WEIRTON STEEL CORP - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
COMMISSION FILE NO. 1-10244

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

DELAWARE 06-1075442
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

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

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

SECURITIES REGISTERED UNDER SECTION 12(b) OF THE ACT: None

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

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

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

Based on the closing price as of March 22, 2002, the aggregate market value
of the voting stock held by nonaffiliates of the Registrant was $29,663,340.85.
(The foregoing calculation includes shares allocated under the Registrant's 1984
and 1989 Employee Stock Ownership Plans to the accounts of employees who are not
otherwise affiliates.)

The number of shares of Common Stock ($.01 par value) of the Registrant
outstanding as of March 22, 2002 was 41,841,883.

DOCUMENTS INCORPORATED BY REFERENCE: None

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TABLE OF CONTENTS
ITEM

PART I

ITEM 1. BUSINESS

STEEL INDUSTRY OVERVIEW

The United States steel industry is in a state of crisis characterized by
record operating losses, more than two dozen bankruptcies, and a permanent
closure of a significant amount of productive capacity, particularly in the past
18 months. The domestic steel industry is cyclical and highly competitive and is
affected by excess world capacity that has limited price increases during
periods of economic growth and greater price competition during periods of
slowing demand and/or increasing supply. Weirton, like most United States
integrated steel producers, has sustained significant operating losses and a
decrease of liquidity as a result of adverse market conditions due to the
current slowing economic conditions, which have been exacerbated by the
September 11, 2001 terrorist attacks on the United States, and depressed selling
prices caused in substantial part by dramatic increases in imported steel since
1998.

Prior to the events of September 11, 2001, industry analysts had expected
an improvement in steel prices as early as the fourth quarter of 2001. Based
upon announced price increases it now appears that price improvements will begin
to be realized in the second quarter of 2002. However, the sustainability of
price improvements is predicated on decreasing supply because of permanent
production cuts in the United States, a decline in imports due to trade cases
filed by steel producers and the impact of recent trade recommendations. On
March 5, 2002, President Bush announced the imposition of tariffs on 12
categories of steel products, including tin mill, hot-rolled, cold-rolled and
galvanized products, which are produced by us, of up to 30% over a three-year
period.

The current crisis in the United States steel industry and the results of
the International Trade Commission's section 201 proceeding regarding the
illegal dumping of steel by foreign competitors may provide the opportunity for
a restructuring of the United States steel industry to take place, greatly
increasing the chances for a meaningful transformation of the United States
steel industry. Although a number of countries have objected to the Bush
Administration's decision and have indicated their intention to challenge the
decision, the Bush Administration has stated publicly that, in its belief, the
decision was made in conformity with World Trade Organization guidelines.
However, we cannot assure you that the announced trade remedies will not be
successfully challenged or that a restructuring of the United States steel
industry will occur.

OUR BUSINESS

We are a major integrated producer of flat-rolled carbon steel with
principal product lines consisting of tin mill products and sheet products. Tin
mill products include tin plate, chrome coated and black plate steels and are
consumed principally by the container and packaging industry for food cans,
general line cans and closure applications, such as caps and lids. Tin mill
products accounted for 49% of our revenues and 36% of tons shipped in 2001
compared to 39% of revenue and 30% of tons shipped in 2000 and 41% of revenue
and 31% of tons shipped in 1999. Sheet products include hot and cold rolled and
both hot-dipped and electrolytic galvanized steel and are used in numerous
end-use applications, including among others the construction, appliance and
automotive industries. Sheet products accounted for 51% of our revenues and 64%
of tons shipped in 2001 compared to 61% of revenue and 70% of tons shipped in
2000 and 59% of revenue and 69% of tons shipped in 1999. In addition, we
currently are providing tolling services at our hot strip mill for a major
stainless steel producer, which accounts for almost 20% of the overall capacity
of our hot strip mill.

We are a Delaware corporation formed in 1982 with our offices and
production facilities located in Weirton, West Virginia. We and our predecessor
companies have been in the business of making and finishing steel products for
over 90 years. From 1929 to 1984, we operated our business as the Weirton Steel
Division of National Steel Corporation, and we acquired our principal operating
assets from National Steel through a 1984 ESOP leveraged transaction.

As an integrated steel producer, we produce carbon steel slabs in our
primary steel making operations from raw materials to industry and customer
specifications. In primary steel making, iron ore pellets, iron ore, coke,
limestone and other raw materials are consumed in blast furnaces to produce
molten iron or "hot metal." We then

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convert the hot metal into liquid steel through basic oxygen furnaces where
impurities are removed, recyclable scrap is added and metallurgical tests are
performed to assure conformity to customer specifications. Our basic oxygen
process, or "BOP," shop is one of the largest in North America, employing two
vessels, each with a steel making capacity of 360 tons per heat. Liquid steel
from the BOP shop is then formed into slabs through our multi-strand continuous
caster. The slabs are then reheated, reduced and finished into coils at our
recently re-built hot strip mill and, in many cases, further cold reduced,
plated or coated at our downstream finishing operations. Our hot strip mill is
one of the best in North America for the production of tin mill products
substrate and one of the few in the industry that is capable of rolling both
carbon and stainless steel substrate. See "Properties."

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

[PROCESS FLOW GRAPHIC]

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

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

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OUR COMPETITIVE ADVANTAGES

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

- MARKET LEADER. We are the second largest United States producer of tin
mill products, with a 25% market share of domestic shipments, and we
enjoy strategic partnerships with many of our largest tin mill products
customers. Over one-third of our shipments go to customers that have
located facilities either directly on or contiguous to our property in
order to maximize the benefits of these strategic relationships. We also
enjoy a leadership position in the production of other light gauge coated
products for use in the residential construction market.

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

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

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

Over the past 15 years, we have invested approximately $1 billion in
modernizing and upgrading our equipment, as a result of which we expect
that only modest capital expenditures will be required through 2003. Of
that $1 billion, approximately $500 million was expended on improvements
to our continuous caster, hot strip mill and No. 9 tin tandem mill. We
believe that this has enabled us to continue to produce superior quality
steel substrate and, consequently, to maintain the high quality of our tin
mill and other value-added products. Our recently rebuilt hot strip mill
is one of the few in the industry that is capable of rolling both carbon
and stainless steel substrate. Our No. 9 tin tandem mill is one of the
most modern in the United States and supplies nearly one million tons per
year of substrate to our four tin platers which are rated, on average, the
most productive in the domestic industry, as compared to other full-range
tin mill product suppliers. Also, the recent addition of temper mills and
tension leveling equipment to both our No. 3 and No. 5 galvanizing lines
has significantly improved strip surface and flatness, allowing production
of substrate suitable for pre-paint and other critical applications.

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

- RESTRUCTURED LABOR AGREEMENTS. In response to deteriorating market
conditions and financial performance, management and the ISU have been
able to negotiate new labor agreements, expiring no earlier than March
2004, that will significantly reduce the number of hourly employees,
facilitated primarily through
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work rule changes. The ISU represents the substantial majority of our
unionized work force and represents only employees of Weirton and no
other steel producer. Weirton and its predecessors have not experienced a
work stoppage due to striking union members in over 45 years.

- POSITIONED TO BENEFIT FROM AN IMPROVEMENT IN AND RESTRUCTURING OF THE
UNITED STATES STEEL INDUSTRY. The United States steel industry has been
characterized by record losses, more than two dozen bankruptcies and the
permanent closure of a significant amount of productive capacity,
particularly in the past 18 months. We believe that, in this distressed
climate, the United States industry is poised for further restructuring.
The implementation of the first steps of our strategic plan, including
the completion of the exchange offers, will enable us to fundamentally
reposition our business, principally through strategic acquisitions and
targeted investments in the tin mill and coated products markets. As a
result, we believe that we will be better positioned to benefit from a
general improvement in steel pricing. For example, we estimate that every
$10 per ton increase in domestic flat rolled steel prices will generate
an additional $18 million in EBITDA, based on our sales and product mix
in 2001.

OUR STRATEGIC PLAN

We seek to strengthen our position as a leading domestic full range
producer of higher margin tin mill products by further shifting our product mix
toward higher margin value-added products and away from lower margin, commodity
flat-rolled sheet products. Our strategy to meet this objective is to capitalize
on our extensive market presence and strong competitive position as the second
largest domestic producer of tin mill products and to leverage our existing
strengths. These strengths include our superior product quality and range of
product offerings, our strategic partnerships with large existing customers, and
the design and configuration of our principal steel making facilities which are
best suited to the production of narrow width tin mill and coated products. We
are also pursuing niche market opportunities for higher margin value-added sheet
products.

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

In response to severe weaknesses in the domestic steel industry and our
worsening financial condition, we have developed a strategic plan to reduce
operating costs, improve our liquidity and working capital position, restructure
our long-term debt and fundamentally reposition our business to focus on the
production and sale of tin mill products and other higher margin value-added
sheet products.

Our strategic plan has five integral steps, and we began to recognize the
benefits of the first three steps in the fourth quarter of 2001:

REDUCING OPERATING COSTS.

To remain competitive, we must continually improve productivity and reduce
our operating costs. In part as a result of our recently negotiated labor
contracts, we expect to achieve significantly lower and more flexible cost
structures. The recent renegotiation of our collective bargaining agreements
allows a reduction in our workforce by 450 persons facilitated through
significant changes to work rules and job classifications, which we believe will
allow us to both reduce labor costs and function more efficiently. We also
agreed to streamline our management structure by eliminating non-core and
redundant activities resulting in a reduction of over 100 management positions.
We have also reduced our employee benefit costs and have made other operating
changes resulting in additional cost savings. The aggregate annual cost savings
from these reductions and changes are approximately $51 million when fully
implemented by the second quarter of 2002. See "Business -- Employees."

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We believe that the acquisition of strategic assets, particularly those
related to the manufacture of tin mill products, should also allow us to
generate higher operating margins through greater efficiencies in our
operations, lower costs of production and an improved product mix.

IMPROVING OUR LIQUIDITY AND LONG-TERM SUPPLIER RELATIONSHIPS.

Under our vendor financing programs, we have negotiated arrangements
primarily with our vendors, including over 60 of our key suppliers, in the form
of purchase credits, improved pricing or other concessions to improve our
liquidity. We currently expect to realize approximately $40 million in liquidity
improvements through these programs. The vendor financing programs have been
structured principally through a sale and leaseback transaction of our
Foster-Wheeler Steam Generating Plant, including the related real property and
certain related energy generating equipment, direct advances or concessions by
certain vendors, and the expected sale and leaseback of our general office
building and research and development building. In addition, WVEDA and one of
our vendors reached an agreement assigning the rights of an operating lease from
a vendor to WVEDA and eliminating the requirement that our future lease
obligations should be supported by a letter of credit. We are also seeking to
renegotiate our long term supply of other services and raw materials.

INCREASING OUR BORROWING AVAILABILITY AND LIQUIDITY.

On October 26, 2001, we entered into a refinancing of our working capital
facilities, which consisted of an accounts receivable securitization program and
a revolving credit facility secured by inventory, through a single asset-based
senior credit facility. Through this new senior credit facility, we have been
able to more effectively borrow against our current assets and have generated
additional availability of approximately $30 to $35 million (compared to our
prior inventory facility and accounts receivable securitization program) to
provide us with greater liquidity for our working capital requirements and
general corporate purposes.

RESTRUCTURING OUR LONG-TERM DEBT.

We intend to offer to exchange up to 100% of our 11 3/8% Senior Notes due
2004 and 10 3/4% Senior Notes due 2005 for new 10% Senior Secured Notes due 2008
and newly-issued shares of our Series C Convertible Redeemable Preferred Stock.
In addition, at our request, the City of Weirton has agreed to offer to exchange
all of its outstanding Pollution Control Revenue Refunding Bonds (Weirton Steel
Corporation Project) series 1989 due November 1, 2014 for new Secured Pollution
Control Revenue Refunding Bonds (Weirton Steel Corporation Project) Series 2002
due April 1, 2012. Through the exchange offers, we seek to lower our debt
service costs, particularly during 2002, 2003 and 2004, and to extend debt
maturities on the 11 3/8% Senior Notes due 2004 and the 10 3/4% Senior Notes due
2005 in order to improve our liquidity, provide financial stability and permit
the strategic repositioning of our business. The exchange offers, if consummated
on the terms proposed, would generate net annual cash savings of approximately
$28 million in 2002 and similar amounts in 2003 and 2004, provided we do not
have to pay contingent interest (which we do not now anticipate being required
to pay). If we are unable to reduce our current debt obligations and extend debt
maturities, we may be unable to attract the necessary outside debt or equity
financing needed to implement our strategic plan. The consummation of the
exchange offers is critical to the success of our strategic plan.

FUNDAMENTAL REPOSITIONING OF OUR BUSINESS.

In order to fundamentally reposition our business, we will seek to invest
in and acquire strategic assets, including tin-related assets, expand our
production of higher margin value-added coated and sheet products such as
polymer film coated products, and optimize the use of our hot strip mill, which
is able to roll both carbon and stainless steel slabs.

Pursue Strategic Acquisitions. In order to strengthen our position as a
leading domestic producer of a full range of higher margin tin mill products, we
intend to pursue the acquisition of strategic assets, including tin-related
assets, from other United States steel producers that are also seeking to
reposition their businesses and leverage their core competitive strengths. Under
current distressed industry conditions, we believe that we may have
opportunities to purchase tin mill assets on acceptable terms in the near term.
Potential acquisitions will be

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evaluated based on a variety of financial, strategic and operational criteria,
including their ability to better serve our existing customers and attract new
customers, add new product capabilities and meet well-defined financial
criteria, including return on investment and enhancement of our operating cash
flow.

However, our ability to make acquisitions will be subject to obtaining the
consent of our lenders under the senior credit facility and to our compliance
with the provisions of the senior credit facility and the restrictive covenants
in the indenture governing the new senior secured notes. We expect that
acquisitions consistent with our strategic plan will be financed out of a
combination of available internally generated funds, permitted working capital
borrowings under our senior credit facility, outside debt or equity financing,
and consideration acceptable to the seller.

Invest in Niche Markets. We intend to expand our existing pilot production
of polymer film coated products into full commercial production in 2002, subject
to obtaining necessary outside financing and the consent of our senior lenders.
The polymer film process eliminates the need to lacquer tin product prior to use
in food and beverage canning operations, is less expensive than the traditional
lacquering process and offers significant environmental benefits.
Commercialization of this line will further enhance our leadership position in
the food and general line can market. Future benefits of this line could also
include expanded zinc coated applications for construction and appliance end
uses.

We also will seek to optimize our existing multiple zinc coating
capabilities, such as galvanized, electrogalvanized, galvanneal and galfan,
through targeted investments.

Optimize Utilization of Our Hot Strip Mill. Our hot strip mill is one of
the few mills in the United States steel industry which is capable of rolling
both carbon and stainless substrate. We have recently taken advantage of this
capability by entering into a long-term tolling agreement with J&L Specialty
Steel, a domestic stainless steel producer which is owned by a major foreign
steel producer, to convert stainless slabs into stainless coils, which accounts
for almost 20% of our hot strip mill's overall capacity. This tolling agreement
provides higher, more stable profit margins than potential carbon slab
conversion opportunities. The facility load from our existing tin and stainless
conversion business now accounts for over 50% of the hot strip mill's overall
capacity. The balance of the hot strip mill capacity supports our galvanizing
operations and our hot and cold rolled commodity sheet production. Under our
strategic plan, we anticipate that our hot strip mill will be further utilized
through additional stainless conversion and increasing the proportion of our
carbon steel rollings used in our downstream finishing operations in the
production of tin mill and other higher margin value-added products.

PRINCIPAL PRODUCTS AND MARKETS

We have two principal products lines consisting of sheet steel products and
tin mill products. Recently, we have also entered into a long-term tolling
agreement with a major stainless steel producer to convert stainless slabs into
stainless coils at our hot strip mill. The percentages of our total revenues
(excluding conversion revenues, which are not material to total revenue and have
historically been reported as a reduction of cost of sales) derived from the
sale of sheet products and tin mill products for each year in the five-year
period ended December 31, 2001 are shown on the following table. Total revenues
include the sale of "secondary" products, which principally include those
products not meeting prime specifications.

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As illustrated by the following table, our shipments have historically been
concentrated within five major markets: steel service centers, containers, pipe
and tube manufacturers, construction and converters. Our overall participation
in the container market substantially exceeds the industry average, and our
reliance on automotive shipments is substantially less than the industry
average.

PERCENT OF TOTAL TONS SHIPPED

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

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

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

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

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

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The following chart shows the significant changes in our product mix
towards tin mill products based on tons shipped in 2000 and 2001.

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(1) Includes secondary products.

Our products are sold primarily to customers within the eastern half of the
United States. A substantial portion of our revenues are derived from long-time
customers, although we actively seek new customers and new markets for our
products. Over the past five years, our largest 10 customers (including steel
service centers and strip converters) accounted for 50% of our sales in each
year. Most of our service center and converter business eventually serves the
construction market (doors and roof panels), furniture and appliance markets and
some automotive markets. One customer accounted for 15% of sales in 2001 and 10%
in 1999.

Our backlog of unfilled orders at March 6, 2002 was 620,000 net tons, most
of which we expect to be filled within the year, as compared to 400,000 net tons
at December 31, 2001.

In addition to utilizing manufacturing service centers for sales, we sell
our products through our direct mill sales force of approximately 90 persons.
Our products are primarily sold through salaried employees who operate from
corporate headquarters and nine regional locations. The sales organization is
closely linked with our technical service personnel who assist in product
engineering and development. We believe that our sales organization plays an
important role in identifying and achieving a more favorable strategic market
mix for Weirton. To supplement our traditional sales force, since October 1996,
we have sold products over the Internet.

