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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
ANNUAL REPORT FILED PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

NEW CF&I, INC.
(Exact name of registrant as specified in its charter)

Delaware 02-20781 93-1086900
- --------------------------------------------------------------------------------
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation or organization) Identification
Number)

1000 S.W. Broadway, Suite 2200, Portland, Oregon 97205
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(503) 223-9228
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)

CF&I STEEL, L.P.
(Exact name of registrant as specified in its charter)

Delaware 02-20779 93-1103440
- --------------------------------------------------------------------------------
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation or organization) Identification
Number)

1000 S.W. Broadway, Suite 2200, Portland, Oregon 97205
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(503) 223-9228
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Title of each class Name of exchange on which registered
------------------- ------------------------------------
Guarantees of 11% First New York Stock Exchange
Mortgage Notes due 2003

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None

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. [ X ]

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
--- ---

State the aggregate market value of the voting stock held by non-affiliates
of the registrant.
Not Applicable

Indicate the number of shares outstanding of each of the registrant's
classes of stock as of January 31, 2003:

NEW CF&I, INC.

COMMON STOCK, $1 PAR VALUE 200
-------------------------- --------------------------------
(Title of Class) (Number of shares outstanding)

DOCUMENTS INCORPORATED BY REFERENCE:

Proxy statement for Oregon Steel Mills, Inc. Annual Meeting of Stockholders to
be held May 1, 2003 is incorporated by reference into Part III of this
report.









NEW CF&I, INC.
CF&I STEEL, L.P.

TABLE OF CONTENTS
ITEM PAGE
- ---- ----
PART I

1. BUSINESS........................................................... 1
General........................................................ 1
Products....................................................... 2
Raw Materials ................................................. 3
Marketing and Customers........................................ 3
Competition and Other Market Factors........................... 4
Environmental Matters.......................................... 4
Labor Matters.................................................. 6
Employees...................................................... 7
Available Information.......................................... 7

2. PROPERTIES......................................................... 8

3. LEGAL PROCEEDINGS.................................................. 8

4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................ 8
Executive Officers of the Registrant........................... 9

PART II

5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.................................... 10

6. SELECTED FINANCIAL DATA............................................ 10

7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................. 11

7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
MARKET RISK.................................................... 15

8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........................ 17

9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE......................... 49

PART III

10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
and 11. AND EXECUTIVE COMPENSATION..................................... 50

12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS................. 52

13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................... 53

14. CONTROLS AND PROCEDURES ........................................... 53

PART IV

15. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND
REPORTS ON FORM 8-K.................................................54
SIGNATURES..........................................................58
CERTIFICATIONS......................................................59








PART I

ITEM 1. BUSINESS

GENERAL

New CF&I, Inc. ("New CF&I") was incorporated in the State of Delaware on
May 5, 1992 as a wholly-owned subsidiary of Oregon Steel Mills, Inc. ("Oregon
Steel"). On March 3, 1993, New CF&I acquired a 95.2% interest in a newly formed
limited partnership, CF&I Steel, L.P. ("CF&I"), a Delaware limited partnership.
The remaining 4.8% interest was owned by the Pension Benefit Guaranty
Corporation ("PBGC"). In August of 1994, New CF&I sold a 10% equity interest in
New CF&I to a subsidiary of Nippon Steel Corporation ("Nippon"). In connection
with that sale, Nippon agreed to license to New CF&I a proprietary technology
for producing deep head-hardened ("DHH") rail products as well as to provide
certain production equipment to produce DHH rail. In November 1995, Oregon Steel
sold equity interests totaling 3% in New CF&I to two subsidiaries of the Nissho
Iwai Group ("Nissho Iwai"), a large Japanese trading company. Oregon Steel owns
the remaining 87% of New CF&I. In 1997, Oregon Steel purchased the 4.8% interest
in CF&I owned by the PBGC. In 1998, Oregon Steel sold a 0.5% interest in CF&I to
a subsidiary of Nippon.

New CF&I purchased the railroad business assets and CF&I purchased
substantially all of the steelmaking, fabricating, and metals assets of CF&I
Steel Corporation ("CF&I Steel"). These assets are located primarily in Pueblo,
Colorado ("Pueblo Mill"). The Pueblo Mill is a steel minimill which produces
long-length, standard and head-hardened steel rails, seamless tubular goods
("seamless pipe"), wire rod, and bar products. In January 1998, CF&I assumed the
trade name of Rocky Mountain Steel Mills ("RMSM").

Shortly after the acquisition of the Pueblo Mill in 1993, New CF&I began
a series of major capital improvements designed to increase yields, improve
productivity and quality and expand the New CF&I's ability to offer specialty
rail, rod and bar products. The primary components of the capital improvements
at the Pueblo Mill are outlined below.

STEELMAKING. New CF&I installed a ladle refining furnace and a vacuum
degassing facility and upgraded both continuous casters. During 1995, New CF&I
eliminated ingot casting and replaced it with more efficient continuous casting
methods that allow New CF&I to cast directly into blooms. These improvements
expanded the Pueblo Mill steelmaking capacity to 1.2 million tons.

ROD AND BAR MILL. At the time of its acquisition, the rod and bar mills
at the Pueblo Mill were relatively old and located in separate facilities, which
resulted in significant inefficiencies as New CF&I shifted production between
them in response to market conditions. In 1995, New CF&I commenced operation of
a new combination rod and bar mill with a new reheat furnace and a high-speed
rod train, capable of producing commodity and specialty grades of rod and bar
products. These improvements enable New CF&I to produce a wider range of high
margin specialty products, such as high-carbon rod, merchant bar and other
specialty bar products, and larger rod coil sizes, which New CF&I believes are
preferred by many of its customers.

RAIL MANUFACTURING. At the time of New CF&I's acquisition of the Pueblo
Mill, rail was produced by ingot casting using energy-intensive processes with
significant yield losses as the ingots were reheated, reduced to blooms and then
rolled into rail. Continuous casting has increased rail yields and decreased
rail manufacturing costs. In 1996, New CF&I invested in its railmaking capacity
by entering into the agreement with Nippon for the license of its proprietary
technology to produce DHH rail, and acquired the production equipment necessary
to produce the specialty rail. DHH rail is considered by the rail industry to be
longer lasting and of higher quality than rail produced using conventional
methods and, accordingly, the DHH rail usually has a corresponding higher
average selling price. New CF&I believes it is able to meet the needs of a broad
array of rail customers with both traditional and DHH rail.

SEAMLESS PIPE. Seamless pipe produced at the Pueblo Mill consists of
seamless casing, coupling stock and standard and line pipe. Seamless pipe casing
is used as a structural retainer for the walls of oil or gas wells. Standard and
line pipe are used to transport liquids and gasses both above and underground.
New CF&I's seamless pipe mill is equipped to produce the most widely used sizes
of seamless pipe (7" outside diameter through 10-3/4" outside diameter) in all
standard lengths. New CF&I's production capability includes carbon and heat
treated tubular products. New CF&I also sells semi-finished seamless pipe
(referred to as green tubes) for processing and finishing by others.

See Part I, Item 2, "Properties", for discussion of the operating
capacities of the Pueblo Mill.


-1-



PRODUCTS

The following chart identifies New CF&I's principal products and the
primary markets for those products.

Products Markets
-------- -------

Rail Rail transportation

Rod and Bar products Construction
Durable goods
Capital equipment

Seamless pipe Oil and petroleum producers

Semi-finished Seamless tube mills


The following table sets forth for the periods indicated the tonnage
shipped and New CF&I's total shipments by product class.


TONS SHIPPED
--------------------------------------------
PRODUCT CLASS 2002 2001 2000
------------- ------- ------- -------

Rail 384,100 246,000 314,700
Rod and Bar 419,700 432,500 395,100
Seamless Pipe (FN1) 30,000 97,700 10,400
Semi-finished 2,700 4,700 36,800
------- ------- -------
Total 836,500 780,900 757,000
======= ======= =======

- ---------------------
(FN1) Due to market conditions, operation at the seamless pipe mill was
suspended from May 1999 to September 2000, from November 2001 to April
2002 and from mid-August 2002 to mid-September 2002.

RAIL. New CF&I produces standard carbon and high-strength head-hardened
rail at its Pueblo Mill. The Pueblo Mill is the sole manufacturer of rail west
of the Mississippi River and one of only two rail manufacturers in the Western
Hemisphere. Rails are manufactured in the six most popular rail weights (ranging
from 115 lb/yard through 141 lb/yard), in 39 and 80-foot lengths. The primary
customers for the Pueblo Mill's rail are the major western railroads, with an
increased share of the eastern railroad business in recent years. New CF&I has
also developed a major presence in the Canadian and Mexican rail markets. Rail
is also sold directly to rail contractors, transit districts and short-line
railroads.

As part of its capital improvement program, New CF&I improved its rail
manufacturing facilities to include the production of in-line head-hardened
rail. In-line head-hardened rail is produced through a proprietary technology,
known as deep head-hardened or DHH technology, which is licensed from a third
party. In 2002, New CF&I produced approximately 144,000 tons of head-hardened
product using the DHH technology. The in-line DHH technology allows New CF&I to
produce head-hardened product up to the capacity of the rail facility. Rail
produced using the improved in-line technology is considered by many rail
customers to be longer lasting and of higher quality than rail produced with
traditional off-line techniques. In 2001, the Pueblo Mill began producing and
marketing an improved head-hardened rail called High Carbon Pearlite ("HCP").
This rail metallurgy was designed for heavy application situations such as heavy
tonnage curves.

ROD AND BAR PRODUCTS. New CF&I's rod and bar mill located at the Pueblo
Mill is able to produce coils of up to 6,000 pounds. The improved steel quality
and finishing capabilities allow New CF&I to manufacture rods up to 1" in
diameter, and to manufacture a variety of high-carbon rod products such as those
used for spring wire, wire rope and tire bead. New CF&I produces several sizes
of coiled rebar in the most popular grades for the reinforcement of concrete
products.

SEAMLESS PIPE. New CF&I's seamless pipe mill at the Pueblo Mill produces
seamless casing, coupling stock and standard and line pipe. The primary use of
these products is in the transmission and recovery of oil and natural gas
resources, through either above ground or subterranean pipelines. The seamless
mill produces both carbon and heat-treated tubular products. New CF&I also
markets green tubes to other tubular mills for processing and finishing. Due to
market conditions, operation at the seamless pipe mill was suspended from May
1999 to September 2000, from November 2001 to April 2002 and from mid-August
2002 to mid-September 2002.

-2-


RAW MATERIALS

New CF&I's principal raw material is ferrous scrap metal derived from,
among other sources, junked automobiles, railroad cars and railroad track
materials and demolition scrap from obsolete structures, containers and
machines. In addition, direct-reduction iron ("DRI"), hot-briquetted iron
("HBI") and pig iron (collectively "alternate metallics") can substitute for a
limited portion of the scrap used in minimill steel production, although the
sources and availability of alternate metallics are substantially more limited
than those of scrap. The purchase prices for scrap and alternate metallics are
subject to market forces largely beyond the control of New CF&I, and are
impacted by demand from domestic and foreign steel producers, freight costs,
speculation by scrap brokers and other conditions. The cost of scrap and
alternate metallics to New CF&I can vary significantly, and New CF&I's product
prices often cannot be adjusted, especially in the short-term, to recover the
costs of increases in scrap and alternate metallics prices.

The long-term demand for steel scrap and its importance to the domestic
steel industry may increase as steelmakers continue to expand scrap-based
electric arc furnace capacity; however, New CF&I believes that near-term
supplies of steel scrap will continue to be available in sufficient quantities
at competitive prices. In addition, while alternate metallics are not currently
cost competitive with steel scrap, a sustained increase in the price of steel
scrap could result in increased implementation of these alternative materials.

MARKETING AND CUSTOMERS

Steel products are sold by New CF&I principally through its own sales
organizations, which have sales offices at various locations in the United
States, and, as appropriate, through foreign sales agents. In addition to
selling to customers who consume steel products directly, New CF&I also sells to
intermediaries such as steel service centers, distributors, processors and
converters.

The sales force is organized by product line. New CF&I has separate sales
people for seamless pipe, rod, bar, and rail products. Most of New CF&I's sales
are initiated by contacts between sales representatives and customers.
Accordingly, New CF&I does not incur substantial advertising or other
promotional expenses for the sale of its products. New CF&I had significant
sales contracts to two rail customers, Burlington Northern Santa Fe Corporation,
and Union Pacific Railroad which accounted for nearly 12% and 16%, respectively,
of its total revenue in 2002. Orders placed with New CF&I generally are
cancelable by the customer prior to production. No single customer or group of
affiliated customers represented more than 10% of New CF&I's sales revenue in
2000 and 2001.

New CF&I does not have a general policy permitting return of purchased
steel products except for product defects. New CF&I does not routinely offer
extended payment terms to its customers.

The demand for a majority of New CF&I's products is not generally subject
to significant seasonal trends. New CF&I's rail products are impacted by
seasonal demand, as dictated by the major railroads' procurement schedules.
Demand for oil country tubular goods ("OCTG") can be subject to seasonal
factors. Overall demand for OCTG is subject to significant fluctuations due to
the volatility of oil and gas prices and North American drilling activity as
well as other factors including competition from imports. New CF&I does not have
material contracts with the United States government and does not have any major
supply contracts subject to renegotiation.

RAIL. The primary customers for the Pueblo Mill's rail are the major
western railroads, with an increased share of the eastern railroad business in
recent years. New CF&I has also developed a major presence in the Canadian and
Mexican rail markets. Rail is also sold directly to rail distributors, transit
districts and short-line railroads. New CF&I believes its proximity to the North
American rail markets benefits New CF&I's marketing efforts.

BAR PRODUCTS. New CF&I sells its bar products, primarily reinforcing bar,
to fabricators and distributors. The majority of these customers are located in
the United States, west of the Mississippi River.

ROD PRODUCTS. New CF&I's wire rod products are sold primarily to wire
drawers ranging in location from the Midwest to the West Coast. The demand for
wire rod is dependent upon a wide variety of markets, including agricultural,
construction, capital equipment and the durable goods segments. New CF&I entered
the high carbon rod market during 1995 as a direct result of the investment in
the new rolling facility. Since that time, New CF&I's participation in the
higher margin, high carbon rod market has steadily increased, to the point where
it now represents nearly two-thirds of total rod product shipments. Typical end
uses of high carbon rod include spring wire, wire rope and tire bead.

SEAMLESS PIPE. New CF&I's seamless pipe is sold primarily through its
internal sales force to a large number of oil exploration and production
companies, and directly to companies outside of the OCTG industry, such as
construction companies. The market for New CF&I's seamless pipe is primarily
domestic. The demand for this product is determined in large part by the number
and drilling depths of the oil and gas drilling rigs working in the United
States.

-3-


COMPETITION AND OTHER MARKET FACTORS

The steel industry is cyclical in nature, and high levels of steel
imports, worldwide production overcapacity and other factors have adversely
affected the domestic steel industry in recent years. New CF&I also is subject
to industry trends and conditions, such as the presence or absence of sustained
economic growth and construction activity, currency exchange rates and other
factors. New CF&I is particularly sensitive to trends in the oil and gas,
construction, capital equipment, rail transportation and durable goods segments,
because these industries are significant markets for New CF&I's products.

Competition within the steel industry is intense. New CF&I competes
primarily on the basis of product quality, price and responsiveness to customer
needs. Many of New CF&I's competitors are larger and have substantially greater
capital resources, more modern technology and lower labor and raw material costs
than New CF&I. Moreover, U.S. steel producers have historically faced
significant competition from foreign producers. The highly competitive nature of
the industry, combined with excess production capacity in some products, results
in significant sales pricing pressure for certain of New CF&I's products.

RAIL. The majority of current rail requirements in the United States are
replacement rails for existing rail lines. Imports have been a significant
factor in the domestic rail market in recent years. New CF&I's capital
expenditure program at the Pueblo Mill provided the rail production facilities
with continuous cast steel capability and in-line head-hardening rail
capabilities necessary to compete with other producers. Pennsylvania Steel
Technologies, a division of Bethlehem Steel Corp. ("Bethlehem"), is the only
other domestic rail producer at this time. Bethlehem is currently operating
under an October 2001 Chapter 11 bankruptcy filing. Bethlehem has reportedly
accepted an $1.5 billion offer to be acquired by International Steel Group.

ROD AND BAR. The competition in bar products includes a group of
minimills that have a geographical location close to the markets in or around
the Rocky Mountains. New CF&I's market for wire rod ranges from the Midwest to
the West Coast. Domestic rod competitors include North Star Steel, Cascade Steel
Rolling Mills, Keystone Steel and Wire for commodity grades and GS Industries,
Ivaco Rolling Mills and North Star Steel for high carbon rod products.

SEAMLESS PIPE. New CF&I's primary competitors in seamless pipe include a
number of domestic and foreign manufacturers. New CF&I has the flexibility to
produce relatively small volumes of specified products on short notice in
response to customer requirements. Principal domestic competitors include U.S.
Steel Corporation and North Star Steel for seamless product. Lone Star Steel
competes with its welded ERW pipe in lieu of seamless, which is acceptable for
some applications.

ENVIRONMENTAL MATTERS

New CF&I is subject to extensive United States and foreign, federal,
state and local environmental laws and regulations concerning, among other
things, wastewater, air emissions, toxic use reduction and hazardous materials
disposal. The Pueblo Mill is classified in the same manner as other similar
steel mills in the industry as generating hazardous waste materials because the
melting operation of the electric arc furnace produces dust that contains heavy
metals. This dust, which constitutes the largest waste stream generated at this
facility, must be managed in accordance with applicable laws and regulations.

The Clean Air Act Amendments ("CAA") of 1990 imposed responsibilities on
many industrial sources of air emissions, including New CF&I's plants. In
addition, the monitoring and reporting requirements of the law subject all
companies with significant air emissions to increased regulatory scrutiny. New
CF&I submitted applications in 1995 to the Colorado Department of Public Health
and Environment ("CDPHE") for permits under Title V of the CAA. The CDPHE issued
the final portion of the Title V permit for the Pueblo Mill in December 2001.
See "Environmental Matters" below for a description of CAA compliance issues
relating to the Pueblo Mill. New CF&I does not know the ultimate cost of
compliance with the CAA, which will depend on a number of site-specific factors.
Regardless of the outcome of the matters discussed below, New CF&I anticipates
that it will be required to incur additional expenses and make additional
capital expenditures as a result of the law and future laws regulating air
emissions.

New CF&I's future expenditures for installation of and improvements to
environmental control facilities, remediation of environmental conditions,
penalties for violations of environmental laws, and other similar matters are
difficult to predict accurately. It is likely that New CF&I will be subject to
increasingly stringent environmental standards, including those relating to air
emissions, waste water and storm water discharge and hazardous materials use,
storage, handling and disposal. It is also likely that New CF&I will be required
to make potentially significant expenditures relating to environmental matters,
including environmental remediation, on an ongoing basis. Although New CF&I has
established reserves for environmental matters described below, additional
measures may be required by environmental authorities or as a result of
additional environmental hazards, identified by such authorities, New CF&I or
others each necessitating further expenditures. Accordingly, the costs of
environmental matters may exceed the amounts reserved. Expenditures of the
nature described below or liabilities resulting from hazardous substances
located on New CF&I's currently or previously owned properties or used or
generated in the conduct of its business, or resulting from circumstances,
actions, proceedings or claims relating to environmental matters, may have a
material adverse effect on New CF&I's consolidated financial condition, results
of operations, or cash flows.

-4-

In connection with the acquisition of the steelmaking and finishing
facilities located at Pueblo, Colorado ("Pueblo Mill"), New CF&I accrued a
liability of $36.7 million for environmental remediation related to the prior
owner's operations. New CF&I believed this amount was the best estimate of costs
from a range of $23.1 million to $43.6 million. New CF&I's estimate of this
liability was based on two remediation investigations conducted by environmental
engineering consultants, and included costs for the Resource Conservation and
Recovery Act facility investigation, a corrective measures study, remedial
action, and operation and maintenance associated with the proposed remedial
actions. In October 1995, New CF&I and the Colorado Department of Public Health
and Environment ("CDPHE") finalized a postclosure permit for hazardous waste
units at the Pueblo Mill. As part of the postclosure permit requirements, New
CF&I must conduct a corrective action program for the 82 solid waste management
units at the facility and continue to address projects on a prioritized
corrective action schedule which substantially reflects a straight-line rate of
expenditure over 30 years. The State of Colorado mandated that the schedule for
corrective action could be accelerated if new data indicated a greater threat
existed to the environment than was presently believed to exist. At December 31,
2002, the accrued liability was $29.9 million, of which $25.9 million was
classified as non-current on the consolidated balance sheet.

The CDPHE inspected the Pueblo Mill in 1999 for possible environmental
violations, and in the fourth quarter of 1999 issued a Compliance Advisory
indicating that air quality regulations had been violated, which was followed by
the filing of a judicial enforcement action ("Action") in the second quarter of
2000. In March 2002, New CF&I and CDPHE reached a settlement of the Action,
which was approved by the court (the "State Consent Decree"). The State Consent
Decree provides for New CF&I to pay $300,000 in penalties, fund $1.5 million of
community projects, and to pay approximately $400,000 for consulting services.
New CF&I is also required to make certain capital improvements expected to cost
approximately $20 million, including converting to the new single New Source
Performance Standards Subpart AAa ("NSPS AAa") compliant furnace discussed
below. The State Consent Decree provides that the two existing furnaces will be
permanently shut down approximately 16 months after the issuance of a Prevention
of Significant Deterioration ("PSD") air permit. New CF&I applied for the PSD
permit in April 2002. Terms of that permit are still under discussion with the
State and it has not yet been issued.

