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

FORM 10-K

For the fiscal year ended October 31, 2001.

or

For the transition period from                      to

Commission file number: 333-18019

(330) 841-8302

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

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

     None.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days. Note: The Registrant files pursuant to an indenture, but is not otherwise subject to Section 13 or 15(d) filing requirements.

[  ] Yes [X] No

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

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

Table of Contents

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

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PART I

ITEM 1. BUSINESS

General

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

Products

     Overview

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

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

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

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     Custom Products

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

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

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

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

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

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

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

     Commodity Products

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

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     Marketing

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

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

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

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

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

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

Customers

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

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

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

Backlog

     On October 31, 2001, WCI’s order backlog was approximately 135,000 net tons with an approximate value of $52 million compared to approximately 144,000 net tons with an approximate value of $64 million at October 31, 2000, based in each case on the then current prices. Under the applicable orders, WCI is scheduled to ship substantially all of the orders in the October 31, 2001 backlog by March 31, 2002. Although customers may cancel orders included in the backlog, such cancellations have been negligible in the past.

Competition

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

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

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

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

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

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

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

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

Manufacturing Process

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

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

Raw Materials

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

     Iron Ore Pellets

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

     Coke

     Coke is the principal fuel used to produce liquid iron and is an essential ingredient in steelmaking. WCI has a contract with an integrated steel producer for a majority of its estimated coke requirements through fiscal 2003. WCI’s coke requirements are approximately 670,000 tons per year. The domestic supply of coke has decreased significantly over the last decade and may decrease further in the future due to the requirements of the Clean Air Act and the financial condition of certain producers. As the Company does not own a coke battery, it is dependent upon commercially available domestic or imported coke to sustain its operations. Although the Company believes that there will be adequate supplies of domestic or imported coke available for its purposes after the expiration of its contracts in 2003, there can be no assurance to such effect.

     Scrap

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

     Energy and Gases

     WCI’s steel operation consumes large amounts of electricity, natural gas, oxygen and other industrial gases. WCI purchases its electrical power requirements under a contract that extends through March 2002 from a local utility. WCI can generate approximately 20% of its own electrical needs. Natural gas is also purchased pursuant to supply contracts, certain of which extend through March 2003. Oxygen is delivered, under a contract that extends through March 2002, from supplier-owned plants located at the Warren facility. A new oxygen supply agreement was entered into with the same supplier for a fifteen (15) year period commencing upon the completion of a new supplier-owned facility also to be located at the Warren facility. The facility is expected to be complete by May 2002. Pursuant to a contract entered into in 1988, WCI is required to purchase all coke oven gas produced at an adjoining coke plant, which is usable by WCI, at a price based upon, but at a discount to, natural gas prices. The

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

Environmental Matters

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

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

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

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

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

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

Employees

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

Benefit Plans

     Hourly Profit Sharing Plan

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

     Salaried Variable Compensation Plan

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

     Pension Plans

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

     The Company has a defined benefit floor offset pension plan, which covers substantially all hourly employees at the Warren facility. The plan, when combined with benefits from the Company’s defined contribution plan which was frozen effective September 1, 1999 and benefits from a predecessor company’s defined benefit pension plan, will provide a minimum level of pension benefits for eligible employees. Benefits are based on age and years of service, but not compensation. Under this plan, employees who retired on or before August 31, 1999 receive a monthly benefit equal to $35 (Benefit Multiplier) times the number of years of service with WCI or its predecessors. Effective September 1, 2000 for retirements on or after September 1, 1999, the Benefit Multiplier increased from $35 to $52.50

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

     Postretirement Benefit Plans

     WCI provides postretirement health care and life insurance benefits to substantially all employees who retire upon meeting certain age and length of service eligibility requirements. The Company has established a trust to hold contributions to fund future postretirement health care and life insurance obligations related to the hourly workforce. This trust holds liens on certain assets of the Company and one of its subsidiaries to secure the Company’s obligation for postretirement health care benefits. As a result of the collective bargaining agreement effective September 1, 1999, the Company was permitted to pay current claims up to $8.8 million from a trust. That limit was reached during the three months ended July 31, 2001 which thereafter requires the Company to pay claims from corporate assets. Claims paid by the Company or trust totaled $5.4 million, $4.4 million and $3.4 million during fiscal years 2001, 2000, and 1999, respectively.

ITEM 2. PROPERTIES

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

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

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

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

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

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ITEM 3. LEGAL PROCEEDINGS

     On January 23, 1996, two retired employees instituted an action against the Company and the United Steelworkers of America (USWA) in the United States District Court for the Northern District of Ohio alleging in substance that certain distributions made by the Company to employees and benefit plans violated certain agreements, the Employee Retirement Income Security Act (ERISA), the National Labor Relations Act (NLRA) and common law. On July 31, 1997, the court granted the Company’s motion to dismiss this action and entered judgement in favor of the Company and the USWA. The Plaintiffs filed an appeal regarding the court’s decision to dismiss, which was heard in June 1998. In March 1999, the appellate court upheld the dismissal of the claims under ERISA and common law, but reversed the dismissal of the NLRA claim and remanded to the district court for further proceedings. On October 9, 2000 the court granted the Company’s motion to dismiss this action and entered judgement in favor of the Company and the USWA. The plaintiffs filed an appeal regarding the court’s decision to dismiss. All briefs have been filed in the Federal Appeals Court but no decision has yet been rendered.

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

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

     No matters were submitted to a vote of security holders during the quarter ended October 31, 2001.

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PART II

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

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

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ITEM 6. SELECTED FINANCIAL DATA

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

     Unless otherwise indicated, references to a year are to the Company’s fiscal year ended October 31.

Results of Operations

     Fiscal 2001 Compared to Fiscal 2000

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

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

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

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

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

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

     Fiscal 2000 Compared to Fiscal 1999

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

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

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

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

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

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

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Liquidity and Capital Resources

     WCI’s liquidity requirements result from capital investments, working capital requirements, postretirement health care and pension funding, interest expense and, to a lesser extent, principal payments on its indebtedness. The Company’s primary sources of liquidity as of October 31, 2001 consisted of cash and cash equivalents of $32.2 million and available borrowing under its $100 million revolving credit agreement (Revolver).

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

     Cash from Operations

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

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

     Capital Expenditures

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

     Debt Transactions

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

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

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

     Dividends

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

     Postretirement Benefit Plans

     WCI provides postretirement health care and life insurance benefits to substantially all employees who retire upon meeting certain age and length of service eligibility requirements. The Company has established a trust to hold contributions to fund future postretirement health care and life insurance obligations related to the hourly workforce. This trust holds liens on certain assets of the Company and one of its subsidiaries to secure the Company’s obligation for postretirement health care benefits. As a result of the collective bargaining agreement effective September 1, 1999, the Company was permitted to pay current claims up to $8.8 million from a trust. That limit was reached during the three months ended July 31, 2001 which thereafter required the Company to pay claims from corporate assets. Claims paid by the Company or trust totaled $5.4 million, $4.4 million and $3.4 million during fiscal years 2001, 2000, and 1999, respectively.

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

     Environmental Matters

     WCI has incurred and, in the future, will continue to incur capital expenditures for matters relating to environmental control and monitoring.

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

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

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     Labor Matters

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

     Accounting Standards

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

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

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

     Outlook

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

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

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

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

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

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

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

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

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

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

Forward-Looking Statements

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

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

See accompanying notes to consolidated financial statements.

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

See accompanying notes to consolidated financial statements.

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

See accompanying notes to consolidated financial statements.

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