TIN MILL PRODUCTS

Tin mill products represent a growing share of our total sales. In 2001,
tin mill products represented 49% of total sales as compared to 39% in 2000 and
41% in 1999. Increases in sales of value-added tin mill products as a result of
continued investment and strategic acquisitions represents an opportunity for
growth in our business. During 2001, our market share increased to approximately
25% from 21%, largely as a result of the imposition of anti-dumping duties on
Japanese producers in August 2000 and former customers of LTV contracting with
us in order to maintain a reliable source of supply. We believe that our
increase in market share is sustainable and that our excess production capacity
can meet additional customer demand. We enjoy a reputation as a high quality
producer of tin metal products.

Our tin mill products comprise a full range of light gauge coated steels,
including black plate, tin coated steel and electrolytic chromium coated steel.
The tin mill products market is primarily directed at food and general line
cans, and the demand for tin mill products in the United States is approximately
3.8 million tons per year. Annual domestic production capacity is approximately
4.0 million tons, and has declined recently as both LTV and United States Steel
have shut down a portion of their tin plating capacity in 2001. We are not aware
of

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any planned or anticipated new capacity. The number of domestic producers of tin
mill products is relatively limited. Significant capital requirements and
product qualifications established by customers represent barriers to entry by
new producers. Worldwide, almost all tin plate is produced using the basic
oxygen furnace process due to critical metallurgical constraints.

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

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(1) Includes secondary products.

In 2001, over 80% of our tin mill product sales were to can manufacturing
and packaging companies, most of which establish in advance by contract a
substantial amount of their annual requirements. The balance of our tin mill
product sales are to manufacturers of caps and closures and specialty products
ranging from film cartridges, oil filters and battery jackets to cookie sheets
and ceiling grids. Our facilities are located near many of our major customers,
with over one-third of our output delivered to customers whose facilities are on
or contiguous to our property in Weirton, West Virginia. Representative
customers of our tin mill products include: Crown Cork & Seal; Ball Corp.;
United States Can; B-Way Corp.; Impress USA Inc.; Seneca Foods; Steel
Technologies; Sonoco Products; and Friskies Petcare Co.

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

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

SHEET PRODUCTS

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

Hot rolled coils are sold directly from the hot strip mill as "hot bands,"
our least processed product, or are further finished using hydrochloric acid or
temper passed to improve surface and are sold as "hot rolled pickled" or "hot
rolled tempered passed." Hot roll is used for unexposed parts in machinery,
construction products and other durable goods. Most of our sales of hot rolled
products have been to steel service centers, pipe and tube manufacturers and
converters. In 2001, we shipped 584,000 tons of hot rolled sheet, which
accounted for 15% of our total revenues, as compared to 704,000 tons in 2000, or
19% of total revenues. Representative customers of our hot roll sheet include
Steel Technologies, Wheatland Tube, Sharon Tube, Vanex and Heidtman Steel
Products.

Cold rolled sheet requires further processing, including additional
rolling, annealing and tempering, to enhance ductility and surface
characteristics. Cold rolled is used in the construction, commercial equipment
and container markets, primarily for exposed parts where appearance and surface
quality are important considera-

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tions. In addition, converters purchase significant quantities of cold rolled
substrate for processing into corrosion-resistant coated products such as hot
dipped and electrogalvanized sheet. In 2001, we shipped 212,000 tons of cold
rolled sheet, which accounted for 7% of our total revenues, as compared to
393,000 tons in 2000, or 15% of total revenues. Representative customers of our
cold rolled sheet include Wheeling-Nisshin, Winner Steel, Steel Technologies,
Edgcombe Metals and Gibraltar.

Galvanized hot-dipped and electrolytic sheet are coated primarily with zinc
compounds to provide extended anti-corrosive properties. Galvanized sheet is
sold to the electrical, construction, automotive, container, appliance and steel
service center markets. In 2001, we shipped 636,000 tons of galvanized products,
which accounted for 29% of our total revenues, as compared to 615,000 tons in
2000, or 27% of total revenues. Representative customers of our galvanized
hot-dipped and electrolytic sheet include Therma-Tru, Midwest Manufacturing,
Arrow Truline, Unimast, Thomas and Betts, New Process Steel and USG Industries.

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

The following table sets forth our shipments of sheet products relative to
the domestic industry. As our overall market share has decreased for sheet
products since 1996 to 2.6% at December 31, 2001, our management has focused on
increasing the percentage of coated products it ships compared to lower margin
flat-rolled sheet steel. Cold rolled shipment volumes during 2001 have been
adversely affected by increased cold rolled imports, as well as by the start up
of new domestic capacity.

- ---------------
(1) Includes secondary products.

TOLLING ARRANGEMENTS

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

10

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

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

RAW MATERIALS AND ENERGY

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

We have entered into a memorandum of understanding with U.S. Steel to
provide us with a minimum of 650,000 net tons of coke in 2002 and 500,000 net
tons of coke in each of 2003 and 2004, with the option to buy incremental volume
so that our total purchases approximate 60% of our requirements, under which the
price of coke fluctuates on an annual basis based on the market price for coke.
In addition we have negotiated a contract for 360,000 net tons per year from
another supplier for additional requirements with pricing also based on market
price. We will continue to acquire any further requirements from overseas
sources. In addition, we are also evaluating several potential coke plant
acquisitions. We obtain our limestone, tin, zinc, scrap metal and other raw
materials requirements from multiple sources.

The primary sources of energy other than coke that we use in our steel
manufacturing processes are natural gas and electricity. We have been able to
reduce our natural gas consumption through the use of alternative operating
configurations and fuels. In 2001, gas prices averaged $5.23 per mcf. Prices
under current forward contracts for delivery of natural gas in the first quarter
of 2002 range from $2.80 to $6.39 per mcf. We also have a contract, expiring in
2011, for the supply of our industrial gas requirements. This agreement
significantly reduced our oxygen and nitrogen supply costs compared to prior
arrangements. Our principal supplier is also a participant in our vendor
financing programs.

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

EMPLOYEES

As of December 31, 2001, we had 3,863 active employees, of whom 3,014 were
engaged in the manufacture of steel products, 451 in support services, 82 in
sales and marketing activities and 311 in management and administration. The
Independent Steelworkers Union represents our production and maintenance
workers, clerical workers and nurses. In addition, the Independent Guard Union
represents our security personnel.

The ISU represents only employees of Weirton and no other steel producers.
Weirton has not experienced a work stoppage due to striking union members in
over 45 years. In response to deteriorating market conditions and financial
performance, management and the ISU have been able to negotiate new labor
agreements, expiring no earlier than March 2004, that will significantly reduce
the number of hourly employees, primarily through work rule changes, to be fully
implemented by the second quarter of 2002. The agreement for our production and
maintenance employees provides for the permanent elimination of a minimum of 372
jobs. The office, clerical and technical agreement provides for the right to
eliminate a minimum of 78 jobs.

11

We have also begun further streamlining our management structure by
eliminating non-core and redundant activities which will result in a total
reduction of 100 management positions. We have also made significant changes to
the employee benefit package resulting in additional cost savings. After full
implementation of the recently negotiated workforce reductions, we will have
approximately 3,600 active employees. The cumulative impact of the labor cost
savings, together with the other elements of our operating cost savings program,
will total approximately $51 million in annual cost reductions, or approximately
$37 million in annual cash savings.

COMPETITION AND IMPORTS

Weirton faces significant competition in the sale of its steel products
from both domestic and foreign competitors. See "Steel Industry Overview."

We also face increasing competition from foreign steelmakers over a wide
range of products. Competition in the industry is influenced increasingly by
global trade patterns and currency fluctuations. Total imports as a percentage
of apparent consumption have remained near historic highs, amounting to 26%, 27%
and 24% in 1999, 2000 and 2001, respectively. Imports of hot rolled and cold
rolled products increased 44% from 1997 to 1998, but declined significantly in
1999 as a result of fair trade enforcement actions. Imports of hot rolled and
cold rolled products increased 5% from 1999 to 2000. Although in 2001, tin mill
product imports in tons as compared to 2000 decreased approximately 5% due to
government tariffs against Japanese tin mill imports, imports of tin mill
products have otherwise risen substantially in the past three years. As a
percentage of domestic consumption in 1999, 2000, and 2001 imports amounted to
20%, 18% and 19%, respectively. According to U.S. Census Bureau preliminary
data, all steel imports rose from 2.0 million net tons in December 2001 to 2.5
million net tons in January 2002, and imported tin mill products increased by
55% over the same period.

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

Since the steel import crisis began in 1998, United States steel companies
have lobbied to stop unfair steel trade. One of the more significant
accomplishments in 2000 was a decision by the federal government to assess
duties for five years against imports of Japanese tin mill products.

In June 2001, the Bush Administration initiated an investigation by the ITC
regarding the illegal dumping of steel from foreign competitors under section
201 of the Trade Practices Act of 1974. On October 22, 2001, the ITC found that
12 steel product lines, representing 74% of the imports under investigation,
have sustained serious injury because of foreign imports. These product lines
include hot rolled, cold rolled, and galvanized sheet and coil and tin mill
products. On December 7, 2001, the ITC recommended tariffs and quotas on sheet
products and tin plate. On March 5, 2002, President Bush decided to impose
tariffs on flat-rolled products over a three-year period at 30% in year one, 24%
in year two and 18% in year three, in addition to tariff relief on other
products. All of our flat-rolled product lines, including tin mill, hot rolled,
cold rolled and galvanized products should benefit from the imposition of
tariffs. In addition, imported steel slabs are subject to an increasing annual
quota of at least 5.4 million tons, subject to the imposition of tariffs if the
tonnage exceeds the quota limit, excluding steel slabs from Mexico and Canada.
Although a number of countries have objected to the Bush Administration's
decision and have indicated their intention to challenge the decision, the Bush
Administration has stated publicly that, in its belief, the decision was made in
conformity with World Trade Organization guidelines. However, we cannot assure
you that the announced trade remedies will not be successfully challenged or
that a restructuring of the steel industry will occur.

12

We are the second largest domestic manufacturer of tin mill products, with
a 25% market share of domestic shipments in the first half of 2001. Our primary
competitors in sheet products consist of most domestic and international
integrated steel producers and mini-mills. Domestic tin mill products
competitors include U.S. Steel, USS-POSCO Industries Corporation, Bethlehem
Steel Corporation, National Steel Corporation and Ohio Coatings (owned 50% by
Wheeling-Pittsburgh Steel). However, imports have increasingly penetrated this
market. Within the past twelve months, a number of the Weirton's competitors,
including four integrated steel producers, LTV Corporation, Bethlehem Steel,
National Steel and Wheeling-Pittsburgh Steel, have sought protection in
bankruptcy, and LTV's tin business was acquired by USX.

RESEARCH AND DEVELOPMENT

Weirton engages in research and development for the improvement of existing
products and processes and the development of new products and product
applications. During 1999, 2000 and 2001, we spent approximately $2.0 million,
$2.7 million and $1.0 million, respectively, for research and development
activities.

WEIRTEC, our research and development center, is the industry leader in the
advancement of steel can making technology, maintaining prototype steel
packaging manufacturing facilities, analytical laboratory facilities and
computer simulation systems in Weirton, West Virginia. WEIRTEC assists customers
in the development of new products and collaborates with the American Iron and
Steel Institute in the development of new product lines and production
techniques to increase the use and quality of steel as a material of choice. Due
in part to the contribution of WEIRTEC, Weirton earned ISO9002 accreditation, an
internationally recognized standard of superior and consistent quality.

Our longer-term research projects also include clean steel production
techniques, polymer to steel lamination, and the application of galvanized steel
products to the residential and commercial construction industry. We believe
that the WEIRTEC scientists, engineers, technicians and facilities enhance
Weirton's technical excellence, product quality and customer service. We also
pioneered the development of an e-commerce sales exchange platform for steel
products through our former subsidiary, MetalSite, Inc. In December 1999, we
sold a portion of our interest in MetalSite to a third party for $170.1 million.

Our research and development efforts have also led to our entry into
additional markets. For example, we formed WeBCo, a joint venture with the Balli
Group, plc, which has played a key role in funding and developing tin mill
product market opportunities in Germany and the United Kingdom. In addition, we
formed W&A Manufacturing LLC, a joint venture with ATAS International, which has
permitted us to enter the steel roofing products market.

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

ENVIRONMENTAL MATTERS

We are subject to extensive federal, state and local laws and regulations
governing discharges into the air and water, as well as the handling and
disposal of solid and hazardous wastes. We are also subject to federal and state
requirements governing the remediation of environmental contamination associated
with past releases of hazardous substances. In recent years, environmental
regulations have been marked by increasingly strict compliance standards.
Violators of these regulations may be subject to civil or criminal penalties,
injunctions, or both. Third parties also may have the right to enforce
compliance. Capital expenditures for environmental control facilities were
approximately $0.7 million in 1999, $1.7 million in 2000, $1.9 million in 2001
and are estimated to be approximately $1.6 million in 2002. As of December 31,
2001, we had accrued approximately $9.0 million for environmental cleanup costs.

13

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

Current Compliance Issues

In 1996, following a multi-media audit of our operations, we entered into a
consent decree with the United States Environmental Protection Agency, or EPA,
the United States Department of Justice, or DOJ, and the West Virginia Division
of Environmental Protection, or DEP. The consent decree required us to implement
certain changes to ensure compliance with water, air and waste-related
regulations, the majority of which have been completed. We do not anticipate
that any additional capital expenditures will be needed to meet the remaining
requirements under the consent decree. The consent decree provides for
stipulated penalties for violations of the decree and for violations of various
regulatory agreements. Such penalties are paid in response to a joint demand
from the federal and state agencies. Stipulated penalties were assessed in 1998
and 1999 in the aggregate amount of $293,500 and there is a potential that the
agencies could issue additional stipulated penalty demands. We do not believe
that our liability for such potential penalty demands or increased costs
associated with meeting the remaining requirements under the consent decree will
be material to our results of operations.

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

West Virginia Water Quality Standards generally require that a public water
supply be protected by prohibiting the discharge of any pollutants in excess of
drinking water standards for one-half mile upstream of a public water supply
intake. The standard is known as the "half mile rule." We currently discharge
wastewater at a point on the Ohio River that is less than one half mile upstream
from our own water supply intake. Because of the proximity of our discharge and
intake, our wastewater discharge permit requires our discharge at that one
location to meet drinking water standards. At the same time it issued the
permit, DEP issued a consent order deferring those requirements until we had
time to upgrade our facilities (both the discharge and the filtration plant at
the point of intake). Under a current extension of the consent order, we have
until June 30, 2003 to meet the standard, and we have secured, until the same
deadline, a temporary waiver from the application of the half mile rule.

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

We have operated with a variance from certain state water discharge
limitations with respect to our discharge to Harmon Creek since 1986. This
variance, however, expires in June of 2004. We may be required to upgrade our
wastewater treatment system if this variance is not renewed.

Potential Compliance Issues and Proposed Regulations

In December 2000, the EPA proposed effluent limitation guidelines for iron
and steel making operations and finishing operations that would establish
technology requirements and wastewater discharge limitations applicable to our
operations and to those of other steel making and finishing plants. After
guidelines are adopted as final rules, they are incorporated in wastewater
discharge permits when the permits are renewed. Our existing wastewater
discharge permit is currently under review. If the existing permit is renewed
prior to the adoption of final rules, the limitations in the renewed permit
should be based on the existing effluent limitation guidelines. We do not expect
that we will have to address any revised guidelines until the renewed permit
expires and is reissued at least five years after the issuance of the renewed
permit. To comply with the proposed guidelines, we would
14

have to make significant capital expenditures to upgrade the wastewater
treatment plants at our hot strip mill, basic oxygen process shop and blast
furnaces. The amount of capital expenditures required and their timing cannot be
determined until the guidelines are final but could be substantial. The proposed
guidelines are under review and have a final action deadline of April 2002.

Environmental Claims

In May 1992 and again on October 9, 2001, the property owner of a former
non-hazardous waste disposal site known as the Hanover Site received notice from
the Pennsylvania Department of Environmental Protection that it was considering
a closure and post-closure plan for a solid waste landfill facility where we and
our predecessors disposed of solid wastes. At this time, definitive closure and
post-closure plans have not been adopted, and we do not anticipate that closure
costs will exceed $1 million.

RISKS ASSOCIATED WITH OUR BUSINESS AND FINANCIAL CONDITION

We may be unable to generate sufficient cash flow from operations to service our
debt, which may require us to refinance our existing debt or possibly seek
bankruptcy protection.

Our business may not be able to generate sufficient cash flow from
operations in the future to service our debt, including fixed and contingent
interest payments, make necessary capital expenditures or meet other cash needs.
In fact, we have generated negative cash flows from operations of $109.7 million
and $84.9 million in 2001 and 2000, respectively. If we are unable to reverse
these trends and generate sufficient cash flow from operations, we may seek,
subject to the restrictive provisions of our debt instruments and consent of our
lenders, to refinance all or a portion of our existing debt, to sell assets or
to obtain additional financing. Any such refinancing, sale of assets or
additional financing may not be possible on terms reasonably favorable to us. In
such circumstances, we may have to seek bankruptcy protection or commence
liquidation or administrative proceedings because we will not have sufficient
cash to repay our indebtedness as it becomes due.

We have experienced losses in the past and could experience additional future
losses, which could prevent us from sustaining or developing our business.

We incurred losses from operations of approximately $89.3 million in 1999,
$40.7 million in 2000 and $322.2 million in 2001. Absent a recovery in the
domestic steel market, particularly with respect to pricing, we expect to
continue to incur losses in the future, which may limit our ability to execute
our business strategy, satisfy our debt obligations and meet other financial
obligations.

Downturns in the United States steel industry have had in the past, and may in
the future have, an adverse effect on our sales and profitability.

