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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2003

or

For the transition period from                      to                     

Commission File Number: 333-79587

CALIFORNIA STEEL INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

(909) 350-6200

(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

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

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

As of March 8, 2004, there were 1,000 shares of the registrant’s common stock, no par value, outstanding.

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CALIFORNIA STEEL INDUSTRIES, INC.

INDEX TO ANNUAL REPORT ON FORM 10-K

For The Fiscal Year Ended December 31, 2003

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PART I

Statements of our belief in this section are based on our own internal studies or research, estimates of members of our senior sales management team, our knowledge of the industry or other information we have internally compiled.

Introduction

We are the leading producer of flat rolled steel in the western United States based on tonnage billed. We produce the widest range of flat rolled steel products in the region, including hot rolled, cold rolled and galvanized coil and sheet. We also produce electric resistance welded (referred to herein as ERW) pipe. Unlike integrated steel mills and mini-mills, we do not manufacture steel. Rather, we process steel slab manufactured by third parties. Our principal market consists of the 11 states located west of the Rocky Mountains. We have two main competitors located in the western United States. Steel products are also supplied to the western United States via imports from foreign companies and from domestic suppliers located outside the western United States. We believe our slab-based business model, breadth of products, non-union work environment, southern California location and long-standing customer relationships provide us with significant advantages over our competition.

Industry Overview

The steel industry is highly cyclical in nature. It is influenced by a combination of factors including periods of economic growth or recession, strength or weakness of the U.S. dollar, worldwide production capacity, levels of steel imports and tariffs. Other factors, including the failure to adapt to technological change, plant inefficiencies, high labor costs and fluctuating energy costs have also affected the industry. Steel, regardless of product type, responds to forces of supply and demand, and prices have been volatile and have fluctuated in reaction to general and industry-specific economic conditions.

There are generally two types of steel producers: “integrated mills” and “mini-mills.” Steel manufacturing by an integrated producer includes ironmaking from raw materials, like iron ore and coal in a blast furnace, followed by steelmaking, slab making, reheating and further rolling into coil or other shapes. A mini-mill is a steel producer that uses an electric arc furnace rather than a blast furnace to create steel from ferrous scrap metal.

Unlike integrated steel mills and mini-mills, we do not manufacture steel. Rather, we process steel slab manufactured by third parties. As a result, we do not have the fixed costs associated with the manufacturing of steel. Historically, raw material costs comprise approximately 70% of our cost of goods sold. We believe we are the largest importer and one of the largest purchasers of steel slab in the world. Our purchasing power provides us with the ability to negotiate favorable terms and conditions for steel slab from low cost and high quality producers throughout the world. Generally, prices of our flat rolled steel products have experienced a correlation to the prices of steel slab. Although we remain subject to the cyclicality inherent in the steel industry, we believe this correlation, combined with our slab-based business model, has historically protected our operating margins when compared to other flat rolled steel producers.

Recent Industry Conditions

On March 5, 2002, President Bush, pursuant to his authority under Section 201 of the Trade Act of 1974, imposed temporary measures on imports of ten categories of steel products. These measures took the form of tariffs ranging from 8 to 30 percent, as well as a tariff-rate quota (TRQ) on semi-finished steel slab. In 2002, the TRQ exempted the first 5.4 million tons of imported semi-finished steel slab from tariffs; with imports above that level facing the same tariffs imposed on finished flat-rolled products (tariffs on flat-rolled products were 30% in 2002 and 24% in 2003). The TRQ exemption increased to 5.9 million tons in 2003.

On December 4, 2003, President Bush announced his decision to terminate the safeguard measures fifteen months before the scheduled end date of March 5, 2005, while reserving the option of introducing new measures should steel imports again surge into the United States.

The World Trade Organization (WTO) ruled in November 2003 that the tariffs established pursuant to Section 201 are illegal under global trade laws, leaving the U.S. open to the risk of heavy trade retaliation from its trading partners, namely, the European Union, Japan, and South Korea. Complaints were also filed with the WTO by Norway, Switzerland, China, New Zealand, and Brazil.

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We opposed quotas or tariffs on semi-finished steel slab before the measures were enacted by President Bush in March 2002, and continued our lobbying efforts to end the TRQ, particularly during the mid-term review conducted by the International Trade Commission during the Summer of 2003. We believe that the early termination of the safeguard measures will have no impact on our slab purchases, or on the prices of steel products, which are dictated by market conditions.

Another key factor influencing our industry is the continuing increase in world demand for steel products, driven primarily by increased demand by China. This increased demand has impacted our industry in two ways. First, it has increased the average selling prices of steel products (including semi-finished steel slabs) as supply has trailed demand. Second, it has led to an increase in freight rates as global shipping capacity has been insufficient to keep pace.

As we have historically focused on our core customers in the western United States, we have not and do not currently pursue foreign sales, including sales to China. Furthermore, we believe that, despite higher average selling prices for steel products in our market, the increased demand for steel products by China, together with higher freight rates and a weaker U.S. dollar will limit imports of steel products into the western United States.

