PART I — FINANCIAL INFORMATION
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
		NOTE 1 : BASIS OF PRESENTATION
		NOTE 2 : INVENTORIES
		NOTE 3 : ENVIRONMENTAL MATTERS and OTHER CONTINGENCIES
		NOTE 4 : OTHER MATTERS
		NOTE 5 : ASSET IMPAIRMENT and RELATED CHARGES
	ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
PART II — OTHER INFORMATION
PART II - OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 6. EXHIBITS and REPORTS ON FORM 8-K
SIGNATURES
EXHIBIT INDEX
EX-10.4.13 - AMENDED/RESTATED LOAN/SECURITY AGRMT.

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

FORM 10-Q

(Mark One)
[x]		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2001.
or
[ ]		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

[x]

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

For the quarterly period ended July 31, 2001.

[ ]

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

For the transition period from to

Commission file number: 333-18019

WCI STEEL, INC. ~~(Exact name of registrant as specified in its charter)~~

Ohio		34-1585405
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)
1040 Pine Ave., S.E.,
Warren, Ohio		44483-6528
(Address of principal executive offices)		(Zip Code)

(Exact name of registrant as specified in its charter)

(330) 841-8302 (Registrant’s telephone number, including area code)


Ohio		34-1585405

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


1040 Pine Ave., S.E., Warren, Ohio		44483-6528

(Address of principal executive offices)		(Zip Code)

(330) 841-8302

(Registrant’s telephone number, including area code)

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

As of ~~May~~August 2430, 2001, the registrant had 100 shares of its common stock, no no par value, $.01 stated value, outstanding.

WCI STEEL, INC. AND SUBSIDIARIES

INDEX

		Page No.
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets as of April 30, 2001 and October 31, 2000.		3
	Consolidated Statements of Operations for the three and six months ended April 30, 2001 and 2000.		4
	Consolidated Statements of Cash Flows for the six months ended April 30, 2001 and 2000.		5
	Notes to Consolidated Financial Statements.		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		9
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		15
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings		16
Item 4.	Submission of Matters to a Vote of Security Holders		16
Item 6.	Exhibits and Reports on Form 8-K		16
	Signatures		17
	Exhibit Index		18

PART I FINANCIAL INFORMATION


		Page No.

Item 1.	Financial Statements

	Consolidated Balance Sheets as of July 31, 2001 and October 31, 2000.		3

	Consolidated Statements of Operations for the three and nine months ended July 31, 2001 and 2000.		4

	Consolidated Statements of Cash Flows for the nine months ended July 31, 2001 and 2000.		5

	Notes to Consolidated Financial Statements.		6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		9

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		14

PART II OTHER INFORMATION

Item 1.	Legal Proceedings		15

Item 6.	Exhibits and Reports on Form 8-K		15

	Signatures		16

PART I —- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

					April 30,				October 31,
				July 31,				October 31,
				2001	~~2001~~			2000	~~2000~~
						(Unaudited	)
				(Unaudited)
ASSETS
Current assets
	Cash and cash equivalents			$	$45,862	~~67,596~~		$	$89,478	~~89,478~~
	Accounts receivable, less allowance for doubtful
	Accounts receivable, less allowance for doubtful accounts of $3,200 and $750, respectively				52,393				47,599
		accounts of $3,050 and $750, respectively				49,378				47,599
	Inventories				90,913				96,171
	Inventories					87,042				96,171
	Prepaid expenses and other current assets				643				1,076
	Prepaid expenses and other current assets					1,149				1,076
		Total current assets			189,811				234,324
			Total current assets			205,165				234,324
Property, plant and equipment, net					192,988				202,578
Property, plant and equipment, net						193,756				202,578
Intangible pension asset, net					20,897				25,677
Intangible pension asset, net						22,490				25,677
Other assets, net					6,386				15,597
Other assets, net						6,167				15,597
		Total assets		$	410,082			$	478,176
			Total assets		$	427,578			$	478,176
LIABILITIES and SHAREHOLDER’S EQUITY
LIABILITIES and SHAREHOLDER’S EQUITY
Current liabilities
Current liabilities
	Current portion of long-term debt			$	181			$	128
	Current portion of long-term debt				$	131			$	128
	Accounts payable				48,517				47,201
	Accounts payable					41,824				47,201
	Accrued liabilities				66,915				50,571
	Accrued liabilities					59,329				50,571
		Total current liabilities			115,613				97,900
			Total current liabilities			101,284				97,900
Long-term debt, excluding current portion					301,374				301,252
Long-term debt, excluding current portion						301,186				301,252
Postretirement health care benefits					116,097				111,584
Postretirement health care benefits						114,410				111,584
Pension benefits					18,861				36,313
Pension benefits						33,781				36,313
Other liabilities					12,214				11,756
Other liabilities						12,264				11,756
		Total liabilities			564,159				558,805
			Total liabilities			562,925				558,805
Shareholder’s equity (deficit)
Shareholder’s equity (deficit)
	Preferred stock, par value $1,000 per share, 5,000 shares authorized, none issued				—				—
	Preferred stock, par value $1,000 per share, 5,000
	Common stock, no par value, stated value $.01 per share, 40,000,000 shares authorized, 100 shares issued and outstanding				—				—
		shares authorized, none issued				—				—
	Additional paid-in capital				279				279
	Common stock, no par value, stated value $.01 per
	Accumulated deficit				(154,356	)			(80,908	)
		share, 40,000,000 shares authorized, 100 shares
		Total shareholder’s equity (deficit)			(154,077	)			(80,629	)
		issued and outstanding				—				—
Commitments and contingencies					—				—
	Additional paid-in capital					279				279
		Total liabilities and shareholder’s equity (deficit)		$	410,082			$	478,176
	Accumulated deficit					(135,626	)			(80,908	)
			Total shareholder’s equity (deficit)			(135,347	)			(80,629	)
Commitments and contingencies						—				—
			Total liabilities and shareholder’s equity (deficit)		$	427,578			$	478,176

See accompanying notes to consolidated financial statements.