In May 2000, the EPA issued a final determination that one of the two
electric arc furnaces at the Pueblo Mill was subject to federal NSPS AA. This
determination was contrary to an earlier "grandfather" determination first made
in 1996 by CDPHE. New CF&I appealed the EPA determination in the federal Tenth
Circuit Court of Appeals, and that appeal is pending. New CF&I has negotiated a
settlement of this matter with EPA. Under that agreement and overlapping with
the commitments made to the CDPHE described below, New CF&I committed to the
conversion to the new NSPS AAa compliant furnace (to be completed approximately
two years after permit approval and expected to cost, with all related emission
control improvements, approximately $20 million), and to pay approximately
$450,000 in penalties and fund certain supplemental environmental projects
valued at approximately $1.1 million, including the installation of certain
pollution control equipment at the Pueblo Mill. The above mentioned expenditures
for supplemental environmental projects will be both capital and non-capital
expenditures. Once the settlement agreement is finalized, the EPA will file
either one or two proposed federal Consent Decrees, which, if approved by the
court, will fully resolve all NSPS and PSD issues. At that time New CF&I will
dismiss its appeal against the EPA. If the proposed settlement with the EPA is
not approved, which appears unlikely, it would not be possible to estimate the
liability if there were ultimately an adverse determination of this matter.

In response to the CDPHE settlement and the resolution of the EPA action,
New CF&I has accrued $2.8 million as of December 31, 2002, for possible fines
and non-capital related expenditures.

In December 2001, the State of Colorado issued a Title V air emission
permit to New CF&I under the CAA requiring that the furnace subject to the EPA
action operate in compliance with NSPS AA standards. This permit was modified in
April 2002 to incorporate the longer compliance schedule that is part of the
settlement with the CDPHE and the EPA. In September 2002, New CF&I submitted a
request for a further extension of certain Title V compliance deadlines,
consistent with a joint petition by the State and New CF&I for an extension of
the same deadlines in the State Consent Decree. This modification gives New CF&I
adequate time (at least 15 1/2 months after CDPHE issues the PSD permit) to
convert to a single NSPS AAa compliant furnace. Any decrease in steelmaking
production during the furnace conversion period when both furnaces are expected
to be shut down will be offset by increasing production prior to the conversion
period by building up semi-finished steel inventory and, if necessary,
purchasing semi-finished steel ("billets") for conversion into rod products at
spot market prices at costs comparable to internally generated billets. Pricing
and availability of billets is subject to significant volatility. However, New
CF&I believes that near term supplies of billets will continue to be available
in sufficient quantities at favorable prices.

In a related matter, in April 2000, the Union filed suit in U.S. District
Court in Denver, Colorado, asserting that New CF&I and CF&I had violated the CAA
at the Pueblo Mill for a period extending over five years. The Union sought
declaratory judgement regarding the applicability of certain emission standards,
injunctive relief, civil penalties and attorney's fees. On July 6, 2001, the
District Court dismissed the suit. The Union appealed the decision. On March 3,
2003, the 10th Circuit Court of Appeals reversed the District Court's dismissal
of the case and remanded the case for further hearing to the District Court. New
CF&I has not decided whether to further appeal this ruling. While New CF&I does
not believe the suit will have a material adverse effect on its results of
operations, the result of litigation, such as this, is difficult to predict and
an adverse outcome with significant penalties is possible. It is not presently
possible to estimate the liability if there is ultimately an adverse
determination on appeal.

-5-

LABOR MATTERS

The labor contract at New CF&I expired on September 30, 1997. After a
brief contract extension intended to help facilitate a possible agreement, on
October 3, 1997, the Union initiated a strike at New CF&I for approximately
1,000 bargaining unit employees. The parties, however, failed to reach final
agreement on a new labor contract due to differences on economic issues. As a
result of contingency planning, New CF&I was able to avoid complete suspension
of operations at the Pueblo Mill by utilizing a combination of new hires,
striking employees who returned to work, contractors and salaried employees.

On December 30, 1997, the Union called off the strike and made an
unconditional offer on behalf of its members to return to work. At the time of
this offer, because New CF&I had permanently replaced the striking employees,
only a few vacancies existed at the Pueblo Mill. Since that time, vacancies have
occurred and have been filled by formerly striking employees ("Unreinstated
Employees"). As of December 31, 2002, approximately 773 Unreinstated Employees
have either returned to work or have declined New CF&I's offer of equivalent
work. At December 31, 2002, approximately 157 Unreinstated Employees remain
unreinstated.

On February 27, 1998, the Regional Director of the National Labor
Relations Board ("NLRB") Denver office issued a complaint against New CF&I,
alleging violations of several provisions of the National Labor Relations Act
("NLRA"). On August 17, 1998, a hearing on these allegations commenced before an
Administrative Law Judge ("Judge"). Testimony and other evidence were presented
at various sessions in the latter part of 1998 and early 1999, concluding on
February 25, 1999. On May 17, 2000, the Judge rendered a decision which, among
other things, found New CF&I liable for certain unfair labor practices and
ordered as remedy the reinstatement of all 1,000 Unreinstated Employees,
effective as of December 30, 1997, with back pay and benefits, plus interest,
less interim earnings. Since January 1998, New CF&I has been returning
unreinstated strikers to jobs as positions became open. As noted above, there
were approximately 157 Unreinstated Employees as of December 31, 2002. On August
2, 2000, New CF&I filed an appeal with the NLRB in Washington, D.C. A separate
hearing concluded in February 2000, with the judge for that hearing rendering a
decision on August 7, 2000, that certain of the Union's actions undertaken since
the beginning of the strike did constitute misconduct and violations of certain
provisions of the NLRA. The Union has appealed this determination to the NLRB.
In both cases, the non-prevailing party in the NLRB's decision will be entitled
to appeal to the appropriate U.S. Circuit Court of Appeals. New CF&I believes
both the facts and the law fully support its position that the strike was
economic in nature and that it was not obligated to displace the properly hired
replacement employees. New CF&I does not believe that final judicial action on
the strike issues is likely for at least two to three years.

In the event there is an adverse determination of these issues,
Unreinstated Employees could be entitled to back pay, including benefits, plus
interest, from the date of the Union's unconditional offer to return to work
through the date of their reinstatement or a date deemed appropriate by the NLRB
or an appellate court. The number of Unreinstated Employees entitled to back pay
may be limited to the number of past and present replacement workers; however,
the Union might assert that all Unreinstated Employees should be entitled to
back pay. Back pay is generally determined by the quarterly earnings of those
working less interim wages earned elsewhere by the Unreinstated Employees. In
addition to other considerations, each Unreinstated Employee has a duty to take
reasonable steps to mitigate the liability for back pay by seeking employment
elsewhere that has comparable working conditions and compensation. Any estimate
of the potential liability for back pay will depend significantly on the ability
to assess the amount of interim wages earned by these employees since the
beginning of the strike, as noted above. Due to the lack of accurate information
on interim earnings for both reinstated and Unreinstated Employees and sentiment
of the Union towards New CF&I, it is not currently possible to obtain the
necessary data to calculate possible back pay. In addition, the NLRB's findings
of misconduct by the Union may mitigate any back pay award with respect to any
Unreinstated Employees proven to have taken part or participated in acts of
misconduct during and after the strike. Thus, it is not presently possible to
estimate the liability if there is ultimately an adverse determination against
New CF&I. An ultimate adverse determination against New CF&I on these issues may
have a material adverse effect on New CF&I's consolidated financial condition,
results of operations, or cash flows. New CF&I does not intend to agree to any
settlement of this matter that will have a material adverse effect on New CF&I.
In connection with the ongoing labor dispute, the Union has undertaken certain
activities designed to exert public pressure on New CF&I. Although such
activities have generated some publicity in the news media, New CF&I believes
that they have had little or no material impact on its operations.

During the strike by the Union at New CF&I, certain bargaining unit
employees of the Colorado & Wyoming Railway Company ("C&W"), a wholly-owned
subsidiary of New CF&I, refused to report to work for an extended period of
time, claiming that concerns for their safety prevented them from crossing the
picket line. The bargaining unit employees of C&W were not on strike, and
because the other C&W employees reported to work without incident, C&W
considered those employees to have quit their employment and, accordingly, C&W
declined to allow those individuals to return to work. The various unions
representing those individuals filed claims with C&W asserting that C&W had
violated certain provisions of the applicable collective bargaining agreement,
the Federal Railroad Safety Act ("FRSA"), or the Railway Labor Act. In all of
the claims, the unions demand reinstatement of the former employees with their
seniority intact, back pay and benefits.

The United Transportation Union, representing thirty of those former
employees, asserted that their members were protected under the FRSA and pursued
their claim before the Public Law Board ("PLB"). A hearing was held in November
1999, and the PLB,
-6-

with one member dissenting, rendered an award on January 8,
2001 against C&W, ordering the reinstatement of those claimants who intend to
return to work for C&W, at their prior seniority, with back pay and benefits,
net of interim wages and benefits received elsewhere. On February 6, 2001, C&W
filed a petition for review of that award and referred the matter back to the
PLB to determine the specific release which should be granted as to each
claimant in accordance with the terms of the award. On May 23, 2002, C&W filed
an appeal of the District Court's order in the United States Court of Appeals.
The appeal was dismissed as being premature given that the hearing on back pay
had not yet occurred. New CF&I does not believe an adverse determination against
C&W of this matter would have a material adverse effect on New CF&I's results of
operations.

The Transportation-Communications International Union, Brotherhood
Railway Carmen Division, representing six of those former C&W employees,
asserted that their members were protected under the terms of the collective
bargaining agreement and pursued their claim before a separate PLB. A hearing
was held in January 2001, and that PLB, with one member dissenting, rendered an
award on March 14, 2001 against C&W, ordering the reinstatement of those
claimants who intend to return to work for C&W, at their prior seniority, with
back pay and benefits, net of interim wages earned elsewhere. As of December 31,
2002, two of the six former employees have accepted a settlement from C&W. New
CF&I does not believe an adverse determination against C&W of this matter would
have a material adverse effect on New CF&I's results of operations.

EMPLOYEES

Approximately 600 employees of New CF&I work under collective bargaining
agreements with several unions, including the United Steelworkers of America.
New CF&I and the United Steelworkers of America have been unable to agree on
terms for a new labor agreement and are operating under the terms of New CF&I's
last contract offer, which was implemented in 1998. See "Business-Labor
Matters".

New CF&I also has a profit participation plan, which permits eligible
employees to share in the pretax income of New CF&I. New CF&I may modify, amend
or terminate the plan, at any time, subject to the terms of various labor
agreements.

AVAILABLE INFORMATION

The public may read and copy any materials New CF&I files with the SEC
at the SEC's Public Reference Room at 450 Fifth Street, NW; Washington, DC
20549. The public may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330.

The SEC maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC, and the address of that site is www.sec.gov.
-----------

Information about New CF&I can be found on Oregon Steel Mills; website at
www.oregonsteel.com. New CF&I makes available free of charge, on or through
- -------------------
Oregon Steel's website, its annual, quarterly and current reports, and any
amendments to those reports, as soon as reasonably practicable after
electronically filing such reports with the Securities and Exchange Commission
("SEC"). Information contained on Oregon Steel's website is not part of this
report.

-7-



ITEM 2. PROPERTIES

The Pueblo Mill is located in Pueblo, Colorado on approximately 570
acres. The operating facilities principally consist of two electric arc
furnaces, a ladle refining furnace and vacuum degassing system, two 6-strand
continuous round casters for producing semi-finished steel, and three finishing
mills (a rail mill, a seamless pipe mill, and a rod and bar mill). Due to market
conditions, operation at the seamless pipe mill was suspended from May 1999 to
September 2000, from November 2001 to April 2002 and from mid-August 2002 to
mid-September 2002.

At December 31, 2002, New CF&I had the following nominal capacities,
which are affected by product mix:


PRODUCTION 2002
CAPACITY PRODUCTION
---------- ----------
(IN TONS)

Melting 1,200,000 916,600
Finishing Mills (FN1) 1,200,000 852,100

- ----------------
(FN1) Includes the production capacity and production in 2002 of 150,000 tons
and 32,500 tons, respectively, of the seamless pipe mill.


On July 15, 2002, Oregon Steel issued $305 million of 10% First Mortgage
Notes due 2009 ("10% Notes") at a discount of 98.772% and an interest rate of
10%. New CF&I and CF&I (collectively "Guarantors") guarantee the obligations of
the 10% Notes, and those guarantees are secured by a lien on substantially all
of the property, plant and equipment and certain assets of the Guarantors,
excluding accounts receivables and inventory. See disclosure regarding
Guarantees in Note 11 of Notes to Consolidated Financial Statements.

ITEM 3. LEGAL PROCEEDINGS

See Part I, Item 1, "Business - Environmental Matters", for discussion of
(a) the lawsuit initiated by the Union alleging violations of the CAA and (b)
the negotiations with CDPHE and EPA regarding environmental issues at New CF&I.

See Part I, Item 1, "Business - Labor Matters", for the status of the
labor dispute at New CF&I.

New CF&I is party to various other claims, disputes, legal actions and
other proceedings involving contracts, employment and various other matters. In
the opinion of management, the outcome of these matters should not have a
material adverse effect on the consolidated financial condition of New CF&I.

New CF&I maintains insurance against various risks, including certain
types of tort liability arising from the sale of its products. New CF&I does not
maintain insurance against liability arising out of waste disposal, or on-site
remediation of environmental contamination because of the high cost of such
insurance coverage. There is no assurance that the insurance coverage currently
carried by New CF&I will be available in the future at reasonable rates, if at
all.

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

No matters were voted upon during the fourth quarter of the year ended
December 31, 2002.


-8-





EXECUTIVE OFFICERS OF THE REGISTRANT

Officers are elected by the Board of Directors of New CF&I to serve for a
period ending with the next succeeding annual meeting of the Board of Directors
held immediately after the annual meeting of stockholders. CF&I has no
independent executive officers.

The name of each executive officer of New CF&I, age as of February 1,
2003, and position(s) and office(s) and all other positions and offices held by
each executive officer are as follows:



ASSUMED PRESENT
EXECUTIVE AGE POSITION(S) EXECUTIVE POSITION(S)
- ------------------- --- --------------------------------- ---------------------


Joe E. Corvin 58 Chairman of the Board, President May 1999
and Chief Executive Officer

L. Ray Adams 52 Vice President - Finance, Chief April 1994
Financial Officer and Treasurer

Robert A. Simon 41 Vice President and General September 2000
Manager

Jeff S. Stewart 41 Corporate Controller April 2000



New CF&I or Oregon Steel has employed each of the executive officers
named above in executive or managerial roles for at least five years.

-9-



PART II

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

Neither the New CF&I's common stock nor CF&I's partnership interests are
publicly traded. At December 31, 2002, the number of New CF&I's stockholders
of record was four. No dividends have been paid on the common stock.

ITEM 6. SELECTED FINANCIAL DATA



YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
2002 2001 2000 1999 1998
--------- --------- --------- --------- ----------
(IN THOUSANDS, EXCEPT TONNAGE AND PER TON AMOUNTS)

INCOME STATEMENT DATA:
Sales (FN1) $ 329,707 $ 310,789 $ 281,614 $ 263,637 $ 366,090
Cost of sales 275,378 278,130 245,800 246,312 330,246
Settlement of litigation -- (2,190) -- (4,539) (4,545)
Gain on sale of assets (1,108) (19) (2,970) -- (4,746)
Selling, general and administrative
expenses 20,404 28,447 17,740 19,462 23,376
Profit participation 1,561 -- 127 -- 363
--------- --------- --------- --------- ---------
Operating income 33,472 6,421 20,917 2,402 21,396
Interest expense (25,393) (28,470) (26,755) (26,092) (25,555)
Other income, net 862 368 391 520 355
Minority interests (392) 1,193 628 1,200 560
Income tax benefit (expense) (4,117) 5,525 1,688 8,718 (439)
--------- --------- --------- --------- ---------
Income (loss) before accounting change 4,432 (14,963) (3,131) (13,252) (3,683)
Cumulative effect of change in accounting
principle, net of tax, net of minority
interest (19,070) -- -- -- --
--------- --------- --------- --------- ---------
Net loss $ (14,638) $ (14,963) $ (3,131) $ (13,252) $ (3,683)
========= ========= ========= ========= =========

BALANCE SHEET DATA (AT DECEMBER 31):
Working capital $ 18,580 $ 9,055 $ 25,668 $ 9,156 $ 12,365
Total assets 309,597 339,833 358,790 336,581 352,353
Current liabilities 65,857 71,660 72,040 58,412 68,512
Long-term debt 228,208 235,330 236,010 224,252 217,023
Total stockholders' equity (deficit) (42,095) (25,486) (9,003) (5,872) 7,380

OTHER DATA:
Depreciation and amortization $ 18,631 $ 17,670 $ 18,495 $ 18,635 $ 17,061
Capital expenditures $ 8,562 $ 7,899 $ 6,900 $ 6,810 $ 10,914
Total tonnage sold 836,500 780,900 757,000 734,900 861,700

Operating margin (FN2) 9.8% 1.4% 6.4% (0.8%) 3.3%
Operating income per ton sold (FN2) $ 41 $ 5 $ 24 $ (3) $ 14

- -----------------------
(FN1) Includes freight revenues of $14.3 million, $16.6 million and $11.3
million, in 2002, 2001, and 2000, respectively, and sale of electricity
of $2.2 million and $0.8 million in 2001 and 2000, respectively.

(FN2) Excluding settlement of litigation and gain/loss on sale of assets.



-10-




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

GENERAL

The following information contains forward-looking statements, which are
subject to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Statements made in this report that are not statements of
historical fact are forward-looking statements. Forward-looking statements made
in this report can be identified by forward-looking words such as, but not
limited to, "expect," "anticipate," "believe," "intend," "plan," "seek,"
"estimate," "continue," "may," "will," "would," "could," and similar
expressions. These forward-looking statements are subject to risks and
uncertainties and actual results could differ materially from those projected.
These risks and uncertainties include, but are not limited to, general business
and economic conditions; competitive products and pricing, as well as
fluctuations in demand; the supply of imported steel and subsidies provided by
foreign governments to support steel companies domiciled in their countries;
changes in U.S. or foreign trade policies affecting steel imports or exports;
potential equipment malfunction; work stoppages; plant construction and repair
delays; reduction in electricity supplies and the related increased costs and
possible interruptions of supply; changes in the availability and costs of raw
materials and supplies used by New CF&I; costs of environmental compliance and
the impact of governmental regulations; risks related to the outcome of the
pending union lawsuit; and failure of New CF&I to predict the impact of lost
revenues associated with interruption of New CF&I's, its customers' or
suppliers' operations.

The consolidated financial statements include the accounts of New CF&I
and its subsidiaries, which include wholly-owned C&W and a 95.2% interest in
CF&I. All significant intercompany balances and transactions have been
eliminated. For the years ended December 31, 2002, 2001, and 2000, total sales
of CF&I were 97.7%, 97.9%, and 97.6%, respectively, of the consolidated sales of
New CF&I. For the years ended December 31, 2002, 2001, and 2000, cost of sales
and freight of CF&I were 98.1%, 98.2%, and 98.2%, respectively, of the
consolidated cost of sales and freight of New CF&I.

The following table sets forth, for the periods indicated, the
percentages of sales represented by selected income statement items and
information regarding selected balance sheet data:


YEAR ENDED DECEMBER 31,
-------------------------------
2002 2001 2000
------ ------ ------
INCOME STATEMENT DATA:
Total sales 100.0% 100.0% 100.0%
Cost of sales 83.5 89.5 87.3
Settlement of litigation -- (0.7) --
Gain on sale of assets (0.3) -- (1.1)
Selling, general and administrative
expenses 6.2 9.2 6.3
Profit participation 0.5 -- --
----- ----- -----
Operating income 10.1 2.0 7.5
Interest expense (7.7) (9.2) (9.5)
Other income, net 0.3 0.1 0.1
Minority interests (0.1) 0.4 0.2
----- ----- -----
Net income (loss) before taxes 2.6 (6.7) (1.7)
Income tax benefit (expense) (1.2) 1.8 0.6
----- ----- -----
Net income (loss) before accounting change 1.4 (4.9) (1.1)
Cumulative effect of change in accounting
principle, net of tax, net of
minority interest (5.8) -- --
----- ----- -----
Net loss (4.4)% (4.9)% (1.1)%
===== ===== =====
BALANCE SHEET DATA:
Current ratio 1.3:1 1.1:1 1.4:1
Total debt as a percentage of capitalization 125.6% 132.8% 121.8%


-11-



The following table sets forth, for the periods indicated, tonnage sold,
revenues and average selling price per ton:

YEAR ENDED DECEMBER 31,
---------------------------------------
2002 2001 2000
TONNAGE SOLD: -------- -------- -------
Rail 384,100 246,000 314,700
Rod and Bar 419,700 432,500 395,100
Seamless Pipe (FN1) 30,000 97,700 10,400
Semi-finished 2,700 4,700 36,800
-------- -------- --------
Total 836,500 780,900 757,000
======== ======== ========
REVENUES:
Product sales (in thousands) (FN2) $315,448 $291,993 $269,505
Average selling price per ton sold $ 377 $ 374 $ 356

- -----------------------
(FN1)Due to market conditions, operation at the seamless pipe mill was suspended
from May 1999 to September 2000, from November 2001 to April 2002 and from
mid-August 2002 to mid-September 2002.

(FN2)Product sales exclude freight revenues in 2002, 2001 and 2000, and sale of
electricity in 2001 and 2000. There were no sales of electricity in 2002.

New CF&I anticipates that it will ship approximately 380,000 tons of rail
and approximately 410,000 tons of rod and bar products in 2003. Seamless pipe
shipments will be dependent on market conditions in the drilling industry. While
New CF&I anticipates that product category average selling prices will be
similar in 2003 as in 2002, higher raw material and energy costs are expected to
have a negative impact on the operating income for New CF&I. Accordingly, New
CF&I expects consolidated operating income to be significantly lower in 2003
versus 2002. However, New CF&I expects liquidity to remain adequate through 2003
unless there is a substantial negative change in overall economic markets.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

New CF&I's discussion and analysis of its financial condition and results
of operations are based upon its consolidated financial statements, which have
been prepared in accordance with Generally Accepted Accounting Principles
("GAAP"). The preparation of these financial statements requires New CF&I to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, New CF&I evaluates its estimates. This
includes allowance for doubtful accounts, inventories, income taxes,
contingencies and litigation. New CF&I bases its estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances. This provides a basis for making judgments about the
carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions, and these differences may be material.

New CF&I believes the following critical accounting policies affect its
more significant judgments and estimates used in the preparation of its
consolidated financial statements.

