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

FORM 10-Q

(Mark One)

For the transition period from                      to

Commission file number: 333-18019

WCI STEEL, INC.

(330) 841-8302

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. Note: The Registrant files pursuant to an indenture, but is not otherwise subject to Section 13 or 15(d) filing requirements.

[ ] Yes [X] No                              

     As of September 16, 2002, the registrant had 100 shares of its common stock, no par value, $.01 stated value, outstanding.

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WCI STEEL, INC. AND SUBSIDIARIES

INDEX

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

WCI STEEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amount)

     See accompanying notes to consolidated financial statements.

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WCI STEEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands)
(Unaudited)

See accompanying notes to consolidated financial statements.

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WCI STEEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS

(Dollars in thousands)
(Unaudited)

     See accompanying notes to consolidated financial statements.

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WCI STEEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three and nine months ended July 31, 2002 and 2001
( Unaudited )

NOTE 1 : BASIS OF PRESENTATION

     WCI Steel, Inc. (Company or WCI) is a wholly-owned subsidiary of Renco Steel Holdings, Inc. (Renco Steel) and an indirect wholly-owned subsidiary of The Renco Group, Inc. (Renco). The financial information included herein is unaudited; however, such information reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim periods. Certain reclassifications of prior year data have been made to conform to the 2002 classifications. The results of operations for the three and nine months ended July 31, 2002 are not necessarily indicative of the results to be expected for the full year.

     These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended October 31, 2001.

NOTE 2 : INVENTORIES

     Inventories are stated at the lower of cost or market. Cost is determined by the last-in, first-out (LIFO) method. Market value is determined based on expected selling price of each product. Inventories consist of the following:

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NOTE 3 : LONG-TERM DEBT

     Long-term debt consists of the following:

     The $300 million 10% Senior Secured Notes due December 1, 2004 (Senior Secured Notes) are secured by a first priority lien on substantially all of the existing property, plant and equipment of the Company. A Voluntary Employee Beneficiaries Association trust fund, established to hold Company contributions to fund postretirement health care and life insurance obligations for the benefit of hourly employees, holds a second priority lien on the security for the Senior Secured Notes.

     The Company has a $100,000,000 Revolver secured by inventories and receivables and subject to eligibility requirements, as defined, reduced by any outstanding letters of credit. The Revolver is subject to a monthly service fee of $15,000 and an annual commitment fee of 0.5% of the unused balance up to $60,000,000 payable monthly. There were borrowings of $34,250,000 outstanding under the Revolver as of July 31, 2002. The Revolver, which expires December 29, 2003, also provides for up to an aggregate amount of $20,000,000 in letters of credit. On September 13, 2002 the Company and its lenders under the Revolver agreed to amend the loan agreement as described below. At July 31, 2002, assuming this amendment had been in place, the Company had borrowing availability of $51,836,000 based on eligible inventory and receivables after deducting $34,250,000 of borrowings outstanding and $14,870,000 in letters of credit outstanding and before reflecting a $20,000,000 minimum borrowing availability covenant as discussed below. The Revolver is subject to a penalty of $250,000 if terminated before October 31, 2003.

     The Company’s Revolver and Senior Secured Notes contain certain financial and other covenants, including maintenance of specified levels of net worth as defined, working capital, and debt service and limitations on capital expenditures. Additional covenants limit the incurrence of additional indebtedness, payments affecting subsidiaries, transactions with affiliates, sale/leaseback transactions, impairment of security interest, consolidations, mergers and transfer of the Company’s assets. On January 25, 2002 the Company and its lenders under the Revolver agreed to amend the loan agreement to require the Company to maintain a minimum net worth, as defined, of not less than the following for each period indicated: negative $225 million through January 31, 2002, negative $240 million from February 1, 2002 through

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April 30, 2002, negative $255 million from May 1, 2002 through July 31, 2002, and negative $260 million on August 1, 2002 and thereafter. In addition, the Company was required to maintain minimum borrowing availability under the Revolver of $25 million. The January amendment also changes the interest charged from prime rate to prime rate plus 1.5% or as to Eurodollar Rate Loans, a rate of 3.5% in excess of the Adjusted Eurodollar Rate applicable for the interest period selected by the Company. On September 13, 2002 the Company and its lenders under the Revolver further agreed to reduce the minimum borrowing availability requirement from $25 million to $20 million provided the Company is able to meet certain minimum cumulative earnings before interest, taxes, depreciation and amortization (EBITDA) targets. A minimum cumulative EBITDA target has been established for each month from August 2002 to December 2003 and totals $73.0 million with monthly increments of not more than $5.5 million and not less than $4.0 million. In addition, while loans and letters of credit continue to be subject to a $100 million maximum, WCI can use up to $105 million of qualifying inventories and receivables based on established advance rates in determining availability with respect to the minimum availability covenant. The Company is permitted to declare and pay dividends, and make other transactions with affiliates provided no condition of default exists or will exist, and the accumulated amount of such transactions is no greater than fifty percent (50%) of the consolidated net income as defined (less 100% of any consolidated net loss) earned for periods subsequent to October 31, 1996 when taken as a single accounting period, less management fees paid to Renco in excess of $1,200,000 annually for the same period. Under these agreements, there were no amounts available for dividends and other transactions with affiliates at July 31, 2002.

NOTE 4: ENVIRONMENTAL MATTERS and OTHER CONTINGENCIES

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

     The Company is subject to a consent decree as a result of a civil action instituted by the Department of Justice (DOJ), on behalf of the Environmental Protection Agency (EPA). The consent decree requires the Company to complete certain supplemental environmental projects with a remaining estimated cost of $2.0 million that will be expended by late 2002. These projects include sediment removal from the Mahoning River at an estimated cost of $0.8 million and the installation of a liner for a surface impoundment estimated to cost approximately $1.2 million. The consent decree also provides for stipulated penalties in the event of noncompliance which the Company does not believe will be material.