Historically, the steel industry has been cyclical in nature as a result of
markets that it serves. Excess worldwide steel production capacity has further
contributed to the destabilization of steel markets, especially during periods
of reduced demand. The United States steel industry is affected by changes in
economic conditions that are outside of our control, including currency exchange
rates, and international, national, regional and local slowdowns in customer
markets. For example, a decline for demand for our products or in the general
financial condition of the packaging industry or its principal members to which
we supply our tin mill products would have a material adverse affect on our
business, financial condition, results of operations or prospects. In addition,
during the periods of economic slowdown such as the one we are currently
experiencing, our credit losses increase. Our operating results may also be
adversely affected by increases in interest rates that may lead to a decline in
the economic activity of our customers, while simultaneously resulting in higher
interest payments under our senior credit facility. See "Business -- Principal
Products and Markets."

Our indebtedness could adversely affect our financial position and prevent us
from obtaining additional financing in the future.

We have, and will continue to have after giving effect to the completion of
the exchange offers, a substantial amount of indebtedness when compared to our
shareholders' equity. The terms of the indentures governing the senior secured
notes proposed to be issued in connection with the exchange offers and the terms
of the senior

15

credit facility generally limit the incurrence of additional indebtedness. As of
December 31, 2001, our outstanding indebtedness was $403.2 million.

As a result of our debt service obligations:

- all of the indebtedness incurred in connection with the senior credit
facility will become due no later than March 31, 2004, prior to the time
the principal payment on the outstanding notes and the new senior secured
notes and other long-term obligations will become due;

- certain of our indebtedness, including the amounts borrowed under our
senior credit facility, will be at variable rates of interest, which will
make us vulnerable to increases in interest rates;

- our ability to obtain additional financing in the future may be limited;

- a portion of cash flow from our operations will be dedicated to the
payment of principal and interest on our indebtedness as well as our
pension and post-retirement obligations, thereby reducing the funds
available for operations, future business opportunities and acquisitions
and other purposes and increasing our vulnerability to adverse general
economic and industry conditions;

- we may be hindered in our ability to adjust rapidly to changing market
conditions;

- we may experience an event of default under one or more of our debt
instruments that, if not cured or waived, could result in the
acceleration of that and other of our indebtedness which would adversely
affect us; and

- our ability to withstand a downturn of our business or the economy
generally or otherwise react to changes in general economic conditions,
the United States steel industry, global competitive pressures or adverse
changes in government regulation may be adversely affected. These factors
may include, among others:

-- the economic and competitive conditions in the steel industry,
particularly as they affect product pricing and shipment volumes;

-- any operating difficulties, increased operating costs or pricing
pressures we may experience;

-- cyclicality of the principal markets we serve;

-- the economic conditions affecting the tin mill products market in
particular and the financial performance of our principal customers;

-- high levels of steel imports and the effect of any governmental actions
to restrain illegal dumping of steel imports;

-- the relative strength of the United States dollar as it affects
international trade;

-- the passage of legislation or other regulatory developments that may
adversely affect us; and

-- volatility in financial markets, which may affect invested pension plan
assets and the calculation of benefit plan liabilities.

Restrictive debt covenants contained in our senior credit facility and
indentures could limit our ability to take certain business, financial and
operational actions.

Our senior credit facility and the proposed indenture governing the new
senior secured notes contain covenants that will limit the discretion of our
management with respect to certain business, financial and operational matters.
The covenants, taken as a whole, place significant restrictions on our ability
to, among other things:

- incur additional indebtedness;

- pay dividends and other distributions;

16

- redeem, repurchase or prepay subordinated obligations, Series C preferred
stock and other equity securities and other obligations;

- convert Series C preferred stock into shares of our common stock;

- enter into sale and leaseback transactions;

- create liens and other encumbrances;

- make acquisitions and certain investments;

- engage in certain transactions with affiliates;

- sell or otherwise dispose of assets; and

- merge or consolidate with other entities.

Our ability to comply with these and other provisions of the senior credit
facility and the proposed indenture governing our new senior secured notes and
other indebtedness may be affected by changes in economic or business conditions
or other events beyond our control. A failure to comply with the obligations
contained in the senior credit facility or the indenture and related agreements
could result in an event of default under either the senior credit facility or
the indentures, which could result in acceleration of the related debt and the
acceleration of debt under other instruments evidencing indebtedness that may
contain cross-acceleration or cross-default provisions. If the indebtedness
under the senior credit facility were to be accelerated, our assets may not be
sufficient to repay in full such indebtedness and our other indebtedness,
including the new senior secured notes.

We may not successfully complete and manage future acquisitions that are
fundamental to the success of our strategic plan.

The consummation of the proposed exchange offers is critical to our ability
to permit the fundamental repositioning of our business, which depends in part
on our ability to make strategic acquisitions of assets related to the tin mill
and coated products markets and to integrate successfully those assets into our
operations. However, any strategic acquisitions require the consent of our
lenders under the senior credit facility, and our existing capital resources are
limited and otherwise are subject to restrictions in our senior credit facility
and in the proposed indenture governing the new senior secured notes.
Consequently, we may not have sufficient funds to finance such acquisitions
unless we are successful in raising necessary debt or equity financing from
third parties. We may not be able to obtain financing for this purpose on terms
that are acceptable to us or our lenders or are permitted under the terms of the
senior credit facility or the indenture or, in the case of equity, if we are
required to increase our authorized capital on terms acceptable to our
stockholders. Moreover, such acquisition opportunities may not become available
or may not be available on acceptable terms.

Any acquisitions consistent with our strategic plan that may occur will
also place increasing demands on management and operations resources. Our future
performance will depend, in part, on our ability to manage our changing
operations and to adapt our operational systems to that end. We may not be
successful at effectively and profitably managing the integration of any future
acquisitions. Our failure to complete and manage any strategic acquisitions
could adversely affect our business financial condition and results of
operations.

Highly competitive conditions in the steel industry may directly and adversely
affect the pricing of our products, our profit margin and operating cash flow.

The steel industry is highly competitive, particularly with respect to
price in the market for sheet products. We face intense competition from
domestic and foreign steel producers. In addition, we face competition from
producers of products other than steel, including aluminum, plastics, composites
and ceramics. Competition is based primarily on price, with factors such as
reliability of supply, service and quality also being important in certain
segments of the industry. In addition, a number of our domestic competitors have
filed for bankruptcy protection and are seeking to maintain their market share,
particularly in commodity sheet steel products, by reducing prices.

Integrated steel makers also face strong competition from mini-mills, which
are efficient, low-cost producers that generally produce steel by melting scrap
in electric arc furnaces, utilize new technologies, have lower
17

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

Foreign producers also compete with us, although to a lesser extent than
domestic mills. Many foreign producers have lower labor costs and some are
subsidized by their governments. Political and social considerations may
influence their decisions with regard to production and sales more than
prevailing market forces. Many foreign steel producers continue to ship to the
United States market despite decreasing profit margins or losses. Other factors
that influence the level of foreign competition include the relative strength of
the dollar, the level of imports, and the effectiveness of United States trade
laws. On October 22, 2001 the ITC found that the domestic steel industry had
sustained serious injury because of foreign imports. On December 7, 2001, the
ITC recommended tariffs and quotas on sheet products and tin plate. On March 5,
2002, President Bush announced the imposition of tariffs on 12 categories of
steel products, including tin mill, hot-rolled, cold-rolled and galvanized
products, all of which are produced by us, of up to 30% over a three-year
period.

Although a number of countries have objected to the Bush Administration's
decision and have indicated their intention to challenge the decision, the Bush
Administration has stated publicly that, in its belief, the decision was made in
conformity with World Trade Organization guidelines. However, we cannot assure
you that the announced trade remedies will not be successfully challenged or
that a restructuring of the United States steel industry will occur.

Moreover, demand may not increase from current depressed levels. Increased
production capacity or operating efficiencies of our competitors, or increased
foreign and domestic competition, may directly and adversely affect pricing and
profit margins and our operating cash flow.

Substantial pension and other postretirement benefit obligations may adversely
affect future cash flow.

We have substantial financial obligations related to our employee
postretirement plans for medical and life insurance benefits and pensions.
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" requires that we accrue retiree
medical and life insurance benefits during an employee's service rather than
defer the recognition of costs until claims are actually paid. In accordance
with this accounting standard, we have established a liability for the present
value of the estimated future medical and life insurance benefit obligations. As
of December 31, 2001, we had balance sheet liabilities for accumulated
postretirement health care and life insurance benefit obligations of $364.4
million. The cash payments for actual postretirement health and life insurance
claims were $23.2 million in 1999, $26.5 million in 2000 and $29.8 million for
2001, and our health care costs are projected to increase between 7.50% and
13.75% in 2002.

In accordance with the Statement of Financial Accounting Standards No. 87,
"Employers' Accounting for Pensions," we had an accrued pension liability of
$205.3 million at December 31, 2001 for our defined benefit pension plans. As of
December 31, 2001, projected benefit obligations of $904.5 million exceeded plan
assets by $271.3 million.

However, adverse developments in health care costs could materially
increase the amount of our postretirement benefit obligations and adverse
conditions in the financial markets have, and could in the future, materially
decrease the plan assets available to fund pension obligations. Plant shutdowns
would substantially increase the amount of our postretirement benefit
obligations. In addition, layoffs or other similar events, including our
recently negotiated workforce reduction, could also increase the amount of our
postretirement benefit obligations.

We do not expect to have any near term funding requirements with respect to
our pension plans. Under minimum funding rules, no contribution is expected in
2002; however, substantial contributions of an average of
18

at least $50 million per year are likely to be required in each of 2003 through
2007. This amount is subject to significant change depending on, among other
things, asset performance.

The price and availability of our raw materials may fluctuate and adversely
affect our operating results.

We purchase a number of raw materials in the open market in the ordinary
course of our business, including scrap, tin, zinc, natural gas and other raw
materials, which are subject to significant price fluctuation. We have entered
into a memorandum of understanding with U.S. Steel to provide us with a minimum
of 650,000 net tons of coke in 2002 and 500,000 net tons of coke in each of 2003
and 2004, with the option to buy incremental volume so that our total purchases
approximate 60% of our requirements, under which the price of coke fluctuates on
an annual basis based on the market price for coke. We also have a contract with
another supplier for additional requirements with pricing also based on market
price. We may not be able to negotiate acceptable renewal terms for these
contracts. We have entered into long-term supply contracts with respect to other
commodities, including iron ore pellets, industrial gases and electricity;
however, the loss of any of those contracts or of our coke supply contracts may
expose us to greater market risks, and the potential for significant cost
increases which could have a material adverse effect on our business, financial
condition, results of operations and prospects.

In addition, certain of our raw material suppliers are participating in our
vendor financing programs, under which we have entered into a sale and leaseback
transaction with respect to our Foster-Wheeler Steam Generating Plant and
related electricity generating assets, which supplies process steam, heat and
electricity. A failure to satisfy our rental payment and other obligations under
this arrangement could result in the termination of the lease. This may
adversely affect our relationships with participating vendors and may also
adversely affect our ability to secure the steam and electricity necessary to
operate our steel making facilities.

Unplanned repairs or equipment outages could interrupt production and reduce
sales and profitability.

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

We may not be able to negotiate favorable labor agreements or prevent work
stoppages.

The Independent Steelworkers Union represents our production and
maintenance workers, clerical workers and nurses. In addition, the Independent
Guard Union represents our security personnel. While we negotiated new
agreements with the ISU and the IGU in October 2001, which expire no earlier
than March 2004, future collective bargaining agreements, or the negotiation of
such agreements, may have an adverse effect on our financial condition and
results of operations. Labor disputes and resulting work stoppages or slowdowns
occasionally occur in the steel industry. Work stoppages or slowdowns may occur
in the future in connection with labor negotiations or otherwise.

We may incur substantial environmental control and remediation costs.

In common with other United States steel producers, we are subject to
various federal, state and local requirements for environmental controls
relating to our operations. These environmental laws and regulations include the
Clean Air Act with respect to air emissions; the Clean Water Act with respect to
water discharges; the Resource Conservation and Recovery Act with respect to
solid and hazardous waste treatment, storage and disposal; and the Comprehensive
Environmental Response, Compensation and Liability Act with respect to releases
and remediation of hazardous substances. In addition, West Virginia has similar
environmental laws.

We have spent substantial amounts of money to control air and water
pollution pursuant to applicable environmental requirements. We have also spent,
and will continue to spend, substantial amounts for proper handling and disposal
and for the environmental investigation and cleanup of properties. Along with
capital investments and operating costs relating to environmental matters, from
time to time we have been and may be subject to penalties or other requirements
as a result of administrative action by regulatory agencies. The ultimate
19

impact of complying with environmental laws and regulations is not always
clearly known or determinable because certain implementing regulations have not
yet been promulgated or in certain instances are undergoing revision. However,
complying with environmental laws and regulations may substantially increase
capital, operating and compliance costs. Currently, we are involved in a number
of environmental remediation projects relating to the remediation of former and
present operating locations and are involved in a number of other remedial
actions under federal and state law.

We may incur environmental exit costs if we decide to sell a current
property, for it is our policy not to accrue such environmental exit costs until
we decide to dispose of a property. These costs include, among other things,
remediation and closure costs and expenses relating to our clean-up of soil
contamination, our closing of waste treatment facilities and our monitoring
commitments. We believe that the ultimate liability for the environmental
remediation matters identified to date, including the clean-up, closure and
monitoring of waste sites and formerly-owned facilities and businesses, will not
materially affect our consolidated financial condition or liquidity. However,
the identification of additional sites, increases in remediation costs with
respect to identified sites, the failure of other potentially responsible
parties to contribute their share of remediation costs, decisions to dispose of
additional properties and other changed circumstances may result in increased
costs to us. These increased costs may have a material adverse effect on our
financial condition, liquidity and results of operations.

We depend on our key personnel for our success, and the loss of their services
could have a negative impact on our business.

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

Weirton's ESOPs hold approximately 40% of our voting power and the ESOP
participants acting together can exercise substantial influence over our
affairs.

Approximately 40% of the combined voting power of our issued and
outstanding shares of common stock and voting convertible preferred stock are
held by Weirton's 1984 ESOP and 1989 ESOP, respectively. Accordingly, the ESOPs
and their participants, consisting of active and retired employees of Weirton,
can exercise significant influence over our affairs, including the election of
our directors and the approval of actions requiring the approval of our
stockholders, including the adoption of amendments to our restated certificate
of incorporation, increases in our authorized capital, issuances of voting
securities, and approval of mergers or sales of substantially all of our assets.
A number of corporate actions require the affirmative vote of holders having at
least 80% of the outstanding voting power. The restated certificate of
incorporation also limits the ability of any stockholder other than the ESOPs to
exercise more than 5% of voting power.

The interests of the ESOPs and their participants may conflict with your
interests. The concerns of employee-stockholders, including retired employees
who are ESOP participants, with respect to matters such as job security,
pensions and postretirement benefits may conflict with your interests. For
example, a "change of control" transaction, which would require us to repurchase
all or a portion of your new senior secured notes, may not be approved by the
requisite supermajority vote of the stockholders, if any employee-stockholder
concerns arising out of a sale, merger or similar transaction are not
satisfactorily resolved. Likewise, the execution of our strategic plan through
selective acquisitions and targeted investments will likely require outside
funding, including the possible issuance of equity or equity-related securities
by the company. The authorization of additional common stock and the approval of
the issuance of common stock, for example, in connection with the financing of
an acquisition or to permit the conversion of the Series C preferred stock will
also require supermajority stockholder approval and possibly be subject to
similar employee or retiree concerns.

20

ITEM 2. PROPERTIES

Weirton owns approximately 2,700 acres in the Weirton, West Virginia area
that are devoted to the production and finishing of steel products, as well as
research and development, storage, support services, and administration
facilities. We own trackage and railroad rolling stock for materials movement,
watercraft for barge docking and a variety of heavy industrial equipment. We
have no material leases for real property except that under our vendor financing
programs we are leasing our Foster-Wheeler Steam Generating Plant and related
electricity generating assets, and plan to enter into a similar transaction with
respect to our executive offices and research and development facility. Our mill
and related facilities are accessible by water, rail and road transportation. We
believe that our facilities are suitable to our needs and are adequately
maintained.

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

Our primary steel making facilities include two blast furnaces, a two
vessel basic oxygen process shop, a CAS-OB facility, two RH degassers, and a
four strand continuous caster with an annual slab production capacity of up to
3.2 million tons. Our downstream operations include a hot strip mill with a
practical capacity of 3.4 million tons per year, two continuous picklers, three
tandem cold reduction mills, three hot dip galvanize lines, one
electro-galvanize line, two tin platers, one chrome plater, one bi-metallic
chrome/tin plating line and various annealing, temper rolling, shearing,
cleaning and edge slitting lines, together with packaging, storage and shipping
and receiving facilities.

The name and area of each of our primary steel making facilities and
principal downstream manufacturing facilities, all of which are located in
Weirton, West Virginia, together with the principal products that they are
equipped to produce as of December 31, 2001, are as follows:

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

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

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

21

Hot Strip Mill. Our hot strip mill is an integral part of our downstream
steel processing operations and one of the few of its kind in the industry. It
is an energy efficient, low-cost mill capable of rolling both carbon and
stainless steel substrate into thin gauge, narrow width sheet. In addition to
rolling our own slabs, we are capable of rolling purchased slabs and slabs
supplied by other steel manufacturers and have entered into a long-term tolling
agreement with a major stainless steel producer to convert stainless slabs into
stainless coils, which account for almost 20% of our hot strip mill overall
capacity. Hot roll is used for unexposed parts in machinery, construction
products and other durable goods. Our hot strip mill was totally rebuilt
beginning in 1988, with the major portion completed by 1994, at a cost of $360
million. Hot strip mill assets include: walking beam reheat furnaces, hydraulic
seals breaker, reversing roughing mill, R-5 roughing stand, heat retention
covers, rotary crop shear, finishing mill, laminar flow cooling system,
downcoilers and mill automation system.