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

			~~Three months ended,~~	Three months ended,							~~Six months ended,~~	Nine months ended,
			April 30,								April 30,
				July 31,								July 31,
			~~2001~~	2001			~~2000~~	2000			~~2001~~	2001			~~2000~~	2000
Net sales			$	~~99,268~~$	109,988		$	~~156,149~~$	140,726		$	~~197,459~~$	307,448		$	~~297,361~~$	438,087
Operating costs and expenses
	~~Cost of products sold~~	Cost of products sold		~~101,026~~	112,827			~~131,208~~	122,258			~~203,066~~	315,893			~~250,388~~	372,646
	~~Depreciation and amortization~~	Depreciation and amortization		~~5,647~~	4,808			~~5,801~~	5,837			~~11,352~~	16,160			~~11,645~~	17,482
	~~Selling, general and administrative expenses~~	Selling, general and administrative expenses		~~3,722~~	3,619			~~4,232~~	4,060			~~9,543~~	13,163			~~8,577~~	12,637
	~~Asset impairment and related charges (note 5)~~	Asset impairment and related charges (note 5)		~~3,909~~	—			—	—			~~3,909~~	3,909			—	—
				114,304				141,241				227,870				270,610
					121,254				132,155				349,125				402,765
Operating income (loss)				~~(15,036~~	)(11,266	)		~~14,908~~	8,571			~~(30,411~~	)(41,677	)		~~26,751~~	35,322
Other income (expense)
	~~Interest expense~~	Interest expense		~~(7,983~~	)(8,004	)		~~(7,981~~	)(7,983	)		~~(15,968~~	)(23,972	)		~~(15,976~~	)(23,959	)
	~~Interest income and other income (expense), net~~	Interest income and other income (expense), net		~~811~~	540			~~1,095~~	1,812			~~(8,339~~	)(7,799	)		~~4,833~~	6,645
				(7,172	)			(6,886	)			(24,307	)			(11,143	)
					(7,464	)			(6,171	)			(31,771	)			(17,314	)
Income (loss) before income taxes				~~(22,208~~	)(18,730	)		~~8,022~~	2,400			~~(54,718~~	)(73,448	)		~~15,608~~	18,008
Income tax (benefit) expense				—	—			—	—			—	—			—	—
Net income (loss)			$	~~(22,208~~$	)(18,730	)	$	~~8,022~~$	2,400		$	~~(54,718~~$	)(73,448	)	$	~~15,608~~$	18,008

See accompanying notes to consolidated financial statements.

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

						Six months ended April 30,
					Nine months ended July 31,
					2001	~~2001~~			2000	~~2000~~
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income (loss)				$	$(73,448	~~(54,718~~)	)	$	$18,008	~~15,608~~
	Adjustment to reconcile net income (loss) to net cash
	Adjustment to reconcile net income (loss) to net cash provided (used) by operating activities:
		provided (used) by operating activities:
		Depreciation and amortization				14,658				15,276
			Depreciation and amortization				9,868				10,177
		Amortization of deferred maintenance costs				1,502				2,206
			Amortization of deferred maintenance costs				1,484				1,468
		Amortization of financing costs				977				968
			Amortization of financing costs				645				645
		Postretirement health care benefits				9,913				8,869
			Postretirement health care benefits				6,626				5,286
		Pension benefits				3,174				4,053
			Pension benefits				3,112				4,118
		Provision for losses on accounts receivable				2,450				—
			Provision for losses on accounts receivable				2,300				—
		Asset impairment and other charges				14,393				—
			Asset impairment and other charges				14,393				—
		Other				93				1,150
			Other				84				1,108
	Cash provided (used) by changes in certain assets and liabilities
	Cash provided (used) by changes in certain assets and
		Accounts receivable				(7,244	)			4,920
		liabilities
		Inventories				5,258				(10,388	)
			Accounts receivable				(4,079	)			(3,551	)
		Prepaid expenses and other assets				(3,319	)			770
			Inventories				9,129				(3,741	)
		Accounts payable				1,316				(7,670	)
			Prepaid expenses and other assets				(3,256	)			(1,628	)
		Accrued liabilities				(5,829	)			(4,765	)
			Accounts payable				(5,377	)			(6,359	)
		Other liabilities				458				807
			Accrued liabilities				1,574				4,419
			Net cash provided (used) by operating activities			(35,648	)			34,204
			Other liabilities				508				648
CASH FLOWS FROM INVESTING ACTIVITIES:
				Net cash provided (used) by operating activities			(17,707	)			28,198
	Additions to property, plant and equipment					(8,248	)			(12,404	)
CASH FLOWS FROM INVESTING ACTIVITIES:
	Gross proceeds from the sale of assets					105				—
	Additions to property, plant and equipment						(4,112	)			(6,103	)
			Net cash used by investing activities			(8,143	)			(12,404	)
				Net cash used by investing activities			(4,112	)			(6,103	)
CASH FLOWS FROM FINANCING ACTIVITIES:
CASH FLOWS FROM FINANCING ACTIVITIES:
	Net change in long-term debt					175				(90	)
	Principal payments on long-term debt						(63	)			(60	)
	Dividends paid					—				(9,200	)
	Dividends paid						—				(5,300	)
			Net cash provided (used) by financing activities			175				(9,290	)
				Net cash used by financing activities			(63	)			(5,360	)
	Net increase (decrease) in cash and cash equivalents					(43,616	)			12,510
	Net increase (decrease) in cash and cash equivalents						(21,882	)			16,735
	Cash and cash equivalents at beginning of period					89,478				76,349
	Cash and cash equivalents at beginning of period						89,478				76,349
	Cash and cash equivalents at end of period				$	45,862			$	88,859
	Cash and cash equivalents at end of period					$	67,596			$	93,084
	Supplemental disclosure of cash flow information
	Supplemental disclosure of cash flow information
		Cash paid for interest			$	30,489			$	30,483
			Cash paid for interest			$	15,324			$	15,331
		Cash paid for income taxes				—				21
			Cash paid for income taxes				—				21

See accompanying notes to consolidated financial statements.

WCI STEEL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three and ~~six~~nine months ended ~~April~~July 3031, 2001 and 2000 ( Unaudited )

NOTE 1 : BASIS OF PRESENTATION

WCI Steel, Inc. (“Company” or “WCI’”) is a wholly-owned subsidiary of Renco Steel Holdings, Inc. (“Renco Steel”) and an indirect wholly-owned subsidiary of The Renco Group, Inc. (“Renco”). The financial information included herein is unaudited; however, such information reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim periods. The results of operations for the three and ~~six~~nine months ended ~~April~~July 3031, 2001 are not necessarily indicative of the results to be expected for the full year.