Products and Customers

Our principal product lines are hot rolled coil and sheet, cold rolled coil and sheet, galvanized coil and sheet and electric resistance welded (ERW) pipe. The following table sets forth our billed tons by product category as a percentage of total shipments for the periods indicated:

The western U.S. steel market is comprised of many consumers typically requiring small order sizes with a wide variety of metallurgical qualities and specifications. In contrast, the majority of other U.S. steel markets primarily depend on heavy-tonnage steel consumers like the automotive and durable goods manufacturing industries. We believe that the western United States’ smaller and more diverse customer base helps balance pricing power between the consumer and the supplier. Instead of competing solely on price, we believe we benefit from having customers that place greater value on our competitive strengths, including integrated service, timeliness of delivery and ability to meet unique customer needs. We further believe that we benefit from our strategic location in Fontana, California.

We have approximately 300 active customers, with no single customer accounting for more than 7% of our 2003 net sales. Our customers include service and processing centers, construction and building material companies, roofing and decking manufacturers, structural tubing concerns, oil and gas producers and distributors, aftermarket automotive manufacturers, as well as various customers in other industries.

We do not actively pursue sales in foreign markets and we make foreign sales only when they are economically advantageous to us. In 2003, we sold approximately 14,596 tons of steel products to customers, primarily in Mexico and Canada, which represented less than 1% of our total 2003 tons billed.

Hot rolled coil and sheet is our largest product category as measured by tons billed per year. Our customers use hot rolled steel for a variety of manufacturing applications, including the production of spiral weld pipe, automobile wheels and rims, strapping, tubing and a variety of construction related products. In 2003, we directed 41.9% of our hot rolled production to outside sales and we further processed approximately 58.1% internally for our own higher-margin, value added product needs.

Cold rolled coil and sheet are used in exposed steel applications where high surface quality is important. Typically, cold rolled material is coated or painted. Applications for our cold rolled products include electronic cabinetry, lighting fixtures, metal office furniture, water heaters, container manufacturers, tubing, appliances and a variety of construction related products. In 2003, we directed approximately 23.8% of our cold rolled production to outside sales and we further processed approximately 76.2% internally for our own higher-margin, value added product needs.

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Galvanized coil and sheet is produced by adding a coating of zinc to cold rolled steel, and in some instances, to hot rolled steel, for additional corrosion resistance. We believe we offer the broadest range of thicknesses, widths and coatings of galvanized products in the western U.S. market. Applications for our galvanized coil product include a variety of construction related products such as roofing, decking, studs, tubing and tanks.

We supply ERW pipe with diameters ranging from 4.5” to 16.0”. The principal end-users of our ERW pipe production are oil and gas transmission companies. We also sell standard pipe to industrial accounts for load bearing and low-pressure applications.

Operations

We initially began operations in 1984 utilizing certain purchased assets from the former Kaiser Steel Corporation. Based on a business model that depended on the purchase of semi-finished steel slab from third party vendors, we were the first company in the United States to operate steel rolling mills without a dedicated source of slab feedstock. Significant business success and market acceptance of our slab based business model encouraged us to consider a modernization program designed to increase production and improve our product mix.

Modernization Program

In 2001, we completed a $265 million modernization program that allowed us to improve our product quality, double production volumes, and increase our percentage of high value added products to our product mix. Since the completion of our modernization program, we have continued to make selective investments designed to keep our facilities competitive or reduce operating costs. Our capital spending in 2001 was $14.8 million. Of this amount, approximately 22% was spent on the installation of phase 2 of our Hydrogen Annealing Project and approximately 18% was spent on various upgrades to our hot strip mill. Total capital spending in 2002 was $20.8 million, the majority of which was spent on motors and other related equipment in our hot strip mill. Total capital spending in 2003 was $16.5 million primarily on various upgrades to our production facilities.

Production efficiencies continue to be gained through improved operating and maintenance practices, targeted capital investments and enhanced production planning and quality control procedures. We believe the success of our modernization program contributes to our being a low cost producer of flat rolled steel products.

Hot Strip Rolling and Finishing Mills

We produce hot rolled coil and sheet from slab in our hot strip mill. A walking beam furnace reheats slab, directs it to a multi-stand rolling mill to reduce thickness and rolls it into coil. Equipped with an automatic gauge control system and technologically advanced computer controls, the hot strip mill currently possesses a throughput capacity of approximately 2.0 million tons annually and can produce hot rolled coil in gauges from 0.053” to 0.750”.

The hot strip mill facility is primarily composed of the following:

In addition, the hot strip finishing lines are composed of the following:

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Continuous Pickle Line

We can further process hot rolled coil on the 62-inch continuous pickle line for direct sales to our customers or for our own cold rolling and galvanizing production. The continuous pickle line is a conventional horizontal design with a coil entry section, welder, hot water preheat tanks, acid tanks, water rinse, dryer, looper, side trimmer, coiler, oiling equipment and scale. The line, which was installed in 1994, can currently yield up to approximately 1.2 million tons per year.