ALLOWANCE FOR DOUBTFUL ACCOUNTS. New CF&I maintains allowances for
doubtful accounts for estimated losses resulting from the inability of its
customers to make required payments. As of December 31, 2002, the allowance of
doubtful accounts was approximately $1.8 million. In establishing a proper
allowance for doubtful accounts, New CF&I evaluates the collectibility of its
accounts receivable based on a combination of factors. In cases where management
is aware of the circumstances that may impair a specific customer's ability to
meet its financial obligations, New CF&I records a specific allowance against
amounts due from customers, and thereby reduces the net recognized receivable
amount New CF&I reasonably believes will be collected. For all other customers,
New CF&I evaluates the allowance for doubtful accounts based on the length of
time the receivables are past due, historical collection experience, customer
credit-worthiness and economic trends.

INVENTORY. New CF&I's inventory consists of raw materials,
semi-finished, finished products, and operating stores and supplies. At December
31, 2002, inventory was approximately $46.1 million. If appropriate, New CF&I's
inventory balances are adjusted to approximate the lower of our manufacturing
cost or market value. No such adjustment was required in 2002. Manufacturing
cost is determined using the average cost method.

ENVIRONMENTAL LIABILITIES. All material environmental remediation
liabilities for non-capital expenditures, which are both probable and estimable,
are recorded in the financial statements based on current technologies and
current environmental standards at the time of evaluation. Adjustments are made
when additional information is available that suggests different remediation
methods or when estimated time periods are changed, thereby affecting the total
cost. The best estimate of the probable cost within a range is recorded;
however, if

-12-


there is no best estimate, the low end of the range is recorded and the range is
disclosed. Even though New CF&I has established certain reserves for
environmental remediation, additional remedial measures may be required by
environmental authorities and additional environmental hazards, necessitating
further remedial expenditures, may be asserted by these authorities or private
parties. Accordingly, the costs of remedial measures may exceed the amounts
reserved.

LITIGATION LIABILITIES. All material litigation liabilities, which are
both probable and estimable, are recorded in the financial statements based on
the nature of the litigation, progress of the case, and opinions of management
and legal counsel on the outcome. Adjustments are made when additional
information is available that alters opinions of management and legal counsel on
the outcome of the litigation. The best estimate of the probable cost within a
range is recorded; however, if there is no best estimate, the low end of the
range is recorded and the range is disclosed.

EMPLOYEE BENEFITS PLANS AND OTHER POST-RETIREMENT BENEFITS. Annual
pension and other post-retirement benefits ("OPRB") expenses are calculated by
third party actuaries using standard actuarial methodologies. The actuaries
assist New CF&I in making estimates based on historical information, current
information and estimates about future events and circumstances. Significant
assumptions used in the valuation of pension and OPRB include expected return on
plan assets, discount rate, rate of increase in compensation levels and the
health care cost trend rate. New CF&I accounts for the defined benefit pension
plans using Statement of Financial Accounting Standards No. 87, "EMPLOYER'S
ACCOUNTING FOR PENSIONS" ("SFAS No.87"). As a result of continuing declines in
interest rates and the market value of New CF&I's defined benefit pension plans'
assets, New CF&I was required to increase the minimum pension liability at
December 31, 2002 by $3.4 million. This adjustment did not impact current
earnings. For further details regarding New CF&I's Benefits and post-retirement
plans, see Note 9 of Notes to the Consolidated Financial Statements.

DEFERRED TAXES. Deferred income taxes reflect the differences between the
financial reporting and tax bases of assets and liabilities at year-end based on
enacted tax laws and statutory tax rates. Tax credits are recognized as a
reduction of income tax expense in the year the credit arises. A valuation
allowance is established when necessary to reduce deferred tax assets to the
amount more likely than not to be realized.

COMPARISON OF 2002 TO 2001

SALES. Consolidated sales for 2002 of $329.7 million increased $18.9
million, or 6.1%, from sales of $310.8 million for 2001. Included in 2001 sales
are $2.2 million in electricity sales. Included in 2002 and 2001 sales are $14.3
million and $16.6 million, respectively, in freight revenue. New CF&I did not
have any sales of electricity in 2002. Revenues from product sales increased
8.0% to $315.4 million in 2002 from $292.0 million in 2001.

New CF&I shipped 836,500 tons in 2002, compared to 780,800 tons in 2001.
Average product selling price per ton increased to $377 in 2002 from $374 in
2001. Growth in both product sales and related average selling prices were due
primarily to higher shipments of rail products in 2002. The decrease in freight
revenue was due to product mix and decreased shipments of seamless pipe during
2002.

GROSS PROFITS. Gross profit was $54.3 million, or 16.5% of total sales
for 2002 compared to $32.7 million, or 10.5% of total sales for 2001. The
increase of $21.6 million in gross profit was primarily the result of increased
tonnage sold of rail products and an increase in rod and bar prices.

SETTLEMENT OF LITIGATION. In 2001, New CF&I recorded a $2.2 million gain
from litigation settlements with various graphite electrode suppliers. In 2002,
there were no litigation settlements recorded.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses ("SG&A") of $20.4 million for 2002 decreased by 28.3%, from $28.4
million for 2001. SG&A expenses decreased as a percentage of total sales to 6.2%
in 2002 from 9.2% in 2001. The decrease was due in part to $3.1 million in
non-recurring seamless pipe commission fees for 2001, environmental fines of
$2.2 million accrued in 2001, a decrease in shipping costs of $1.2 million and a
reduction in bad debt expense of $1.0 million.

INTEREST EXPENSE. Total interest expense decreased $3.1 million, or
10.8%, to $25.4 million in 2002, compared to $28.5 million in 2001. The decrease
in interest expense from 2001 is due to a lower interest rate plus decreased
borrowings from Oregon Steel.

INCOME TAX EXPENSE. The effective income tax (expense) or benefit rate
was (48.2)% and 26.9% for 2002 and 2001, respectively. The effective income tax
rate for 2002 varied principally from the combined state and federal statutory
rate due to the adjustments created by structural changes in New CF&I's foreign
operations, and non-deductible fines and penalties.

-13-


COMPARISON OF 2001 TO 2000

SALES. Consolidated sales for 2001 of $310.8 million increased $29.2
million, or 10.4%, from sales of $281.6 million in 2000. Included in 2001 sales
are $2.2 million in electricity sales and $16.6 million in freight revenue.
Included in 2000 sales are $0.8 million in electricity sales and $11.2 million
in freight revenue. Revenues from product sales increased 8.3% to $291.9 million
in 2001 from $269.5 million in 2000. Freight revenue increased in response to
product sales growth, as well as the product mix and customer preference on
shipping.

New CF&I shipped 780,900 tons in 2001, compared to 757,000 tons in 2000.
The increase was due to higher shipments of seamless pipe and rod and bar
products, partially offset by decreased rail shipments caused by capital program
reductions by the major railroads. Average product selling price per ton
increased to $374 in 2001 from $356 in 2000. The shift of product mix to
seamless pipe in 2001 was the principal reason for the improved pricing, as
seamless pipe has the highest selling price per ton of all New CF&I's products.
Due to the adverse market conditions in the prior year, no seamless products
were shipped during the first nine months of 2000 because the operation was
temporarily shut down. While performance of seamless products for the first half
of 2001 was strong, market conditions again deteriorated as demand from oil and
gas distributors decreased toward the second half of the year, due to
significant decline of oil and natural gas prices. As a result, the seamless
mill was temporarily shut down in November 2001.

GROSS PROFITS. Gross profit was $32.7 million, or 10.5%, for 2001
compared to $35.8 million, or 12.7%, for 2000. The decrease of $3.1 million was
primarily related to decreased sales prices of rail and semi-finished products.
This decrease was partially offset by increased sales prices and volume of
seamless pipe products, as well as the sale of electricity.

SETTLEMENT OF LITIGATION. In 2001, New CF&I recorded a $2.2 million gain
from litigation settlements with various graphite electrode suppliers.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses ("SG&A") of $28.4 million for 2001 increased by 60.5%, from $17.7
million in 2000. SG&A expenses increased as a percentage of total sales to 9.2%
in 2001 from 6.3% in 2000. The increase was due in part to $3.1 million in
additional seamless pipe commission fees for 2001, as compared to commission
fees paid in 2000 when the seamless mill was shutdown for the majority of that
year. In addition, shipping costs increased 57.7% from $2.6 million in 2000 to
$4.1 million in 2001. This was a direct result of higher volume of shipments of
seamless pipe in 2001. The remaining increase from the prior year was due to
higher general and administrative costs. This included an increase in bad debt
expense of $1.6 million and an increase in reserves for environmental and other
legal expenses of $4.0 million.

INTEREST EXPENSE. Interest expense increased $1.7 million, or 6.3%, to
$28.5 million in 2001, compared to $26.8 million in 2000. The increase in
interest expense in 2001 was primarily due to an increase in borrowings from
Oregon Steel.

INCOME TAX EXPENSE. The effective income tax benefit rate was 26.9% and
35.0% for 2001 and 2000, respectively. The effective income tax rate for 2001
varied from the combined state and federal statutory rate due to adjustments to
state net operating loss carryforwards, an increase in the valuation allowance
for state tax credit carryforwards, and non-deductible fines and penalties.

LIQUIDITY AND CAPITAL RESOURCES

Cash flow provided by operations in 2002 was $24.0 million compared with
cash flow provided by operations in 2001 of $7.5 million. The items primarily
affecting the $16.5 million increase in cash flow were; a) non-cash transactions
including: 1) a write-off of $31.9 million worth of goodwill during the first
quarter of 2002 resulting in a cumulative effect of change in accounting
principle of $19.1 million (net of a $11.3 million tax effect and a $1.5 million
minority interest impact); 2) a decrease in deferred income taxes of $2.1
million in 2002 versus an increase of $7.1 million in 2001; and b) changes in
working capital requirements including: 1) a decrease in net receivables in 2002
of $8.1 million versus a decrease in 2001 of $5.1 million; 2) an increase in
inventories in 2002 of $10.0 million versus an decrease in 2001 of $12.6
million; 3) an increase in accounts payable of $2.8 million versus a decrease of
$5.7 million in 2001; 4) an increase in accrued expenses of $2.6 million in 2002
versus an increase of $6.8 million in 2001.

Borrowing requirements for capital expenditures and other cash needs,
both short-term and long-term, are provided through a loan from Oregon Steel. As
of December 31, 2002, $228.2 million of aggregate principal amount of the loan
was outstanding, all of which was classified as long-term. The loan includes
interest on the daily amount outstanding at the rate of 10.65%. The principal is
due on demand or, if no demand is made, due December 31, 2004. Interest on the
principal amount of the loan is payable monthly. Because the loan from Oregon
Steel is due on demand, the applicable interest rate is effectively subject to
renegotiation at any time, and there is no assurance the interest rate will not
be materially increased in the future.

New CF&I has been able to fulfill its needs for working capital and
capital expenditures, due in part to the financing arrangement with Oregon
Steel. New CF&I expects that operations will continue for 2003, with the
realization of assets, and discharge of liabilities in the ordinary course of
business. New CF&I believes that its prospective needs for working capital and
capital expenditures will be met from cash flows generated by operations and
borrowings pursuant to the financing arrangement with Oregon

-14-



Steel. If operations are not consistent with management's plans, there is no
assurance that the amounts from these sources will be sufficient for such
purposes. Oregon Steel is not required to provide financing to New CF&I and,
although the demand for repayment of the obligation in full is not expected
during 2003, Oregon Steel may demand repayment of the loan at any time. If
Oregon Steel were to demand repayment of the loan, it is not likely that New
CF&I would be able to obtain the external financing necessary to repay the loan
or to fund its capital expenditures and other cash needs, and if available, that
such financing would be on terms as favorable to New CF&I as that provided by
Oregon Steel. The failure of either New CF&I or Oregon Steel to maintain their
current financing arrangements would likely have a material adverse impact on
New CF&I and CF&I.

As of December 31, 2002, New CF&I, CF&I, and Colorado and Wyoming Railway
Company are borrowers under the Oregon Steel Credit Agreement, which will expire
on June 30, 2005. At December 31, 2002, the amount available was the lesser of
$70 million or the sum of the product of Oregon Steel's eligible domestic
accounts receivable and inventory balances and specified advance rates. Although
New CF&I and CF&I are borrowers under the Oregon Steel Credit Agreement, New
CF&I and CF&I generally borrow directly from Oregon Steel as discussed above.

During 2002, New CF&I expended (exclusive of capital interest)
approximately $8.4 million on capital projects. Despite the unfavorable net
results for 2002, caused by a $19.1 million non-cash goodwill impairment charge
required under the new accounting provision of FAS 142, New CF&I has been able
to satisfy its needs for working capital and capital expenditures through
operating income and in part through its ability to secure adequate financing
arrangements. New CF&I believes that its anticipated needs for working capital
and capital expenditures for the next twelve months will be met from funds
generated from operations, and if necessary, from the available credit facility.

New CF&I's level of indebtedness presents other risks to investors,
including the possibility that New CF&I and its subsidiaries may be unable to
generate cash sufficient to pay the principal of and interest on their
indebtedness when due. In that event, the holders of the indebtedness may be
able to declare all indebtedness owing to them to be due and payable
immediately, and to proceed against their collateral, if applicable. These
actions would likely have a material adverse effect on New CF&I. In addition,
New CF&I faces potential costs and liabilities associated with environmental
compliance and remediation issues and the labor dispute at the Pueblo Mill. See
"Business-Environmental Matters" and "Business-Labor Matters" for a description
of those matters. Any costs or liabilities in excess of those expected by New
CF&I could have a material adverse effect on New CF&I.

NEW ACCOUNTING PRONOUNCEMENTS

See Part II, Item 8, "Financial Statements and Supplementary Data - Notes
to Consolidated Financial Statements" for New CF&I and "Notes to Financial
Statements for CF&I".

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

New CF&I has entered into certain market-risk-sensitive financial
instruments for other than trading purposes, principally short-term debt.

The following discussion of market risks necessarily includes
forward-looking statements. Actual changes in market conditions and rates and
fair values may differ materially from those used in the sensitivity and fair
value calculations discussed. Factors which may cause actual results to differ
materially include, but are not limited to: greater than 10% changes in interest
rates or foreign currency exchange rates, changes in income or cash flows
requiring significant changes in the use of debt instruments or the cash flows
associated with them, or changes in commodity market conditions affecting
availability of materials in ways not predicted by New CF&I.

INTEREST RATE RISK

A sensitivity analysis was used to determine the potential impact that
market risk exposure may have on the fair values of New CF&I's financial
instruments, including debt and cash equivalents. New CF&I has assessed the
potential risk of loss in fair values from hypothetical changes in interest
rates by determining the effect on the present value of the future cash flows
related to these market sensitive instruments. The discount rates used for these
present value computations were selected based on market interest rates in
effect at December 31, 2002, plus or minus 10%.

All of New CF&I's debt is provided through a financing arrangement with
Oregon Steel at an interest rate of 10.65%. A hypothetical 10% decrease in
interest rates with all other variables held constant would result in an
increase in the fair value of New CF&I's fixed-rate debt by $5.3 million. A
hypothetical 10% increase in interest rates with all other variables held
constant would result in a decrease in the fair value of New CF&I's
fixed-rate debt by $5.1 million. The fair value of the New CF&I's fixed-rate
debt was estimated by considering the impact of the hypothetical interest rates
on quoted market prices and current yield of the Oregon Steel's 10% First
Mortgage Notes. While changes in interest rates impact the fair value of this
debt, there is no impact to earnings and cash flows because New CF&I and Oregon
Steel intend to maintain the same terms of the financing agreement until
maturity.

-15-




ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Stockholders of New CF&I, Inc.

In our opinion, the consolidated financial statements listed in the index
appearing under Item 15(a)(ii) on page 54 present fairly, in all material
respects, the financial position of New CF&I, Inc. and its subsidiaries at
December 31, 2002, 2001, and 2000, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2002 in
conformity with accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement schedule listed in
the index appearing under Item 15(a)(v) on page 54 presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related financial statements. These financial statements and financial
statement schedule are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

As discussed in Notes 2 and 6 to the financial statements, the Company changed
its method of accounting for goodwill in 2002.


PRICEWATERHOUSECOOPERS LLP
Portland, Oregon
March 03, 2003

-16-







NEW CF&I, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT FOR PER SHARE AND SHARE AMOUNTS)


DECEMBER 31,
---------------------------------------------------
2002 2001 2000
-------------- --------------- ---------------

ASSETS
Current assets:
Cash and cash equivalents $ 289 $ 3 $ 5
Trade accounts receivable, less allowance for
doubtful accounts of $1,811, $1,972, and $640 32,458 40,383 45,485
Inventories 46,104 36,058 48,629
Deferred tax asset 4,841 3,965 2,840
Other 745 306 749
--------- --------- ---------
Total current assets 84,437 80,715 97,708
--------- --------- ---------

Property, plant and equipment:
Land and improvements 3,454 3,503 3,475
Buildings 19,886 19,959 18,651
Machinery and equipment 260,791 254,316 250,933
Construction in progress 5,151 3,178 3,830
--------- --------- ---------
289,282 280,956 276,889
Accumulated depreciation (111,469) (93,019) (80,214)
--------- --------- ---------
Net property, plant and equipment 177,813 187,937 196,675
Cost in excess of assets acquired, net 1,106 31,863 32,883
Other assets 46,241 39,318 31,524
--------- --------- ---------
$ 309,597 $ 339,833 $ 358,790
========= ========= =========

LIABILITIES
Current liabilities:
Current portion of long-term debt $ -- $ 9,464 $ 8,625
Accounts payable 39,701 36,942 42,682
Accrued expenses 26,156 25,254 20,733
--------- --------- ---------
Total current liabilities 65,857 71,660 72,040

Long-term debt -- 5,072 14,536
Long-term debt -- Oregon Steel Mills, Inc. 228,208 230,258 221,474
Environmental liability 27,488 28,465 30,850
Deferred employee benefits 8,299 8,024 7,053
--------- --------- ---------
Total liabilities 329,852 343,479 345,953
--------- --------- ---------
Redeemable common stock, 26 shares
issued and outstanding (Note 10) 21,840 21,840 21,840
--------- --------- ---------

Commitments and contingencies (Note 11)

STOCKHOLDERS' EQUITY (DEFICIT)

Common stock, par value $1 per share, 1,000 shares
authorized; 200 issued and outstanding 1 1 1
Additional paid-in capital 16,603 16,603 16,603
Accumulated deficit (55,208) (40,570) (25,607)
Accumulated other comprehensive income:
Minimum pension liability (3,491) (1,520) --
--------- --------- ---------
(42,095) (25,486) (9,003)
--------- --------- ---------
$ 309,597 $ 339,833 $ 358,790
========= ========= =========

The accompanying notes are an integral part of the consolidated financial statements.

-17-




NEW CF&I, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)

YEAR ENDED DECEMBER 31,
-------------------------------------
2002 2001 2000
---------- ---------- ----------

SALES
Product sales $ 315,448 $ 291,993 $ 269,505
Freight 14,259 16,646 11,270
Electricity sales - 2,150 839
---------- ---------- ----------
329,707 310,789 281,614

COSTS AND EXPENSES:
Cost of sales 275,378 278,130 245,800
Settlement of litigation - (2,190) -
Gain on sale of assets (1,108) (19) (2,970)
Selling, general and administrative 20,404 28,447 17,740
Incentive Compensation 1,561 - 127
---------- ---------- ----------
296,235 304,368 260,697
---------- ---------- ----------

Operating income 33,472 6,421 20,917

OTHER INCOME (EXPENSE):
Interest expense (25,393) (28,470) (26,755)
Minority interests (392) 1,193 628
Other income, net 862 368 391
---------- ---------- ----------
Income (loss) before income taxes 8,549 (20,488) (4,819)

INCOME TAX (EXPENSE) BENEFIT (4,117) 5,525 1,688
---------- ---------- ----------
Net income (loss) before accounting change 4,432 (14,963) (3,131)
Cumulative effect of change in accounting
principle, net of tax, net of minority interest (19,070) - -
---------- ---------- ----------
NET LOSS $ (14,638) $ (14,963) $ (3,131)
========== ========== ==========

The accompanying notes are an integral part of the consolidated financial statements.

-18-





NEW CF&I, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS EXCEPT SHARES)


ACCUMULATED
ADDITIONAL OTHER
COMMON STOCK PAID-IN ACCUMULATED COMPREHENSIVE
--------------------
SHARES AMOUNT CAPITAL DEFICIT INCOME TOTAL
------ ------ ------- ----------- ------------- ---------

BALANCES, DECEMBER 31, 1999 200 $ 1 $ 16,603 $(22,476) $ -- $ (5,872)

Net loss -- -- -- (3,131) -- (3,131)
------- ------ -------- -------- --------- --------
BALANCES, DECEMBER 31, 2000 200 $ 1 $ 16,603 $(25,607) $ -- $ (9,003)

Net loss -- -- -- (14,963) -- (14,963)
Minimum pension liability -- -- -- -- (1,520) (1,520)
------- ------ -------- -------- --------- --------
BALANCES, DECEMBER 31, 2001 200 $ 1 $ 16,603 $(40,570) $ (1,520) $(25,486)

Net loss -- -- -- (14,638) -- (14,638)
Minimum pension liability -- -- -- -- (1,971) (1,971)
------- ------ -------- -------- --------- --------
BALANCES, DECEMBER 31, 2002 200 $ 1 $ 16,603 $(55,208) $ (3,491) $(42,095)
======= ====== ======== ======== =========

The accompanying notes are an integral part of the consolidated financial statements.