These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended October 31, 2000.

NOTE 2 : INVENTORIES

Inventories are stated at the lower of cost or market. Cost is determined by the last-in, first-out (“LIFO”) method. The composition of inventories at ~~April~~July 3031, 2001 and October 31, 2000 was as follows:

	April 30,		October 31,
	July 31,		October 31,
	2001		2000
	(Unaudited)
	(Dollars in Thousands)
Raw materials	$	3031,~~952~~154	$	38,873
Finished and semi-finished product		5962,~~039~~122		60,785
Supplies		79122		74
		90,070		99,732
		93,398		99,732
Less LIFO reserve		32,~~028~~485		3,561
	$	8790,~~042~~913	$	96,171

NOTE 3 : ENVIRONMENTAL MATTERS and OTHER CONTINGENCIES

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

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

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

On January 23, 1996, two retired employees instituted an action against the Company and the United Steelworkers of America (“USWA”) in the United States District Court for the Northern District of Ohio alleging in substance that certain distributions made by the Company to employees and benefit plans violated certain agreements, the Employee Retirement Income Security Act (“ERISA”), the National Labor Relations Act (“NLRA”) and common law. On July 31, 1997, the court granted the Company’s motion to dismiss this action and entered judgement in favor of the Company and the USWA. On appeal by the plaintiffs in March 1999, the appellate court upheld the dismissal of the claims under ERISA and common law, but reversed the dismissal of the NLRA claim and remanded to the district court for further proceedings. On October 9, 2000 the district court granted the Company’s motion to dismiss this action and entered judgement in favor of the Company and the USWA. The plaintiffs filed an appeal regarding the court’s decision to dismiss.

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

NOTE 4 : OTHER MATTERS

LTV Corporation (“LTV”) filed for reorganization under Chapter 11 of the United States Bankruptcy Code on December 29, 2000. WCI supplies steam to an LTV Steel Company coke plant adjacent to WCI’s facility in Warren, Ohio. As a result of the filing, WCI recorded a charge of $2.1 million in the first fiscal quarter of 2001 to reduce the amounts due from LTV to estimated net realizable value. WCI has an ongoing exposure to LTV with respect to the supply of steam from both a credit risk aspect and the uncertainty of actions that LTV may take due to the filing. Cessation of operations at the coke plant or termination of the contract for the supply of steam through reorganization proceedings, could have a material adverse effect on WCI’s results of operations until such time as WCI would be able to install electrical generating equipment to convert the steam to a productive use. During ~~fiscal~~the ~~year~~nine ~~2000~~months ended July 31, ~~WCI~~2001, WCI recorded revenue of $108.23 million for the sale of steam to LTV.

NOTE 5 : ASSET IMPAIRMENT and RELATED CHARGES

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

ITEM 2.

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

RESULTS OF OPERATIONS

Three Months Ended ~~April~~July 3031, 2001 Compared to Three Months Ended ~~April~~July 3031, 2000.

Net sales for the three months ended ~~April~~July 3031, 2001 were $99110.30 million on ~~241~~278,~~131~~552 tons shipped, representing a 3621.48% decrease in net sales and a 319.18% decrease in tons shipped compared to the three months ended ~~April~~July 3031, 2000. Shipping volume for the 2001 period decreased due primarily to lower customer demand resulting from a general slowing in the U.S. economy. Net sales per ton shipped decreased 713.64% to $~~412~~395 in the 2001 period compared to $~~446~~456 for the ~~2000~~ 2000 period, with net selling prices down 1113.79% offset somewhat by changes in product mix. However, net selling prices were flat in the third quarter compared to the second quarter of 2001. Shipments of custom carbon, alloy and electrical steels accounted for 5652.84% of total shipments for the three months ended ~~April~~July 3031, 2001 compared to 5054.63% for the three months ended ~~April~~July 3031, 2000. On ~~April~~July 3031, 2001, WCI’s order backlog was approximately 158,000 net tons compared to approximately ~~234~~ 187,000 net tons at ~~April~~July 3031, 2000 and 144,000 net tons at October 31, 2000.

The table below shows the Company’s product mix for the three months ended July ~~April 30~~31, 2001 and ~~April~~July 3031, 2000.

		Net Tons Shipped				Percent of Total
		Three Months Ended				Three Months Ended
		April 30,				April 30,
		July 31,				July 31,
		2001		2000		2001			2000
CUSTOM PRODUCTS:
	Hot Rolled		7675,~~847~~747		~~105~~93,~~771~~700		3127.92	%		30.23	%
	Cold Rolled		45,~~325~~193		45,~~658~~856		1.89	%		1.39	%
	Coated products		5564,~~610~~899		6668,~~747~~116		23.13	%		1922.1	%
Total Custom Products			~~136~~145,~~782~~839		~~177~~167,~~176~~672		5652.84	%		5054.63	%
Total Commodity Products			~~104~~132,~~349~~713		~~172~~141,~~569~~240		4347.26	%		4945.47	%
Total Steel Products			~~241~~278,~~131~~552		~~349~~308,~~745~~912		100.0	%		100.0	%

The following table sets forth the percentage of WCI’s net tons shipped to various markets for the three months ended ~~April~~July 3031, 2001 and ~~April~~July 3031, 2000.

		Three Months Ended
		April 30,
		July 31,
Customer Category		2001			2000
	Conversion / further processing		4751.06	%		4843.32	%
	Steel service centers		2016.95	%		26.46	%
	Construction		1618.2	%		1115.90	%
	Electrical equipment		54.54	%		45.80	%
	Direct automotive		54.18	%		46.92	%
	Other		54.35	%		34.70	%
Total			100.0	%		100.0	%

Gross margin (loss) (sales less cost of products sold) was ($12.8) million for the three months ended ~~April~~July 3031, 2001 compared to gross margin of $2418.95 million for the three months ended ~~April~~July 3031, 2000. The decrease in gross ~~margin~~ margin reflects the lower shipping volume and transaction prices discussed above and higher per ton production costs resulting from ~~significantly~~ lower production volume and its effect on fixed operating costs per ton. Production volume during the ~~second~~ third quarter of 2001 was approximately 7382% of operating capacity compared to approximately 9885% in the 2000 period.