     As a condition of a previous Resource Conservation and Recovery Act (RCRA) operating permit, the Company is required to undertake a corrective action program with respect to historical material handling practices at the Warren facility. The Company has completed the initial phase of the first investigation step of the corrective action program, the RCRA Facility Investigation (RFI), and has submitted its report to the EPA. The Company and the EPA agreed that additional sampling would be required to complete a full RFI which is expected to be completed by the end of 2003. The RFI workplan identifies thirteen historical solid waste management units to be investigated. The final scope of corrective action required to remediate any contamination that may be present at or emanating from the Warren

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facility is dependent upon the completion and findings of the RFI and the development and approval of a corrective action program. Accordingly, the Company is unable at this time to estimate the final cost of the corrective action program or the period over which such costs may be incurred and there can be no assurance that any such corrective action program would not have a material adverse effect on the operating results or financial condition of the Company.

     On January 23, 1996, two retired employees instituted an action against the Company and the United Steelworkers of America (USWA) in the United States District Court for the Northern District of Ohio alleging in substance that certain distributions made by the Company to employees and benefit plans violated certain agreements, the Employee Retirement Income Security Act (ERISA), the National Labor Relations Act (NLRA) and common law. On July 31, 1997, the court granted the Company’s motion to dismiss this action and entered judgement in favor of the Company and the USWA. The Plaintiffs filed an appeal regarding the court’s decision to dismiss, which was heard in June 1998. In March 1999, the appellate court upheld the dismissal of the claims under ERISA and common law, but reversed the dismissal of the NLRA claim and remanded to the district court for further proceedings. On October 9, 2000 the court granted the Company’s motion to dismiss this action and entered judgement in favor of the Company and the USWA. The plaintiffs filed an appeal regarding the court’s decision to dismiss which was heard on April 23, 2002. On May 24, 2002 the appellate court affirmed the decision to dismiss this action. No appeal has been filed regarding the decision and the time frame for filing an appeal has expired.

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

NOTE 5: OTHER MATTERS

     Based on WCI’s current order intake rate and backlog, the Company expects shipping volume to be approximately 330,000 tons in the fourth quarter of 2002. WCI’s order backlog was approximately 293,000 tons at July 31, 2002 compared to 158,000 at July 31, 2001 and 352,000 at April 30, 2002. We expect net sales per ton shipped to increase approximately 10% during the fourth quarter compared to the third quarter. WCI expects cost of products sold per ton shipped to increase approximately 2% in the fourth quarter compared to the third quarter due primarily to changes in product mix with capacity utilization remaining at approximately 90% or greater. During the fourth quarter of 2002, the Company expects its working capital needs to increase by approximately $15 million as a result of increasing iron ore pellet inventories prior to the end of the shipping season and due to increased accounts receivable resulting from increasing revenues. Assuming no change in the U.S. economy or level of steel imports, WCI expects shipping volume during the first fiscal quarter of 2003 to decline approximately 5% compared to the fourth quarter of 2002 with net sales and cost of goods sold per ton remaining flat. Based on these expectations, the Company believes that it has adequate availability of cash resources to maintain operations and meet its debt service requirements into 2003 and if current market conditions persist, the Company expects to generate significant free cash flow both from operations and working capital in the first half of 2003.

     Significant uncertainty remains regarding the direction of the U.S. economy and the short-term as well

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as long-term condition of the steel market. Improvements in order intake rates and pricing realized during 2002 could be reversed by a number of factors including increasing domestic supply through the restart of closed facilities, increases in steel imports due to rising domestic steel prices or the granting of exemptions to tariffs imposed as a result of the Section 201 investigation or the failure of an economic recovery to materialize or be sustained in the U.S. If the volume or net sales prices expected to be realized by WCI during the fourth quarter are not sustained in subsequent quarters due to these or other factors, WCI may not have adequate availability under its existing financing arrangements to sustain its operations and may require additional sources of financing. WCI cannot assure that it has the ability to obtain such additional financing or what the terms of such additional financing might be. Failure to obtain such additional financing in these circumstances would likely have a material adverse effect on WCI’s operations.

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

Results of Operations

     Three months ended July 31, 2002 compared to three months ended July 31, 2001

     Net sales for the three months ended July 31, 2002 were $132.8 million on 334,367 tons shipped, representing a 20.7% increase in net sales and a 20.0% increase in tons shipped compared to the three months ended July 31, 2001. When the third fiscal quarter of 2002 is compared to the prior quarter ended April 30, 2002, net sales showed a more modest increase of 4.0%, however tons shipped decreased by 6.0%. Net sales per ton shipped of $397 for the three months ended July 31, 2002 was 0.5% higher than the net sales per ton shipped of $395 for the comparable prior year period ended July 31, 2001, with net selling prices up 6.0% offset by changes to product mix. Net sales per ton increased 10.6% for the third fiscal quarter of 2002 compared to the second fiscal quarter of 2002, with net selling prices increasing 9.4%. Shipments of custom carbon, alloy and electrical steels accounted for 47.4% of total shipments for the three months ended July 31, 2002 compared to 52.4% for the three months ended July 31, 2001 and 47.6% for the three months ended April 30, 2002. The improvements in shipping volume and increased net selling prices in the third quarter 2002 compared to the third quarter 2001 resulted from a variety of factors including a decrease in domestic supply due to the closing of facilities during the last several years, the implementation of tariffs under a favorable Section 201 decision on certain imported steel which became effective for imports entering the U.S. on or after March 20, 2002, a conclusion to inventory reductions by customers and a slight improvement in overall economic activity.

     The table below shows the Company’s product mix for the three months ended July 31, 2002 an