-19-



NEW CF&I, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(IN THOUSANDS)

YEAR ENDED DECEMBER 31,
--------------------------------------------
2002 2001 2000
----------- ---------- -----------

Cash flows from operating activities:
Net loss $ (14,638) $ (14,963) $ (3,131)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and amortization 18,631 17,670 18,495
Cumulative effect of change in accounting principle,
net of tax, net of minority interest 19,070 -- --
Deferred income taxes, net 2,070 (7,056) (2,440)
Minority interests' share of income 392 (1,270) (628)
Gain on sale of assets and investments (1,108) (19) (2,970)
Other, net (1,247) (3,905) --
Changes in current assets and liabilities:
Trade accounts receivable 8,086 5,102 (18,271)
Inventories (10,046) 12,571 (13,231)
Accounts payable 2,759 (5,740) 10,630
Accrued expenses & employee benefits 2,598 6,762 2,862
Other (2,535) (1,621) 143
--------- --------- ---------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 24,032 7,531 (8,541)
--------- --------- ---------

Cash flows from investing activities:
Additions to property, plant and equipment (8,562) (7,899) (6,900)
Proceeds from disposal of property and equipment 1,112 164 3,156
Other, net 290 43 (237)
--------- --------- ---------
NET CASH USED BY INVESTING ACTIVITIES (7,160) (7,692) (3,981)
--------- --------- ---------

Cash flows from financing activities:
Borrowings from Oregon Steel Mills, Inc. 137,163 141,434 151,963
Payments to Oregon Steel Mills, Inc. (139,213) (132,650) (131,579)
Payment of long-term debt (14,536) (8,625) (7,862)
--------- --------- ---------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (16,586) 159 12,522
--------- --------- ---------

Net increase (decrease) in cash and cash equivalents 286 (2) --
Cash and cash equivalents at the beginning of year 3 5 5
--------- --------- ---------
Cash and cash equivalents at the end of year $ 289 $ 3 $ 5
========= ========= =========

Supplemental disclosures of cash flow information:
Cash paid for:
- --------------
Interestt $ 26,085 $ 28,812 $ 24,886


The accompanying notes are an integral part of the consolidated financial statements.


-20-




NEW CF&I, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF OPERATIONS

New CF&I, Inc. and subsidiaries ("New CF&I") manufacture various
specialty and commodity steel products in Pueblo, Colorado. Principal markets
are steel service centers, steel fabricators, railroads, oil and gas producers
and distributors, and other industrial concerns, primarily in the United States
west of the Mississippi River. New CF&I also markets products outside North
America.

New CF&I was incorporated in the State of Delaware on May 5, 1992, as a
wholly owned subsidiary of Oregon Steel Mills, Inc. ("Oregon Steel").

On March 3, 1993, New CF&I (1) issued 100 shares of common stock to
Oregon Steel for $22.2 million in certain consideration and, (2) as the general
partner, acquired for $22.2 million a 95.2% interest in a newly formed limited
partnership, CF&I Steel, L.P. ("CF&I"). The remaining 4.8% interest was acquired
by the Pension Benefit Guaranty Corporation ("PBGC") as a limited partner. On
October 1, 1997, Oregon Steel purchased PBGC's limited partnership interest in
CF&I, and subsequently sold 0.5% to another shareholder in New CF&I.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the 95.2% interest in CF&I
and the Colorado and Wyoming Railway Company ("C&W"), a wholly-owned subsidiary.
All significant intercompany transactions and account balances have been
eliminated.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the amounts of revenues and expenses during the reporting
periods. Actual results could differ from those estimates.

REVENUE RECOGNITION

New CF&I recognizes revenues when title passes, the earnings process is
substantially complete, and New CF&I is reasonably assured of the collection of
the proceeds from the exchange, all of which generally occur upon shipment of
New CF&I's products or delivering of the product at the destination specified by
customer.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include short-term securities that have an
original maturity date of 90 days or less.

CONCENTRATIONS OF CREDIT RISK

Financial instruments that potentially subject New CF&I to concentrations
of credit risk consist principally of cash and cash equivalents and trade
receivables. New CF&I places its cash in high credit quality investments and
limits the amount of credit exposure to any one financial institution. At times,
cash balances are in excess of the Federal Deposit Insurance Corporation
insurance limit of $100,000. New CF&I believes that risk of loss on its trade
receivables is reduced by ongoing credit evaluation of customer financial
condition and requirements for collateral, such as letters of credit and bank
guarantees.

INVENTORY

New CF&I's inventory consists of raw materials, semi-finished, finished
products, and operating stores and supplies. At December 31, 2002, inventory was
approximately $46.1 million. If appropriate, New CF&I's inventory balances are
adjusted to approximate the lower of manufacturing cost or market value. No such
adjustment was required for the years ended 2002, 2001, and 2000. Manufacturing
cost is determined using the average cost method.

-21-


PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost, including interest
capitalized during construction of $164,600, $325,000 and $215,000 in 2002, 2001
and 2000, respectively. Depreciation is determined using principally the
straight-line and the units of production methods over the estimated useful
lives of the assets. The original cost of machinery, which is being depreciated
using the units of production method, is approximately $35 million. Total
finished goods production for the years ended 2002, 2001, and 2000 were 852,000
tons, 748,000 tons, and 740,000 tons, respectively. The estimated useful lives
of most of New CF&I's operating machinery and equipment are from 20 to 30 years.
Maintenance and repairs are expensed as incurred and costs of improvements are
capitalized. Maintenance and repair expense for 2002, 2001, and 2000 were
$26.3 million, $23.8 million, and $19.4 million, respectively. Upon disposal,
cost and accumulated depreciation are removed from the accounts and gains or
losses are reflected in results of operations.

COST IN EXCESS OF NET ASSETS ACQUIRED

New CF&I adopted Statement of Financial Accounting Standard ("SFAS") No.
142, "Goodwill and other Intangible Assets," effective January 1, 2002. As
required under the transitional accounting provisions of SFAS No. 142, New CF&I
completed the steps required to identify and measure goodwill impairment at each
reporting unit. The reporting units were measured for impairment by comparing
implied fair value of the reporting units' goodwill with the carrying amount of
the goodwill. As a result, the entire goodwill was written off in the amount of
$31.9 million, and a net charge of $19.1 million (after tax and minority
interest) was recognized as a cumulative effect of a change in accounting
principle during the first quarter of 2002. In accordance with SFAS No. 142,
goodwill is no longer amortized, but is reviewed at least annually for
impairment. The remaining $1.1 million in assets consists of proprietary
technology, presented at cost, net of accumulated amortization, which are
amortized over their estimated useful lives of ten years using the straight-line
method.

OTHER ASSETS

Included in other assets are net water rights of approximately $11.0
million. These water rights include the rights to divert and use certain amounts
of water from various river systems for either industrial or agricultural use.

IMPAIRMENT OF LONG-LIVED ASSETS

When events or circumstances indicate the carrying value of a long-lived
asset may be impaired, New CF&I uses an estimate of the future undiscounted cash
flows to be derived from the remaining useful life of the asset to assess
whether or not the asset is recoverable. If the future undiscounted cash flows
to be derived over the life of the asset do not exceed the asset's net book
value, New CF&I then considers estimated fair market value versus carrying value
in determining any potential impairment.

INCOME TAXES

Deferred income taxes are provided for temporary differences between the
amount of assets and liabilities for financial and tax reporting purposes.
Deferred tax assets are reduced by a valuation allowance when it is estimated to
be more likely than not that some portion of the deferred tax assets will not be
realized. Income taxes are allocated in accordance with a tax allocation
agreement between Oregon Steel and New CF&I, which provides for taxes on a
separate return basis. A consolidated tax return is filed by Oregon Steel.

DERIVATIVE FINANCIAL INSTRUMENTS

Effective January 1, 2001, New CF&I adopted SFAS No. 133, "ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES", which requires that all
derivative instruments be recorded on the balance sheet at fair value. The
adoption of SFAS No. 133 did not have material effect on New CF&I's results of
operations or its financial position. New CF&I did not have any derivative
financial instruments outstanding at the time of adoption. See disclosure
regarding Financial Instruments in Note 7.

SEGMENT REPORTING

In accordance with the criteria of SFAS No. 131, "DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION", New CF&I operates in a
single reportable segment, the steel industry. All of the products of New CF&I
are steel products in finished or semi-finished form. Production is the standard
"mini-mill" process where electric arc furnaces are used to melt scrap and other
metallics. Liquid steel is cast and cooled, then reheated for additional
forming. New CF&I markets and sells the majority of its products through its own
sales organization to customers primarily in the transportation, construction,
or oil and gas industries. New CF&I distributes product at various locations in
the United States and Canada, and as appropriate, through foreign sales agents.

-22-


SHIPPING AND HANDLING COST

All shipping costs billed to customers is recorded as revenue with the
related cost being recorded under cost of sales. Internal handling costs
incurred to store, move, or prepare goods for shipments are recorded under
Selling, General, and Administration expenses. For the years of 2002, 2001, and
2000, internal handling costs were $3.0 million, $4.1 million, and $2.6 million,
respectively.

RECLASSIFICATIONS

Certain reclassifications have been made in prior years to conform to the
current year presentation. Such reclassifications do not affect results of
operations as previously reported.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other
Intangible Assets," collectively referred to as the "Standards." SFAS No. 141
supersedes Accounting Principles Board Opinion (APB) No. 16, "Business
Combinations." The provisions of SFAS No. 141 (1) require that the purchase
method of accounting be used for all business combinations initiated after June
30, 2001, and (2) provide specific criteria for the initial recognition and
measurement of intangible assets apart from goodwill. SFAS No. 141 also requires
that, upon adoption of SFAS No. 142, New CF&I reclassify the carrying amounts of
certain intangible assets into or out of goodwill, based on certain criteria.
SFAS No. 142 supersedes APB 17, "Intangible Assets," and is effective for fiscal
years beginning after December 15, 2001. SFAS No. 142 primarily addresses the
accounting for goodwill and intangible assets subsequent to their initial
recognition. The provisions of SFAS No. 142 (1) prohibit the amortization of
goodwill and indefinite-lived intangible assets, (2) require that goodwill and
indefinite-lived intangible assets be tested annually for impairment (and in
interim periods if certain events occur indicating that the carrying value of
goodwill and/or indefinite-lived intangible assets may be impaired), (3) require
that reporting units be identified for the purpose of assessing potential future
impairments of goodwill, and (4) remove the forty-year limitation on the
amortization period of intangible assets that have finite lives. New CF&I
adopted the provisions of SFAS No. 141 and 142 during its first quarter ended
March 31, 2002. See Note 6 for further information.

In August 2001, the FASB issued SFAS No. 143, "ACCOUNTING FOR ASSET
RETIREMENT OBLIGATIONS." SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated retirement costs. This statement requires that New
CF&I record a liability for the fair value of an asset retirement obligation
when New CF&I has a legal obligation to remove the asset. SFAS No. 143 is
effective for New CF&I beginning January 1, 2003. New CF&I does not believe that
the adoption of SFAS No. 143 will have a material impact on its consolidated
financial statements.

On October 3, 2001, the FASB issued SFAS No. 144 "ACCOUNTING FOR THE
IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS." SFAS No. 144 supercedes SFAS No.
121 "ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF." SFAS No. 144 applies to all long-lived assets
(including discontinued operations) and consequently amends Accounting
Principles Board Opinion No. 30 (APB 30), "REPORTING RESULTS OF OPERATIONS -
REPORTING THE EFFECTS OF DISPOSAL OF A SEGMENT OF A BUSINESS." SFAS No. 144
develops one accounting model for long-lived assets that are to be disposed of
by sale. SFAS No. 144 requires that long-lived assets that are to be disposed of
by sale be measured at the lower of book value or fair value less cost to sell.
Additionally, SFAS No. 144 expands the scope of discontinued operations to
include all components of an entity with operations that (1) can be
distinguished from the rest of the entity and (2) will be eliminated from the
ongoing operations of the entity in a disposal transaction. SFAS No. 144 was
effective for New CF&I for the year beginning January 1, 2002. The adoption of
this standard did not have a material effect on New CF&I's financial statements.

In May 2002, the FASB issued SFAS No. 145, "RECISSION OF FAS NOS. 4, 44,
AND 64, AMENDMENT OF FAS 13, AND TECHNICAL CORRECTIONS." Among other things,
SFAS No. 145 rescinds various pronouncements regarding early extinguishment of
debt and allows extraordinary accounting treatment for early extinguishment only
when the provisions of Accounting Principles Board Opinion No. 30, "REPORTING
THE RESULTS OF OPERATIONS - REPORTING THE EFFECTS OF DISPOSAL OF A SEGMENT OF A
BUSINESS, AND EXTRAORDINARY, UNUSUAL AND INFREQUENTLY OCCURRING EVENTS AND
TRANSACTIONS" are met. SFAS No. 145 provisions regarding early extinguishment of
debt are generally effective for fiscal years beginning after May 15, 2002. New
CF&I does not believe that the adoption of this statement will have a material
impact on its consolidated financial statements.

In July 2002, the FASB issued SFAS No. 146, "ACCOUNTING FOR THE
IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS AND FOR OBLIGATIONS ASSOCIATED WITH
DISPOSAL ACTIVITIES." SFAS No. 146 addresses the differences in accounting for
long-lived assets and operations (segments) to be disposed of under SFAS No. 121
and APB No. 30 and accounting for costs associated with those and other disposal
activities, including restructuring activities, under Emerging Issues Task Force
("EITF") Issue No. 94-3. SFAS No. 146 is effective for disposal activities after
December 31, 2002, with early application encouraged. New CF&I does not believe
that the adoption of this statement will have a material impact on its
consolidated financial statements.


-23-


In November 2002, the FASB issued FIN No. 45, "GUARANTOR'S ACCOUNTING AND
DISCLOSURE REQUIREMENTS FOR GUARANTEES, INCLUDING INDIRECT GUARANTEES OF
INDEBTEDNESS OF OTHERS." It clarifies that a guarantor is required to recognize,
at the inception of a guarantee, a liability for the fair value of the
obligation undertaken in issuing the guarantee, including its ongoing obligation
to stand ready to perform over the term of the guarantee in the event that the
specified triggering events or conditions occur. FIN No. 45 is effective for
guarantees issued or modified after December 31, 2002. The disclosure
requirements were effective for the year ending December 31, 2002, which expand
the disclosures required by a guarantor about its obligations under a guarantee.
New CF&I will record the fair value of future material guarantees, if any.

In January 2003, the FASB issued FIN No. 46, "CONSOLIDATION OF VARIABLE
INTEREST ENTITIES." FIN No. 46 requires a variable interest entity to be
consolidated by a company if that company is subject to a majority of the risk
of loss from the variable interest entity's activities or entitled to receive a
majority of the entity's residual returns or both. FIN No. 46 also requires
disclosures about variable interest entities that a company is not required to
consolidate but in which it has a significant variable interest. FIN 46 applies
immediately to variable interest entities created after January 31, 2003 and to
existing variable interest entities in the periods beginning after June 15,
2003. New CF&I is currently evaluating the impact of adoption of FIN No. 46 on
the financial position and results of operations.

3. INVENTORIES

Inventories were as follows at December 31:

2002 2001 2000
-------- -------- --------
(IN THOUSANDS)

Raw materials $ 5,536 $ 9,711 $ 7,412
Semi-finished product 11,325 9,610 13,140
Finished product 17,420 9,752 20,969
Stores and operating supplies 11,823 6,985 7,108
-------- -------- --------
Total inventory $ 46,104 $ 36,058 $ 48,629
======== ======== ========

4. ACCOUNTS PAYABLE

Accrued expenses consist of the following:

2002 2001 2000
------- ------- -------
(IN THOUSANDS)

Accrued post retirement obligations $11,315 $ 9,357 $ 5,025
Accrued payables and expenses 6,168 9,151 9,174
Accrued environmental 4,972 3,939 1,679
Accrued property tax 2,941 2,530 3,058
Other 760 277 1,797
------- ------- -------
Total accrued expenses $26,156 $25,254 $20,733
======= ======= =======
5. DEBT, FINANCING ARRANGEMENTS AND LIQUIDITY

Borrowing requirements for capital expenditures and working capital have
been provided through a revolving loan from Oregon Steel to New CF&I. The loan
includes interest on the daily amount outstanding, paid monthly, at the rate of
10.65%. The principal is due on demand or, if no demand, due December 31, 2004.
See Note 13 for discussion of the resultant transactions.

At December 31, 2002, principal payments on long-term debt were due as
follows (in thousands):

2004 $ 228,208
=========

Although New CF&I generated operating profit for the year ended December
31, 2002, New CF&I experienced a net loss for this same period. Contributing to
the adverse results was the interest paid by New CF&I to Oregon Steel for its
financing. New CF&I has been able to fulfill its needs for working capital and
capital expenditures due, in part, to the financing arrangement with Oregon
Steel. New CF&I expects that operations will continue for 2003, with the
realization of assets, and discharge of liabilities in the ordinary course of
business. New CF&I believes that its prospective needs for working capital and
capital expenditures will be met from cash flows generated by operations and
borrowings pursuant to the financing arrangement with Oregon Steel. If
operations are

-24-


not consistent with management's plans, there is no assurance that the amounts
from these sources will be sufficient for such purposes. Oregon Steel is not
required to provide financing to New CF&I and, although the demand for repayment
of the obligation in full is not expected during 2003, Oregon Steel may demand
repayment of the loan at any time. If Oregon Steel were to demand repayment of
the loan, it is not likely that New CF&I would be able to obtain the external
financing necessary to repay the loan or to fund its capital expenditures and
other cash needs and, if available, that such financing would be on terms
satisfactory to New CF&I.

6. GOODWILL AND INTANGIBLE ASSETS

Effective January 1, 2002, New CF&I adopted SFAS No.142, "GOODWILL
AND OTHER INTANGIBLE ASSETS." As part of this adoption, New CF&I ceased
amortizing all goodwill and assessed goodwill for possible impairment. As an
initial step, New CF&I tested goodwill impairment within CF&I, the only
reporting unit with goodwill.

As required under the transitional accounting provisions of SFAS No.
142, New CF&I completed the steps required to identify and measure goodwill
impairment at CF&I. This reporting unit was measured for impairment by comparing
implied fair value of the reporting unit's goodwill with the carrying amount of
the goodwill. As a result, the entire goodwill at CF&I was written off in the
amount of $31.9 million and a charge of $19.1 million (after tax and minority
interest) was recognized as a cumulative effect of a change in accounting
principle during the first quarter of 2002. Historical earnings and applying an
earnings multiple resulted in the identification of an impairment that was
recognized at the reporting unit. The implementation of SFAS No. 142 required
the use of judgements, estimates and assumptions in the determination of fair
value and impairment amounts related to the required testing. Prior to adoption
of SFAS No. 142, New CF&I had historically evaluated goodwill for impairment by
comparing the entity level unamortized balance of goodwill to projected
undiscounted cash flows, which did not result in an indicated impairment.

Additionally, pursuant to SFAS No. 142, New CF&I completed its
reassessment of finite intangible asset lives, which consists of proprietary
technology at CF&I. Based on this reassessment, no adjustment was needed on the
proprietary technology. New CF&I does not have any other acquired intangible
assets, whether finite or indefinite-lived assets.

Listed below are schedules describing the goodwill and intangibles of
New CF&I. Also included is a report of what adjusted earnings would have been if
amortization had not taken place for the years ended 2002, 2001 and 2000.

GOODWILL - ADOPTION OF SFAS NO. 142
- -----------------------------------

New CF&I applied the SFAS No. 142 rules in accounting of goodwill and
intangibles and $31.9 million of goodwill was written off in the first quarter
of 2002. During 2002, no additional goodwill was acquired. There was no
remaining goodwill at December 31, 2002.

INTANGIBLE ASSETS

The carrying amount of intangible assets and the associated
amortization expenses are as follows:


AS OF DECEMBER 31, 2002
-------------------------------------
GROSS CARRYING ACCUMULATED
AMOUNT AMORTIZATION
-------------- ------------
(IN THOUSANDS)

AMORTIZED INTANGIBLE ASSETS: (FN1)
----------------------------------
Proprietary technology $1,892 $(786)
====== =====


AGGREGATE AMORTIZATION EXPENSE: 2002 2001
------------------------------- ---- ----

For the years ended $ 122 $ 122

ESTIMATED AMORTIZATION EXPENSE:
-------------------------------
For the year ended 12/31/03 $122
For the year ended 12/31/04 $122
For the year ended 12/31/05 $122
For the year ended 12/31/06 $122
For the year ended 12/31/07 $122

(FN1) Weighted average amortization period is 16 years.

-25-



The following adjusts reported net loss to exclude goodwill amortization.




FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------
(IN THOUSANDS)
2002 2001 2000
--------- --------- --------




Goodwill amortization $ -- $ (1,020) $(1,020)
======== ======== =======

Net loss (14,638) (14,963) (3,131)
Add back: Goodwill amortization,
net of tax, net of minority interest - 576 576
-------- -------- -------
Adjusted net loss $(14,638) $(14,387) $(2,555)
======== ======== =======


7. FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value of New CF&I's financial instruments at
December 31 were as follows:


2002 2001 2000
------------------------------ ----------------------------- ------------------------------
CARRYING FAIR CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
-------------- --------------- -------------- -------------- --------------- --------------
(IN THOUSANDS)

Cash and cash equivalents $ 289 $ 289 $ 3 $ 3 $ 5 $ 5
Long-term debt, including
current portion -- -- 14,536 14,494 23,162 22,779
Long-term debt to Oregon Steel 228,208 210,494 230,258 213,792 221,474 154,000


The carrying amount of cash and cash equivalents approximate fair value
due to their short maturity. The fair value of long-term debt, both to external
parties and to Oregon Steel are estimated by discounting future cash flows based
on the Company's incremental borrowing rate for similar types of borrowing
arrangements.

