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
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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.

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(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.

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(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 associate