Operating income (loss) was ($1511.03) million, or ($6240) per ton, for the three months ended ~~April~~July 3031, 2001 compared to operating income of $148.9 6 million, or $4328 per ton, for the three months ended ~~April~~July 3031, 2000. The decrease in operating income for the 2001 period reflects the lower gross margin discussed ~~above along with a charge of $3.9 million associated with~~ ~~YSC’s announced indefinite idling of its operating facility by July 15, 2001. (See “Note 5: Asset Impairment and Related Charges”~~ above). ~~Excluding the~~ ~~impairment charge, the operating loss was ($11.1) million, or ($46) per ton for~~ ~~the three months ended April 30, 2001.~~

AsInterest aincome ~~result~~and ofother ~~the~~income ~~items discussed above~~(expense), ~~the~~net ~~Company~~was ~~had a loss before taxes of~~ $220.25 million for the three months ended ~~April~~July 3031, 2001 compared to ~~income~~ ~~before taxes of~~ $81.08 million for the three months ended ~~April~~July 3031, 2000. The decrease in interest income was due primarily to lower cash balances and lower interest rates in the 2001 period compared to the 2000 period.

~~Effective~~As ~~November 1,~~a ~~1998,~~result of the ~~Company~~items ~~was~~discussed ~~designated~~above, asthe aCompany ~~qualified subchapter~~had Sa ~~subsidiary~~loss bybefore taxes ~~Renco~~of $18.7 million ~~Accordingly,~~for the ~~Company~~three ismonths ~~generally~~ended ~~not subject~~July 31, to2001 compared to income before taxes of $2.4 million for the three months ended July 31, 2000.

~~Six~~ Effective ~~Months Ended April~~November 301, ~~2001~~1998, ~~Compared~~the toCompany was designated as a qualified ~~Six~~subchapter ~~Months~~S ~~Ended~~subsidiary ~~April 30~~by Renco. Accordingly, ~~2000~~the Company is generally not subject to income taxes.

~~Net~~Nine ~~sales~~Months ~~for~~Ended ~~the six months ended April~~July 3031, 2001 ~~were~~Compared ~~$197.5 million on 478,154 tons shipped, representing a 33.6% decrease in net sales and a 29.2% decrease in tons shipped compared~~ to ~~the six months ended April 30, 2000.~~ ~~Shipping~~Nine ~~volume~~Months ~~for~~Ended the 2001 period was lower due primarily to lower customer demand resulting from a general slowing in the U.S. economy coupled with high levels of imported steel. Net sales per ton shipped decreased 6.1% to $413 in the 2001 period compared to $440 for the 2000 period, with net selling prices down 9.5% offset somewhat by changes in product mix. Shipments of custom carbon, alloy and electrical steels accounted for 54.6% of total shipments for the six months ended AprilJuly 3031, ~~2001 compared to 51.4% for the six months ended April 30,~~ 2000.

10 Net sales for the nine months ended July 31, 2001 were $307.4 million on 756,706 tons shipped, representing a 29.8% decrease in net sales and a 23.2% decrease in tons shipped compared to the nine months ended July 31, 2000. Shipping volume for the 2001 period was lower due primarily to lower customer demand resulting from a general slowing in the U.S. economy coupled with high levels of imported steel. Net sales per ton shipped decreased 8.8% to $406 in the 2001 period compared to $445 for the 2000 period, with net selling prices down 11.0% offset somewhat by changes in product mix. Shipments of custom carbon, alloy and electrical steels accounted for 53.7% of total shipments for the nine months ended July 31, 2001 compared to 52.4% for the nine months ended July 31, 2000.

~~Table of Contents~~10

TheTable tableof below shows the Company’s product mix for the six months ended April 30, 2001 and April 30, 2000. Contents

		Net Tons Shipped				Percent of Total
		Six Months Ended				Six Months Ended
		April 30,				April 30,
		2001		2000		2001			2000
CUSTOM PRODUCTS:
	Hot Rolled		153,810		218,583		32.2	%		32.3	%
	Cold Rolled		8,374		8,705		1.8	%		1.3	%
	Coated products		98,493		120,479		20.6	%		17.8	%
Total Custom Products			260,677		347,767		54.6	%		51.4	%
Total Commodity Products			217,477		328,021		45.4	%		48.6	%
Total Steel Products			478,154		675,788		100.0	%		100.0	%

The table below shows the Company’s product mix for the nine months ended July 31, 2001 and July 31, 2000.

The following table sets forth the percentage of WCI’s net tons shipped to various markets for the six months ended April 30, 2001 and April 30, 2000.


		Net Tons Shipped				Percent of Total

		Nine Months Ended				Nine Months Ended
		July 31,				July 31,
		2001		2000		2001			2000

CUSTOM PRODUCTS:





	Hot Rolled		229,557		312,283		30.3	%		31.7	%




	Cold Rolled		13,567		14,561		1.8	%		1.5	%




	Coated products		163,392		188,595		21.6	%		19.2	%


Total Custom Products			406,516		515,439		53.7	%		52.4	%





Total Commodity Products			350,190		469,261		46.3	%		47.6	%


Total Steel Products			756,706		984,700		100.0	%		100.0	%

		Six Months Ended
		April 30,
Customer Category		2001			2000
	Conversion / further processing		49.5	%		52.2	%
	Steel service centers		21.6	%		24.7	%
	Construction		13.8	%		10.4	%
	Electrical equipment		5.2	%		5.0	%
	Direct automotive		5.1	%		4.3	%
	Other		4.8	%		3.4	%
Total			100.0	%		100.0	%

The following table sets forth the percentage of WCI’s net tons shipped to various markets for the nine months ended July 31, 2001 and July 31, 2000.

Gross margin (loss) (sales less cost of products sold) was ($5.6) million for the six months ended April 30, 2001 compared to gross margin of $47.0 million for the six months ended April 30, 2000. The decrease in gross margin reflects the lower shipping volume and transaction prices discussed above and higher per ton production costs resulting from significantly lower production volume and its effect on fixed operating costs per ton. Production volume during the six months ended April 30, 2001 was approximately 67% of operating capacity compared to approximately 98% in the 2000 period.