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

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

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

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

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

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

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

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

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

Galvanizing Lines. We have one electrolytic galvanizing line that applies
a coating of zinc to black plate steel through an electroplating process. The
product processed through this line is generally light gauge with narrow widths
and is used predominantly in the construction market. We also have three
hot-dipped galvanizing lines that apply a coating of zinc to cold rolled steel
by submerging the substrate through a bath of hot zinc. These lines are capable
of a variety of coating weights, gauges, and widths (up to 48") as well as
coating and annealing requirements (galvanized, galvannealed and galfan).
Weirton's galvanized sheet steel products provide superior
22

protection in many corrosive environments and are appropriate for almost any
application that calls for formability, strength, corrosion protection and cost
efficiency.

Finished products are packaged as required to provide superior protection
from the elements and from handling damage. Located on the Ohio River, Weirton
offers truck, rail and barge transportation.

The lenders under our senior secured credit facility currently have a first
priority lien on our No. 9 tin tandem mill and, effective upon the consummation
of the exchange offer, will have a first priority lien on our hot strip mill,
No. 9 tin tandem mill and tin assets. The holders of the new senior secured
notes and the new secured series 2002 bonds will hold a second priority lien in
these assets.

ITEM 3. LEGAL PROCEEDINGS

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

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

None.

PART II

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

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

In connection with our 1989 public offering, Weirton established a second
employee stock ownership plan, or the 1989 ESOP, and funded it with the Series A
Convertible Voting Preferred Stock. Substantially all of our employees
participate in the 1984 ESOP and the 1989 ESOP, which as of December 31, 2001
owned approximately 19% of the issued and outstanding shares of our common stock
and substantially all of the issued and outstanding shares of our Series A
preferred stock, collectively representing approximately 40% of the voting power
of our voting capital stock. In 1991 we issued 500,000 shares of Series B
preferred stock, and we redeemed all of those shares in 1994.

As of March 22, 2002, there were 41,841,883 shares of common stock, $.01
par value ("Common Stock"), outstanding held by 3,685 stockholders of record.

Subject to any preferences of outstanding preferred stock, holders of
Common Stock are entitled to receive ratably such dividends as may be declared
by the board of directors out of legally available funds.

Under the senior credit facility, our ability to pay dividends on our stock
is limited to the greater of (i) $5.0 million or (ii) $5.0 million plus one-half
of our cumulative consolidated net income since March 31, 1993, plus the net
proceeds from subsequent issuances of certain capital stock, less certain
allowable payments. As of December 31, 2001, pursuant to these covenants, we
could pay dividends on Common Stock of up to $5.0 million.

As of March 22, 2002, 7,678,039 shares of Common Stock, or 18% of the
outstanding shares of Common Stock, were held by one stockholder of record,
United National Bank--North, as Trustee of the 1984 ESOP. As of that date, the
1984 ESOP had approximately 5,263 participants who were active or former
employees of the Company. In addition, as of March 22, 2002 there were 1,496,091
shares of Convertible Voting Preferred Stock, Series A (the "Series A Preferred
Stock"), outstanding. As of that date, United National Bank--North, as Trustee

23

of the Company's second Employee Stock Ownership Plan (the "1989 ESOP"), was the
record owner of
shares of the Series A Preferred Stock, or over 94% of the outstanding shares of
Series A Preferred Stock, subject to the terms and conditions of said Plan. As
of that date, the 1989 ESOP had approximately 6,052 participants who were active
or former employees of the Company. The Series A Preferred Stock is not listed
for trading on any exchange. The Series A Preferred Stock has a liquidation
preference of $5 per share and is convertible into one share of Common Stock,
subject to adjustment. Each share of Series A Preferred Stock is entitled to 10
votes in all matters presented to the stockholders for approval. Participants in
the Company's two ESOPs have full voting rights over all shares allocated to
their accounts. See "Employees" under Item 1.

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

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

(1) First Quarter 2001 through March 22, 2002.

24

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The following data, insofar as it relates to each of the years 1997 through
2001, has been derived from financial statements audited by Arthur Andersen LLP,
independent public accountants. You should read the selected consolidated
financial data together with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the audited historical consolidated
financial statements which includes a report with an explanatory paragraph with
respect to the uncertainty regarding the Company's ability to continue as a
going concern, as discussed in Note 2 to the financial statements, and the
accompanying notes.

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

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

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

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

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

(5) Interest expense has been reduced by capitalized interest of $0.2 million
for 2000, $0.4 million for 1998 and $0.5 million for 1997. There was no
capitalized interest expense applicable to facilities under construction
for the years 2001 or 1999.

(6) Does not include a net outflow of cash as these contributions are returned
to Weirton in the form of payments on loans from Weirton to the 1984 and
1989 ESOPs.

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

(8) Reflects certain costs incurred in connection with the early extinguishment
of debt.

(9) Long-term debt (including current portion) does not include amounts
utilized under our accounts receivable securitization program. Under our
accounts receivable securitization program, we obtained proceeds by selling
participation interests in our accounts receivable as opposed to borrowing
money using accounts receivable as collateral. As a result of this
structure, proceeds received were accounted for as a reduction of our
accounts receivable balance. We had sold participation interests in our
accounts receivable of $25.0 million and $35.0 million at December 31, 2000
and 1999, respectively. We terminated our accounts receivable
securitization program when we entered into our senior credit facility.

(10) Reflects the historical cost of the preferred stock at $14.50 per share at
the time of its original issuance. The outstanding shares of Series A
mandatorily redeemable preferred stock are subject to redemption at a price
equal to the appraised value at the redemption date. At December 31, 2001,
the shares had an appraised fair value of $0.25 per share. In any given
year, we are only required to redeem those shares put to us by a limited
number of former ESOP participants who have retired or otherwise separated
from service.

26

(11) EBITDA is calculated as income (loss) from operations plus depreciation and
non-recurring items including restructuring charges and asset impairment.
EBITDA is presented because our management believes that such information
is considered by certain investors to be an additional basis for evaluating
our ability to pay interest and repay debt. EBITDA should not be considered
as an alternative to measures of operating performance as determined in
accordance with generally accepted accounting principles, as a measure of
our operating results and cash flows or as a measure of our liquidity.
EBITDA is not calculated identically by all companies.

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

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

(14) Our working capital ratio is calculated by dividing our total current
assets by our total current liabilities. At December 31, 2001, total
current liabilities, which included $335.4 million of current debt and
revolving credit obligations, exceeded current assets by $262.0 million.

(15) Does not reflect the workforce reduction of 550 employees implemented
beginning in the fourth quarter 2001 pursuant to our operating cost savings
plan or the effect of the operating cost savings plan on average cost per
ton shipped. We expect that the workforce reduction program will be fully
implemented by the second quarter of 2002.

We estimate that our operating cost savings program will result in annual
cost savings of approximately $51 million, of which approximately $44
million is expected to be cost of sales savings (with the remainder
resulting from reduced selling, general and administrative expenses). The
$44 million in cost of sales savings equates to approximately $15 to $20
per ton based on shipment levels.

As a result of the operating cost savings program, we recorded a
restructuring charge of $129 million. The restructuring charge included an
increase in pension and other post retirement obligations of approximately
$119 million, an $8 million increase in other long-term liabilities and $2
million in other short term costs, including severance payments. This
restructuring provides for the permanent elimination of a minimum of 372
production and maintenance jobs, a minimum of 78 office, clerical and
technical jobs and a reduction of 100 management positions.

27

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

The following discussion should be read in conjunction with, and is
qualified in its entirety by reference to, the audited consolidated financial
statements and notes thereto, which begins on page 38.

OVERVIEW

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

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

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

Recent Developments. Weirton, like most United States integrated steel
producers, has sustained significant operating losses and a decrease of
liquidity as a result of adverse market conditions due to the current slowing
economic conditions, which have been exacerbated by the September 11, 2001
terrorist attacks on the United States, and depressed selling prices caused in
substantial part by dramatic increases in imported steel. See "Item I,
Business -- Steel Industry Overview."

Many industry observers believe that the severity of the current crisis in
the United States will lead to a necessary restructuring of the industry. In
June 2001, the Bush Administration initiated a trade investigation by the ITC
under section 201 of the Trade Practices Act of 1974 regarding the illegal
dumping of steel by foreign competitors. On October 22, 2001, the International
Trade Commission found that twelve steel product lines, representing 74% of the
imports under investigation, have sustained serious injury because of foreign
imports. These product lines include hot rolled, cold rolled, galvanized sheet
and coil, and tin mill products. On December 7, 2001, the ITC recommended
tariffs and quotas on sheet products and tin plate. On March 5, 2002, President
Bush decided to impose tariffs on flat-rolled products over a three-year period
at 30% in year one, 24% in year two and 18% in year three, in addition to tariff
relief with respect to other products. All of our flat-rolled product lines,
including tin mill, hot rolled, cold rolled and galvanized products, should
benefit from the imposition of tariffs. In addition, imported steel slabs are
subject to an increasing annual quota of at least 5.4 million tons, subject to
the imposition of tariffs if the tonnage exceeds the quota limit, excluding
steel slabs from Mexico and Canada. Although a number of countries have objected
to the Bush Administration's decision and have indicated their intention to
challenge the decision, the Bush Administration has stated publicly that, in its
belief, the decision was made in conformity with World Trade Organization
guidelines. However, we cannot assure you that the announced trade remedies will
not be successfully challenged or that a restructuring of the steel industry
will occur.

In response to severe weaknesses in the domestic steel industry and our
worsening financial condition, we have developed a strategic plan to reduce
operating costs, improve our liquidity and working capital position,
28

restructure our long-term debt and fundamentally reposition our business to
focus on the production and sale of tin mill products and other higher margin
value-added sheet products. See "Item I, Business -- Our Strategic Plan."

Our strategic plan has five integral steps and we began to recognize the
benefits of the first three steps in the fourth quarter of 2001:

- reducing our operating costs on an annual basis through the full
implementation of a cost savings program which includes a workforce
reduction, reductions to our employee benefits costs and other
operating cost savings, which became effective in late October 2001
(estimated to generate approximately $51 million in annual cost
savings when fully implemented by the second quarter 2002);

- improving our liquidity and long-term supplier relationships through
financing programs we entered into primarily with our vendors,
including over 60 suppliers, in late October 2001 and through
ongoing negotiations with other suppliers of services and raw
materials (currently estimated to generate at least $40 million in
additional near term liquidity);

- increasing our borrowing availability and liquidity through the
refinancing of our bank credit and asset securitization facilities,
which became effective in late October 2001 (which has resulted in
$30 to $35 million in additional availability compared to our prior
inventory facility and accounts receivable securitization program);

- restructuring our long-term debt and lowering our debt service costs
through the exchange offers and the series 1989 bonds exchange offer
in order to increase our liquidity and financial flexibility by
approximately $28 million in 2002, and similar amounts in 2003 and
2004, provided we do not pay contingent interest; and

- fundamental repositioning of our business to focus on tin mill and
other higher margin value-added sheet products and significantly
reduce our presence in the commodity flat-rolled product market.

RESULTS OF OPERATIONS

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

Net loss for 2001 was $533.3 million, or $12.85 per diluted share, which
included a non-cash charge of $153.8 million to fully reserve the deferred tax
assets, restructuring charges of $129.0 million related to fourth quarter
workforce reductions associated with our strategic plan, $12.3 million for an
involuntary first quarter reduction program for non-represented employees, the
write-off of our remaining interests in certain joint ventures totaling $18.1
million and an extraordinary loss on the early extinguishment of debt of $1.0
million. Excluding the effects of these items, net loss for 2001 was $219.1
million compared to a net loss of $85.1 million, or $2.06 per diluted share, for
2000.

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

Tin mill product net sales for 2001 were $472.8 million, an increase of
$34.5 million from 2000. Shipments of tin mill products in 2001 were 799,000
tons compared to 736,000 tons for 2000. The increase in revenue resulted from a
9% increase in shipments which was partially offset by a modest decrease in
selling prices.

29

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

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

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

In the fourth quarter of 2001, as part of our five part strategic plan we
began implementation of an operating cost reduction program. Our management
negotiated new labor agreements with the ISU that became effective in late
October 2001. The agreements provide for the permanent elimination of a minimum
of 372 production and maintenance jobs and a minimum of 78 office, clerical and
technical jobs. We also streamlined our management structure by elimination of
non-core and redundant activities resulting in a reduction of 100 management
positions.

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

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

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

Interest expense increased $3.8 million in 2001 as a result of greater
utilization of our working capital facilities. At December 31, 2001, we had
borrowed $92.1 million under our senior credit facility.

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

30

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

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

YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999

Net loss for 2000 was $85.1 million or $2.06 per diluted share compared to
net income of $30.9 million or $0.71 per diluted share in 1999. The results for
1999 include a net pretax gain of $170.1 million related to the sale of a
portion of our investment in MetalSite and a non-cash pretax asset impairment
charge of $22.5 million associated with the write down of a long-lived asset to
fair value. Excluding the effects of these non-recurring items, profit sharing,
and the resulting impact on income taxes, the net loss for 1999 would have been
$76.4 million or $1.84 per diluted share. Total shipments in 2000 were 2,448
thousand tons compared to 2,514 thousand tons in 1999. Net sales were $1,117.8
million in 2000 compared to $1,130.4 million in 1999.

Shipments and selling prices improved slightly in the first half of 2000,
but near record levels of imports caused steep declines in shipments and selling
prices in the second half of the year.

Tin mill product shipments in 2000 were 736 thousand tons compared to 771
thousand tons in 1999, a decrease of 5%. Tin mill product shipments resulted in
net sales of $438.2 million in 2000, a decrease of $21.8 million compared to
1999. The decrease in net sales is primarily the result of the decrease in
shipment volume.

Sheet product shipments in 2000 were 1,712 thousand tons compared to 1,743
thousand tons in 1999, a decrease of 2%. Sheet mill product shipments resulted
in net sales of $679.6 million in 2000, an increase of $10.1 million compared to
1999. The increase in net sales is primarily attributable to an improvement in
sheet product selling prices during the first half of 2000.

Cost of sales per ton increased approximately $2 per ton from $428 per ton
in 1999 to $430 per ton in 2000. We benefited from a two blast furnace
configuration for most of 2000 and favorable raw material prices in the first
half of 2000. These benefits were offset by a significant increase in natural
gas costs in the fourth quarter of 2000 and lower shipment and production levels
in the second half of 2000. In response to these conditions, we idled our No. 4
blast furnace in November 2000.

Selling, general and administrative expenses in 2000 were $41.7 million
compared to $44.8 million in 1999. The decrease resulted primarily from the
inclusion of MetalSite's selling, general and administrative costs during 1999,
which had been consolidated. MetalSite's results were reported using the equity
method of accounting during 2000. The decrease associated with MetalSite was
partially offset by an increase in reserve for bad debt expense related to
specific customers.

Depreciation expense increased $3.1 million from 1999 to 2000. The increase
is primarily attributable to increased units of production depreciation
associated with restarting the No. 4 blast furnace in December 1999. The furnace
had been idled for most of 1999.

Loss from unconsolidated subsidiaries increased $25.1 million from 1999 to
2000. The additional loss resulted primarily from the recognition of a $15.9
million loss associated with funding requirements of GalvPro resulting from
start-up expenditures and adverse market conditions and an $11.1 million equity
loss recorded for MetalSite.

31

Interest expense decreased $9.6 million in 2000 compared to 1999. Weirton
repaid $84.0 million in senior notes at maturity in October 1999, resulting in
lower average outstanding debt during 2000.

We recorded an income tax benefit of $11.6 million in 2000 compared to an
income tax provision of $8.2 million in 1999. The change resulted from the
change in our net income (loss) and a reduction in the effective tax rate due to
increased valuation allowance requirements based on our analysis of our ability
to realize deferred tax assets.

The results for 1999 include a net pretax gain of $170.1 million related to
the sale of a portion of our investment in MetalSite.

During 1999, Weirton recognized an asset impairment charge of $22.5 million
associated with the write down of a slab sizing press to its estimated fair
value.

In 1999, Weirton recorded a provision for profit sharing of $15.5 million
pursuant to our company wide profit sharing plan. In 2000, there was no profit
sharing provision due to the net loss incurred.

LIQUIDITY AND CAPITAL RESOURCES

Total liquidity from cash and financing facilities amounted to $33.6
million at December 31, 2001, as compared to $131.7 million at December 31,
2000. Our liquidity has continued to decline primarily as a result of operating
losses from prolonged adverse market conditions. To mitigate the effects of
these prevailing adverse conditions, we have initiated a strategic plan to
reduce operating costs and enhance our liquidity. The results and status of
certain points of that strategic plan are summarized below.

At December 31, 2001, we had cash and equivalents of $5.7 million compared
to $32.0 million as of December 31, 2000. Our consolidated statements of cash
flows at December 31 are summarized below:

The $109.7 million net cash outflow from operating activities resulted from
adverse market conditions prevailing in the domestic steel industry. To help
offset the difficult market conditions, we undertook several measures during
2001 to enhance our operating cash flow by reducing overall operating costs and
net working capital investment. Excluding $25.0 million repaid under our
accounts receivable securitization facility, reductions in our net working
capital investment had a positive impact of $73.5 million on our outstanding
cash balance. This was achieved mainly through a $65.5 million reduction in
inventory. The favorable impact of the reduction in inventory has been partially
offset by lower than historic accounts payable levels. Lower purchase levels,
arrangements with raw materials vendors which reduce both inventory and accounts
payable and tightening in terms from vendors concerned with the overall health
of the domestic steel industry have caused a reduction in our accounts payable
balance. We have no significant past due payables.

