
Chapter 11 protection during the third quarter of 2003, the Company no longer
accrues for interest expense on unsecured and under-secured debt. If the Company
continued to accrue contractual interest on unsecured and under-secured debt,
interest expense would have increased by $1.5 million.

During the first nine months of 2003 other income decreased $10.2 million,
compared to the same period in 2002. During the first nine months of 2003, the
Company recognized a $4.1 million charge due to the write-down of certain fixed
assets. During the first nine months of 2002, the Company sold excess nitrogen
oxide (NOX) allowances for $4.4 million, received approximately $3.2 million
from the sale of stock received as a result of demutualization of an insurer and
the received a $1.9 million legal settlement from one of its suppliers.

The Company recorded no income tax benefit in the first nine months of
2003. Continuing losses and the Company's voluntary bankruptcy petition have
raised doubts about the Company's ability to continue to realize additional
deferred tax assets in the future, such as operating loss carryforwards, prior
to their expiration. During the first nine months of 2002, the Company received
an income tax refund of $3.5 million as a result of the Job Creation and Worker
Assistance Act of 2002.

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 that 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

20

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. Historically, on an annual basis,
management has determined 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 and whether the Company continues to provide the type of
benefit in question 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.

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.

The financial statements presented in this report have been prepared on a
going concern basis, which contemplates continuity of operations, realization of
assets, and payment of liabilities in the ordinary course of business. As a
result of the Chapter 11 filing, there is no assurance that the carrying amounts
of assets will be realized or that liabilities will be settled for amounts
recorded. Implementing a plan of reorganization could change the amounts
reported in the financial statements and cause a material change in the carrying
amount of assets and liabilities. The financial statements have be prepared in
accordance with the AICPA's Statement of Position 90-7, "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"). SOP 90-7
requires segregating pre-petition liabilities that are subject to compromise and
identifying all transactions and events that are directly associated with the
reorganization of the Company. Also in accordance with SOP 90-7, interest will
no longer be accrued on any unsecured or undersecured debt.

RECENT ACCOUNTING PRONOUNCEMENTS

In May 2003, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 150, "Accounting for
Certain Financial Instruments with Characteris-
21

tics of both Liabilities and Equity." The Statement requires the Company to
classify a financial instrument within its scope as a liability (or an asset in
some circumstances). These include certain financial instruments that a) are
mandatorily redeemable, b) embody an obligation to repurchase the Company's
equity shares or c) embody an obligation that the Company must or may settle by
issuing a variable number of its equity shares. The provisions of SFAS No. 150
were effective as of the first interim period beginning after June 15, 2003. For
further discussion refer to Note 8 to the consolidated condensed financial
statements.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities," ("FIN 46"). FIN 46 requires the primary beneficiary
to consolidate certain variable interest entities ("VIEs"). The primary
beneficiary is generally defined as one having the majority of the risks and
rewards arising from the VIE. For VIEs in which a significant (but not majority)
variable interest is held, certain disclosures are required. The consolidation
requirements of FIN 46 apply immediately to VIEs created after January 31, 2003.
The consolidation requirements apply to older entities in the first fiscal year
or interim period ending after December 15, 2003. The adoption of FIN 46 is not
applicable to the financial position or results of operations of the Company.

In December 2002, FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure; Amendment of FASB Statement No. 123."
SFAS 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
both the annual and interim disclosure provisions of SFAS 148, and these
disclosures are properly included in the notes to these consolidated condensed
financial statements. 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, 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 interim disclosures required by FIN 45 are included in Note 7 to
the consolidated condensed 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.

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 and certain other filings
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 Securities and Exchange Commission (the "SEC").

FORWARD LOOKING STATEMENTS

Certain statements in this report are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Weirton from
time to time makes forward-looking statements in reports filed with 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.

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

22

materially from those projected in these forward-looking statements. These
factors include, but are not necessarily limited to:

Bankruptcy factors:

- our ability to continue as a going concern;

- our ability to meet the conditions of the ESLGB guarantee;

- our ability to operate pursuant to the terms of the DIP Facility and to
satisfy the covenants under the DIP Facility;

- our ability to obtain Court approval with respect to motions in the
Chapter 11 proceeding from time to time;

- our ability to negotiate, prosecute, confirm and consummate a plan of
reorganization with respect to our Chapter 11 case;

- risks associated with third parties seeking and obtaining court approval
to terminate or shorten the exclusivity period that we have in order to
propose and confirm a plan of reorganization, for the appointment of a
Chapter 11 trustee or to convert our case to a Chapter 7 case;

- our ability to obtain and maintain normal terms with vendors and service
providers;

- our ability to maintain contracts that are critical to our operations;

- our ability to maintain the services of managers and other key
employees;

- our ability to maintain commercial position with strategic customers;

- the potential adverse impact of the Chapter 11 case on our liquidity or
results of operations; and

- our ability to develop, fund and execute our revised business plan.

General factors:

- 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 post-employment
and retirement obligations;

- 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;

- the effects of the currently ongoing major steel industry consolidation
effort and how they will relate to Weirton;

- 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;

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- 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.

ITEM 3. 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 for 2003. Domestic coke has a 3.0 million ton deficit (demand is
greater than supply) for 2003, caused by recent blast furnace start-ups and coke
plant closures. Domestic coke prices rose over $20 per ton from 2002 to 2003. At
normal consumption levels, a $1.00 per ton change in our coke costs would result
in an estimated $0.3 million change in our quarterly operating costs.