8. INCOME TAXES

The income tax (expense) benefit consisted of the following:

2002 2001 2000
-------- -------- --------
(IN THOUSANDS)
Current:
Federal $ (738) $ (471) $ (659)
State (119) (81) (94)
------- ------- -------
(857) (552) (753)
------- ------- -------
Deferred:
Federal (1,684) 5,472 503
State (1,576) 605 1,938
------- ------- -------
(3,260) 6,077 2,441
------- ------- -------
Income tax (expense) benefit $(4,117) $ 5,525 $ 1,688
======= ======= =======

A reconciliation of the statutory benefit rate to the effective (tax) or
benefit rate on loss before income taxes is as follows:

2002 2001 2000
------- ----- ------

Federal (35.0)% 35.0% 35.0%
State (12.1) (4.3) 5.1
Other (1.1) (3.8) (5.1)
----- ---- ----
(48.2)% 26.9% 35.0%
===== ==== ====

-26-

The current and noncurrent components of the net deferred tax assets at
December 31 were as follows:


2002 2001 2000
-------- ------- --------
(IN THOUSANDS)

Net current deferred tax asset:
Assets:
Inventories $ 706 $ 921 $ 868
Accrued expenses 3,305 2,284 1,517
Allowance for doubtful accounts 830 760 455
-------- -------- --------
Net current deferred tax asset $ 4,841 $ 3,965 $ 2,840
======== ======== ========

Net noncurrent deferred tax asset:
Assets:
Net operating loss carryforward $ 57,624 $ 61,165 $ 54,932
Environmental liability 13,342 11,960 12,417
State tax credits 5,754 5,565 5,546
Pension liability adjustment 2,288 978 --
Other 6,151 5,187 5,667
-------- -------- --------
85,159 84,855 78,562
Valuation allowance (5,162) (3,424) (3,105)
-------- -------- --------
79,997 81,431 75,457
-------- -------- --------
Liabilities:
Property, plant and equipment 47,211 47,773 47,051
Costs in excess of net assets acquired -- 9,309 9,987
-------- -------- --------
47,211 57,082 57,038
-------- -------- --------
Net noncurrent deferred tax asset $ 32,786 $ 24,349 $ 18,419
======== ======== ========


At December 31, 2002, 2001 and 2000, New CF&I included in accounts
payable amounts due to Oregon Steel of $830,000, $1,336,000 and $784,000,
respectively, related to income taxes.

At December 31, 2002, New CF&I had state tax credits of $5.7 million
related to enterprise zone credits for eligible completed capital projects,
expiring 2003 through 2014.

At December 31, 2002, New CF&I had $154.7 million in federal net
operating loss carryforwards expiring in 2010 through 2021 that it expects to
utilize through a tax sharing agreement with Oregon Steel. In addition, New CF&I
has $155.3 million in state net operating loss carryforwards expiring in 2004
through 2021.

New CF&I maintained a valuation allowance of $5.2 million, $3.4 million
and $3.1 million at December 31, 2002, 2001, and 2000, respectively, for state
tax credit carryforwards. Management believes that it is more likely than not
that future taxable income will not be sufficient to realize the full benefit of
the state tax credit carryforwards. No valuation allowance has been established
for net operating loss carryforwards.

At December 31, 2002, New CF&I recorded deferred tax assets totaling $2.3
million created by a minimum pension liability established pursuant to SFAS No.
87, "EMPLOYER'S ACCOUNTING FOR PENSION." The setup of the deferred tax asset has
no impact on the current year deferred tax expense calculation because of the
direct impact on equity required by SFAS No. 87.

9. EMPLOYEE BENEFIT PLANS

PENSION PLANS

New CF&I has noncontributory defined benefit retirement plans covering
all of the eligible employees of New CF&I. The plans provide benefits based on
participants' years of service and compensation. New CF&I funds at least the
minimum annual contribution required by ERISA.

-27-



The following table sets forth the funded status of the plans and the
amounts recognized as of December 31:



2002 2001 2000
-------- -------- --------
(IN THOUSANDS)

Change in benefit obligation
- ----------------------------
Projected benefit obligation at January 1 $ 26,211 $ 22,487 $ 20,861
Service cost 1,762 1,528 1,179
Interest cost 1,796 1,647 1,523
Benefits paid (1,058) (1,072) (1,004)
Actuarial loss (gain) 1,096 1,621 (72)
-------- -------- --------
Projected benefit obligation at December 31 29,807 26,211 22,487
-------- -------- --------

Change in plan assets
- ---------------------
Fair value of plan assets at January 1 16,167 17,721 19,668
Actual loss on plan assets (1,426) (778) (943)
Company contribution 4,400 296 --
Benefits paid (1,058) (1,072) (1,004)
-------- -------- --------
Fair value of plan assets at December 31 18,083 16,167 17,721
-------- -------- --------

Projected benefit obligation in excess of plan assets (11,724) (10,044) (4,766)
Unrecognized net loss (gain) 7,474 3,746 (114)
-------- -------- --------
Net amount recognized (4,250) (6,298) (4,880)
Minimum liability (6,021) (2,575) --
-------- -------- --------
Total pension liability recognized in consolidated balance sheet $(10,271) $ (8,873) $ (4,880)
======== ======== ========


Net pension cost was $2.4 million, $1.7 million and $1.0 million for the
years ended December 31, 2002, 2001 and 2000, respectively.

Plan assets are invested in interest-bearing cash and equivalents (2%),
and common stock and bond funds (98%) at December 31, 2002.

Generally weak financial market conditions resulted in poor investment
returns in the pension plans for the year 2002, thus causing pension assets to
be lower than actuarial liabilities and requiring an additional liability of
$3.4 million to be recorded. The additional liability is tax-affected when
recorded to stockholders' equity and shown as a component of other comprehensive
income.

The following table sets forth the significant actuarial assumptions for
New CF&I's pension plans:

2002 2001 2000
---- ---- ----
Discount rate 6.8% 7.0% 7.5%
Rate of increase in future compensation levels 4.0% 4.0% 4.0%
Expected long-term rate of return on plan assets 8.5% 8.5% 8.5%


POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS

New CF&I provides certain health care and life insurance benefits for
substantially all of its retired employees. Employees are generally eligible for
benefits upon retirement after completion of a specified number of years of
service. The benefit plans are unfunded.

-28-




The following table sets forth the unfunded status and the amounts
recognized at December 31:



2002 2001 2000
-------- -------- --------
(IN THOUSANDS)

Change in benefit obligation
- ----------------------------
Accumulated postretirement benefit obligation at January 1 $ 10,427 $ 9,659 $ 9,179
Service cost 118 113 90
Interest cost 705 700 661
Benefits paid (598) (475) (525)
Actuarial loss 1,868 430 254
-------- -------- --------
Accumulated postretirement benefit obligation at December 31 12,520 10,427 9,659
-------- -------- --------

Accumulated benefit obligation in excess of plan assets (12,520) (10,427) (9,659)
Unrecognized prior service cost 460 531 602
Unrecognized net loss 3,643 1,872 1,511
-------- -------- --------
Postretirement liability recognized in consolidated balance sheet $ (8,417) $ (8,024) $ (7,546)
======== ======== ========

Net postretirement benefit cost was $991,000, $953,000 and $871,000 for
the years ended December 31, 2002, 2001 and 2000, respectively.

The obligations and costs for the retiree medical plan are not dependent
on changes in the cost of medical care. Retirees are covered under plans
providing fixed dollar benefits. The discount rate used in determining the
accumulated postretirement benefit obligation was 6.8%, 7.0% and 7.5% in 2002,
2001 and 2000, respectively.

OTHER EMPLOYEE BENEFIT PLANS

New CF&I has a profit participation plan under which it distributes
quarterly to eligible employees 12% of CF&I's pretax income after adjustments
for certain non-operating items. Each eligible employee receives a share of the
distribution based upon the level of the eligible employee's base compensation
compared with the total base compensation of all eligible employees of New CF&I.
New CF&I may modify, amend or terminate the plan at any time, subject to the
terms of the various labor agreements.

New CF&I has qualified Thrift (401(k)) plans for eligible employees under
which New CF&I, depending on the plan, matches 50% of the first 4%, or 25% of
the first 6% of the participants' deferred compensation. Company contribution
expense in 2002, 2001 and 2000 was $350,000, $264,000 and $265,000,
respectively.

10. SALES OF REDEEMABLE COMMON STOCK

In June 1994, the Board of Directors approved an increase in New CF&I's
authorized $1 par value common stock from 100 to 1,000 shares. In August 1994,
New CF&I sold a 10% equity interest to a subsidiary of Nippon Steel Corporation
("Nippon"). On November 15, 1995, a 74% stock dividend was declared, increasing
Oregon Steel's holding of New CF&I's common stock to 174 shares.

In connection with the sale, New CF&I and Oregon Steel entered into a
stockholders' agreement with Nippon pursuant to which Nippon was granted a right
to sell, in certain circumstances, all, but not less than all, of its equity
interest in New CF&I back to New CF&I at the then fair market value. Those
circumstances include, among other things, a change of control, as defined, in
New CF&I, certain changes involving the composition of New CF&I's board of
directors, and the occurrence of certain other events that are within the
control of New CF&I or Oregon Steel. Oregon Steel also agreed not to transfer
voting control of New CF&I to a nonaffiliate except in those circumstances where
Nippon is offered the opportunity to sell its interest in New CF&I to the
transferee at the same per share price obtained by Oregon Steel. New CF&I
retains a right of first refusal in the event that Nippon desires to transfer
its interest in New CF&I to a nonaffiliate. During 1995, Oregon Steel sold a 3%
equity interest in New CF&I to the Nissho Iwai Group ("Nissho Iwai") under
substantially the same terms and conditions of the Nippon transaction. New CF&I
believes that it is not probable that the conditions which would permit a stock
redemption will occur.

11. COMMITMENTS AND CONTINGENCIES

ENVIRONMENTAL

All material environmental remediation liabilities for non-capital
expenditures, which are probable and estimable, are recorded in the financial
statements based on current technologies and current environmental standards at
the time of evaluation. Adjustments are made when additional information is
available that suggests different remediation methods or periods may be required
and affect the total cost. The best estimate of the probable cost within a range
is recorded; however, if there is no best estimate, the low end of the range is
recorded and the range is disclosed.

-29-


In connection with the acquisition of the steelmaking and finishing
facilities located at Pueblo, Colorado ("Pueblo Mill"), CF&I accrued a liability
of $36.7 million for environmental remediation related to the prior owner's
operations. CF&I believed this amount was the best estimate of costs from a
range of $23.1 million to $43.6 million. CF&I's estimate of this liability was
based on two remediation investigations conducted by environmental engineering
consultants, and included costs for the Resource Conservation and Recovery Act
facility investigation, a corrective measures study, remedial action, and
operation and maintenance associated with the proposed remedial actions. In
October 1995, CF&I and the Colorado Department of Public Health and Environment
("CDPHE") finalized a postclosure permit for hazardous waste units at the Pueblo
Mill. As part of the postclosure permit requirements, CF&I must conduct a
corrective action program for the 82 solid waste management units at the
facility and continue to address projects on a prioritized corrective action
schedule which substantially reflects a straight-line rate of expenditure over
30 years. The State of Colorado mandated that the schedule for corrective action
could be accelerated if new data indicated a greater threat existed to the
environment than was presently believed to exist. At December 31, 2002, the
accrued liability was $29.9 million, of which $25.9 million was classified as
non-current on the consolidated balance sheet.

The CDPHE inspected the Pueblo Mill in 1999 for possible environmental
violations, and in the fourth quarter of 1999 issued a Compliance Advisory
indicating that air quality regulations had been violated, which was followed by
the filing of a judicial enforcement action ("Action") in the second quarter of
2000. In March 2002, CF&I and CDPHE reached a settlement of the Action, which
was approved by the court (the "State Consent Decree"). The State Consent Decree
provides for CF&I to pay $300,000 in penalties, fund $1.5 million of community
projects, and to pay approximately $400,000 for consulting services. CF&I is
also required to make certain capital improvements expected to cost
approximately $20 million, including converting to the new single New Source
Performance Standards Subpart AAa ("NSPS AAa") compliant furnace discussed
below. The State Consent Decree provides that the two existing furnaces will be
permanently shut down approximately 16 months after the issuance of a Prevention
of Significant Deterioration ("PSD") air permit. CF&I applied for the PSD permit
in April 2002. Terms of that permit are still under discussion with the State
and it has not yet been issued.

In May 2000, the EPA issued a final determination that one of the two
electric arc furnaces at the Pueblo Mill was subject to federal NSPS AA. This
determination was contrary to an earlier "grandfather" determination first made
in 1996 by CDPHE. CF&I appealed the EPA determination in the federal Tenth
Circuit Court of Appeals, and that appeal is pending. CF&I has negotiated a
settlement of this matter with EPA. Under that agreement and overlapping with
the commitments made to the CDPHE described below, CF&I committed to the
conversion to the new NSPS AAa compliant furnace (to be completed approximately
two years after permit approval and expected to cost, with all related emission
control improvements, approximately $20 million), and to pay approximately
$450,000 in penalties and fund certain supplemental environmental projects
valued at approximately $1.1 million, including the installation of certain
pollution control equipment at the Pueblo Mill. The above mentioned expenditures
for supplemental environmental projects will be both capital and non-capital
expenditures. Once the settlement agreement is finalized, the EPA will file
either one or two proposed federal Consent Decrees, which, if approved by the
court, will fully resolve all NSPS and PSD issues. At that time, CF&I will
dismiss its appeal against the EPA. If the proposed settlement with the EPA is
not approved, which appears unlikely, it would not be possible to estimate the
liability if there were ultimately an adverse determination of this matter.

In response to the CDPHE settlement and the resolution of the EPA action,
CF&I has accrued $2.8 million as of December 31, 2002, for possible fines and
non-capital related expenditures.

In December 2001, the State of Colorado issued a Title V air emission
permit to CF&I under the CAA requiring that the furnace subject to the EPA
action operate in compliance with NSPS AA standards. This permit was modified in
April 2002 to incorporate the longer compliance schedule that is part of the
settlement with the CDPHE and the EPA. In September 2002, New CF&I submitted a
request for a further extension of certain Title V compliance deadlines,
consistent with a joint petition by the State and New CF&I for an extension of
the same deadlines in the State Consent Decree. This modification gives CF&I
adequate time (at least 15 1/2 months after CDPHE issues the PSD permit) to
convert to a single NSPS AAa compliant furnace. Any decrease in steelmaking
production during the furnace conversion period when both furnaces are expected
to be shut down will be offset by increasing production prior to the conversion
period by building up semi-finished steel inventory and, if necessary,
purchasing semi-finished steel ("billets") for conversion into rod products at
spot market prices at costs comparable to internally generated billets. Pricing
and availability of billets is subject to significant volatility. However, New
CF&I believes that near term supplies of billets will continue to be available
in sufficient quantities at favorable prices.

In a related matter, in April 2000, the Union filed suit in U.S. District
Court in Denver, Colorado, asserting that New CF&I and CF&I had violated the CAA
at the Pueblo Mill for a period extending over five years. The Union sought
declaratory judgement regarding the applicability of certain emission standards,
injunctive relief, civil penalties and attorney's fees. On July 6, 2001, the
District Court dismissed the suit. The Union appealed the decision. On March 3,
2003, the 10th Circuit Court of Appeals reversed the District Court's dismissal
of the case and remanded the case for further hearing to the District Court. New
CF&I has not decided whether to further appeal this ruling. While New CF&I does
not believe the suit will have a material adverse effect on its results of

-30-


operations, the result of litigation, such as this, is difficult to predict and
an adverse outcome with significant penalties is possible. It is not presently
possible to estimate the liability if there is ultimately an adverse
determination on appeal.

LABOR MATTERS

The labor contract at CF&I expired on September 30, 1997. After a brief
contract extension intended to help facilitate a possible agreement, on October
3, 1997, the Union initiated a strike at CF&I for approximately 1,000 bargaining
unit employees. The parties, however, failed to reach final agreement on a new
labor contract due to differences on economic issues. As a result of contingency
planning, CF&I was able to avoid complete suspension of operations at the Pueblo
Mill by utilizing a combination of new hires, striking employees who returned to
work, contractors and salaried employees.

On December 30, 1997, the Union called off the strike and made an
unconditional offer on behalf of its members to return to work. At the time of
this offer, because CF&I had permanently replaced the striking employees, only a
few vacancies existed at the Pueblo Mill. Since that time, vacancies have
occurred and have been filled by formerly striking employees ("Unreinstated
Employees"). As of December 31, 2002, approximately 773 Unreinstated Employees
have either returned to work or have declined CF&I's offer of equivalent work.
At December 31, 2002, approximately 157 Unreinstated Employees remain
unreinstated.

On February 27, 1998, the Regional Director of the National Labor
Relations Board ("NLRB") Denver office issued a complaint against CF&I, alleging
violations of several provisions of the National Labor Relations Act ("NLRA").
On August 17, 1998, a hearing on these allegations commenced before an
Administrative Law Judge ("Judge"). Testimony and other evidence were presented
at various sessions in the latter part of 1998 and early 1999, concluding on
February 25, 1999. On May 17, 2000, the Judge rendered a decision which, among
other things, found CF&I liable for certain unfair labor practices and ordered
as remedy the reinstatement of all 1,000 Unreinstated Employees, effective as of
December 30, 1997, with back pay and benefits, plus interest, less interim
earnings. Since January 1998, New CF&I has been returning Unreinstated Employees
to jobs as positions became open. As noted above, there were approximately 157
Unreinstated Employees as of December 31, 2002. On August 2, 2000, CF&I filed an
appeal with the NLRB in Washington, D.C. A separate hearing concluded in
February 2000, with the judge for that hearing rendering a decision on August 7,
2000, that certain of the Union's actions undertaken since the beginning of the
strike did constitute misconduct and violations of certain provisions of the
NLRA. The Union has appealed this determination to the NLRB. In both cases, the
non-prevailing party in the NLRB's decision will be entitled to appeal to the
appropriate U.S. Circuit Court of Appeals. CF&I believes both the facts and the
law fully support its position that the strike was economic in nature and that
it was not obligated to displace the properly hired replacement employees. New
CF&I does not believe that final judicial action on the strike issues is likely
for at least two to three years.

In the event there is an adverse determination of these issues,
Unreinstated Employees could be entitled to back pay, including benefits, plus
interest, from the date of the Union's unconditional offer to return to work
through the date of their reinstatement or a date deemed appropriate by the NLRB
or an appellate court. The number of Unreinstated Employees entitled to back pay
may be limited to the number of past and present replacement workers; however,
the Union might assert that all Unreinstated Employees should be entitled to
back pay. Back pay is generally determined by the quarterly earnings of those
working less interim wages earned elsewhere by the Unreinstated Employees. In
addition to other considerations, each Unreinstated Employee has a duty to take
reasonable steps to mitigate the liability for back pay by seeking employment
elsewhere that has comparable working conditions and compensation. Any estimate
of the potential liability for back pay will depend significantly on the ability
to assess the amount of interim wages earned by these employees since the
beginning of the strike, as noted above. Due to the lack of accurate information
on interim earnings for both reinstated and Unreinstated Employees and sentiment
of the Union towards New CF&I, it is not currently possible to obtain the
necessary data to calculate possible back pay. In addition, the NLRB's findings
of misconduct by the Union may mitigate any back pay award with respect to any
Unreinstated Employees proven to have taken part or participated in acts of
misconduct during and after the strike. Thus, it is not presently possible to
estimate the liability if there is ultimately an adverse determination against
CF&I. An ultimate adverse determination against CF&I on these issues may have a
material adverse effect on New CF&I's consolidated financial condition, results
of operations, or cash flows. CF&I does not intend to agree to any settlement of
this matter that will have a material adverse effect on New CF&I. In connection
with the ongoing labor dispute, the Union has undertaken certain activities
designed to exert public pressure on CF&I. Although such activities have
generated some publicity in news media, CF&I believes that they have had little
or no material impact on its operations.

During the strike by the Union at CF&I, certain bargaining unit employees
of the Colorado & Wyoming Railway Company ("C&W"), a wholly-owned subsidiary of
New CF&I, refused to report to work for an extended period of time, claiming
that concerns for their safety prevented them from crossing the picket line. The
bargaining unit employees of C&W were not on strike, and because the other C&W
employees reported to work without incident, C&W considered those employees to
have quit their employment and, accordingly, C&W declined to allow those
individuals to return to work. The various unions representing those individuals
filed claims with C&W asserting that C&W had violated certain provisions of the
applicable collective bargaining agreement, the Federal Railroad Safety Act
("FRSA"), or the Railway Labor Act. In all of the claims, the unions demand
reinstatement of the former employees with their seniority intact, back pay and
benefits.

-31-


The United Transportation Union, representing thirty of those former
employees, asserted that their members were protected under the FRSA and pursued
their claim before the Public Law Board ("PLB"). A hearing was held in November
1999, and the PLB, with one member dissenting, rendered an award on January 8,
2001 against C&W, ordering the reinstatement of those claimants who intend to
return to work for C&W, at their prior seniority, with back pay and benefits,
net of interim wages and benefits received elsewhere. On February 6, 2001, C&W
filed a petition for review of that award and referred the matter back to the
PLB to determine the specific release which should be granted as to each
claimant in accordance with the terms of the award. On May 23, 2002, C&W filed
an appeal of the District Court's order in the United States Court of Appeals.
The appeal was dismissed as being premature given that the hearing on back pay
had not yet occurred. New CF&I does not believe that adverse determination
against C&W of this matter would have a material adverse effect on New CF&I's
results of operations.

The Transportation-Communications International Union, Brotherhood
Railway Carmen Division, representing six of those former C&W employees,
asserted that their members were protected under the terms of the collective
bargaining agreement and pursued their claim before a separate PLB. A hearing
was held in January 2001, and that PLB, with one member dissenting, rendered an
award on March 14, 2001 against C&W, ordering the reinstatement of those
claimants who intend to return to work for C&W, at their prior seniority, with
back pay and benefits, net of interim wages earned elsewhere. As of December 31,
2002, two of the six former employees have accepted a settlement from C&W. New
CF&I does not believe that adverse determination against C&W of this matter
would have a material adverse effect on New CF&I's results of operations.

PURCHASE COMMITMENTS

Effective February 2, 1993, New CF&I entered into an agreement, which
was subsequently amended on August 4, 1994, to purchase a base amount of oxygen
produced at the Pueblo Mill. The agreement specifies that New CF&I will pay a
base monthly charge that is adjusted annually based upon a percentage change in
the Producer Price Index. The monthly base charge at December 31, 2002 for this
agreement was $116,000.

GUARANTEES

On July 15, 2002, Oregon Steel issued $305 million of 10% First
Mortgage Notes due 2009 ("10% Notes) at a discount of 98.772% and an interest
rate of 10%. Interest is payable on January 15 and July 15 of each year. The
proceeds of this issuance were used to redeem Oregon Steel's 11% First Mortgage
Notes due 2003 (including interest accrued from June 16, 2002 until the
redemption date of August 14, 2002), refinance its existing credit agreement,
and for working capital and general corporate purposes. The existing credit
agreement was replaced with a new $75 million credit facility that will expire
on June 30, 2005.