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

Net cash used by investing activities includes $10.4 million and $37.8
million of capital expenditures for the years ended December 31, 2001 and 2000,
respectively. Our new senior credit facility places limits on our ability to
make certain future capital expenditures to $13.8 million in 2002 and $34.5
million in 2003, subject to increase to $40.0 million in 2003 if we meet certain
financial tests.

32

Net cash used by investing activities also includes loans and advances to
our MetalSite and GalvPro joint ventures totaling $0.8 million and $40.9 million
for the years ended December 31, 2001 and 2000, respectively. Such loans and
advances have been written down to zero as of December 31, 2001.

The $94.6 million in net cash provided by financing activities in 2001 was
necessary to maintain operation of our facilities. Cash provided by financing
activities in 2001 consisted of $92.1 million in borrowings under our senior
credit facility and $11.5 million in cash received under our vendor financing
arrangements. The cash provided by these two facilities was offset by the
deferred financing costs spent to establish the facilities as well as the costs
of preparing an offer to exchange our existing senior notes.

The new senior credit facility was established on October 26, 2001 by
agreement with Fleet Capital Corporation, as agent for itself and other lenders,
Foothill Capital Corporation, as syndication agent, The CIT Group/Business
Credit, Inc. and GMAC Business Credit LLC, which serve as co-documentation
agents for the facility, and Transamerica Business Capital Corporation. The
proceeds from the facility were used to refinance our existing inventory
facility and accounts receivable securitization program. Through this new asset
based facility, we are able to more effectively borrow against our accounts
receivable and inventory than we were under previous facilities. The new senior
credit facility has resulted in additional availability of approximately $30
million to $35 million compared to our prior inventory facility and accounts
receivable securitization program. At December 31, 2001, we had borrowed $92.1
million under the senior credit facility and we had utilized an additional $9.5
million under the letter of credit sub-facility. Taking into account outstanding
letters of credit, we had $27.9 million available for additional borrowing under
the facility at December 31, 2001.

In connection with the exchange offers, our new senior credit facility will
be amended and restated to permit the exchange offers on the terms described in
the prospectus, including the grant of a first priority security interest to the
senior lenders in our hot strip mill, No. 9 tin tandem mill and tin assets and a
second priority security interest to the holders of the new senior secured notes
and the new secured series 2002 bonds in the same collateral effective upon the
consummation of the exchange offers.

Beginning in late October 2001, we also obtained assistance from certain
key vendors and others through our vendor financing programs to improve our near
term liquidity. Under the vendor financing programs, we have negotiated
arrangements with over 60 vendors in the form of purchase credits, improved
pricing or other concessions to achieve one-time cash benefits of over $40
million in the aggregate. Principal among the financing transactions is the sale
and leaseback transaction of our Foster-Wheeler Steam Generating Plant,
including the related real property and certain related energy generating
equipment, direct advances or concessions by certain vendors and the expected
sale and leaseback of our general office building and research and development
building. The sale and leaseback transaction of our Foster-Wheeler Steam
Generating Plant has been accounted for as a financing or borrowing transaction.
As of December 31, 2001, we had received approximately $11.5 million in proceeds
related to the sale and leaseback of the Foster-Wheeler Steam Generating Plant
and related financing programs and expect to receive approximately $30 million
in 2002, largely by the end of the first quarter. In February 2002, the West
Virginia Economic Development Authority and one of our vendors reached an
agreement assigning the rights of an operating lease from the vendor to the
WVEDA. As part of this arrangement, the WVEDA has agreed to remove the
requirement to have future lease payments supported by a letter of credit and,
consequently, removal of the letter of credit requirement will result in net
additional availability under our senior credit facility of $8.4 million.

At December 31, 2001 we had outstanding $244.1 million of publicly held
senior notes under two substantially identical indentures, including $121.3
million in principal amount of our 10 3/4% Senior Notes due 2005 and $122.7
million in principal amount of our 11 3/8% Senior Notes due 2004. We did not
make scheduled interest payments of $6.5 million on the 10 3/4% Senior Notes due
2005 which were due December 1, 2001 or of $7.0 million on our 11 3/8% Senior
Notes due 2004 which were due on January 1, 2002. Our failure to pay interest
has resulted in an event of default under the indentures governing the senior
notes. Holders of at least 25% of the outstanding senior notes have the right to
cause those notes to be accelerated following the expiration of a 30-day grace
period after our default in making the applicable interest payments. We have
obtained the agreement of members of the informal committee representing the
holders of a majority of the outstanding principal amount of the senior notes to
forbear exercising these remedies during the course of the exchange offer, but
that committee

33

does not include all of the holders of our senior notes. As of the date of this
prospectus, our obligations with respect to the senior notes have not been
accelerated.

At December 31, 2001, we had $360.1 million in deferred tax assets which
were fully reserved with a valuation allowance of the same amount. These assets,
although they are fully reserved for financial accounting purposes, are
available to offset future income tax liabilities should we generate taxable
income including any taxable income that may result from the exchange offers,
subject to certain limitations that may apply to our use of such deferred tax
assets depending on future changes in the ownership of our stock, including if
we issue additional shares of our stock in the future. We have been required in
the past, and may be required in the future, to make payments under federal
alternative minimum tax regulation.

We do not expect to have any near term funding requirements with respect to
our pension plans. Under minimum funding rules, no contribution is expected in
2002; however, substantial contributions of an average of at least $50 million
per year are likely to be required in each of 2003 through 2007. This amount is
subject to significant change depending on, among other things, asset
performance.

LIQUIDITY OUTLOOK

Though prevailing market conditions in the domestic steel industry remain
difficult, we are anticipating that positive events, including the shut-down and
consolidation of steel producing assets and United States governmental
restrictions on imports, should result in improvements in operating results
during 2002.

In addition to establishing our new senior credit facility and vendor
financing arrangements, we have taken measures to significantly reduce our
operating costs. Management and the Independent Steelworkers Union have been
able to negotiate new labor agreements, effective in late October 2001, and
expiring no earlier than March 2004, that will significantly reduce the number
of represented employees, facilitated primarily through work rule changes. The
agreement for our production and maintenance employees provides for the
permanent elimination of a minimum of 372 jobs. The office, clerical and
technical agreement provides for the right to eliminate a minimum of 78 jobs. We
have also streamlined our management structure by eliminating non-core and
redundant activities resulting in a reduction of 100 management positions. We
have also made significant changes to the employee benefits package resulting in
more cost savings.

If we exchange all of the outstanding senior notes and secured series 1989
bonds on the terms proposed, our debt service costs will be lowered and our
liquidity will be increased by approximately $28 million in 2002 and by similar
amounts in each of 2003 and 2004, provided we do not have to pay contingent
interest on the new senior secured notes and the new secured series 2002 bonds.
Currently, we do not anticipate generating "excess cash flow" in 2003 and 2004
that would trigger the payment of contingent interest.

Under the senior credit facility, following the consummation of the
exchange offers on the terms and conditions described in this prospectus, we
will be able to make scheduled semi-annual cash interest payments on the new
senior secured notes and in respect of the new secured series 2002 bonds,
provided that these cash payments may be reserved for against availability under
the facility. The reserve could, if fully implemented, at the discretion of the
agent, reduce amounts available to us under the senior credit facility up to a
maximum of approximately $8 million in any six month period, assuming valid
tenders of all of the aggregate principal amount of the outstanding notes and
series 1989 bonds. In the event that less than all of the aggregate principal
amount of the outstanding notes and series 1989 bonds are tendered in the
exchange offers, we are permitted to make cash interest payments on any
remaining outstanding notes and series 1989 bonds of up to $4 million in any
year subject to similar reservation against availability under the facility.

Subject to the consummation of the exchange offers on the proposed terms,
based on the amount of cash on hand, the amount of cash expected to be generated
from operating activities, cash savings resulting from our operating cost
savings program and our vendor financing programs, additional borrowing
availability under our new senior credit facility and liquidity improvement as a
result of the consummation of the exchange offers and the achievement of our
2002 operating plan, our management believes that we will have sufficient cash
to meet our operating cash needs over the next 12 to 18 months.

34

There can be no assurance, however, that the exchange offers will be
consummated on the proposed terms or that we will have sufficient cash to meet
our operating needs. In addition, financing of strategic acquisitions is
expected to require the issuance of additional debt and equity securities or
other consideration, subject to the restrictions in the senior credit facility,
the indenture governing the new senior secured notes and the loan agreement with
the City of Weirton relating to the new secured series 2002 bonds. We can make
no assurance that additional financing or other sources of funds sufficient to
fund acquisitions or targeted investments will be available to us.

If we do not successfully complete the exchange offers, we will not make
scheduled cash interest payments for a period of at least one year on any
outstanding notes and series 1989 bonds under our voluntary financing
restructuring plan as presented to our senior bank lenders and as reflected in
our senior credit facility. Thereafter, any interest payments will be made to
the extent funds are available and provided that these payments are included in
the reserve under our senior credit facility as described above. Failure to pay
interest on the outstanding notes and series 1989 bonds would result in an event
of default and may cause an acceleration of the outstanding notes and series
1989 bonds, unless the payment defaults were cured. In addition, an acceleration
event that results in an event of default under our outstanding notes and series
1989 bonds would constitute a default under our senior credit facility. In such
circumstances, we may have to seek bankruptcy protection or commence liquidation
proceedings.

IMPACT OF CRITICAL ACCOUNTING POLICIES, ESTIMATES AND RECENT ACCOUNTING
PRONOUNCEMENTS

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.

In September 2000, SFAS No. 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities -- a replacement of FASB
Statement No. 125" was issued. SFAS No. 140 revises criteria for accounting for
asset securitization, other financial-assets transfers, and collateral and
introduces new disclosures, but otherwise carries forward most of SFAS No. 125's
provisions without amendment. SFAS No. 140 has an immediate impact through new
disclosure requirements and amendments of the collateral provisions of SFAS No.
125. These changes must be applied for transactions occurring after March 31,
2001, except for certain required disclosures which must be applied for fiscal
years ending after December 15, 2000. The required disclosures are included in
our consolidated financial statements.

In June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations," SFAS No. 142, "Goodwill and Other Intangible Assets,"
and SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 141
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001. We do not believe that the
prospective adoption of this standard will have a material impact on our
consolidated results.

SFAS No. 142 changes the accounting for goodwill and certain other
intangible assets from an amortization method to an impairment only approach.
The Company will adopt SFAS No. 142 effective January 1, 2002. At December 31,
2001, the Company had no goodwill or non-goodwill intangible assets recorded on
its books.

SFAS No. 143 addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. It applies to legal obligations associated with the
retirement of long-lived assets that result from the acquisition, construction,
development and/or the normal operation of a long-lived asset. We are required
to adopt this standard on January 1, 2003 and are preparing a plan for
implementation.

In August 2001, the Financial Accounting Standards Board issued SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No.
144 addresses financial accounting and reporting for the impairment or disposal
of long-lived assets. We are required to adopt this standard in fiscal years
beginning after December 15, 2001 and are preparing a plan for implementation.

35

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The fair values of cash and cash equivalents, receivables and accounts
payable approximated carrying values and were relatively insensitive to changes
in interest rates at December 31, 2001 due to the short term maturity of these
instruments.

We had the following financial liabilities (where fair value differed from
carrying value) as of December 31, 2001:

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

36

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO THE BOARD OF DIRECTORS OF
WEIRTON STEEL CORPORATION:

We have audited the accompanying consolidated balance sheets of Weirton
Steel Corporation (a Delaware corporation) and subsidiaries as of December 31,
2001 and 2000, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 2001. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

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

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

/s/ ARTHUR ANDERSEN LLP
--------------------------------------
Arthur Andersen LLP
Pittsburgh, Pennsylvania
January 24, 2002

37

WEIRTON STEEL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

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

WEIRTON STEEL CORPORATION

CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these statements.
39

WEIRTON STEEL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these statements.
40

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41

WEIRTON STEEL CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The accompanying notes are an integral part of these statements.

42

43

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

NOTE 1

BASIS OF PRESENTATION

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

In the Company's consolidated balance sheets, MetalSite is accounted for
under the equity method as of December 31, 2001 and 2000. MetalSite's results of
operations are consolidated with the Company's results through December 29,
1999, and were reported under the equity method thereafter until the Company
wrote-off its investment in the first quarter of 2001. See Note 20.

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.

NOTE 2

ORGANIZATION AND BACKGROUND

Background

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

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

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

Current Conditions and Management's Plan

The Company incurred a net loss for the year ended December 31, 2001 of
$533.3 million and had a total stockholders' deficit of $469.6 million as of
that date. Recessionary conditions continue to prevail in the U.S. domestic
steel industry, materially and adversely affecting the Company and its
competitors. There have been favorable signs of improvement in these market
conditions in early 2002. Management's 2002 operating plan is based on further
improvements in market conditions within the U.S. domestic steel industry.

44

Representatives of an informal committee composed of institutional holders
of 70.1% of the aggregate principal amount outstanding of the 11 3/8% Senior
Notes due 2004 and 46.5% of the aggregate principal amount outstanding of the
10 3/4% Senior Notes due 2005 contacted the Company in November 2001 and
negotiated the terms of an offer to exchange outstanding senior notes for a
combination of 10% Senior Secured Notes due 2008 and Series C preferred stock.
The City of Weirton is also offering to exchange all of its outstanding
Pollution Control Revenue Refunding Bonds (Weirton Steel Corporation Project)
Series 1989 due 2014 for Secured Pollution Control Revenue Refunding Bonds
(Weirton Steel Corporation Project) Series 2002 due 2012. Each exchange offer is
conditioned on the consummation of the other exchange offer.

During its negotiations with representatives of the informal committee of
institutional holders, the Company has not made scheduled interest payments of
$6.5 million on the 10 3/4% Senior Notes due 2005, which were due December 1,
2001, or scheduled interest payments of $7.0 million on the 11 3/8% Senior Notes
due 2004, which were due January 1, 2002. Failure to make these payments
constituted events of default under the indentures governing the senior notes.
Thus, the notes have been classified as current in the accompanying balance
sheet. As a result of this event of default, either the trustee for the senior
notes or holders of not less than 25% in aggregate principal amount of the
senior notes may declare the entire principal of all the notes immediately due
and payable by notifying the Company in writing.

Prior to the commencement of the exchange offer, the Company will enter
into forbearance and lock-up agreements with holders of a majority of the
outstanding senior notes.

The closing of these exchange offers is a critical part of a strategic plan
to reduce operating costs, improve liquidity and working capital position,
restructure long-term debt and fundamentally reposition the business to focus on
the production and sale of tin mill products and other higher margin sheet
products.

If the Company is unable to close the exchange offers, it may have to seek
bankruptcy protection or commence liquidation or administrative proceedings. In
that case, owners of the outstanding senior notes and series 1989 bonds may only
receive repayments of little or none of the principal amount of their notes or
bonds. In a bankruptcy proceeding, the Company's ability to reposition its
business would be significantly impaired, delayed, or may never occur.

The Company's strategic plan has five integral steps and began to recognize
the benefits of the first three steps in the fourth quarter of 2001:

- reducing operating costs on an annual basis through the full
implementation of a cost savings program which includes a workforce
reduction, reductions to employee benefits costs and other operating cost
savings, which became effective in late October 2001;

- improving liquidity and long-term supplier relationship through financing
programs entered into primarily with the Company's vendors, including
over 60 suppliers, in later October 2001 and through ongoing negotiations
with other suppliers of services and raw materials;

- increasing borrowing availability and liquidity through the refinancing
of the Company's bank credit and asset securitization facilities, which
became effective in October 2001;

- restructuring long-term debt and lowering our debt service costs through
the exchange offers and the series 1989 bonds exchange offer in order to
increase liquidity and financial flexibility, as well as to provide
greater overall financial stability and to permit the fundamental
repositioning of the Company's business through strategic acquisition and
target investments; and

- fundamental repositioning of the Company's business to focus on tin mill
and other higher margin sheet products and significantly reduce the
Company's presence in the commodity flat-rolled product market through
strategic acquisition and targeted investments and further improvements
to the Company's operating cost structure by increasing the use of its
hot strip mill capacity dedicated to tolling or converting stainless
steel slabs and increasing the proportion of its coils used in its
downstream finishing operations in the production of tin mill and other
higher margin value-added products.

45

The consummation of the exchange offers to restructure our long-term debt
is the critical next step in the Company's strategic plan. If the Company is
unable to reduce its current debt obligations and extend debt maturities on the
outstanding notes and bonds through the exchange offers, and thus improve its
liquidity and financial stability, it may be unable to attract the necessary
outside debt or equity financing needed to implement the final step of its plan,
the fundamental repositioning of its business through strategic acquisitions and
new investments. If the Company is not successful in repositioning and achieving
its 2002 operating plan and its strategic plan, the corporate restructuring and
refinancing steps that it has taken to date may be inadequate to ensure its
continued viability and competitiveness.

Employees

Substantially all of the Company's employees participate in the 1984 ESOP
and the 1989 ESOP which owned approximately 19% of the issued and outstanding
common shares and substantially all the shares of the Company's preferred stock
as of December 31, 2001. The shares of common stock and preferred stock held by
the 1984 ESOP and the 1989 ESOP collectively represent 40% of the voting power
of the Company's voting stock as of December 31, 2001.

In June 2001, the Company and four bargaining units covering all
represented employees ratified labor agreements which extend through September
1, 2002. The Company and the bargaining units reopened and modified the
agreements to allow for the necessary workforce reductions to implement the
Company's planned employment cost savings program. The new agreements extend
through at least March 2004. They contain workrule and retirement provisions
necessary to achieve the workforce reductions that are part of the Company's
operating cost savings program. The new agreements also provide for a $1.00 per
hour wage increase beginning in April 2003. Approximately 86% of the Company's
workforce is covered under these collective bargaining agreements.