		Nine Months Ended
		July 31,
*Customer Category*		2001			2000

	Conversion / further processing		50.3	%		49.4	%




	Steel service centers		19.7	%		25.3	%




	Construction		15.4	%		11.8	%




	Electrical equipment		4.9	%		5.0	%




	Direct automotive		5.0	%		4.9	%




	Other		4.7	%		3.6	%

Total			100.0	%		100.0	%

~~Operating~~Gross ~~income~~margin (loss) ~~was~~ (~~$30.4)~~sales ~~million,~~less orcost of products sold) was ($648.4) ~~per ton,~~ million for the ~~six~~ nine months ended ~~April~~July 3031, 2001 compared to ~~operating~~gross ~~income~~margin of $2665.8 4 million, ~~or $40 per ton,~~ for the ~~six~~nine months ended ~~April~~July 3031, 2000. The decrease in ~~operating~~gross margin ~~income~~reflects ~~for~~ the ~~2001~~lower ~~period~~shipping ~~reflects~~volume ~~the~~and ~~lower~~transaction ~~gross~~prices ~~margin~~ discussed above ~~along~~ ~~with a charge of $3.9 million associated with YSC’s announced indefinite~~and ~~idling~~higher ofper ~~its~~ton ~~operating~~production ~~facility~~costs byresulting ~~July 15,~~from ~~2001~~significantly ~~(See~~lower ~~“Note 5: Asset~~production ~~Impairment~~volume and ~~Related~~its ~~Charges”~~effect ~~above)~~on ~~and~~fixed aoperating ~~charge~~costs ofper $2ton.~~1 million~~ ~~to establish~~Production ~~a reserve for amounts due from a financially distressed steel company~~volume ~~(See~~during ~~“Note~~the 4:nine ~~Other~~months ~~Matters”~~ended ~~above).~~July 31, ~~Excluding~~2001 ~~these~~was ~~charges,~~approximately ~~the~~73% of operating ~~loss~~capacity ~~was~~compared ~~($24.4)~~to ~~million,~~approximately or94% ~~($51)~~in ~~per ton for~~ the ~~six~~2000 ~~months ended April 30, 2001~~period.

11 Operating income (loss) was ($41.7) million, or ($55) per ton, for the nine months ended July 31, 2001 compared to operating income of $35.3 million, or $36 per ton, for the nine months ended July 31, 2000. The decrease in operating income for the 2001 period reflects the lower gross margin discussed above along with a charge of $3.9 million associated with YSC’s indefinite idling of its operating facility on July 15, 2001 (See “Note 5: Asset Impairment and Related Charges” above) and a charge of $2.1 million to establish a reserve for amounts due from a financially distressed steel company (See “Note 4: Other Matters” above). Excluding these charges, the operating loss was ($35.7) million, or ($47) per ton for the nine months ended July 31, 2001.

~~Table of Contents~~11

InterestTable income and other income (expense), net was ($8.3) million for the six months ended April 30, 2001 compared to income of $4.8 million for the six months ended April 30, 2000. In the 2001 period WCI recorded a charge of $10.5 million to write down the carrying value of Acme Metals 10.875% Senior Unsecured Notes owned by WCI. In the 2000 period, the Company recorded a gain of $2.8 million as a result of an agreement with the United Steelworkers, which permitted the Company to pay certain medical benefits from assets in a trust previously restricted for other benefits. Contents

AsInterest aincome ~~result~~and other income (expense), net was ($7.8) million for the nine months ended July 31, 2001 compared to income of $6.6 million for the ~~items~~nine months ~~discussed~~ended ~~above~~July 31, 2000. In the ~~Company~~2001 ~~had~~period WCI recorded a ~~loss~~charge ~~before~~of $10.5 ~~taxes~~million to write down the carrying value of Acme Metals, Inc. 10.875% Senior Unsecured Notes owned by WCI. In the 2000 period, the Company recorded a gain of $552.18 million as a result of an agreement with the United Steelworkers, which permitted the Company to pay certain medical benefits from assets in a trust previously restricted for other benefits. Interest income was $2.4 million for the ~~six~~nine months ended ~~April~~July 3031, 2001 compared to ~~income~~ ~~before~~interest ~~taxes~~income of $153.64 million for the ~~six~~nine months ended ~~April~~July 3031, 2000. The decrease in interest income was due primarily to lower cash balances and lower interest rates in the 2001 period compared to the 2000 period.

~~Effective~~As ~~November 1,~~a ~~1998,~~result of the ~~Company~~items ~~was~~discussed ~~designated~~above, asthe aCompany ~~qualified subchapter~~had Sa ~~subsidiary~~loss bybefore taxes ~~Renco~~of $73.4 million ~~Accordingly,~~for the ~~Company~~nine ismonths ~~generally~~ended ~~not subject~~July 31, to2001 compared to income before taxes of $18.0 million for the nine months ended July 31, 2000.

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

~~WCI’s~~Liquidity ~~liquidity requirements result from capital investments, working capital requirements, postretirement health care~~ and ~~pension~~Capital ~~funding, interest~~Resources ~~expense and, to a lesser extent, principal payments on its indebtedness. WCI~~ has met these requirements in each fiscal year since 1992 from cash balances and cash provided by operating activities. The Company’s primary sources of liquidity as of April 30, 2001 consisted of cash and cash equivalents of $67.6 million and available borrowing under its $100 million revolving credit agreement (Revolver).

~~The~~WCI’s ~~Revolver~~liquidity ~~has~~requirements aresult ~~maximum~~from ~~borrowing~~capital ~~limit~~investments, ofworking capital ~~$100 million~~requirements, ispostretirement ~~secured~~health ~~by eligible~~care ~~inventories~~ and ~~receivables~~pension funding, asinterest expense ~~defined~~and, ~~therein~~to a lesser extent, ~~and~~principal ~~expires~~payments on ~~December 29,~~ ~~2003~~its indebtedness. AsWCI has ofmet ~~April 30,~~these ~~2001,~~requirements ~~WCI~~in ~~had~~each nofiscal ~~borrowings~~year ~~outstanding~~since 1992 from cash balances ~~under~~and ~~the~~cash ~~Revolver,~~provided ~~with~~by aoperating ~~borrowing~~activities. ~~limit~~The Company’s primary sources of liquidity ~~$76.3~~as of July ~~million~~31, ~~based~~2001 onconsisted ~~eligible inventories~~of cash and ~~receivables,~~cash ~~net~~equivalents of $1445.1 9 million inand ~~letters~~available ofborrowing under its $100 million revolving credit ~~outstanding~~agreement ~~or committed~~(“Revolver”).