New CF&I and CF&I (collectively "Guarantors") guarantee the obligations
of Oregon Steel under the 10% Notes, and those guarantees are secured by a lien
on substantially all of the property, plant and equipment and certain other
assets of the Guarantors, excluding accounts receivable and inventory. On August
16, 2002, Oregon Steel along with New CF&I and CF&I filed a registration
statement on Form S-4 to exchange the 10% Notes for notes with substantially
identical terms registered with the Securities and Exchange Commission.

In addition, as of December 31, 2002, Oregon Steel, New CF&I, CF&I, and
C&W are borrowers ("Borrowers") under a $75 million revolving credit facility
("Credit Agreement") that is collateralized, in part, by certain equity and
intercompany interests, accounts receivable and inventory of New CF&I and CF&I.
At December 31, 2002, $5.0 million was restricted under the Credit Agreement,
$8.2 million was restricted under the outstanding letters of credit, and $61.8
million was available for use. The Credit Agreement contains various restrictive
covenants related to Oregon Steel including a minimum consolidated tangible net
worth amount, a minimum earnings before interest, taxes, depreciation and
amortization ("EBITDA") amount, a minimum fixed charge coverage ratio,
limitations on maximum annual capital and environmental expenditures,
limitations on stockholder dividends and limitations on incurring new or
additional debt obligations other than as allowed by the Credit Agreement. The
Borrowers were in compliance with such covenants at December 31, 2002.

OTHER CONTINGENCIES

New CF&I is party to various claims, disputes, legal actions and other
proceedings involving contracts, employment and various other matters. In the
opinion of management, the outcome of these matters would not have a material
adverse effect on the consolidated financial condition of New CF&I.

-32-




12. MAJOR CUSTOMERS

During 2002, New CF&I had sales to two rail customers, Burlington
Northern Santa Fe Corporation, and Union Pacific Railroad which accounted for
nearly 12% and 16%, respectively, of its total revenue for the year. No single
customer or group of affiliated customers represented more than 10% of New
CF&I's sales revenue in 2001 and 2000.

13. RELATED PARTY TRANSACTIONS

OREGON STEEL MILLS, INC.

New CF&I pays administrative fees to Oregon Steel for services it
provides based on an allocation from Oregon Steel and reimburses Oregon Steel
for costs incurred on behalf of New CF&I. The following table summarizes the
transactions between New CF&I and Oregon Steel:




2002 2001 2000
-------- -------- --------
(IN THOUSANDS)

Oregon Steel administrative fees $ 3,414 $ 3,855 $ 3,825
Interest expense on notes payable to Oregon Steel 24,601 26,963 24,263
Notes payable to Oregon Steel at December 31 228,208 230,258 221,474
Accounts payable to Oregon Steel at December 31 7,669 4,231 5,776


NIPPON STEEL CORPORATION

In 1994, CF&I entered into an equipment supply agreement for purchase of
deep head-hardened ("DHH") rail equipment from Nippon. Additionally, CF&I pays
royalties to Nippon based on sales of DHH rail. CF&I has made payments on the
DHH rail equipment and paid certain license and technical fees, and royalties.
The following table summarizes the transactions between New CF&I and Nippon:

2002 2001 2000
---- ------ ----
(IN THOUSANDS)
Payments to Nippon for the year ended December 31 $890 $1,210 $484
Accounts payable to Nippon at December 31 262 403 794

14. UNUSUAL AND NONRECURRING ITEMS

SETTLEMENT OF LITIGATION

Operating income for 2001 includes a $2.2 million gain from a settlement
of outstanding litigated claims with certain graphite electrode suppliers.

-33-


REPORT OF INDEPENDENT ACCOUNTANTS

To the Partners of
CF&I Steel, L.P.

In our opinion, the financial statements listed in the index appearing under
Item 15(a)(iv) on page 54 present fairly, in all material respects, the
financial position of CF&I Steel, L.P. at December 31, 2002, 2001, and 2000, and
the results of its operations and its cash flows for each of the three years in
the period ended December 31, 2002 in conformity with accounting principles
generally accepted in the United States of America. In addition, in our opinion,
the financial statement schedule listed in the index appearing under Item
15(a)(v) on page 54 presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related financial
statements. These financial statements and financial statement schedule are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

As discussed in Notes 2 and 6 to the financial statements, the Company changed
its method of accounting for goodwill in 2002.


PRICEWATERHOUSECOOPERS LLP
Portland, Oregon
March 03, 2003

-34-






CF&I STEEL, L.P.
BALANCE SHEETS
(IN THOUSANDS EXCEPT FOR PER SHARE AND SHARE AMOUNTS)


DECEMBER 31,
--------------------------------------------------
2002 2001 2000
-------------- -------------- --------------

ASSETS
Current assets:
Cash and cash equivalents $ -- $ -- $ 2
Trade accounts receivable, less allowance for
doubtful accounts of $1,311, $1,972 and 640 31,036 38,178 42,743
Inventories 45,829 35,824 48,421
Other 506 71 440
--------- --------- ---------
Total current assets 77,371 74,073 91,606
--------- --------- ---------

Property, plant and equipment:
Land and improvements 3,449 3,498 3,470
Buildings 18,496 18,570 18,419
Machinery and equipment 258,013 251,573 248,407
Construction in progress 5,150 3,178 3,806
--------- --------- ---------
285,108 276,819 274,102
Accumulated depreciation (109,396) (91,204) (78,601)
--------- --------- ---------
Net property, plant and equipment 175,712 185,615 195,501
--------- --------- ---------

Cost in excess of net assets acquired, net 1,106 31,863 32,883
Other assets 13,334 14,728 12,864
--------- --------- ---------
$ 267,523 $ 306,279 $ 332,854
========= ========= =========
LIABILITIES
Current liabilities:
Current portion of long-term debt $ -- $ 9,464 $ 8,625
Accounts payable 48,016 45,496 53,575
Accrued expenses 25,895 26,120 20,617
--------- --------- ---------
Total current liabilities 73,911 81,080 82,817

Long-term debt -- 5,072 14,536
Long-term debt -- Oregon Steel Mills, Inc. 228,208 230,258 221,474
Long-term debt -- New CF&I, Inc. 21,756 21,756 21,756
Environmental liability 27,488 28,465 30,850
Deferred employee benefits 8,417 8,024 7,053
--------- --------- ---------
Total liabilities 359,780 374,655 378,486
--------- --------- ---------
Commitments and contingencies (Note 9)

PARTNERS' DEFICIT

General partner (87,829) (65,094) (43,443)
Limited partners (4,428) (3,282) (2,189)
--------- --------- ---------
(92,257) (68,376) (45,632)
--------- --------- ---------
$ 267,523 $ 306,279 $ 332,854
========= ========= =========


The accompanying notes are an integral part of the financial statements


-35-


CF&I STEEL, L.P.
STATEMENTS OF INCOME
(IN THOUSANDS)


YEAR ENDED DECEMBER 31,
---------------------------------------------------------
2002 2001 2000
-------------- ---------- ---------------


SALES:
Product sales $ 308,025 $ 285,366 $ 262,759
Freight 14,259 16,646 11,270
Electricity sales -- 2,150 839
--------- --------- ---------
322,284 304,162 274,868

COSTS AND EXPENSES:
Cost of sales 270,121 273,186 241,371
Settlement of litigation -- (2,190) --
Gain on sale of assets (1,109) (19) (2,972)
Selling, general and administrative 17,778 26,045 17,090
Incentive Compensation 1,561 -- 127
--------- --------- ---------
288,351 297,022 255,616
--------- --------- ---------

Operating income 33,933 7,140 19,252

OTHER INCOME (EXPENSE):
Interest expense (26,648) (30,127) (28,773)
Other income, net 862 367 262
--------- --------- ---------
Net income (loss) before accounting change 8,147 (22,620) (9,259)
Cumulative effect of change in accounting
principle (31,863) -- --
--------- --------- ---------
NET LOSS $ (23,716) $ (22,620) $ (9,259)
========= ========= =========

The accompanying notes are an integral part of the financial statements.



-36-



CF&I STEEL, L.P.
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(IN THOUSANDS)

GENERAL LIMITED
PARTNER PARTNERS TOTAL
--------- -------- ----------

BALANCES, DECEMBER 31, 1999 (34,627) (1,746) (36,373)

Net loss (8,816) (443) (9,259)
-------- -------- --------
BALANCES, DECEMBER 31, 2000 (43,443) (2,189) (45,632)

Net loss (21,533) (1,087) (22,620)
Minimum pension liability (118) (6) (124)
-------- -------- --------

BALANCES, DECEMBER 31, 2001 $(65,094) $ (3,282) $(68,376)

Net loss (22,578) (1,138) (23,716)
Minimum pension liability (157) (8) (165)
-------- -------- --------

BALANCES, DECEMBER 31, 2002 $(87,829) $ (4,428) $(92,257)
======== ======== ========

The accompanying notes are an integral part of
the financial statements.

-37-



CF&I STEEL, L.P.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

YEAR ENDED DECEMBER 31,
---------------------------------------------
2002 2001 2000
------------ ------------ ------------

Cash flows from operating activities:
Net loss $ (23,716) $ (22,620) $ (9,259)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and amortization 18,373 17,624 18,363
Goodwill write off 31,863 -- --
Gain on sale of assets and investments (1,109) (19) (2,972)
Other, net (1,130) (2,385) --
Changes in current assets and liabilities:
Trade accounts receivable 7,303 4,565 (16,576)
Inventories (10,005) 12,597 (13,264)
Accounts payable 2,520 (8,079) 12,741
Accrued expenses and deferred employee benefits 168 6,474 1,922
Other (560) (1,820) 307
--------- --------- ---------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 23,707 6,337 (8,738)
--------- --------- ---------

Cash flows from investing activities:
Additions to property, plant and equipment (8,523) (6,705) (6,900)
Proceeds from disposal of property and equipment 1,112 164 3,156
Other, net 290 43 (40)
--------- --------- ---------
NET CASH USED BY INVESTING ACTIVITIES (7,121) (6,498) (3,784)
--------- --------- ---------

Cash flows from financing activities:
Borrowings from related parties 137,163 141,434 151,963
Payments to related parties (139,213) (132,650) (131,579)
Payment of long-term debt (14,536) (8,625) (7,862)
--------- --------- ---------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (16,586) 159 12,522
--------- --------- ---------

Net decrease in cash and cash equivalents -- (2) --
Cash and cash equivalents at the beginning of year -- 2 2
--------- --------- ---------
Cash and cash equivalents at the end of year $ -- $ -- $ 2
========= ========= =========

Supplemental disclosures of cash flow information:
Cash paid for:
- --------------
Interest $ 26,085 $ 28,812 $ 24,886


The accompanying notes are an integral part of the financial statements.


-38-



CF&I STEEL, L.P.
NOTES TO FINANCIAL STATEMENTS

1. NATURE OF OPERATIONS

CF&I Steel, L.P. ("CF&I") manufactures various specialty and commodity
steel products in Pueblo, Colorado. Principal markets are steel service centers,
steel fabricators, railroads, oil and gas producers and distributors, and other
industrial concerns, primarily in the United States west of the Mississippi
River. CF&I also markets products outside of North America.

On March 3, 1993, the inception date of CF&I's operations, New CF&I, Inc.
("New CF&I"), a then wholly-owned subsidiary of Oregon Steel Mills, Inc.
("Oregon Steel"), (1) issued 100 shares of common stock to Oregon Steel for
$22.2 million in certain consideration and (2) as the general partner, acquired
for $22.2 million a 95.2% interest in CF&I. The remaining 4.8% interest was
acquired by the Pension Benefit Guaranty Corporation ("PBGC"), as a limited
partner, with a capital contribution of an asset valued at $1.2 million. On
October 1, 1997, Oregon Steel purchased PBGC's limited partnership interest in
CF&I, and subsequently sold 0.5% to another shareholder in New CF&I.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the amounts of revenues and expenses during the reporting
periods. Actual results could differ from those estimates.

REVENUE RECOGNITION

CF&I recognizes revenues when title passes, the earnings process is
substantially complete, and CF&I is reasonably assured of the collection of the
proceeds from the exchange, all of which generally occur upon shipment of CF&I's
products or delivering of the product at the destination specified by customer.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include short-term securities that have an
original maturity date of 90 days or less.

CONCENTRATIONS OF CREDIT RISK

Financial instruments that potentially subject CF&I to concentrations of
credit risk consist principally of cash and cash equivalents and trade
receivables. CF&I places its cash in high credit quality investments and limits
the amount of credit exposure to any one financial institution. At times, cash
balances are in excess of the Federal Deposit Insurance Corporation insurance
limit of $100,000. CF&I believes that risk of loss on its trade receivables is
reduced by ongoing credit evaluation of customer financial condition and
requirements for collateral, such as letters of credit and bank guarantees.

INVENTORY

CF&I's inventory consists of raw materials, semi-finished, finished
products and operating stores and supplies. At December 31, 2002, inventory was
approximately $45.8 million. CF&I's inventory balances are adjusted to
approximate the lower of manufacturing cost or market value. No such adjustment
was required for the years ended 2002, 2001 and 2000. Manufacturing cost is
determined using the average cost method.


PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost, including interest
capitalized during construction of $164,600, $325,000 and $215,000 in 2002, 2001
and 2000, respectively. Depreciation is determined using principally the
straight-line and the units of production methods over the estimated useful
lives of the assets. The original cost of machinery, which is being depreciated
using the units of production method, is approximately $35 million. Total
finished goods production for the years ended 2002, 2001, and 2000 were 852,000,
748,000, and 740,000, respectively. The estimated useful lives of most of CF&I's
operating machinery and equipment are from 20 to 30 years. Maintenance and
repairs are expensed as incurred and costs of improvements are capitalized.
Major maintenance and repair expense for 2002, 2001, and 2000 were $26.3
million, $23.8 million, and $19.4 million, respectively.

-39-


Upon disposal, cost and accumulated depreciation are removed from the accounts
and gains or losses are reflected in results of operations.

COST IN EXCESS OF NET ASSETS ACQUIRED

CF&I adopted Statement of Financial Accounting Standard ("SFAS") No. 142,
"Goodwill and other Intangible Assets," effective January 1, 2002. As required
under the transitional accounting provisions of SFAS No. 142, CF&I completed the
steps required to identify and measure goodwill impairment at each reporting
unit. The reporting units were measured for impairment by comparing implied fair
value of the reporting units' goodwill with the carrying amount of the goodwill.
As a result, the entire goodwill was written off in the amount of $31.9 million
and was recognized as a cumulative effect of a change in accounting principle
during the first quarter of 2002. In accordance with SFAS No. 142, goodwill is
no longer amortized, but is reviewed at least annually for impairment. The
remaining $1.1 million in assets consists of proprietary technology, presented
at cost, net of accumulated amortization, which are amortized over their
estimated useful lives of ten years using the straight-line method.

OTHER ASSETS

Included in other assets are net water rights of approximately $11.0
million. These water rights include the rights to divert and use certain amounts
of water from various river systems for either industrial or agricultural use.

IMPAIRMENT OF LONG-LIVED ASSETS

When events or circumstances indicate the carrying value of a long-lived
asset may be impaired, CF&I uses an estimate of the future undiscounted cash
flows to be derived from the remaining useful life of the asset to assess
whether or not the asset is recoverable. If the future undiscounted cash flows
to be derived over the life of the asset do not exceed the asset's net book
value, CF&I then considers estimated fair market value versus carrying value in
determining any potential impairment.

DERIVATIVE FINANCIAL INSTRUMENTS

Effective January 1, 2001, CF&I adopted SFAS No. 133, "ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES", which requires that all
derivative instruments be recorded on the balance sheet at fair value. The
adoption of SFAS No. 133 did not have material effect on CF&I's results of
operations or its financial position. CF&I did not have any derivative financial
instruments outstanding at the time of adoption. See disclosure regarding
Financial Instruments in Note 7.

SEGMENT REPORTING

In accordance with the criteria of SFAS No. 131, "DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION", CF&I operates in a single
reportable segment, the steel industry. All of the products of CF&I are steel
products in finished or semi-finished form. Production is the standard
"mini-mill" process where electric arc furnaces are used to melt scrap and other
metallics. Liquid steel is cast and cooled, then reheated for additional
forming. CF&I markets and sells the majority of its products through its own
sales organization to customers primarily in the transportation, construction,
or oil and gas industries. CF&I distributes product at various locations in the
United States and Canada, and as appropriate, through foreign sales agents.


SHIPPING AND HANDLING COST

All shipping costs billed to customers is recorded as revenue with the
related cost being recorded under cost of sales. Internal handling costs
incurred to store, move, or prepare goods for shipments are recorded under
Selling, General, and Administration expenses. For the years of 2002, 2001, and
2000, internal handling costs were $3.0 million $4.1 million, and $2.6 million,
respectively.

RECLASSIFICATIONS

Certain reclassifications have been made in prior years to conform to the
current year presentation. Such reclassifications do not affect results of
operations as previously reported.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 141, "BUSINESS COMBINATIONS," and SFAS No. 142, "GOODWILL AND OTHER
INTANGIBLE ASSETS," collectively referred to as the "Standards." SFAS No. 141
supersedes Accounting Principles Board Opinion (APB) No. 16, "Business
Combinations." The provisions of SFAS No. 141 (1) require that the purchase
method of accounting be used for all business combinations initiated after June
30, 2001, and (2) provide specific criteria for the initial recognition and
measurement of intangible assets apart from goodwill. SFAS No. 141 also requires
that, upon adoption of SFAS No.

-40-


142, CF&I reclassify the carrying amounts of certain intangible assets into or
out of goodwill, based on certain criteria. SFAS No. 142 supersedes APB 17,
"Intangible Assets," and is effective for fiscal years beginning after December
15, 2001. SFAS No. 142 primarily addresses the accounting for goodwill and
intangible assets subsequent to their initial recognition. The provisions of
SFAS No. 142 (1) prohibit the amortization of goodwill and indefinite-lived
intangible assets, (2) require that goodwill and indefinite-lived intangible
assets be tested annually for impairment (and in interim periods if certain
events occur indicating that the carrying value of goodwill and/or
indefinite-lived intangible assets may be impaired), (3) require that reporting
units be identified for the purpose of assessing potential future impairments of
goodwill, and (4) remove the forty-year limitation on the amortization period of
intangible assets that have finite lives. CF&I adopted the provisions of SFAS
No. 141 and 142 during its first quarter ended March 31, 2002. See Note 6 for
further information.

In August 2001, the FASB issued SFAS No. 143, "ACCOUNTING FOR ASSET
RETIREMENT OBLIGATIONS." SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated retirement costs. This statement requires that CF&I
record a liability for the fair value of an asset retirement obligation when
CF&I has a legal obligation to remove the asset. SFAS No. 143 is effective for
CF&I beginning January 1, 2003. CF&I does not believe that the adoption of SFAS
No. 143 will have a material impact on its consolidated financial statements.

On October 3, 2001, the FASB issued SFAS No. 144 "ACCOUNTING FOR THE
IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS." SFAS No. 144 supercedes SFAS No.
121 "ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF." SFAS No. 144 applies to all long-lived assets
(including discontinued operations) and consequently amends Accounting
Principles Board Opinion No. 30 (APB 30), Reporting Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business." SFAS No. 144
develops one accounting model for long-lived assets that are to be disposed of
by sale. SFAS No. 144 requires that long-lived assets that are to be disposed of
by sale be measured at the lower of book value or fair value less cost to sell.
Additionally, SFAS No. 144 expands the scope of discontinued operations to
include all components of an entity with operations that (1) can be
distinguished from the rest of the entity and (2) will be eliminated from the
ongoing operations of the entity in a disposal transaction. SFAS No. 144 was
effective for CF&I for the year beginning January 1, 2002. The adoption of this
standard did not have a material effect on CF&I's financial statements.

In July of 2002, the FASB issued SFAS No. 146, "ACCOUNTING FOR THE
IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS AND FOR OBLIGATIONS ASSOCIATED WITH
DISPOSAL ACTIVITIES." SFAS No. 146 addresses the differences in accounting for
long-lived assets and operations (segments) to be disposed of under SFAS No. 121
and APB No. 30 and accounting for costs associated with those and other disposal
activities, including restructuring activities, under Emerging Issues Task Force
("EITF") Issue No. 94-3. SFAS No. 146 is effective for disposal activities after
December 31, 2002, with early application encouraged. CF&I does not believe that
the adoption of this statement will have a material impact on its consolidated
financial statements.

In November 2002, the FASB issued FIN No. 45, "GUARANTOR'S ACCOUNTING AND
DISCLOSURE REQUIREMENTS FOR GUARANTEES, INCLUDING INDIRECT GUARANTEES OF
INDEBTEDNESS OF OTHERS." It clarifies that a guarantor is required to recognize,
at the inception of a guarantee, a liability for the fair value of the
obligation undertaken in issuing the guarantee, including its ongoing obligation
to stand ready to perform over the term of the guarantee in the event that the
specified triggering events or conditions occur. FIN No. 45 is effective for
guarantees issued or modified after December 31, 2002. The disclosure
requirements were effective for the year ending December 31, 2002, which expand
the disclosures required by a guarantor about its obligations under a guarantee.
CF&I will record the fair value of future material guarantees, if any.

3. INVENTORIES

Inventories were as follows as of December 31:

2002 2001 2000
------- ------- -------
(IN THOUSANDS)

Raw materials $ 5,536 $ 9,711 $ 7,412
Semi-finished product 11,325 9,610 13,140
Finished product 17,420 9,752 20,761
Stores and operating supplies 11,548 6,751 7,108
------- ------- -------
Total inventory $45,829 $35,824 $48,421
======= ======= =======

-41-

4. ACCOUNTS PAYABLE

Accrued expenses consist of the following:

2002 2001 2000
------- ------- -------
(IN THOUSANDS)

Accrued post retirement obligations $11,315 $ 9,357 $ 5,025
Accrued payables and expenses 6,038 10,125 10,703
Accrued environmental 4,972 3,939 1,679
Accrued property tax 2,811 2,422 2,946
Other 759 277 264
------- ------- -------
Total accrued expenses $25,895 $26,120 $20,617
======= ======= =======

5. DEBT, FINANCING ARRANGEMENTS AND LIQUIDITY

Borrowing requirements for capital expenditures and working capital
have been provided through revolving loans from Oregon Steel and New CF&I. The
loan from Oregon Steel includes interest on the daily amount outstanding at the
rate of 10.65%. The principal is due on demand or, if no demand, due on December
31, 2004. The loan from New CF&I includes interest on the daily amount
outstanding at the rate of 9.5%. The principal is due on demand or, if no
demand, due on December 31, 2004. Interest on the loans is paid on a monthly
basis. See Note 11 for discussion of the resultant transactions.