Other

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

NOTE 3

SIGNIFICANT ACCOUNTING POLICIES

Cash

The liability representing outstanding checks drawn against a zero-balance
general disbursement bank account is included in accounts payable for financial
statement presentation. Such amounts were $4.8 million and $8.6 million as of
December 31, 2001 and 2000, respectively.

In conjunction with its senior credit facility, the Company has entered
into arrangements that require it to utilize all available cash to pay down
amounts outstanding under its senior credit facility. Cash needs are funded via
issuances from the senior credit facility. The December 31, 2001 cash balance of
$5.7 million is the result of amounts received from customers that had not yet
been transferred to pay down amounts outstanding under the senior credit
facility and certain required compensating balances. See Note 6.

Cash Equivalents

Cash equivalents, which consist primarily of certificates of deposit,
commercial paper and time deposits, are stated at cost, which approximates fair
value. For financial statement presentation, the Company considers all highly
liquid investments purchased with a maturity of 90 days or less to be cash
equivalents.

Inventories

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

46

Property, Plant and Equipment

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

Depreciation of steelmaking facilities is determined by the
production-variable method which adjusts straight-line depreciation to reflect
actual production levels. The cost of relining blast furnaces is amortized over
the estimated production life of the lining. All other assets are depreciated on
a straight-line basis.

Senior Credit Facility

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

Employee Stock Ownership Plan (ESOP) Accounting

The Company recognizes as compensation expense an amount based upon its
required contributions to the ESOPs. The resulting expense approximates the cost
to the ESOPs for the shares allocated to participants for the period. Shares may
be contributed to the ESOPs by the Company or their purchase may be financed by
the ESOPs. For financed shares, the number of shares allocated to participants
for the period is determined based on the ratio of the period's ESOP debt
principal payment to the total estimated debt principal payments. Shares are
then allocated to individual participants based on the participant's relative
compensation.

Employee Profit Sharing

There were no provisions for employee profit sharing in 2001 and 2000. The
provision for 1999 of $15.5 million for employee profit sharing was calculated
in accordance with the Profit Sharing Plan as amended in 1994.

Research and Development

The Company incurs research and development costs to improve existing
products, develop new products and develop more efficient operating techniques.
The costs are charged to expense as incurred and totaled $1.0 million, $2.7
million and $2.0 million in 2001, 2000 and 1999, respectively.

Shipping and Handling Fees and Costs

In the fourth quarter of 2000, the Company adopted Emerging Issues Task
Force Issue 00-10, "Accounting for Shipping and Handling Fees and Costs" ("EITF
00-10"), which addresses the diversity in the income statement classification of
amounts charged to customers for shipping and handling, as well as for costs
incurred related to shipping and handling. EITF 00-10 requires all amounts
billed to a customer in a sales transaction related to shipping and handling be
classified as revenue and that shipping and handling charges incurred by the
Company not be recorded as a reduction of revenue. Therefore, the Company
reclassified from net sales to cost of sales $42.4 million and $39.0 million for
2000 and 1999, respectively, which represent those shipping and handling charges
incurred by the Company and previously recorded as a reduction of revenue. In
2001, the Company included in sales and cost of sales $42.0 million in shipping
and handling charges that it incurred.

Derivative Instruments

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("Statement 133"). The Statement establishes
accounting and reporting standards requiring that every derivative instrument

47

(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair value. The impact of the Company's implementation of Statement 133,
effective January 1, 2001, was immaterial to the Company's financial position.

Revenue Recognition

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

NOTE 4

INVENTORIES

Inventories consisted of the following:

NOTE 5

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following:

During the fourth quarter of 1999, the Company recognized an asset
impairment charge of $22.5 million related to a slab sizing press. The service
potential of the asset was impaired as a result of changes in world slab markets
and the Company's decision to restart the No. 4 Blast Furnace. Further, the
Company terminated discussions with an entity concerning a strategic
combination, which if consummated would have provided support for the viability
of the asset. Given the existing facts and circumstances pertaining to the slab
sizing press, the Company has no plans to utilize the asset. In the event those
facts and circumstances change significantly, the Company may reconsider its
decision.

The fair value was determined based upon the value of individual components
and the absence of opportunities to sell the slab sizing press.

Capitalized interest applicable to facilities under construction for the
year ended December 31, 2000 amounted to $0.2 million. There was no capitalized
interest applicable to facilities under construction for the years ended
December 31, 2001 and 1999.

For the years ended December 31, 2001 and 2000 the Company incurred capital
expenditures of $3.9 million and $7.3 million on a project to install new
equipment related to a new polymer coating process. The Company

48

has temporarily suspended the project. The Company plans to continue
installation of the equipment when resources for capital projects are more
readily available.

NOTE 6

FINANCING ARRANGEMENTS

Debt Obligations

Senior Notes

The indentures governing the senior notes are substantially similar and
contain covenants that limit, among other things, the incurrence of additional
indebtedness, the declaration and payment of dividends and distributions on the
Company's capital stock, investments in joint ventures, as well as mergers,
consolidations, liens and sales of certain assets. Representatives of an
informal committee composed of institutional holders of 70.1% of the aggregate
principal amount outstanding of the 11 3/8% Senior Notes due 2004 and 46.5% of
the aggregate principal amount outstanding of the 10 3/4% Senior Notes due 2005
contacted the Company in November 2001 and negotiated the terms of the offer to
exchange the outstanding senior notes for new senior secured notes and Series C
preferred stock. During these negotiations, the Company did not make scheduled
interest payments of $6.5 million on the 10 3/4% Senior Notes due 2005, which
were due December 1, 2001, or scheduled interest payments of $7.0 million on the
11 3/8% Senior Notes due 2004, which were due January 1, 2002. Failure to make
these payments constituted events of default under the indentures governing the
senior notes. As a result of this event of default, either the trustee for the
senior notes or holders of not less than 25% in aggregate principal amount of
the senior notes may declare the entire principal of all the notes immediately
due and payable by notifying the Company in writing.

As of December 31, 2001, the Company's ability to incur additional
indebtedness under the indentures governing the senior notes was limited to
$45.7 million, excluding certain types of permitted indebtedness including
indebtedness under the senior credit facility and the prior Inventory Facility
referred to below. Under covenants affecting the Company's ability to pay
dividends on its common stock, the Company is limited as to the payment of
aggregate dividends, to the greater of (i) $5.0 million or (ii) $5.0 million
plus one-half of the Company's cumulative consolidated net income since March
31, 1993, plus the net proceeds from future issuances of certain capital stock
less certain allowable payments. As of December 31, 2001, pursuant to this
covenant, the Company's ability to pay dividends on its common stock was limited
to $5.0 million. Upon the occurrence of a change in control, as defined under
the indentures, holders of the senior notes will have the option to cause the
Company to repurchase their senior notes at 101% of the principal amount, plus
accrued interest to the date of repurchase.

The city of Weirton is offering to exchange the outstanding series 1989
bonds for new secured series 2002 bonds. The Company has made all scheduled
interest payments on the series 1989 bonds through November 1, 2001. The series
1989 bonds and the senior notes contain cross-acceleration covenants. Though the
senior notes

49

had an event of default, no acceleration action has been made. Thus, the series
1989 bonds are classified as long term debt.

The Company has $122.7 million in principal payments due in 2004, $121.3
million due in 2005 and $56.3 million due thereafter.

Senior Credit Facility

The new senior credit facility was established on October 26, 2001 by
agreement with Fleet Capital Corporation, as agent for itself and other lenders,
Foothill Capital Corporation, as syndication agent, the CIT Group/Business
Credit, Inc. and GMAC Business Credit LLC, which serve as co-documentation
agents for the facility, and Transamerica Business Capital Corporation. The
proceeds from the facility were used to refinance the existing Inventory
Facility and Receivables Participation Agreements. Through this new asset-based
facility, the Company is able to more effectively borrow against its current
assets and generate additional availability as compared to its prior facilities
to provide it with greater liquidity for its working capital requirements and
general corporate purposes. The new senior credit facility has resulted in
additional availability of approximately $30 to $35 million (at existing current
asset levels). At December 31, 2001, the Company had borrowed $92.1 million
under the senior credit facility and had utilized an additional $9.5 million
under the letter of credit sub-facility. After consideration of amounts
outstanding under the letter of credit subfacility, the Company had $27.9
million available for additional borrowing under the facility.

The senior credit facility, which matures on March 31, 2004, consists of up
to $200.0 million of available loans secured by accounts receivable (including
related general intangibles) and inventory, including a $25.0 million letter of
credit subfacility and a $25.0 million tandem mill subfacility, which in
addition to the collateral described above is also secured by the real property
constituting the No. 9 tin tandem mill and all equipment and fixtures located on
that property. Although a portion of the senior credit facility is secured by
the No. 9 tin tandem mill, the Company is permitted, with reasonable consent of
the lenders under the facility, to enter into a sale and leaseback or other
financing involving the No. 9 tin tandem mill for amounts in excess of $30.0
million. However, if the Company does enter into such a financing transaction,
the required reserve of $20.0 million against the borrowing base will increase
to $30.0 million. The Company has no present intention to enter into a
transaction involving the No. 9 tin tandem mill.

Amounts available to the Company from time to time under the senior credit
facility are based upon the level of qualifying accounts receivable and
inventory subject to a minimum availability reserve. Borrowings under the senior
credit facility bear interest at variable rates on the basis of either LIBOR or
the prime rate announced from time to time by Fleet National Bank, at the
Company's option, plus an applicable margin. In addition to such interest, the
Company will also pay a commitment fee equal to 0.50% per annum on unused
portions of the facility. The senior credit facility also contains covenants
that require that the Company demonstrate a certain level of liquidity resulting
from the Company's vendor financing programs and certain levels of operating
cost savings from its restructuring plan.

Under the senior credit facility, following consummation of the exchange
offers on satisfactory terms and conditions, the Company will be able to make
scheduled semi-annual cash interest payments on the new senior secured notes and
in respect of the new secured series 2002 bonds, provided that these cash
payments may be reserved against availability under the facility. The reserve
could, if fully implemented, reduce amounts available under the facility up to a
maximum of approximately $8 million in any six month period, assuming valid
tender of all the aggregate principal amount of the outstanding notes and
Pollution Control Bonds. In the event that less than all of the aggregate
principal amount of the outstanding notes and Pollution Control Bonds are
tendered in the exchange offers, the Company is permitted to make cash interest
payments on any remaining outstanding notes and Pollution Control Bonds of up to
$4.0 million in any year subject to similar reservation against availability
under the facility.

As part of the senior credit facility, and in conjunction with banking
arrangements entered into with Fleet, all available cash is used to pay down
amounts outstanding under the senior credit facility. Cash needs are funded via
issuance from the senior credit facility. Because the Company had not
transitioned all deposit accounts to Fleet at December 31, 2001, the Company had
a cash balance of $5.7 million. The amount includes balances

50

received into lockboxes and other deposit accounts that had not yet been
transferred to Fleet to pay down the senior credit facility.

Vendor Financing Programs

The Company has also obtained assistance from its key vendors and others
through its vendor financing programs to improve its near term liquidity. Under
the vendor financing programs, the Company has negotiated arrangements with over
60 vendors, utilities and local entities in the form of purchase credits or
other concessions and improvements in terms to achieve one-time cash benefits of
at least $40 million in the aggregate. The vendor financing programs have been
structured principally as a sale and leaseback transaction of the Company's
Foster-Wheeler Steam Generating Plant, including the related real property and
certain related energy generating equipment, direct advances or concessions by
certain vendors, and the transfer of a major operating lease to a public entity
(eliminating the Company's need to secure its obligations under the lease with a
letter of credit). In addition, the Company expects to enter into a sale and
leaseback of the general office building and research and development building.
To facilitate the sale-leaseback of the steam generating property, the assets
were transferred to FW Holdings, Inc., a wholly owned subsidiary of the Company.
Because the steam generating property is integral to the Company's operation,
the transaction is accounted for as a financing. The Company records a long-term
lease obligation in the amount of proceeds as they are received. The obligations
bear an implicit interest rate of 12% through 2007 and 16% from 2008 to 2012.
The Company will begin making installment payments in the first quarter of 2003.
The amount of payments will be dependent on the total proceeds. The Company
expects the payments to be $1.5 million based on $30.0 million in proceeds. The
Company will have the option to terminate the lease and repurchase the assets in
2007 at the unamortized lease balance.

In February 2002, the West Virginia Economic Development Authority and one
of the Company's vendors reached an agreement assigning the rights of an
operating lease from the vendor to the WVEDA. As part of this arrangement, the
WVEDA has agreed to remove the requirement to have future lease payments
supported by a letter of credit and, consequently, removal of the letter of
credit requirement will result in additional availability under the Company's
senior credit facility of $8.4 million.

Receivables Participation Agreements

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

As of December 31, 2000, $25.0 million of funded participation interest had
been sold to the banks under the WRI Amended Receivables Facilities. Because
proceeds obtained under the WRI Amended Receivables Facilities were obtained by
selling a participation interest in the Company's accounts receivable, as
opposed to borrowing money using accounts receivable as collateral, the proceeds
were recorded as a reduction of the accounts receivable balance. For 2001, 2000
and 1999, the Company recognized $1.1 million, $0.3 million and $0.6 million,
respectively, in discount expense from the sale of the funded participation
interest. Discount expense was recorded as a reduction to other income for
financial reporting purposes. As of December 31, 2000, $8.8 million in letters
of credit under a subfacility were in place. After sale of funded participation
interests and amounts in place under the letter of credit subfacility, the base
amount available for cash sale under both facilities was approximately $3.6
million at December 31, 2000.

The Company values its accounts receivable based on the face value of
invoices outstanding with allowances for uncollectible accounts and other
potential claims and deductions. The Company valued the portion of the
participation interest it retained by WRI as its outstanding accounts receivable
balance, after allowances, less cash

51

received in exchange for the participation interest sold. The participation
interest sold to the banks was secured by the interest retained by WRI.

The key assumption used in valuing the participation interest retained by
WRI is the allowance recorded against its accounts receivable. At December 31,
2000, the Company had recorded a valuation allowance of $7.8 million. Any
hypothetical difference between the valuation allowance recorded and the actual
credit losses and other deductions will entirely affect WRI's accounts
receivable participation because that interest secures the participation
interest held by the banks. During the year ended December 31, 2000, the Company
recorded net losses for uncollectible accounts of $6.2 million.

Inventory Facility

In November 1999, the Company and a bank agreed to a new working capital
facility of up to $100.0 million secured by a first priority lien on the
Company's inventory (the "Inventory Facility"). Upon the consummation of the
senior credit facility, the Inventory Facility was closed and the amounts
outstanding were refinanced through the new senior credit facility. Borrowings
under the Inventory Facility were based upon the levels and composition of the
Company's inventory. The amount available for borrowing was limited by both the
Inventory Facility and the Company's senior notes indentures which permit
borrowing only up to 50% of the Company's inventory balance. At the option of
the Company, the Inventory Facility bore interest at a prime or LIBOR rate.
Based upon the amount outstanding, 0.00% to 2.50% was added to the prime or
LIBOR rate. During 2001, the Company incurred interest expense of $2.9 million
related to the facility. On October 26, 2001, prior to refinancing the facility,
borrowings under the facility were $47.8 million. At December 31, 2000, the
Company had not borrowed any amounts under the Inventory Facility.

The Company incurred a $1.0 million extraordinary loss on early
extinguishment of debt pertaining to costs incurred in the closing of the
inventory facility.

Leases

The Company uses certain lease arrangements to supplement its financing
activities.

Rental expense under operating leases was $5.3 million, $9.0 million and
$7.8 million for the years ended December 31, 2001, 2000 and 1999, respectively.
The minimum future lease payments under noncancelable operating leases are $5.4
million, $4.0 million, $2.6 million, $1.1 million and $0.4 million for the years
ending 2002 through 2006, respectively, and $13.4 million thereafter.

NOTE 7

EMPLOYEE RETIREMENT BENEFITS

In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosure
about Pensions and Other Postretirement Benefits." SFAS No. 132 establishes
amended standards for pension and other postretirement benefits disclosures. The
standard disclosures established in SFAS No. 132 are included herein.

Pensions

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

The Company's funding policy is influenced by its general cash requirements
but, at a minimum, complies with the funding requirements of federal laws and
regulations. There were no employer contributions to the Pension Plan during
2001, 2000 and 1999. The Pension Plan's assets are held in trust, the
investments of which consist primarily of common stocks, fixed income securities
and short term investments.

52

Benefits Other Than Pensions

The Company provides healthcare and life insurance benefits to
substantially all of the Company's retirees and their dependents. The healthcare
plans contain cost-sharing features including co-payments, deductibles and
lifetime maximums. The life insurance benefits provided to retirees are
generally based upon annual base pay at retirement for salaried employees and
specific amounts for represented employees.

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

The medical cost and administrative expense rates used to project
anticipated cash flows and measure the Company's postretirement benefit
obligation as of December 31, 2001, 2000 and 1999 are as follows:

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

54

Other

During the year ended December 31, 2001, the Company was required to record
an additional minimum pension liability of $19.7 million. In accordance with
SFAS No. 87 "Employers Accounting for Pensions," the offset to this additional
minimum pension liability was recorded as an intangible asset as the additional
minimum liability did not exceed unrecognized prior service costs.

As a condition of the purchase of the Company's assets from National Steel,
National Steel agreed to retain liability for pension service and the cost of
life and health insurance for employees of the Company's predecessor business
who retired through May 1, 1983. National Steel also retained the liability for
pension service through May 1, 1983 for employees of the predecessor business
who subsequently became active employees of the Company.