~~Cash~~The ~~(used) provided~~Revolver byhas ~~operating~~a ~~activities~~maximum ~~was~~borrowing ~~($17.7)~~limit of $100 million, ~~for~~is ~~six~~secured by ~~months~~eligible ~~ended~~inventories ~~April 30~~and receivables, ~~2001~~as ~~compared~~defined totherein, ~~$28.2 million~~and ~~for~~expires ~~the~~on December 29, ~~2000 period~~2003. ~~The decreased~~As ~~operating~~of ~~cash~~July 31, ~~flow in the~~ 2001, ~~period~~WCI ~~compared~~had tono ~~the~~borrowings ~~2000 period~~outstanding ~~resulted~~under ~~primarily~~the ~~from~~Revolver, with a ~~decrease~~borrowing inlimit ~~income~~of ~~before~~$81.5 million ~~taxes~~based ~~excluding~~on ~~non-cash~~eligible ~~charges~~inventories ~~offset~~and ~~somewhat~~receivables, bynet ~~changes~~of $14.2 million in ~~working~~letters ~~capital~~of credit outstanding or committed.

~~Capital~~Cash ~~expenditures~~(used) provided ~~were~~by ~~$4.1 million~~operating ~~and~~activities was ($635.1 6) million ~~during~~for ~~the six~~nine months ended ~~April~~July 3031, 2001 ~~and~~compared ~~2000, respectively. Capital expenditures are expected~~ to ~~be approximately~~ $1534.2 million for ~~all~~the of2000 ~~fiscal 2001~~period. The ~~Company~~ ~~expects~~decreased tooperating ~~reline~~cash ~~its~~flow ~~blast~~in ~~furnace during~~ the ~~second~~2001 ~~calendar~~period ~~quarter~~compared ~~of 2002 at an estimated cost of $10 million~~ to ~~$15 million.~~the ~~Management~~2000 ~~has~~period resulted ~~funded~~primarily ~~the Company’s~~from ~~capital~~a ~~expenditures~~decrease in ~~2001~~income ~~and~~before ~~2000~~taxes ~~through~~excluding non-cash charges ~~balances~~offset ~~and~~somewhat ~~cash provided~~ by ~~operating~~changes ~~activities.~~in Atworking ~~April 30, 2001, the Company had commitments for~~ capital ~~expenditures of approximately $3~~.~~1 million.~~

~~The~~Capital ~~Revolver~~expenditures ~~and~~were ~~the~~$8.2 million ~~indenture governing WCI’s 10% Senior Secured Notes due 2004 contain numerous covenants~~ and ~~prohibitions~~$12.4 million ~~that~~during ~~limit~~ the ~~financial~~nine ~~activities~~months ofended ~~the Company~~July 31, ~~including~~2001 ~~requirements~~and ~~that~~2000, ~~the~~respectively. ~~Company~~Capital ~~satisfy~~expenditures are ~~certain~~expected ~~financial~~to ~~ratios.~~be Onapproximately ~~April~~$15 ~~30,~~million ~~2001~~for ~~the~~all ~~Company~~of ~~and~~fiscal ~~its~~2001. ~~lenders~~The ~~under~~Company ~~the~~expects ~~Revolver agreed~~ to ~~amend~~reline ~~the~~its ~~loan~~blast ~~agreement~~furnace toduring ~~require~~ the ~~Company~~third ~~to maintain~~calendar aquarter ~~minimum net worth, as defined,~~ of ~~not less than a negative $200~~2002 ~~million~~at ~~instead~~an ofestimated ~~the~~cost ~~previous minimum net worth requirement~~ of ~~not less than a negative~~ $~~150~~15 million. ~~The~~Management ~~ability~~has offunded the Company’s capital toexpenditures ~~meet~~in ~~its~~2001 ~~debt service requirements~~ and to2000 ~~comply~~through ~~with~~cash ~~such~~balances ~~covenants~~and ~~will~~cash ~~be dependent upon future~~provided by operating ~~performance~~activities. ~~and~~At ~~financial~~July 31, ~~results~~2001, of the Company, ~~which~~had ~~will~~commitments befor ~~subject~~capital toexpenditures ~~financial, economic, political, competitive and other factors affecting the Company, many~~ of ~~which~~approximately ~~are beyond its control~~$5.9 million.

12 The Revolver and the indenture governing WCI’s 10% Senior Secured Notes due 2004 (“Senior Secured Notes”) contain numerous covenants and prohibitions that limit the financial activities of the Company, including requirements that the Company satisfy certain financial ratios. The Revolver requires the Company to maintain a minimum net worth, as defined, of not less than a negative $200 million. The ability of the Company to meet its debt service requirements and to comply with such covenants will be dependent upon future operating performance and financial results of the Company, which will be subject to financial, economic,

~~Table of Contents~~12

TheTable Companyof paid no dividends and was not permitted to do so under the Senior Secured Notes indenture during the six months ended April 30, 2001. The Company does not expect to be permitted to pay dividends for the foreseeable future based on limitations under the Senior Secured Notes indenture. Contents

~~Postretirement~~political, ~~Benefit~~competitive ~~Plans~~and other factors affecting the Company, many of which are beyond its control.

The Company ~~provides~~paid ~~postretirement~~no ~~health~~dividends ~~care~~ and ~~life~~was ~~insurance benefits~~not permitted to ~~substantially~~do ~~all~~so ~~employees~~under ~~who retire from~~ the ~~Company upon~~ ~~meeting~~Senior ~~certain~~Secured ~~age~~Notes ~~and~~indenture ~~length~~during ~~of service eligibility requirements. As a result of~~ the ~~collective~~nine ~~bargaining~~months ~~agreement~~ended ~~effective September~~July 131, ~~1999,~~2001. ~~the Company~~The isCompany ~~permitted~~does tonot ~~pay~~expect ~~current claims up~~ to ~~$8.8 million from a trust, after which time (expected to occur late in the third fiscal quarter or early in the fourth fiscal quarter of 2001) the Company will~~ be ~~required~~permitted to pay ~~claims~~dividends ~~from corporate~~for ~~assets. Claims paid by~~ the ~~Company or trust totaled $2.6 million,~~foreseeable ~~$4.4 million~~future ~~and~~based ~~$3.4 million~~on ~~during~~limitations under the ~~six~~Senior ~~months~~Secured ~~ended April 30,~~Notes ~~2001, and fiscal years 2000 and 1999, respectively~~indenture.