As of December 31, 2002, principal payments on long-term debt were due as
follows (in thousands):

2004 $248,964
========

Although CF&I generated operating profit for the year ended December 31,
2002, CF&I experienced a net loss for this same period. Contributing to the
adverse results was the interest paid by CF&I to Oregon Steel for its financing.
CF&I has been able to fulfill its needs for working capital and capital
expenditures due, in part, to the financing arrangement with Oregon Steel. CF&I
expects that operations will continue for 2003, with the realization of assets,
and discharge of liabilities in the ordinary course of business. CF&I believes
that its prospective needs for working capital and capital expenditures will be
met from cash flows generated by operations and borrowings pursuant to the
financing arrangement with Oregon Steel. If operations are not consistent with
management's plans, there is no assurance that the amounts from these sources
will be sufficient for such purposes. Oregon Steel is not required to provide
financing to CF&I and, although the demand for repayment of the obligation in
full is not expected during 2003, Oregon Steel may demand repayment of the loan
at any time. If Oregon Steel were to demand repayment of the loan, it is not
likely that CF&I would be able to obtain the external financing necessary to
repay the loan or to fund its capital expenditures and other cash needs and, if
available, that such financing would be on terms satisfactory to CF&I.

6. GOODWILL AND INTANGIBLE ASSETS

Effective January 1, 2002, CF&I adopted SFAS No. 142, "GOODWILL AND OTHER
INTANGIBLE ASSETS." As part of this adoption, CF&I ceased amortizing all
goodwill and assessed goodwill for possible impairment. As an initial step, CF&I
tested goodwill impairment within CF&I, the only reporting unit with goodwill.

As required under the transitional accounting provisions of SFAS No. 142,
CF&I completed the steps required to identify and measure goodwill impairment at
CF&I. This reporting unit was measured for impairment by comparing implied fair
value of the reporting unit's goodwill with the carrying amount of the goodwill.
As a result, the entire goodwill at CF&I was written off in the amount of $31.9
million during the first quarter of 2002. Historical earnings and applying an
earnings multiple resulted in the identification of an impairment that was
recognized at the reporting unit. The implementation of SFAS No. 142 required
the use of judgements, estimates and assumptions in the determination of fair
value and impairment amounts related to the required testing. Prior to adoption
of SFAS No. 142, CF&I had historically evaluated goodwill for impairment by
comparing the entity level unamortized balance of goodwill to projected
undiscounted cash flows, which did not result in an indicated impairment.

Additionally, pursuant to SFAS No. 142, CF&I completed its reassessment
of finite intangible asset lives, which consists of proprietary technology at
CF&I. Based on this reassessment, no adjustment was needed on the proprietary
technology. CF&I does not have any other acquired intangible assets, whether
finite or indefinite-lived assets.

Listed below are schedules describing the goodwill and intangibles of
CF&I. Also included is a report of what adjusted earnings would have been if
amortization had not taken place for years ended 2002 and 2001.

-42-


GOODWILL - ADOPTION OF SFAS NO. 142
- -----------------------------------

CF&I applied the SFAS No. 142 rules in accounting of goodwill and
intangibles and $31.9 million of goodwill was written off in the first quarter
of 2002. During 2002, no additional goodwill was acquired. There was no
remaining goodwill at December 31, 2002.

INTANGIBLE ASSETS
- -----------------

The carrying amount of intangible assets and the associated amortization
expenses are as follows:

AS OF DECEMBER 31, 2002
----------------------------------
GROSS CARRYING ACCUMULATED
AMOUNT AMORTIZATION
-------------- ------------
(IN THOUSANDS)

AMORTIZED INTANGIBLE ASSETS: (FN1)
----------------------------------
Proprietary technology $1,892 $(786)
====== =====


AGGREGATE AMORTIZATION EXPENSE:
-------------------------------
2002 2001
---- ----
For the year ended $ 122 $ 122

ESTIMATED AMORTIZATION EXPENSE:
-------------------------------
For the year ended 12/31/03 $122
For the year ended 12/31/04 $122
For the year ended 12/31/05 $122
For the year ended 12/31/06 $122
For the year ended 12/31/07 $122

(FN1) Weighted average amortization period is 16 years.

The following adjusts reported net loss to exclude goodwill amortization.

FOR THE YEAR ENDED
DECEMBER 31, (IN THOUSANDS)
------------------------------------
2002 2001 2000
--------- -------- -------


Goodwill amortization $ -- $ (1,020) $(1,020)
======== ======== =======

Net loss (23,716) (22,620) (9,259)
Add back goodwill amortization -- 1,020 1,020
-------- -------- -------
Adjusted net loss $(23,716) $(21,600) $(8,239)
======== ======== =======


7. FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value of the CF&I's financial instruments at December
31 were as follows:




2002 2001 2000
------------------------------ ----------------------------- -------------------------
CARRYING FAIR CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
-------------- --------------- -------------- -------------- ------------- -----------
(IN THOUSANDS)

Cash and cash equivalents $ - $ - $ - $ - $ 2 $ 2
Long-term debt, including
current portion - - 14,536 14,494 23,162 22,779
Long-term debt to Oregon Steel 228,208 210,494 230,258 213,792 221,474 154,000
Long-term debt to New CF&I 21,756 20,925 21,756 20,805 21,756 20,500


The carrying amount of cash and cash equivalents approximate fair value
due to their short maturity. The fair value of long-term debt to Oregon Steel
and New CF&I are estimated by discounting future cash flows based on CF&I's
incremental borrowing rate for similar types of borrowing arrangements.

-43-



8. EMPLOYEE BENEFIT PLANS

PENSION PLANS

CF&I has noncontributory defined benefit retirement plans covering all
eligible employees. The plans provide benefits based on participants' years of
service and compensation. CF&I funds at least the minimum annual contribution
required by ERISA.

The following table sets forth the funded status of the plans and the
amounts recognized as of December 31:



2002 2001 2000
-------- -------- --------
(IN THOUSANDS)

Change in benefit obligation
- ----------------------------
Projected benefit obligation at January 1 $ 26,211 $ 22,487 $ 20,861
Service cost 1,762 1,528 1,179
Interest cost 1,796 1,647 1,523
Benefits paid (1,058) (1,072) (1,004)
Actuarial loss (gain) 1,096 1,621 (72)
-------- -------- --------
Projected benefit obligation at December 31 29,807 26,211 22,487
-------- -------- --------

Change in plan assets
- ---------------------
Fair value of plan assets at January 1 16,167 17,721 19,668
Actual loss on plan assets (1,426) (778) (943)
Company contribution 4,400 296 --
Benefits paid (1,058) (1,072) (1,004)
-------- -------- --------
Fair value of plan assets at December 31 18,083 16,167 17,721
-------- -------- --------

Projected benefit obligation in excess of plan assets (11,724) (10,044) (4,766)
Unrecognized net loss (gain) 7,474 3,746 (114)
-------- -------- --------
Net amount recognized (4,250) (6,298) (4,880)
Minimum liability (6,021) (2,575) --
-------- -------- --------
Total pension liability recognized in consolidated balance sheet $(10,271) $ (8,873) $ (4,880)
======== ======== ========



Net pension cost was $2.4 million, $1.7 million and $1.0 million for the
years ended December 31, 2002, 2001 and 2000, respectively.

Plan assets are invested in interest-bearing cash and equivalents (2%),
and common stock and bond funds (98%) at December 31, 2002.

Generally weak financial market conditions resulted in poor investment
returns in the pension plans for the year 2002, thus causing pension assets to
be lower than actuarial liabilities and requiring an additional liability of
$3.4 million to be recorded.

The following table sets forth the significant actuarial assumptions for
CF&I's pension plans:

2002 2001 2000
---- ---- ----
Discount rate 6.8% 7.0% 7.5%
Rate of increase in future compensation levels 4.0% 4.0% 4.0%
Expected long-term rate of return on plan assets 8.5% 8.5% 8.5%

POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS

CF&I provides certain health care and life insurance benefits for
substantially all of its retired employees. Employees are generally eligible for
benefits upon retirement after completion of a specified number of years of
service. The benefit plans are unfunded.


-44-



The following table sets forth the unfunded status and the amounts
recognized at December 31:




2002 2001 2000
-------- -------- --------
(IN THOUSANDS)

Change in benefit obligation
- ----------------------------
Accumulated postretirement benefit obligation at January 1 $ 10,427 $ 9,659 $ 9,179
Service cost 118 113 90
Interest cost 705 700 661
Benefits paid (598) (475) (525)
Actuarial loss 1,868 430 254
-------- -------- --------
Accumulated postretirement benefit obligation at December 31 12,520 10,427 9,659
-------- -------- --------

Accumulated benefit obligation in excess of plan assets (12,520) (10,427) (9,659)
Unrecognized prior service cost 460 531 602
Unrecognized net loss 3,643 1,872 1,511
-------- -------- --------
Postretirement liability recognized in consolidated balance sheet $ (8,417) $ (8,024) $ (7,546)
======== ======== ========


Net postretirement benefit cost was $991,000, $953,000 and $871,000 for
the years ended December 31, 2002, 2001 and 2000, respectively.

The obligations and costs for the retiree medical plan are not dependent
on changes in the cost of medical care. Retirees are covered under plans
providing fixed dollar benefits. The discount rate used in determining the
accumulated postretirement benefit obligation was 6.8%, 7.0% and 7.5% in 2002,
2001 and 2000, respectively.


OTHER EMPLOYEE BENEFIT PLANS

CF&I has a profit participation plan under which it distributes quarterly
to eligible employees 12% of its pretax income after adjustments for certain
non-operating items. Each eligible employee receives a share of the distribution
based upon the level of the eligible employee's base compensation compared with
the total base compensation of all eligible employees. CF&I may modify, amend or
terminate the plan at any time, subject to the terms of the various collective
bargaining agreements.

CF&I has qualified Thrift (401(k)) plans for eligible employees under
which CF&I matches, depending on plan, 50% of the first 4%, or 25% of the first
6% of the participants' deferred compensation. CF&I's contribution expense in
2002, 2001 and 2000 was $350,000, $264,000 and $265,000, respectively.

9. COMMITMENTS AND CONTINGENCIES

ENVIRONMENTAL

All material environmental remediation liabilities for non-capital
expenditures, which are probable and estimable, are recorded in the financial
statements based on current technologies and current environmental standards at
the time of evaluation. Adjustments are made when additional information is
available that suggests different remediation methods or periods may be required
and affect the total cost. The best estimate of the probable cost within a range
is recorded; however, if there is no best estimate, the low end of the range is
recorded and the range is disclosed.

In connection with the acquisition of the steelmaking and finishing
facilities located at Pueblo, Colorado ("Pueblo Mill"), CF&I accrued a liability
of $36.7 million for environmental remediation related to the prior owner's
operations. CF&I believed this amount was the best estimate of costs from a
range of $23.1 million to $43.6 million. CF&I's estimate of this liability was
based on two remediation investigations conducted by environmental engineering
consultants, and included costs for the Resource Conservation and Recovery Act
facility investigation, a corrective measures study, remedial action, and
operation and maintenance associated with the proposed remedial actions. In
October 1995, CF&I and the Colorado Department of Public Health and Environment
("CDPHE") finalized a postclosure permit for hazardous waste units at the Pueblo
Mill. As part of the postclosure permit requirements, CF&I must conduct a
corrective action program for the 82 solid waste management units at the
facility and continue to address projects on a prioritized corrective action
schedule which substantially reflects a straight-line rate of expenditure over
30 years. The State of Colorado mandated that the schedule for corrective action
could be accelerated if new data indicated a greater threat existed to the
environment than was presently believed to exist. At December 31, 2002, the
accrued liability was $29.9 million, of which $25.9 million was classified as
non-current on the consolidated balance sheet. The CDPHE inspected the Pueblo
Mill in 1999 for possible environmental violations, and in the fourth quarter of
1999 issued a Compliance Advisory indicating that air quality regulations had
been violated, which was followed by the filing of a judicial enforcement action
("Action") in the second quarter of 2000. In March 2002, CF&I and CDPHE reached
a settlement of the Action,

-45-


which was approved by the court (the "State Consent Decree"). The State Consent
Decree provides for CF&I to pay $300,000 in penalties, fund $1.5 million of
community projects, and to pay approximately $400,000 for consulting services.
CF&I is also required to make certain capital improvements expected to cost
approximately $20 million, including converting to the new single New Source
Performance Standards Subpart AAa ("NSPS AAa") compliant furnace discussed
below. The State Consent Decree provides that the two existing furnaces will be
permanently shut down approximately 16 months after the issuance of a Prevention
of Significant Deterioration ("PSD") air permit. CF&I applied for the PSD permit
in April 2002. Terms of that permit are still under discussion with the State
and it has not yet been issued.

In May 2000, the EPA issued a final determination that one of the two
electric arc furnaces at the Pueblo Mill was subject to federal NSPS AA. This
determination was contrary to an earlier "grandfather" determination first made
in 1996 by CDPHE. CF&I appealed the EPA determination in the federal Tenth
Circuit Court of Appeals, and that appeal is pending. CF&I has negotiated a
settlement of this matter with the EPA. Under that agreement and overlapping
with the commitments made to the CDPHE described below, CF&I committed to the
conversion to the new NSPS AAa compliant furnace (to be completed approximately
two years after permit approval and expected to cost, with all related emission
control improvements, approximately $20 million), and to pay approximately
$450,000 in penalties and fund certain supplemental environmental projects
valued at approximately $1.1 million, including the installation of certain
pollution control equipment at the Pueblo Mill. The above mentioned expenditures
for supplemental environmental projects will be both capital and non-capital
expenditures. Once the settlement agreement is finalized, the EPA will file
either one or two proposed federal Consent Decrees, which, if approved by the
court, will fully resolve all NSPS and PSD issues. At that time, CF&I will
dismiss its appeal against the EPA. If the proposed settlement with the EPA is
not approved, which appears unlikely, it would not be possible to estimate the
liability if there were ultimately an adverse determination of this matter.

In response to the CDPHE settlement and the resolution of the EPA action,
CF&I has accrued $2.8 million as of December 31, 2002, for possible fines and
non-capital related expenditures.

In December 2001, the State of Colorado issued a Title V air emission
permit to CF&I under the CAA requiring that the furnace subject to the EPA
action operate in compliance with NSPS AA standards. This permit was modified in
April 2002 to incorporate the longer compliance schedule that is part of the
settlement with the CDPHE and the EPA. In September 2002, CF&I submitted a
request for a further extension of certain Title V compliance deadlines,
consistent with a joint petition by the State and CF&I for an extension of the
same deadlines in the State Consent Decree. This modification gives CF&I
adequate time (at least 15 1/2 months after CDPHE issues the PSD permit) to
convert to a single NSPS AAa compliant furnace. Any decrease in steelmaking
production during the furnace conversion period when both furnaces are expected
to be shut down will be offset by increasing production prior to the conversion
period by building up semi-finished steel inventory and, if necessary,
purchasing semi-finished steel ("billets") for conversion into rod products at
spot market prices at costs comparable to internally generated billets. Pricing
and availability of billets is subject to significant volatility. However, CF&I
believes that near term supplies of billets will continue to be available in
sufficient quantities at favorable prices.

In a related matter, in April 2000, the Union filed suit in U.S. District
Court in Denver, Colorado, asserting that New CF&I and CF&I had violated the CAA
at the Pueblo Mill for a period extending over five years. The Union sought
declaratory judgement regarding the applicability of certain emission standards,
injunctive relief, civil penalties and attorney's fees. On July 6, 2001, the
District Court dismissed the suit. The Union appealed the decision. On March 3,
2003, the 10th Circuit Court of Appeals reversed the District Court's dismissal
of the case and remanded the case for further hearing to the District Court.
CF&I has not decided whether to further appeal this ruling. While CF&I does not
believe the suit will have a material adverse effect on its results of
operations, the result of litigation, such as this, is difficult to predict and
an adverse outcome with significant penalties is possible. It is not presently
possible to estimate the liability if there is ultimately an adverse
determination on appeal.

LABOR MATTERS

The labor contract at CF&I expired on September 30, 1997. After a brief
contract extension intended to help facilitate a possible agreement, on October
3, 1997, the Union initiated a strike at CF&I for approximately 1,000 bargaining
unit employees. The parties, however, failed to reach final agreement on a new
labor contract due to differences on economic issues. As a result of contingency
planning, CF&I was able to avoid complete suspension of operations at the Pueblo
Mill by utilizing a combination of new hires, striking employees who returned to
work, contractors and salaried employees.

On December 30, 1997, the Union called off the strike and made an
unconditional offer on behalf of its members to return to work. At the time of
this offer, because CF&I had permanently replaced the striking employees, only a
few vacancies existed at the Pueblo Mill. Since that time, vacancies have
occurred and have been filled by formerly striking employees ("Unreinstated
Employees"). As of December 31, 2002, approximately 773 Unreinstated Employees
have either returned to work or have declined CF&I's offer of equivalent work.
At December 31, 2002, approximately 157 Unreinstated Employees remain
unreinstated.

-46-

On February 27, 1998, the Regional Director of the National Labor
Relations Board ("NLRB") Denver office issued a complaint against CF&I, alleging
violations of several provisions of the National Labor Relations Act ("NLRA").
On August 17, 1998, a hearing on these allegations commenced before an
Administrative Law Judge ("Judge"). Testimony and other evidence were presented
at various sessions in the latter part of 1998 and early 1999, concluding on
February 25, 1999. On May 17, 2000, the Judge rendered a decision which, among
other things, found CF&I liable for certain unfair labor practices and ordered
as remedy the reinstatement of all 1,000 Unreinstated Employees, effective as of
December 30, 1997, with back pay and benefits, plus interest, less interim
earnings. Since January 1998, CF&I has been returning Unreinstated Employees to
jobs as positions became open. As noted above, there were approximately 157
Unreinstated Employees as of December 31, 2002. On August 2, 2000, CF&I filed an
appeal with the NLRB in Washington, D.C. A separate hearing concluded in
February 2000, with the judge for that hearing rendering a decision on August 7,
2000, that certain of the Union's actions undertaken since the beginning of the
strike did constitute misconduct and violations of certain provisions of the
NLRA. The Union has appealed this determination to the NLRB. In both cases, the
non-prevailing party in the NLRB's decision will be entitled to appeal to the
appropriate U.S. Circuit Court of Appeals. CF&I believes both the facts and the
law fully support its position that the strike was economic in nature and that
it was not obligated to displace the properly hired replacement employees. CF&I
does not believe that final judicial action on the strike issues is likely for
at least two to three years.

In the event there is an adverse determination of these issues,
Unreinstated Employees could be entitled to back pay, including benefits, plus
interest, from the date of the Union's unconditional offer to return to work
through the date of their reinstatement or a date deemed appropriate by the NLRB
or an appellate court. The number of Unreinstated Employees entitled to back pay
may be limited to the number of past and present replacement workers; however,
the Union might assert that all Unreinstated Employees should be entitled to
back pay. Back pay is generally determined by the quarterly earnings of those
working less interim wages earned elsewhere by the Unreinstated Employees. In
addition to other considerations, each Unreinstated Employee has a duty to take
reasonable steps to mitigate the liability for back pay by seeking employment
elsewhere that has comparable working conditions and compensation. Any estimate
of the potential liability for back pay will depend significantly on the ability
to assess the amount of interim wages earned by these employees since the
beginning of the strike, as noted above. Due to the lack of accurate information
on interim earnings for both reinstated and Unreinstated Employees and sentiment
of the Union towards CF&I, it is not currently possible to obtain the necessary
data to calculate possible back pay. In addition, the NLRB's findings of
misconduct by the Union may mitigate any back pay award with respect to any
Unreinstated Employees proven to have taken part or participated in acts of
misconduct during and after the strike. Thus, it is not presently possible to
estimate the liability if there is ultimately an adverse determination against
CF&I. An ultimate adverse determination against CF&I on these issues may have a
material adverse effect on CF&I's consolidated financial condition, results of
operations, or cash flows. CF&I does not intend to agree to any settlement of
this matter that will have a material adverse effect on CF&I. In connection with
the ongoing labor dispute, the Union has undertaken certain activities designed
to exert public pressure on CF&I. Although such activities have generated some
publicity in news media, CF&I believes that they have had little or no material
impact on its operations.

PURCHASE COMMITMENTS

Effective February 2, 1993, CF&I entered into an agreement, which was
subsequently amended on August 4, 1994, to purchase a base amount of oxygen
produced at a facility at the Pueblo Mill. The agreement specifies that CF&I
will pay a base monthly charge that is adjusted annually based upon a percentage
change in the Producer Price Index. The monthly base charge at December 31, 2002
for this agreement was $116,000.

GUARANTEES

On July 15, 2002, Oregon Steel issued $305 million of 10% First
Mortgage Notes due 2009 ("10% Notes") in a private offering at a discount of
98.772% and an interest rate of 10%. Interest is payable on January 15 and July
15 of each year. The proceeds of this issuance were used to redeem Oregon
Steel's 11% First Mortgage Notes due 2003 (including interest accrued from June
16, 2002 until the redemption date of August 14, 2002), refinance its existing
credit agreement, and for working capital and general corporate purposes. The
existing credit agreement was replaced with a new $75 million credit facility
that will expire on June 30, 2005.

New CF&I and CF&I (collectively "Guarantors") guarantee the obligations
of Oregon Steel under the 10% Notes, and those guarantees are secured by a lien
on substantially all of the property, plant and equipment and certain other
assets of the Guarantors, excluding accounts receivable and inventory. On August
16, 2002, Oregon Steel along with New CF&I and CF&I filed a registration
statement on Form S-4 to exchange the 10% Notes for notes with substantially
identical terms registered with the Securities and Exchange Commission.