NOTE 8

POSTEMPLOYMENT BENEFITS

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

Actuarial assumptions and demographic data, as applicable, that were used
to measure the postemployment benefit obligation as of December 31, 2001 and
2000, were consistent with those used to measure pension and other
postretirement benefit obligations for each respective year. As of December 31,
2001 and 2000, the Company had accrued $36.9 million and $31.9 million,
respectively, for postemployment benefit obligations.

NOTE 9

RESTRUCTURING CHARGES

As discussed in Note 2, the Company has initiated a five part strategic
restructuring plan. As part of that plan, the Company announced an operating
cost reduction program in 2001. In conjunction with that program, the Company's
management and the ISU negotiated new labor agreements that became effective in
late October 2001. The agreement for production and maintenance employees
provided for the permanent elimination of a minimum of 372 jobs. The office,
clerical and technical agreement provides for the right to eliminate a minimum
of 78 jobs. The Company also streamlined its management structure by eliminating
non-core and redundant activities resulting in a reduction of 100 management
positions.

These workforce reductions were a key component to the operating cost
savings program. Having identified the specific positions and job classes that
were subject to the reduction and having notified all employees that were
potentially subject to reduction, the Company recorded a fourth quarter
restructuring charge of $129.0 million. The fourth quarter restructuring charge
consisted of a $90.0 million increase in our accrued pension cost and a $28.6
million increase in our liability for other postretirement benefits. Also as
part of the fourth quarter restructuring charge, the Company recorded a $7.7
million liability to reimburse the National Steel Pension Plan for Weirton
Employees. As part of the agreement under which the Company acquired its assets
from National Steel Corporation in 1984, National Steel agreed to assume the
responsibility for pension benefits related to employees' service prior to
acquisition of the facilities by the Company. However, under the same agreement,
the Company is required to partially reimburse the National Steel Pension Plan
for Weirton Employees if employees are induced into retiring early. The
remaining $2.7 million of the fourth quarter restructuring charge was related to
other separation and severance benefits provided to the affected employees.

In March 2001, prior to the initiation of the Company's strategic
restructuring plan, the Company established and implemented the 2001 Workforce
Downsizing Program. The program reduced non-represented staff employees by
approximately 10%. As a result the Company recorded a first quarter
restructuring charge of $12.3 million consisting of an increase in accrued
pension cost of $5.4 million and an increase in our liability for other
postretirement benefits of $3.9 million. The remaining $3.0 million consisted of
a $0.6 million liability to reimburse the National Steel Pension Plan for
Weirton Employees and $2.4 million of other separation and severance benefits
provided to the affected employees. As of December 31, 2001, the Company had
paid

55

$1.1 million related to the restructuring charges and had accrued $4.0 million
of severance and other benefits to be paid in the future.

NOTE 10

INCOME TAXES

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

As of December 31, 2001, the Company had available, for federal and state
income tax purposes, regular net operating loss carryforwards of approximately
$465.9 million expiring in 2007 through 2021; an alternative minimum tax credit
of approximately $13.5 million; and general business tax credits of
approximately $4.7 million expiring in 2002 to 2005.

In 2001, 2000 and 1999, as a result of its deferred tax attributes, the
Company did not generate any liability for regular federal income tax. In 2001
and 2000, the Company did not generate any liability for alternative minimum
tax. However, in 1999, the Company did generate a liability for alternative
minimum tax of $8.4 million.

In the absence of specific favorable factors, application of FASB Statement
No. 109, "Accounting for Income Taxes," requires a 100% valuation allowance for
any deferred tax asset when a company has cumulative financial accounting
losses, excluding unusual items, over several years. Accordingly, the Company
has provided a 100% valuation allowance for its deferred tax assets as of
December 31, 2001, which increased the non-cash provision for income taxes and
net loss for the year by $153.8 million. The Company will continue to provide a
100% valuation allowance for the deferred income tax assets until it returns to
an appropriate level of taxable income.

The ultimate realization of the net deferred tax assets depends on the
Company's ability to generate sufficient taxable income in the future. The
Company has tax planning opportunities that could generate taxable income,
including sales of assets and timing of contributions to the pension fund. If
the Company's current plans and strategies to improve profitability for 2002 and
beyond are successful, the Company believes that its deferred tax assets may be
realized by future operating results and tax planning strategies. Additionally,
the Company

56

intends to utilize such deferred tax assets to offset any taxable income
resulting from the exchange offers discussed in Note 2. If the Company is able
to generate sufficient taxable income in the future, the Company will reduce the
valuation allowance through a reduction of income tax expense.

The elements of the Company's deferred income taxes associated with its
results for the years ended December 31, 2001, 2000 and 1999, respectively, are
as follows:

The total income tax provision (benefit) recognized by the Company for the
years ended December 31, 2001, 2000 and 1999, reconciled to that computed under
the federal statutory corporate rate follows:

NOTE 11

REDEEMABLE STOCK

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

NOTE 12

STOCK PLANS

The Company has two stock option plans (the "1987 Stock Option Plan" and
the "1998 Stock Option Plan"), an employee stock purchase plan (the "2000
Employee Stock Purchase Plan") and deferred and stock compensation plans for
nonemployee members of the board of directors (the "Directors' Deferred
Compensation Plan" and the "Directors' Stock Compensation Policy").

1987 and 1998 Stock Option Plans

The Company may grant options for up to 750,000 shares under the 1987 Stock
Option Plan as amended. Under the plan, the option exercise price equals the
stock's market price on the date of grant. Generally, the

57

options granted under the 1987 Stock Option Plan vest in one-third increments
beginning on the date of grant, with the remaining two-thirds becoming
exercisable after the first and second years. The options expire approximately
10 years from the date of grant.

During 2000, the 1998 Stock Option Plan was amended to increase the number
of options the Company may grant from 3,250,000 shares to 6,500,000 shares. The
option price and vesting requirements are determined by a Stock Option Committee
appointed by the board of directors. The options granted during 2001 under the
1998 Stock Option Plan vest in one-third increments beginning on the date of
grant, with the remaining two-thirds becoming exercisable after the first and
second years. The options expire 10 years from the date of grant. The options
granted during 2000 under the 1998 Stock Option Plan vest on May 23, 2010 and
expire the following day. The options granted during 2000 are subject to
accelerated vesting based on the continued employment of the recipients and the
attainment of certain market prices for the Company's common stock. The stock
prices necessary for accelerated vesting range from $6.12 to $12.41 and must be
maintained for 20 consecutive trading days for accelerated vesting to occur.
Options that vest pursuant to the accelerated vesting provisions expire on May
24, 2010. All the options granted during 1999 and 1998 under the 1998 Stock
Option Plan had vested as of December 31, 2000 and will expire on June 24, 2002.

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

The following table represents additional information with regard to the
1987 and 1998 Stock Option Plans at December 31, 2001:

58

The fair value of each stock option grant is estimated on the date of the
grant using the Black-Scholes option-pricing model with the following weighted
average assumptions for grants in 2001, 2000 and 1999:

2000 Employee Stock Purchase Plan

In May 2000, the Company replaced the 1994 Employee Stock Purchase Plan,
which expired in 1999, with the 2000 Employee Stock Purchase Plan. The Company
reserved 1.0 million shares of its common stock to be offered over a four and a
half year period beginning July 1, 2000 to eligible employees under its 2000
Employee Stock Purchase Plan. The 2000 Employee Stock Purchase Plan provides for
participants to purchase the Company's common stock at 85% of the lesser of the
stock's closing price at the beginning or the end of each year. (For 2000, 85%
of the lesser of the stock's closing price on July 1, 2000 or December 31, 2000
was used to determine the purchase price.) As of December 31, 2001 and 2000,
339,976 and 59,978 shares respectively, valued at approximately $0.1 million
were issuable in accordance with the 2000 Employee Stock Purchase Plan.

Board of Directors' Deferred Compensation Plan

During 1991, the Company adopted a deferred compensation plan (the
"Directors' Deferred Compensation Plan") to permit nonemployee members of the
board of directors to receive shares of common stock in lieu of cash payments
for total compensation or a portion thereof for services provided in their
capacity as a member of the board of directors. The Company reserved 445,000
shares for issuance under the Directors' Deferred Compensation Plan. During
2000, the Directors' Deferred Compensation Plan was modified to allow directors
to either defer shares issuable to a non-qualified trust maintained by an
institutional trustee until such time as the shares are distributed to the
directors or to defer share equivalents to a separate account maintained by the
Company. The cost of the shares held in the trust are accounted for as a
reduction to equity. The liability to compensate the directors is retained until
such time as the shares are issued from the trust. The Directors' Deferred
Compensation Plan provides for the stock portion of the directors' compensation
to be valued at 90% of the lesser of the stock's average trading price at the
beginning or the end of each year. As of December 31, 2001, $0.2 million was
issuable to the directors who elected to defer compensation to the trust for
2001, and a total of 336,399 shares with a cost of $0.6 million was held by the
trust for future distribution. As of December 31, 2001, 92,208 shares valued at
$0.1 million were issuable and deferred by directors choosing not to have shares
issued to the Company maintained trust.

Board of Directors' Stock Compensation Policy

Under a stock compensation policy initiated in 1998, the Company's
non-employee directors receive a portion of their annual retainers payable in
shares of the Company's common stock. The directors may elect to defer all or a
portion of the shares under the Directors' Deferred Compensation Plan. As of
December 31, 2001,

59

no shares were issuable to non-employee directors; all shares otherwise
attributable to retainers for 2001 were deferred under the Directors' Deferred
Compensation Plan.

NOTE 13

STOCK BASED COMPENSATION

The Company accounts for its stock plans under Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," under which
compensation costs, if applicable, have been determined. Had compensation costs
for these plans been determined consistent with Statement of Financial
Accounting Standards No. 123, "Accounting for Stock Based Compensation," (SFAS
No. 123), net income (loss) and earnings per share would have been reduced to
the following:

Because the SFAS 123 method of accounting has not been applied to options
granted prior to January 1, 1995, the resulting pro forma compensation costs may
not be representative of that expected in future years.

NOTE 14

ESOP FINANCING

The purchase by the 1989 ESOP of the Series A Preferred was financed
through the issuance of a $26.1 million promissory note to the Company payable
ratably over a 10 year period. The Company's contribution to the 1989 ESOP for
the principal and interest components of debt service was immediately returned.
As such, the respective interest income and expense on the ESOP notes were
entirely offset within the Company's net financing costs. As of December 31,
2001, 1,416,214 shares of Series A Preferred were allocated to participants of
the 1989 ESOP.

NOTE 15

REPURCHASES OF COMMON STOCK FOR TREASURY

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

NOTE 16

EARNINGS PER SHARE

For the years ended December 31, 2001 and 2000, basic and diluted earnings
per share were the same; however, securities totaling 1,515,275 shares and
2,028,933 shares, respectively, were excluded from the diluted earnings per
share calculation due to their anti-dilutive effect. For 2001, 2000 and 1999,
there were an additional

60

2,363,194, 722,149 and 3,430,000 options, respectively, outstanding for which
the exercise price was greater than the average market price. The following
represents a reconciliation between basic earnings per share and diluted
earnings per share for the year ended December 31, 1999:

NOTE 17

ENVIRONMENTAL COMPLIANCE, LEGAL PROCEEDINGS AND COMMITMENTS AND CONTINGENCIES

Environmental Compliance

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

The Company continued its environmental remediation and regulatory
compliance activities required under its 1996 consent decree with federal and
state environmental authorities that had settled certain water discharge, air
emissions and waste handling enforcement issues. Under the consent decree, the
Company committed to undertake environmental upgrade and modification projects
totaling approximately $19.8 million, of which $16.3 million had been spent
through December 31, 2001.

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

At December 31, 2001, the Company had accrued approximately $9.0 million
related to the consent decree, the corrective action order, and other
environmental liabilities.

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

In March 2002, National Steel filed for protection under federal bankruptcy
law. The Company had no significant receivables from National Steel at the time
of its filing. Therefore, the filing had no material impact on the Company's
financial position, but it may affect the Company's ability to seek and obtain
reimbursement or indemnification from National Steel for environmental
remediation activity.

Legal Proceedings

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

61

management establishes or adjusts financial provisions and reserves for
contingencies in accordance with SFAS No. 5, "Accounting for Contingencies."

Commitments and Contingencies

The Company obtains insurance for automobile, general liability and
property damage. However, the Company has elected to retain a portion of
expected losses for property damage and general liability claims through the use
of deductibles. Additionally the Company's health care and workers' compensation
plans are self insured. Provisions for losses under those programs, other than
post-retirement benefits costs, which are actuarially determined, are recorded
based on estimates (utilizing claims experience and other data), of the
aggregate liability for claims incurred and claims incurred but not reported.

In October 1991, the Company entered into a supply agreement with a
subsidiary of Cleveland-Cliffs Inc. to provide the majority of its iron ore
pellet requirements beginning in 1992 and extending through 2006. The Company
has a contract with a subsidiary of Cleveland-Cliffs Inc. to purchase 100% of
its standard and flux grade iron ore pellet requirements. This contract provides
for the supply of a minimum annual tonnage of pellets based on mine production
capacity, with pricing primarily dependent on mine production costs. The balance
of the pricing for the Company's requirements fluctuates based on world pellet
market prices. Cleveland-Cliffs is one of the participating suppliers in the
Company's vendor financing programs.

The Company has entered into a memorandum of understanding with U.S. Steel
to provide it with a minimum of 650,000 net tons of coke in 2002 and 500,000 net
tons of coke in each of 2003 and 2004, with the option to buy incremental volume
so that total purchases approximate 60% of the Company's requirements, under
which the price of coke fluctuates on an annual basis based on the market price
for coke. In addition the Company has negotiated a contract for 360,000 net tons
per year from another supplier for additional requirements from overseas
sources. In addition, the Company is also evaluating several potential coke
plant acquisitions. The Company obtains its limestone, tin, zinc, scrap metal
and other raw materials requirements from multiple sources.

NOTE 18

OPERATING SEGMENT INFORMATION

In June of 1997, the FASB issued SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information." SFAS No. 131 establishes standards
for the way public companies report information about operating segments, and it
establishes standards for related disclosures about products, services,
geographic areas and major customers.

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

NOTE 19

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

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

Cash and Equivalents

The carrying amount approximates fair value because of the short maturity
of those investments.

Redeemable Preferred Stock

The fair value of the Series A Preferred stock was determined based upon an
independent appraisal performed as of December 31, 2001 and 2000.

62

Long Term Debt Obligations

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

The estimated fair values of the Company's financial instruments are as
follows as of December 31, 2001 and 2000, respectively:

Significant Group Concentrations of Credit Risk

One customer accounted for 15% and 10% of net sales in 2001 and 1999,
respectively. Two customers accounted for 23% of trade receivables as of
December 31, 2001.

NOTE 20

SUBSIDIARIES AND JOINT VENTURES

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

MetalSite

MetalSite, Inc. ("MetalSite") was originally formed as a partnership in
November 1998 to develop and offer a secure web-based marketplace for the online
purchase of metal products from various suppliers and to provide the latest
industry news and information.

Prior to December 29, 1999, the Company had a majority interest in
MetalSite. On December 29, 1999, the Company sold a portion of its investment in
MetalSite to Internet Capital Group, Inc., resulting in a net pretax gain of
$170.1 million. MetalSite's results of operations are consolidated with the
Company's results through December 29, 1999, and are reported under the equity
method thereafter.

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

GalvPro

GalvPro LP ("GalvPro" formerly "GalvStar LP") was formed in 1998 with
affiliates of Dutch steelmaker Koninklijke Hoogovens (now a unit of Corus Group
plc) for the purpose of constructing and operating a 300,000 ton hot-dipped
galvanizing line.

During the first quarter of 2001, the temporary idling of GalvPro's
manufacturing facility, the continued adverse market conditions for galvanized
product and the strategic alternatives being discussed by the Company and Corus
were all factors considered by the Company during its periodic review of its
investment in GalvPro. While the Company's management believed the quality of
GalvPro's property and equipment provided strong potential for future economic
benefit, it also recognized that there was considerable doubt about whether or
not the Company would be able to realize those future benefits. As such, the
Company incurred equity losses, including a charge to write its investment in
GalvPro to zero, of $12.2 million during the first quarter of 2001.

63

In August 2001, GalvPro filed for Chapter 11 bankruptcy. The Company has no
direct liability from GalvPro's filing and therefore continues to carry a zero
balance for its investment in GalvPro as of December 31, 2001.

WeBCo

WeBCo International LLC ("WeBCo") was formed in 1997 with the Balli Group,
plc. The primary function of WeBCo is to market and sell the partners' products
globally. As of December 31, 2001, the Company owned 50% of WeBCo, and the
carrying amount of the Company's investment in WeBCo was $1.1 million.

W&A

W&A Manufacturing LLC ("W&A") was formed in 1998 with ATAS International
for the purpose of manufacturing steel roofing products. As of December 31,
2001, the Company owned 50% of W&A, and the carrying amount of the Company's
investment in W&A was $0.5 million.

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

Related Party Transactions

The Company's purchases of goods and services from unconsolidated
subsidiaries totaled $31.1 million, $27.4 million and $62.6 million in 2001,
2000 and 1999, respectively. The Company's sales of steel to unconsolidated
subsidiaries totaled $9.0 million, $42.8 million and $36.0 million in 2001, 2000
and 1999, respectively. These transactions arose in the ordinary course of
business and were transacted at arms-length. Pursuant to certain service
agreements, the Company provides services to unconsolidated subsidiaries. The
Company billed for these arrangements at amounts approximating the cost to
provide the service. Such amounts totaled $0.5 million in 2001, $0.3 million in
2000, $0.4 million in 1999. At December 31, 2001 and 2000, the Company had
outstanding trade receivables from unconsolidated subsidiaries of $3.0 million
and $3.9 million respectively.