~~The~~Postretirement ~~Company~~Benefit ~~has a defined benefit pension plan (“DBP”) which covers~~Plans ~~substantially all bargained for employees. The Company expects to contribute~~ approximately $7.2 million, $24.6 million and $15.4 million to the plan during 2001, 2002 and 2003, respectively, which is expected to satisfy the minimum funding requirements of ERISA for those periods. The Company contributed $4.2 million and $6.7 million to the plan during fiscal 2000 and fiscal 1999, respectively.

~~Trade~~ The ~~Cases~~Company provides postretirement health care and life insurance benefits to substantially all employees who retire from the Company upon meeting certain age and length of service eligibility requirements. As a result of the collective bargaining agreement effective September 1, 1999, the Company was permitted to pay current claims up to $8.8 million from a trust. That limit was reached during the three months ended July 31, 2001 which will now require the Company to pay claims from corporate assets. Claims paid by the Company or trust totaled $4.0 million, $4.4 million and $3.4 million during the nine months ended July 31, 2001 and fiscal years 2000 and 1999, respectively.

InThe ~~July 2000,~~Company ~~the~~has ~~U.S.~~a ~~Department~~defined ofbenefit ~~Commerce~~pension plan (“~~DOC~~DBP”) ~~released~~which ~~a study~~covers ~~that~~substantially ~~found~~all ~~illegal~~bargained ~~subsidies,~~for ~~dumping~~employees. ~~and~~The ~~discriminatory~~Company ~~practices~~expects byto ~~foreign~~contribute ~~governments~~approximately ~~have distorted steel trade worldwide and harmed U~~$7.~~S. steelworkers and companies. In November~~2 ~~2000~~million, ~~the International Trade Commission (“ITC”) conducted a five-year (sunset)~~$24.6 ~~review~~million ~~of certain steel products from 16 countries~~ and ~~concluded~~$15.4 million ~~that a continuation of existing antidumping and countervailing duty orders on those steel products was necessary~~ to ~~prevent further injury to~~ the ~~U.S.~~plan ~~industry. On November 13~~during 2001, ~~2000,~~2002 ~~11 petitioners of the domestic steel industry filed new trade cases against dumped~~ and ~~subsidized imports of hot rolled carbon steel from 11 countries. On December 28~~2003, ~~2000~~respectively, ~~the~~ ~~ITC~~which ~~determined that there~~ is aexpected ~~reasonable~~to ~~indication~~satisfy ~~that~~ the ~~U.S. industry~~minimum isfunding ~~materially~~requirements ~~injured by reason~~ of ~~imports~~ERISA offor ~~hot rolled steel products from~~ those ~~11 subject countries~~periods. AsThe aCompany ~~result~~contributed ~~of the ITC’s affirmative preliminary~~$5.4 ~~determination~~million, ~~the trade cases were forwarded to the DOC for further investigation and determination~~$4. ~~On February~~2 8,million ~~2001~~ and again on April 16, 2001 the DOC announced their preliminary affirmative determination of countervailing (government subsidized) duties (“CVD”) against steel producers in 5 countries: Argentina, India, Indonesia, South Africa and Thailand$6. ~~The CVD’s range from~~ 7~~% to 40% and require the U.S. Customs Service to collect the penalty fees against the value of the hot rolled steel these countries export to the U.S. In addition, the DOC announced on April~~ ~~24,~~million 2001 their preliminary affirmative antidumping (sales less than fair value) duty (“AD”) against steel producers from all 11 countries named in the trade case petition: Argentina, India, Indonesia, Kazakhstan, the Netherlands, the People’s Republic of China, Romania, South Africa, Taiwan, Thailand and the Ukraine. The preliminary AD’s range from 2% to ~~240% against~~ the ~~value~~plan ofduring the ~~hot~~nine ~~rolled~~months ~~steel these countries~~ended ~~export to the U.S. Final determinations by the DOC and ITC, if the date is not extended, are scheduled on~~ July 731, 2001 and ~~August 21,~~fiscal ~~2001,~~years ~~respectively~~2000 ~~with issuance~~and ~~of final orders scheduled on August 28~~1999, ~~2001~~respectively.

Accounting Standards

In ~~June~~July ~~1998~~2001, the Financial Accounting Standards Board issued Statement of ~~Financial~~No. 141, ~~Accounting~~Business ~~Standards~~Combinations, and Statement No. ~~133~~142, ~~“Accounting~~Goodwill and Other Intangible Assets. Statement 141 requires that the purchase method of accounting be used for ~~Derivative~~all ~~Instruments~~business combinations initiated after June 30, 2001 as well as all purchase method business combinations completed after June 30, 2001. Statement 142 will require that goodwill and ~~Hedging~~intangible ~~Activities”~~assets ~~(“FAS133”)~~with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of Statement 142. InThe ~~June~~Company is required to adopt the provisions of Statement 141 immediately, and Statement 142 effective November 1, 2002. The adoption of Statement 141 and Statement 142 is not expected to have a material effect on either financial position or results of operation.

13 In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“FAS133”). In June 2000, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 138, “Accounting for Derivative Instruments and Hedging Activities an amendment of FASB Statement No. 133,” (“FAS138”) which amended FAS133 and added guidance for certain derivative instruments and hedging activities. The new standard, FAS133 as amended by FAS138, requires recognition of all derivatives as either assets or liabilities at fair value. One of the primary amendments to FAS133, which is covered by FAS138 establishes a “normal purchases and normal sales” exception. This exception permits companies to exclude contracts which provide for the purchase or sale of something other than a financial or derivative instrument that will be delivered in quantities expected to be used or sold by the entity over a reasonable period of time in the normal course of business operations. The Company adopted FAS133 as amended by FAS138 effective November 1, 2000. The Company has forward purchase contracts for certain energy and coating metal commodities that qualify for the “normal purchase exception” provisions of FAS138. The adoption of FAS133 as amended by FAS138 had no material effect on either financial position or results of operations.