In addition, as of December 31, 2002, Oregon Steel, New CF&I, CF&I, and
C&W are borrowers ("Borrowers") under a $75 million revolving credit facility
("Credit Agreement") that is collateralized, in part, by certain equity and
intercompany interests, accounts receivable and inventory of New CF&I and CF&I.
At December 31, 2002, $5.0 million was restricted under the Credit Agreement,
$8.2 million was restricted under the outstanding letters of credit, and $61.8
million was available for use. The Credit

-47-


Agreement contains various restrictive covenants including a minimum
consolidated tangible net worth amount, a minimum earnings before interest,
taxes, depreciation and amortization ("EBITDA") amount, a minimum fixed charge
coverage ratio, limitations on maximum annual capital and environmental
expenditures, limitations on stockholder dividends and limitations on incurring
new or additional debt obligations other than as allowed by the Credit
Agreement. The Borrowers were in compliance with such covenants at December 31,
2002.

OTHER CONTINGENCIES

CF&I is party to various other claims, disputes, legal actions and other
proceedings involving contracts, employment and various other matters. In the
opinion of management, the outcome of these matters would not have a material
adverse effect on the consolidated financial condition of CF&I.

10. MAJOR CUSTOMERS

No single customer or group of affiliated customers represented more than
10% of CF&I's sales revenue in 2000 and 2001. During 2002 CF&I had sales to two
rail customers, Burlington Northern Santa Fe Corporation and Union Pacific
Railroad which accounted for nearly 12% and 16%, respectively, of its total
revenue for the year.

11. RELATED PARTY TRANSACTIONS

OREGON STEEL MILLS, INC.

CF&I pays administrative fees to Oregon Steel for services it provides
based on an allocation from Oregon Steel and reimburses Oregon Steel for costs
incurred on behalf of CF&I. The following table summarizes the transactions
between CF&I and Oregon Steel:





2002 2001 2000
--------- --------- --------
(IN THOUSANDS)

Oregon Steel administrative fees $ 3,414 $ 3,855 $ 3,733
Interest expense on notes payable to Oregon Steel 24,602 26,963 24,263
Notes payable to Oregon Steel at December 31 228,208 230,258 221,474
Accounts payable to Oregon Steel at December 31 7,669 4,231 5,776


NEW CF&I, INC.

CF&I includes in costs of sales amounts related to transportation
services provided by a subsidiary of New CF&I. The following table summarizes
the transactions between CF&I and New CF&I or its subsidiary:





2002 2001 2000
-------- -------- --------
(IN THOUSANDS)
Services from subsidiary of New CF&I $ 2,931 $ 2,838 $ 3,197
Interest expense on notes payable to New CF&I 1,015 1,482 2,017
Accounts payable to New CF&I at December 31 6,146 4,630 3,190
Debt payable to New CF&I at December 31 21,756 21,756 21,756
Interest payable on that debt at December 31 7,093 10,295 10,337



NIPPON STEEL CORPORATION

In 1994, CF&I entered into an equipment supply agreement for purchase of
deep head-hardened ("DHH") rail equipment from Nippon. Additionally, CF&I pays
royalties to Nippon based on sales of DHH rail. CF&I has made payments on the
DHH rail equipment and paid certain license and technical fees, and royalties.
The following table summarizes the transactions between CF&I and Nippon:


2002 2001 2000
---- ------ ----
(IN THOUSANDS)
Payments to Nippon for the year ended December 31 $890 $1,210 $484
Accounts payable to Nippon at December 31 262 403 794

-48-

12. UNUSUAL AND NONRECURRING ITEMS

SETTLEMENT OF LITIGATION

Operating income for 2001 includes a $2.2 million gain from a settlement
of outstanding litigated claims with certain graphite electrode suppliers.


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

None.


-49-


PART III

ITEMS 10. AND 11. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT AND
EXECUTIVE COMPENSATION

The following table sets forth information with respect to each director
of New CF&I including their names and ages as of February 1, 2003, business
experience during the past five years and directorships in other corporations.
Directors are elected each year at the annual stockholders meeting.




PRINCIPAL OCCUPATION AND DIRECTOR
NAME CERTAIN OTHER DIRECTORSHIPS AGE SINCE
- ----------------------- -------------------------------------------------------------------- --- --------


Joe E. Corvin (FN2) Mr. Corvin is the Chairman of the Board of Directors, President and 58 1993
Chief Executive Officer of Oregon Steel and New CF&I. He served as
President and Chief Operating Officer of Oregon Steel from August
1996 to May 1999 and, prior to that, as Senior Vice President of
Manufacturing and Chief Operating Officer of New CF&I from March
1993 to August 1996. Since January 2000, he has been the President
and Chief Executive Officer of Oregon Steel. He previously held the
positions of President and Chief Operating Officer of Oregon Steel
since December 1996; prior to that, he served as Senior Vice
President for Oregon Steel from July 1996. He has served as a
Director of Oregon Steel since 1997.

L. Ray Adams (FN2) Mr. Adams is the Vice President, Finance and Chief Financial 52 1993
Officer and Treasurer of New CF&I. He assumed these positions in
April 1993. He is also the Vice President - Finance, Chief
Financial Officer, and Treasurer of Oregon Steel. He assumed the
positions of Vice President - Finance and Chief Financial Officer
with Oregon Steel in April 1991 and Treasurer in January 2000.

Steven M. Rowan (FN2) Mr. Rowan is the President of C&W. He assumed this position April 57 2000
1993. He is also Vice President - Materials and Transportation of
Oregon Steel, a position he assumed in February 1992.

Keiichiro Shimakawa (FN1) Mr. Shimakawa became the Executive Vice President, General Manager 53 1996
of Nippon Steel U.S.A., Inc., Chicago Branch, in 1996. He served as
(FN2) Executive Vice President of Nippon Steel USA, Inc. from July 1994 to
July 1996. He also served as Manager of Tin Plate Sales for the
Sheet Sales Department at Nippon Steel's head office in Tokyo,
Japan, from 1990 to July 1994.

(FN1 Mr. Shimakawa served as Director from 1996-1998 and then was reappointed in 2000.

(FN2 No Director received any fees for their service as a member of the Board.


The following table sets forth the compensation paid to or accrued by New
CF&I and its subsidiaries for the Chief Executive Officer and each of the four
most highly paid executive officers of New CF&I and its subsidiaries as of
December 31, 2002, and other individuals fitting such description. The Chief
Executive Officer and certain other executive officers were paid by Oregon
Steel. With the exception of Messrs. Stewart and Rowan, the compensation
information relating to the named executive officers of New CF&I who are also
named executives of Oregon Steel and Section 16(a) reporting compliance
information as set forth under the captions "Executive Compensation," "Defined
Benefit Retirement Plans," "Employment Contracts and Termination of Employment
and Change in Control Arrangements," "Compensation Committee Interlocks and
Insider Participation," "Board Compensation Committee Report on Executive
Compensation" and "Section 16(a) Beneficial Ownership Reporting Compliance" in
the Oregon Steel Mills, Inc. Proxy Statement for the 2003 Annual Meeting of
Stockholders ("2003 Proxy Statement") are incorporated herein by reference.
Executive officers of New CF&I are listed on page 8 of this Form 10-K.

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SUMMARY COMPENSATION TABLE


ANNUAL COMPENSATION(FN1) ALL OTHER COMPENSATION(FN1)
---------------------------------------- ----------------------------
NAME AND THRIFT PLAN
PRINCIPAL POSITION YEAR SALARY BONUS CONTRIBUTION OTHER
------------------ ---- ------ ----- ------------ -----
(FN2)
----


Joe E. Corvin
President and Chief Executive
Officer (FN3)(FN5)

L. Ray Adams
Vice President, Finance,
Chief Financial Officer, and
Treasurer (FN3)(FN5)

Jeff S. Stewart
Corporate Controller (FN3) 2002 $150,000 $36,000 $2,250
2001 150,000 - 4,219
2000 148,333 - 4,505

Robert A. Simon
Vice President and
General Manager (FN4)(FN5)

Steven M. Rowan 2002 $200,000 $48,000 $2,750
President of C&W (FN3) 2001 200,000 - 4,800
2000 200,000 - 4,800
- -----------------------

(FN1) Pension benefits accrued in 2001 and 2002 are not included in this Summary Compensation Table.

(FN2) Matching contributions made by New CF&I on behalf of the named executive to New CF&I's Thrift Plan.

(FN3) Compensation paid by Oregon Steel.

(FN4) Compensation paid by CF&I.

(FN5) Compensation for named executives is included in the 2003 Proxy Statement and such information is
incorporated by reference herein.




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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES

The following table sets forth certain information concerning each
exercise of stock options during the last completed fiscal year by each of the
named executive officers and the fiscal year-end value of unexercised options:







--------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
(a) (b) (c) (d) (e)
Number of Securities Value of
Underlying Unexercised
Unexercised Options In-the-Money Options
at FY-End (#) at FY-End ($)
Name Shares Acquired on Value Realized ($) Exercisable/ Exercisable/
Exercise (#) Unexercisable Unexercisable

Joe E. Corvin (FN1)

L. Ray Adams (FN1)

Jeff S. Stewart 0 0 18,251/7,249 14,698/3,444

Robert A. Simon (FN1)

Steven M. Rowan 0 0 23,268/9,132 19,470/4,526
--------------------------------- ----------------------- ----------------------- ---------------------- -----------------------

(FN1) Information related to options exercised and fiscal year-end option
values for named executives is included in the 2003 Proxy statement
and such information is incorporated by reference herein.



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The equity of New CF&I is held 87% by Oregon Steel, 10% by Nippon and 3%
by Nissho Iwai. New CF&I, as general partner, has a 95.2% partnership interest
in CF&I. Oregon Steel has a 4.3% limited partnership interest in CF&I. Nippon
has a .5% limited partnership interest in CF&I.

The following table summarizes information with respect to options under
New CF&I's equity compensation plans at December 31, 2002:



Number of securities
remaining available for
Number of securities to be Weighted-average exercise future issuance under equity
issued upon exercise of price of outstanding compensation plans
outstanding options, options, warrants, and (excluding securities
warrants, and rights rights reflected in Column (a))
(a) (b) (c)



Equity compensation plans
approved by security holders 0 $0 0

Equity compensation plans not
approved by security holders 0 $0 0
- -

Total 0 0
= =



As of December 31, 2002, New CF&I has no equity compensation plans. All
stock options that were granted to New CF&I executive officers were granted
under the Oregon Steel Equity Compensation Plan. Information related to stock
options granted, options exercised and fiscal year-end option values for New
CF&I executives are included in Item 10 and 11.

-52-


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

For related party transactions, see Note 13 to New CF&I's consolidated
financial statements and Note 11 to CF&I's financial statements.


ITEM 14. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures
- ------------------------------------------------

New CF&I's chief executive officer and chief financial officer, after
evaluating the effectiveness of New CF&I's "disclosure controls and procedures"
(as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and
15d-14(c)) as of a date (the "Evaluation Date") within 90 days before the filing
date of this annual report, have concluded that as of the Evaluation Date, New
CF&I's disclosure controls and procedures were effective and designed to ensure
that material information relating to New CF&I and New CF&I's consolidated
subsidiaries would be made known to them by others within those entities.

Changes in internal controls
- ----------------------------

There were no significant changes in New CF&I's internal controls or in
other factors that could significantly affect those controls subsequent to the
Evaluation Date.

-53-






PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K

PAGE
----

(A) FINANCIAL STATEMENTS:
NEW CF&I, INC.
(i) Report of Independent Accountants - 2002, 2001 and 2000..........16
(ii) Consolidated Financial Statements:
Balance Sheets at December 31, 2002, 2001 and 2000..........17
Statements of Income for each of the three years
in the period ended December 31, 2002...................18
Statements of Changes in Stockholders' Equity
for each of the three years in the period ended
December 31, 2002................................ 19
Statements of Cash Flows for each of the three years
in the period ended December 31, 2002...................20
Notes to Consolidated Financial Statements..................21

CF&I STEEL, L.P.
(iii) Report of Independent Accountants - 2002, 2001 and 2000..........34
(iv) Financial Statements:
Balance Sheets at December 31, 2002, 2001 and 2000...........35
Statements of Operations for each of the three years
in the period ended December 31, 2002...................36
Statements of Changes in Partners' Equity
for each of the three years in the period
ended December 31, 2002................................ 37
Statements of Cash Flows for each of the three years
in the period ended December 31, 2002...................38
Notes to Financial Statements................................39
(v) Financial Statement Schedule for each of the
three years in the period ended December 31,
2002:
Schedule II - Valuation and Qualifying Accounts..............55
(vi) Exhibits: Reference is made to the list on page 56 of
the exhibits filed with this report.

(B) REPORT ON FORM 8-K:
No reports on Form 8-K were required to be filed by New
CF&I or CF&I during the quarter ended December 31, 2002.

-54-




NEW CF&I, INC.
CF&I STEEL, L.P.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31
(IN THOUSANDS)



COLUMN C
---------------------------
COLUMN B ADDITIONS COLUMN E
---------- ----------
BALANCE AT CHARGED TO CHARGED BALANCE AT
COLUMN A BEGINNING COSTS AND TO OTHER COLUMN D END OF
- -------- ----------
CLASSIFICATION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- -------------- ---------- ----------- -------- ---------- ----------

2002
----
Allowance for doubtful accounts $1,972 $ 633 $ - $(794) $1,811
Valuation allowance for impairment
of noncurrent deferred income
tax assets 3,424 1,738 - - 5,162
2001
----
Allowance for doubtful accounts $ 640 $1,611 $ - $(279) $1,972
Valuation allowance for impairment
of noncurrent deferred income
tax assets 3,105 319 - - 3,424
2000
----
Allowance for doubtful accounts $ 638 $ 2 $ - $ - $ 640
Valuation allowance for impairment
of noncurrent deferred income
tax assets 3,106 - - (1) 3,105


-55-






LIST OF EXHIBITS*

3.1 Certificate of Incorporation of New CF&I, Inc. (Filed as
exhibit 3.1 to Form S-1 Registration Statement 333-02355 and
incorporated by reference herein.)
3.2 Amended and Restated Agreement of Limited Partnership of CF&I
Steel, L.P. dated as of March 3, 1993, by and between New CF&I,
Inc. and the Pension Benefit Guaranty Corporation. (Filed as
exhibit 28.1 to the Current Report on Form 8-K of Oregon Steel
Mills, Inc. dated March 3, 1993, and incorporated by reference
herein.)
3.3 Bylaws of New CF&I, Inc. (Filed as exhibit 3.3 to Form S-1
Registration Statement 333-02355 and incorporated by reference
herein.)
4.1 Rights Agreement between Oregon Steel Mills, Inc. and ChaseMellon
Shareholder Services, LLC (now Mellon Investor Services, LLC), as
Rights Agent. (Filed as Exhibit 1 to Oregon Steel's Registration
Statement on Form 8-A (SEC Reg. No. 1-9987) and incorporated by
reference herein.)
4.2 Indenture, dated as of July 15, 2002, by and among Oregon Steel
Mills, U.S. Bank National Association, as trustee, and New CF&I,
Inc., and CF&I Steel, L.P., as guarantors. (Filed as exhibit 4.1
to the Registration statement on Form S-4 (SEC Reg. No. 333-98249)
and incorporated by reference herein.)
4.3 First Amendment to Oregon Steel Mills, Inc. Indenture. (Filed as
Exhibit 4.2 to Form 10-Q dated September 30, 2002, and incorporated
by reference herein.)
4.4 Exchange and Registration Rights Agreement, dated July 15, 2002,
between Oregon Steel Mills and Goldman, Sachs & Co. (Filed as
exhibit 4.2 to the Registration Statement on Form S-4 (SEC Reg.
No. 333-98249) and incorporated by reference herein.)
4.5 Security Agreement, dated as of July 15, 2002, between Oregon Steel
Mills and U.S. Bank National Association. (Filed as exhibit 4.3 to
the Registration Statement on Form S-4 (SEC Reg. No. 333-98249) and
incorporated by reference herein.)
4.6 Security Agreement, dated as of July 15, 2002, between CF&I Steel,
L.P. and U.S. Bank National Association. (Filed as exhibit 4.4 to
the Registration Statement on Form S-4 (SEC Reg. No. 333-98249)
and incorporated by reference herein.)
4.7 Security Agreement, dated as of July 15, 2002, between New CF&I,
Inc. and U.S. Bank National Association. (Filed as exhibit 4.5 to
the Registration Statement on Form S-4 (SEC Reg. No. 333-98249) and
incorporated by reference herein.)
4.8 Intercreditor Agreement, dated July 15, 2002 between U.S. Bank
National Association and Textron Financial Corporation. (Filed as
exhibit 4.6 to the Registration Statement on Form S-4 (SEC Reg. No.
333-98249) and incorporated by reference herein.)
4.9 Form of Deed of Trust, Assignment of Rents and Leases and Security
Agreement. (Filed as exhibit 4.7 to the Registration Statement on
Form S-4 (SEC Reg. No. 333-98249) and incorporated by reference
herein.)
4.10 Form of Global Note. (Filed as exhibit 4.8 to the Registration
Statement on Form S-4 (SEC Reg. No. 333-98249) and incorporated by
reference herein.)
4.11 Guarantee of CF&I Steel, L.P. (Filed as exhibit 4.9 to the
Registration Statement on Form S-4 (SEC Reg. No. 333-98249) and
incorporated by reference herein.)
4.12 Guarantee of New CF&I, Inc. (Filed as exhibit 4.10 to the
Registration Statement on Form S-4 (SEC Reg. No. 333-98249) and
incorporated by reference herein.)
10.1 Asset Purchase Agreement dated as of March 3, 1993 among CF&I Steel
Corporation, Denver Metals Company, Albuquerque Metals Company,
CF&I Fabricators of Colorado, Inc., CF&I Fabricators of Utah, Inc.,
Pueblo Railroad Service Company, Pueblo Metals Company, Colorado &
Utah Land Company, The Colorado and Wyoming Railway Company,
William J. Westmark as trustee for the estate of The Colorado and
Wyoming Railway Company, CF&I Steel, L.P., New CF&I, Inc. and
Oregon Steel Mills, Inc. (Filed as exhibit 2.1 to the Current
Report on Form 8-K of Oregon Steel Mills, Inc. dated March 3, 1993,
and incorporated by reference herein.)
10.2** Form of Key Employee Contract between Oregon Steel Mills, Inc. and
its Executive Officers. (Filed as exhibit 10.2 to Oregon Steel
Mills, Inc. Form 10-Q of dated September 30, 2000 and incorporated
by reference herein.)
10.3** 2002 Annual Incentive Plan for certain of New CF&I's management
employees. (Filed as exhibit 10.11 to Form 10-K of Oregon Steel
Mills, Inc., dated December 31, 2001 and incorporated by reference
herein.)
10.4** 2000 Non-Qualified Stock Option Plan. (Filed as exhibit 99.1 to
Oregon Steel's Registration Statement on Form S-8 (see Reg.
No. 333-68732) and incorporated by reference herein.)
10.5*** Credit Agreement, dated as of July 12, 2002, among Oregon Steel
Mills, Inc., New CF&I, Inc., CF&I Steel, L.P. and Colorado &
Wyoming Railway Company as borrowers, the financial institutions
that are or may from time to time become parties thereto, as
Lenders, Textron Financial Corporation, as Agent for the Lenders,
and GMAC Business Credit LLC, as Co-Managing Agent. (Filed as
exhibit 10.1 to the Registration Statement on Form S-4 (SEC Reg.
No. 333-98249) and incorporated by reference herein.)
10.6 Amendment No. 1 to Credit Agreement dated as of December 13, 2002,
among Oregon Steel Mills, Inc., New CF&I, Inc., CF&I Steel, L.P.
and Colorado & Wyoming Railway Company as borrowers, the financial
institutions that are or may from time to time become parties
thereto, as Lenders, Textron Financial Corporation, as Agent for
the Lenders, and GMAC Business Credit LLC, as Co-Managing Agent.
10.7 10.12 Security Agreement, dated as of July 12, 2002, among Oregon
Steel Mills, Inc., New CF&I, Inc., CF&I Steel, L.P. and the Agent
for the Lenders. (Filed as exhibit 10.2 to the Registration
Statement on Form S-4 (SEC Reg. No. 333-98249) and incorporated by
reference herein.)


-56-

99.1 CEO Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
99.2 CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.



* New CF&I will furnish to stockholders a copy of the exhibit upon payment
of $.35 per page to cover the expense of furnishing such copies. Requests
should be directed to Vicki A. Tagliafico, Vice President, Corporate
Affairs, Oregon Steel Mills, Inc., PO Box 5368, Portland, Oregon 97228.

** Management contract or compensatory plan.

*** Certain Exhibits and Schedules to this Exhibit are omitted. A list of
omitted Exhibits is provided in the Exhibit and the Registrant agrees to
furnish to the Commission as a supplement a copy of any omitted Exhibits
or Schedules upon request.


-57-





SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrants have duly caused this report to be signed
on their behalf by the undersigned, thereunto duly authorized.

NEW CF&I, INC.

BY: /S/ JOE E. CORVIN
------------------------------------
CHAIRMAN AND CHIEF EXECUTIVE OFFICER



CF&I STEEL, L.P.

BY: NEW CF&I, INC.
GENERAL PARTNER

BY: /S/ JOE E. CORVIN
------------------------------------
CHAIRMAN AND CHIEF EXECUTIVE OFFICER

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of New CF&I, Inc. and
CF&I Steel, L.P. in the following capacities on the dates indicated.




SIGNATURE TITLE DATE
- --------- ----- ----


/s/ Joe E. Corvin Chairman of the Board March 17, 2003
- -----------------------
(Joe E. Corvin) President, Chief Executive
Officer and Director of New CF&I, Inc.
(Principal Executive Officer)


/s/ L. Ray Adams Vice President, Finance, March 17, 2003
- -----------------------
(L. Ray Adams) Chief Financial Officer, Treasurer and
Director of New CF&I, Inc.
(Principal Financial Officer)

/s/ Jeff S. Stewart Corporate Controller of New CF&I, Inc. March 17, 2003
- -----------------------
(Jeff S. Stewart) (Principal Accounting Officer)

/s/ Steven M. Rowan Director of New CF&I, Inc. March 17, 2003
- -----------------------
(Steven M. Rowan)


/s/ Keiichiro Shimakawa Director of New CF&I, Inc. March 17, 2003
- -------------------------
(Keiichiro Shimakawa)



-58-