At December 31, 2000 and 1999, MetalSite had borrowed $9.4 million and $3.2
million, respectively, from the Company under a partner loan facility at the PNC
Bank prime interest rate plus 1%. Also at December 31, 2000 and 1999, the
Company had a promissory note from MetalSite for $1.8 million at an 8% fixed
interest rate. The Company's equity in MetalSite's losses was netted against the
Note, the partner loan facility and the promissory note.

In 2000, the Company received a distribution of $1.0 million from WeBCo.
There were no dividends or partnership distributions received from equity
affiliates in 2001 or 1999.

NOTE 21

SALE OF METALSITE INVESTMENT

Prior to December 29, 1999, the Company had a majority interest in
MetalSite. On December 29, 1999, the Company sold a portion of its investment in
MetalSite to Internet Capital Group, Inc. ("ICG") resulting in a net pretax gain
of $170.1 million. MetalSite's results of operations are consolidated with the
Company's results through December 29, 1999, and are reported under the equity
method thereafter.

64

SELECTED QUARTERLY FINANCIAL DATA

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

(1) Includes an asset impairment charge of $22.5 million and a profit sharing
provision of $15.5 million.

(2) Includes gain on sale of investment of $170.1 million.

(3) In accordance with Emerging Issues Task Force Issue 00-10, "Accounting for
Shipping and Handling Fees and Costs," the Company reclassed from net sales
to cost of sales shipping and handling costs incurred by the Company.

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

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

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

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

None.

65

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES OF THE REGISTRANT

DIRECTORS

Pursuant to our restated certificate of incorporation, members of the board
of directors are divided into three classes. Each class serves a three-year
term, and the terms are staggered so that the term of one class expires at each
year's annual meeting of stockholders. The annual meeting for 2001 was not held.
Consequently, the successors for the Class II and Class III directors will be
selected at the annual meeting for 2002, serving two and three year terms,
respectively.

Information with respect to those persons who serve as directors is set
forth below.

THE BOARD OF DIRECTORS: COMMITTEES, MEETINGS AND COMPENSATION

Audit Committee

The audit committee of our board of directors currently is composed of
Messrs. Reins, Burt, D'Anniballe, Sturges and Wise, four of whom are independent
directors. Mr. Reins serves as chairman of the committee. The audit committee
reviews, at least annually, the services performed and to be performed by our
independent public accountants and the fees charged for their services, and, in
that connection, considers the effect of those fees on the independence of the
accountants. The audit committee also discusses with our independent public
accountants and management our accounting policies and reporting practices,
including the impact of alternative accounting policies. The audit committee
also reviews with our internal audit department the scope and results of
internal auditing procedures and the adequacy of accounting and financial
systems and internal controls. The audit committee held five meetings during
2001.

Management Development and Compensation Committee

The management development and compensation committee of our board of
directors currently is composed of Messrs. Reitman, Bozic, Schubert, Whitaker
and Wise. Mr. Reitman serves as chairman of the committee. The management
development and compensation committee held six meetings in 2001.

67

Nominating Committee

The nominating committee of our board currently is composed of Messrs.
Bozic, Glyptis, Walker, Whitaker and Wise. Mr. Bozic serves as chairman of the
committee. The nominating committee identifies and recommends to the board of
directors candidates to be nominated as independent directors. The nominating
committee held three meetings in 2001.

Corporate Responsibility Committee

The corporate responsibility committee of our board currently is composed
of Messrs. Schubert, Burt, D'Anniballe, Doty, Glyptis and Wise. Mr. Schubert
serves as chairman of the committee. The corporate responsibility committee
advises our management concerning matters of public and internal policy with
regard to such matters as governmental and regulatory affairs, safety and health
of employees, charitable contributions and environment, and recommends, for
action by the full board, policies concerning those types of matters where
appropriate. The corporate responsibility committee held one meeting in 2001.

Finance and Strategic Planning Committee

The finance and strategic planning committee of our board currently is
composed of Messrs. Whitaker, Bozic, Burt, Doty, Glyptis, Reins, Reitman,
Sturges and Wise. Mr. Whitaker serves as chairman of the committee. The
committee reviews and confers with management on the following subject matters
in the finance function, including our projected financial condition and
financial plans; our financial policies, including dividend recommendations; the
management and performance of our employee benefit funds; and our policies and
practices on financial risk management.

In the strategic planning area, the committee assists management in the
development of a viable strategic plan including projections of the market and
competitive assessment of our core strengths and weaknesses; identification of
key opportunities and threats; and articulation of our long-range direction,
including action plans addressing both the core business and growth
opportunities. The finance and strategic planning committee held one meeting in
2001.

Meetings and Attendance

Our board of directors held six regular and eight special meetings in 2001.
All directors who served during any portion of 2001 attended at least 75% of the
aggregate of the meetings of the board of directors and board committees
occurring while they served in 2001.

Directors' Compensation

Directors who are not officers or employees of Weirton receive an annual
retainer of $25,000, $10,000 of which is in the form of shares of our common
stock, and the remaining $15,000 of which is payable monthly in cash. Those
directors also receive a meeting fee of $800 for each meeting of the board of
directors attended, together with a meeting fee of $700 for each meeting of a
committee of the board of directors attended. The chairman of each committee is
paid an additional $200 for each meeting chaired. The chairman of the board of
directors serves as a non-executive chairman, devoting substantial time to this
position and receives an annual retainer of $120,000, payable quarterly, but
does not receive additional fees for attendance at meetings of the board or its
committees. Directors who are officers or other employees of Weirton do not
receive a retainer or meeting fees. All directors who are not officers or other
employees of Weirton are eligible to participate in our deferred compensation
plan for directors. The Plan permits participants to defer part or all of their
directors' fees for a specified year. Amounts representing deferred fees are
used to purchase shares of our common stock at 90% of the market price of our
common stock on the first or last trading day of the year, whichever is lower.
As to the portion of the directors' retainer paid in the form of shares of our
common stock and not deferred, pricing is at 100% of the then prevailing market
price of the our common stock. Shares representing amounts of deferred
compensation are held in trust until distributed to the respective participants
in accordance with their election.

68

EXECUTIVE OFFICERS AND KEY EMPLOYEES

Set forth below is certain information relating to the ages and business
experience of non-director executive officers of Weirton as of December 31,
2001.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth information for each of our last three
fiscal years, summarizing the compensation paid to our former chief executive
officer, our current chief executive officer and each of our next four most
highly compensated executive officers or "named executive officers" who were
serving as such at the end of our last completed fiscal year.

69

SUMMARY COMPENSATION TABLE

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

* Mr. Riederer resigned as chief executive officer effective January 25, 2001
and Mr. Walker became chief executive officer on January 25, 2001. Mr.
Robertson resigned effective December 31, 2001.

(1) Bonuses for 1999 were awarded by the management development and compensation
Committee of our board of directors to the named executive officers in the
amounts indicated for developing and realizing value for stockholders
through the sale of a portion of our interest in Metal Site L.P. which
generated net cash proceeds of $170.1 million.

(2) Under the terms of our supplemental executive retirement plans, or "SERPs,"
we pay income taxes associated with contributions made to trusts established
under the SERPs on behalf of the named executive officers while the SERPs
are being funded. The following "tax gross-up" payments are included in the
table: (a) $209,007, $16,629, $27,241, $16,793 and $100,484, for Messrs.
Walker, Kaplan, Kiefer, Scram and Robertson, respectively, in 2001; (b)
$30,499, $67,270, $70,111, $396,000, $343,000 and $199,654 for Messrs.
Walker, Kaplan, Kiefer, Scram, Riederer and Robertson, respectively, in
2000; and (c) $0, $0, $15,855, $739, $422,600 and $56,825 for Messrs.
Walker, Kaplan, Kiefer, Scram, Riederer and Robertson, respectively, in
1999. The amount of SERP contribution, in the case of any individual, is
determined by various factors including: age, compensation, years of service
with us and anticipated retirement benefits from qualified pension plans. As
shown in the tables below, the named executive officers exercised previously
granted stock options during 2000. The following amounts of option related
compensation have been included in this column: $666,603, $253,306,
$1,449,213 and $959,449 for Messrs. Kaplan, Kiefer, Riederer and Robertson,
respectively. Aggregate amounts of perquisites and other personal benefits
that are the lesser of $50,000 or 10% of each of the respective named
executive officer's combined salary and bonuses, have been omitted from the
table in accordance with SEC rules.

(3) For 2000 and 2001, the figures reflect numbers of shares underlying options
granted under our 1998 stock option plan. Options held by Mr. Riederer
expired unexercised on April 25, 2001.

70

OPTION/SAR GRANTS

The following table sets forth information about stock options and/or stock
appreciation rights (SARs) granted during 2001 to the named executive officers.

Option/SAR Grants in last fiscal year -- Individual Grants

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

(1) Options granted pursuant to our 1998 stock option plan were granted in
February 2001 at a price of $1.13 for Mr. Walker, with an expiration date of
January 31, 2011. The options vest in one-third increments each February 1,
2001, February 1, 2002 and February 1, 2003.

(2) The date shown assumes continued employment with Weirton for the full term
of the options.

(3) The Company used the Black-Scholes Option Valuation Method to determine the
grant date present value of stock options. The Company does not advocate or
necessarily agree that the Black-Scholes Model properly reflects the value
of a stock option. The assumptions used in calculating the grant date
present value are as follows: A risk-free interest rate of 4.94%; a dividend
yield of 0%; volatility of 71.3%, calculated using monthly stock returns for
the 36 month period preceding the stock option award; an underlying stock
price of $1.12; an option exercise price of $1.13; and a ten year term
(expected life 5 years). The valuation of a stock option under the
Black-Scholes model applying the preceding assumptions was $0.70.

OPTION/SAR EXERCISE/OUTSTANDING OPTIONS AND YEAR-END VALUES

The following table sets forth information regarding the exercise of stock
options and SARs during 2001 and the unexercised options/SARs held as of the end
of the 2001 fiscal year by the named executive officers.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES

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

(1) The figures shown represent options granted under our 1987 Option Plan and
our 1998 Option Plan. Of the options granted prior to December 31, 1999
under our 1998 Option Plan, 60% became exercisable on February 3, 2000, and
the remaining 40% on March 27, 2000. The options granted in October 2000
under our 1998 option plan remain unexercisable. For Mr. Walker, one-third
of the options granted under the 1998 option plan in 2001 were exercisable
at December 31, 2001. Options held by Mr. Robertson expire on March 31,
2002.

71

(2) The "Value of Unexercised In-the-Money Options/SARs at Fiscal Year-End" is
based on the closing price ($0.24 per share) of our common stock
over-the-counter on its last trading day in 2001 (December 31, 2001), which
was less than the exercise price ($3.88 for the options granted in 1998,
$5.56 $6.69 for those options granted in 2000 and $1.13 for the options
granted in 2001).

EMPLOYMENT AGREEMENTS WITH CERTAIN EXECUTIVES

Mr. Walker, our President and Chief Executive Officer, who also serves as a
member of our board of directors, has an employment agreement with Weirton
providing a base salary of $395,000. In addition, Mr. Walker's maximum total
benefit under our pension plan is 70% of final average earnings at age 62 and
attainment of 10 years of service.

The agreements for Mr. Walker and the other named executive officers, other
than Mr. Robertson, also provide for supplemental disability income and
supplemental life insurance. Those agreements may be terminated by us or by the
employee, but require us to pay 24 months compensation in a lump sum within 10
days of the termination date if terminated by us without cause.

Mr. Robertson had employment agreements with us which was terminated.
However, Mr. Robertson is entitled to receive an amount equivalent to the
severance pay which he would have received if, during 2002 Weirton enters into a
transaction which constitutes a "change in control," as that term is defined in
his former contract.

PENSION PLAN

PENSION PLAN TABLE

The figures in the pension table reflect the sum of annual benefits from
the qualified pension plan plus expected annual benefits from the non-qualified
SERPs (both administered by Weirton), payable for life following assumed
retirement at age 62. The SERPs are "target benefit" plans under which we
contribute to separate trusts actuarially determined amounts which are
calculated to produce the defined target annual benefit at age 62. Under both
the qualified pension plan and the SERPs, the amount of pension is based upon
the employee's average earnings (average of the highest five years of the last
fifteen years). For those participating in a SERP, expected benefits are based
on earnings defined as annual cash compensation (as reported in the salary and
bonus columns of the summary compensation table) and pension service credited
under the SERPs. The benefits reflected in the pension table include maximum
total benefits, under all plans, of 55% of final average earnings upon
attainment of 16 2/3 years of pension service. For the named executive officers,
pension service as of December 31, 2001 for the purpose of calculating
retirement benefits under the SERPs was as follows: Mr. Walker: 10.33 years; Mr.
Kaplan: 6.25 years; Mr. Kiefer: 16.92 years; Mr. Scram: 21.5 years, and Mr.
Robertson: 13.25 years. Under a contract with us, Mr. Robertson, who had prior
pension service with us through its predecessor, was entitled to an additional
five years of benefit service under the SERPs upon commencement of employment.

The senior SERP was terminated at the conclusion of the plan year 2001.

72

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following tables set forth the beneficial ownership of Weirton's common
stock and Series A convertible preferred stock as of February 28, 2002 by each
person or group known by us to beneficially own more than five percent of the
outstanding common stock and Series A convertible preferred stock, by each
director and executive officer and by all directors and executive officers as a
group. Included are those shares of common stock, if any, allocated under the
1984 ESOP. The table also sets forth the number of shares of Series A
convertible preferred stock, if any, allocated under the 1989 ESOP through the
latest allocation date (December 31, 1998), and the percentage of outstanding
common stock and Series A convertible preferred stock represented thereby.
Unless otherwise indicated, and except for shares allocated to the accounts of
employees under the terms of the 1984 ESOP and 1989 ESOP, the holders of all
shares shown in the table have sole voting and investment power with respect to
such shares. In determining the number and percentage of shares beneficially
owned by each person, shares that may be acquired by such person pursuant to
options or convertible stock exercisable or convertible within 60 days of the
date hereof are deemed outstanding for the purposes of determining the total
number of outstanding shares for such person and are not deemed outstanding for
such purpose for all other stockholders. Except as indicated in the footnotes,
Weirton believes that the person named in the table have the sole voting and
investment power with respect to all shares shown as beneficially owned by them.

COMMON STOCK

73

SERIES A CONVERTIBLE PREFERRED STOCK

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

(1) An asterisk in this column indicates ownership of less than 1%.

(2) All shares have been allocated to the accounts of participants in the 1984
ESOP consisting of approximately 5,263 employees and former employees of the
Company. Participants generally have full voting but limited dispositive
power over securities allocated to their accounts.

(3) Based on Schedule 13G filed by Dimensional Fund Advisors, Inc. dated
December 31, 2001.

(4) Includes 94,403, 43,660, 20,521, 13,465, 20,521, 20,521, 40,349 and 117,852
shares credited to the accounts of Messrs. Bozic, Burt, D'Anniballe, Doty,
Reins, Schubert, Sturges, Whitaker and Wise, respectively, under the
Deferred Compensation Plan for Directors, over which shares the named
individuals do not exercise voting and/or investment power until
distribution.

(5) Includes shares subject to options currently exercisable (or exercisable
within 60 days): Messrs. Walker 133,334, Robertson 145,022, Kaplan 126,000,
Kiefer 52,334 and Scram 12,000. Mr. Riederer had 517,500 options which
expired unexercised April 25, 2001. Mr. Robertson has 402,500 options which
expire March 31, 2002.

(6) Includes stock credited on the account balance method for 2000 directors'
fees; 2001 directors' fees were deposited in cash in the trust.

(7) Includes 657,940 shares subject to options currently exercisable as of
February 28, 2002.

(8) All shares have been allocated to the accounts of participants in the 1989
ESOP consisting of approximately 6,086 employees and former employees of the
Company. Participants generally have full voting but limited dispositive
power over securities allocated to their accounts.

74

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

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

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

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

3. Exhibits.

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

(b) Reports on Form 8-K.

The Company filed a current report on Form 8-K on February 26, 2002.

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

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

75

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, Weirton Steel Corporation has duly caused this
Report to be signed on its behalf by the undersigned, thereunto duly authorized,
on the 28th day of March 2002.

WEIRTON STEEL CORPORATION

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

Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on behalf of
Weirton Steel Corporation and in the capacities indicated on the 28th day of
March 2002.

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

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

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

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

/s/ ROBERT J. D'ANNIBALLE, JR.
- ------------------------------------------------------
Robert J. D'Anniballe, Jr.
Director

/s/ GEORGE E. DOTY, JR.
- ------------------------------------------------------
George E. Doty, Jr.
Director
/s/ MARK G. GLYPTIS
- ------------------------------------------------------
Mark G. Glyptis
Director

/s/ RALPH E. REINS
- ------------------------------------------------------
Ralph E. Reins
Director

/s/ ROBERT S. REITMAN
- ------------------------------------------------------
Robert S. Reitman
Director

/s/ RICHARD F. SCHUBERT
- ------------------------------------------------------
Richard F. Schubert
Director

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

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

/s/ D. LEONARD WISE
- ------------------------------------------------------
D. Leonard Wise
Director

76

EXHIBIT INDEX

79

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES

To the Board of Directors of
Weirton Steel Corporation:

We have audited in accordance with auditing standards generally accepted in
the United States, the consolidated financial statements included in this Form
10-K, and have issued our report thereon dated January 24, 2002. Our audit was
made for the purpose of forming an opinion on those statements taken as a whole.
The schedule listed in the index in Item 14(a)2 of the Form 10-K is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not a part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in our audit of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.

/s/ ARTHUR ANDERSEN LLP

Pittsburgh, Pennsylvania
January 24, 2002

S-1

WEIRTON STEEL CORPORATION AND SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

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

S-2