~~Table of Contents~~13

2000,Table the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 138, “Accounting for Derivative Instruments and Hedging Activities an amendment of FASB Statement No. 133,” (“FAS138”) which amended FAS133 and added guidance for certain derivative instruments and hedging activities. The new standard, FAS133 as amended by FAS138, requires recognition of all derivatives as either assets or liabilities at fair value. One of the primary amendments to FAS133, which is covered by FAS138 establishes a “normal purchases and normal sales” exception. This exception permits companies to exclude contracts which provide for the purchase or sale of something other than a financial or derivative instrument that will be delivered in quantities expected to be used or sold by the entity over a reasonable period of time in the normal course of business operations. The Company adopted FAS133 as amended by FAS138 effective November 1, 2000. The Company has forward purchase contracts for certain energy and coating metal commodities that qualify for the “normal purchase exception” provisions of FAS138. The adoption of FAS133 as amended by FAS138 had no material effect on either financial position or results of operations. Contents

Outlook

The domestic steel market continues to be negatively impacted by high levels of steel imports and a general slowing of the economy. However, the recent interest rate cuts by the Federal Reserve are expected to strengthen the economy and lead to increased steel consumption ~~later~~early ~~this~~next year. In addition, service center inventories and car and light truck inventories have dropped significantly from their recent highs. While we are encouraged by both the preliminary and final determinations recently announced by the U.S. Department of of Commerce regarding the importation of hot-rolled carbon steel products, ~~imports~~and the initiation of a Section 201 International Trade Commission investigation, imports are expected to continue to supply a significant portion of domestic ~~steel~~ steel demand which will result in continued price pressure.

The Company’s order entry rate has ~~improved~~stabilized ~~modestly~~ and the Company ~~expects~~ expects shipping volume ~~increases~~ to ~~approach~~be ~~approximately~~flat ~~10%~~ in the ~~third~~ fourth fiscal quarter of 2001 ~~from~~compared ~~the~~to ~~record lows experienced in~~ the ~~first and second~~ ~~quarters~~third quarter. ~~Net~~Selling ~~sales~~ prices are expected to bedecline ~~flat~~slightly in the ~~third quarter~~fourth quarter compared to the ~~second~~third quarter asdue ~~price~~to ~~increases~~decreases ~~announced~~in ~~effective~~prices ~~March 1,~~for cold ~~2001~~rolled ~~have~~and ~~generally~~galvanized ~~not been successful~~products. Custom products are expected to ~~comprise~~ comprise approximately 5450% of shipments in the ~~third~~fourth quarter compared to 5652.84% in the third ~~second~~ quarter. Per ton production costs are expected to ~~decline~~ increase slightly in the ~~third~~fourth quarter compared to the ~~second~~third quarter asdue ~~the~~to ~~effect~~increased ofmaintenance ~~production~~costs ~~rate~~and ~~increases~~natural ~~more~~gas ~~than~~prices ~~offset~~and the ~~effect~~cost of ~~higher~~idling ~~natural~~certain ~~gas~~finishing ~~prices~~facilities periodically during the quarter. As a result, the Company expects to incur a loss in the ~~third~~fourth quarter that is ~~slightly~~larger ~~less~~ than that reported in the ~~second quarter excluding~~ ~~special charges. While the Company expects its cash balance to decrease during the~~ third quarter ~~due to the $15 million coupon payment on its Senior Secured Notes, management believes that it has sufficient liquidity to support its operations~~.

Forward-Looking Statements

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to commodity price risk with respect to natural gas and zinc. The Company uses forward purchase contracts to manage the volatility related to these exposures. No contracts are entered into for speculative purposes. The Company’s ~~previously placed forward purchase contracts for natural gas expired in March 2001 requiring the Company to place new forward purchase contracts at higher~~ market ~~prices.~~risk ~~Market~~has ~~prices~~not ~~for~~changed ~~natural~~materially ~~gas~~from ~~are~~that ~~currently~~reported ~~approximately~~in ~~50% higher than~~ the Company’s ~~cost~~10-K ~~during~~for the ~~six months~~fiscal year ended ~~April~~October 3031, ~~2001~~2000. ~~This increase will result in an increase of per~~ ~~ton production costs of approximately 2% in the third quarter of 2001 compared~~ ~~to the second quarter.~~

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PART II —- OTHER INFORMATION

WCI STEEL, INC.

ITEM 1. LEGAL PROCEEDINGS

For information as to the environmental matters and as to the employee litigation described in the Company’s Form 10-K for the year ended October 31, 2000, see Part I, Note 3 to Item 1, Financial Statements.

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

On February 2, 2001, Renco Steel Holdings, Inc., as sole shareholder of WCI Steel, Inc., by unanimous written consent, re-elected Ira Leon Rennert as Chairman and sole Director of WCI Steel, Inc.

ITEM 6. EXHIBITS and REPORTS ON FORM 8-K

(a)		Exhibits:
		A list of the exhibits required to be filed as part of this Report on Form 10-Q is set forth in the “Exhibit Index” which immediately precedes such exhibits, and is incorporated herein by reference.
		None
(b)		Reports on Form 8-K:
		On April 30, 2001, the Company filed a current report on Form 8-K, incorporated herein by reference, to report material events that have occurred since the Company filed its quarterly report on Form 10-Q on February 22, 2001 for the three months ended January 31, 2001.
		None

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WCI STEEL, INC.

SIGNATURES

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

WCI STEEL, INC.
(registrant)

Date: May 24, 2001	/S/ JOHN P. JACUNSKI
		John P. Jacunski
		Vice President and Chief Financial Officer
			(principal financial officer)


Date: August 30, 2001		/S/ JOHN P. JACUNSKI


		John P. Jacunski Vice President and Chief Financial Officer (principal financial officer)

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WCI STEEL, INC.

EXHIBIT INDEX

Exhibit Number		Description
10.4.13		Amendment No. 1 dated April 30, 2001 to the Second Amended and Restated Loan and Security Agreement dated July 30, 1999.

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