In 2003 domestic natural gas prices have increased significantly from 2002.
At normal consumption levels, a $1.00 per mcf change in domestic natural gas
prices would result in an estimated $4.1 million change in our normal operating
costs for the quarter. A hypothetical 10% change in the Company's natural gas
prices would result in a change in the Company's pretax loss of approximately
$2.6 million. The Company has entered into a number forward purchase contracts
for natural gas for delivery between November 2003 and October 2004. For those
contracts, a $1.00 per mcf change in price could require the Company to provide
approximately $8.0 million of collateral, based upon the provisions of the
agreements with our suppliers. For the quarters ended September 30, 2003 and
2002, the average price of natural gas consumed by the Company was $6.24 per mcf
and $3.65 per mcf, respectively, for a total cost of $25.6 million and $15.3
million, respectively.

ITEM 4. CONTROLS AND PROCEDURES

An evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures was performed, under the supervision and with
the participation of management, including our Chief Executive Officer and Chief
Financial Officer, as of the end of the period covered by this report. Based
upon that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that these disclosure controls and procedures are effective.

Weirton's system of controls and procedures has been designed to provide
reasonable assurance as to the reliability of the disclosures included in this
report. In designing and evaluating disclosure controls and procedures,
management recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurances of achieving the
desired control objective, and management necessarily is required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and
procedures. We believe that our disclosure controls and procedures provide such
reasonable assurance.

No changes were made to our internal control over financial reporting
during the last fiscal quarter that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On May 19, 2003, Weirton filed a voluntary petition with the Court under
Chapter 11 of the Bankruptcy Code (Chapter 11 Case No. 03-1802) in the United
States Bankruptcy Court for the Northern District of West Virginia. Weirton
remains in possession of its assets and properties, and continues to operate its
business and manage its properties as a debtor-in-possession, as permitted by
Sections 1107(a) and 1108 of the Bankruptcy Code. We are following normal
bankruptcy procedures with the Court.

Weirton, in the ordinary course of its business, is the subject of various
pending or threatened legal actions involving governmental agencies or private
interests. Prosecution of certain of these actions is subject to automatic stay
by Weirton's Chapter 11 filing. Weirton believes that any ultimate liability
arising from these actions should not have a material adverse effect on its
consolidated financial position at September 30, 2003 or the date of this
report.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

On May 16, 2003, the Company issued and contributed 380,000 shares of
Series D Preferred Stock, par value $0.10 per share, to its 1989 ESOP as
required under amendments to collective bargaining agreements reached with
unions earlier in the year. No cash proceeds were received in the transaction.
The Company believes the issuance was exempt from registration requirements of
the Securities Act of 1933 by reason of the operation of Section 4 (2) of that
Act.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

On May 19, 2003, Weirton filed a voluntary petition for reorganization
under Chapter 11 of the Bankruptcy Code. This event constituted an Event of
Default under the then existing Senior Credit Facility and under the terms of
our other indebtedness reflected in Note 3 of the consolidated condensed
financial statements, either independently or by reason of cross-default
provisions. In accordance with the order of the Court, the Senior Credit
Facility was re-financed with the proceeds of the DIP Facility. The entitlements
and claims of creditors under such other indebtedness are subject to the
resolution of the bankruptcy process.

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

Not applicable

ITEM 5. OTHER INFORMATION

Not applicable

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

Exhibit 3.1 -- Certificate of the Designation, Powers, Preferences and
Rights of the Exchangeable Redeemable Preferred Stock Series D

Exhibit 10.1 -- Employment Agreement between D. Leonard Wise and the
Company dated August 7, 2003.

Exhibit 10.2 -- Employment Agreement between Mark E. Kaplan and the
Company dated August 7, 2003.

Exhibit 10.3 -- Summary of the Key Employee Retention Program approved
by the Court on August 25, 2003.

Exhibit 31.1 -- Certification of Principal Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
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Exhibit 31.2 -- Certification of Principal Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.1 -- Certification of Principal Executive Officer and
Principal Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K

Weirton filed the following Current Reports on Form 8-K with the Securities
and Exchange Commission since the end of its second quarter:

1. August 15, 2003 -- Item 9, Monthly Operating Report for the period
July 1, 2003 to July 31, 2003, as filed with the Bankruptcy Court.

2. September 15, 2003 -- Item 9, Monthly Operating Report for the period
August 1, 2003 to August 31, 2003, as filed with the Bankruptcy
Court.

3. October 16, 2003 -- Item 9, Monthly Operating Report for the period
September 1, 2003 to September 30, 2003, as filed with the Bankruptcy
Court.

4. October 21, 2003 -- Item 5, Pension Benefit Guaranty Corporation's
notification of the termination of Weirton Steel Corporation
Retirement Plan.

5. October 22, 2003 -- Item 9, Amendment 1 to the Monthly Operating
Report for the period September 1, 2003 to September 30, 2003, as
filed with the Bankruptcy Court.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

WEIRTON STEEL CORPORATION
Registrant

/s/ MARK E. KAPLAN
--------------------------------------
Mark E. Kaplan
President and Chief Financial Officer

November 14, 2003

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