Cold Rolled Mill

Cold rolled sheet is hot rolled steel that has been further processed through the continuous pickle line and then successively passed through a rolling mill without reheating until the desired gauge and other physical properties have been achieved. Cold rolling reduces gauge and hardens the steel and, when further processed through an annealing furnace and temper mill, improves uniformity, ductility and formability. Cold rolling can also impart various surface finishes and textures. Cold rolled steel is used in applications that demand higher quality or finish.

The cold rolled facility, with a current annual finished capacity of approximately 1.1 million tons, includes the following:

The five-stand reduction mill reduces pickled steel strip from a gauge range of 0.075” to 0.225” to a range of 0.010” to 0.172” in thickness, with a maximum width of 60”. The five-stand reduction mill was completely revamped in 1997. After cold reduction, coil is cleaned in a 200 feet to 1,000 feet per minute electrolytic cleaning line, producing smut-free steel which is then annealed before final production in the 60” temper mill, where the steel is tempered to specified finish and gauge.

Hydrogen annealing is a process that heats steel coils to annealing temperatures in a pure hydrogen atmosphere and then slowly allows the steel coils to cool. This process restores ductility to our steel products that is lost as a result of cold rolling. Our hydrogen annealing facility has an annual capacity of 360,000 tons of cold rolled annealed product per year.

Galvanizing Mills

Galvanized coil and sheet represent our highest value added products, requiring the greatest degree of processing and quality controls. We produce galvanized sheet by taking cold rolled coils, and in some instances, hot rolled coils, heating it in an annealing furnace and dipping the coil, while still hot, into a pot of molten zinc. As the coil leaves the pot, coating controls insure product specifications match customer requirements. The steel’s corrosion resistance makes it ideal for applications like air conditioning units, air ducts, metal ties, studs, siding, decking and roofing.

We currently operate two continuous galvanizing lines and believe that our galvanizing facilities can produce the full range of coated steel. In 2003 we increased the productivity of our galvanizing lines to approximately 750,000 tons of galvanized steel production. The first continuous galvanizing line is horizontally configured and produces gauges from 0.012” to 0.174”. The second continuous galvanizing line is vertically configured and produces gauges from 0.010” to 0.060”.

Electric Resistance Weld (ERW) Pipe Mill

We produce ERW pipe by rollforming hot rolled skelp into a pipe shape, welding the edges together with a high frequency welder, annealing the weld and cutting the finished product to length on a continuous line. The ERW pipe may then undergo additional testing and/or finishing operations like hydrotesting and end beveling.

The pipe mill produces pipe with outside diameters ranging from 4.5” to 16” and wall thickness ranging from 0.156” to 0.375”, with lengths available up to 63 feet without mid-weld. Process coating is available through local coating applicators, one of whom lease space on our property. The ERW pipe mill has a current capacity of approximately 150,000 tons per year.

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Semi-Finished Steel Slab and Suppliers

Steel slab is a semi-finished steel raw material in rectangular form and is generally the first form taken by molten steel after it solidifies. The principal users of steel slab are steel producers or processors that roll slab into finished products like plate or coil.

Historically, our raw material consumption costs have comprised approximately 70% of our cost of goods sold. We are the largest importer and one of the largest purchasers of slab in the world. We purchase slab from a diverse group of foreign suppliers to obtain high quality steel at competitive cost through reliable sources. Our foreign vendors are located in Brazil, Mexico, Australia, Japan, Russia, South Africa, Argentina, Venezuela and China.

We typically make our slab purchases on a quarterly basis. As of December 31, 2003 we were committed, in the form of open purchase orders, to purchase approximately $82.3 million in steel slabs. We negotiate slab procurement for longer periods when our purchasing power combined with market conditions provide us with the opportunity to negotiate on terms which we believe are favorable to us.

Although we are not reliant on any one single vendor, in 2003, we purchased approximately 40% of our slab from Ispat Mexicana de C. V. (Imexsa) of Mexico and approximately 25% of our slab from Companhia Siderurgica de Tubarão of Brazil. Ispat Mexicana is the only steel facility in the world dedicated solely to the production of steel slab.

We own 4% of the common stock of Companhia Siderurgica de Tubarão, which represents 1.5% of the total equity interest in Companhia Siderurgica de Tubarão. Companhia Siderurgica de Tubarão is a subsidiary of both Companhia Vale do Rio Doce and JFE Steel Corporation, our stockholders’ parent companies. All slab purchases with our parent or affiliated companies are negotiated on an “arm’s length” basis and in accordance with market conditions.

We negotiate with a variety of shipping companies to deliver our slab directly to the Port of Los Angeles. The vessels are loaded following a specific stowage plan that we develop. The plan is designed to provide high productivity rates at both the loading and unloading sites. Our agents are on site for the loading of each shipment. After unloading, the slab is transported to our facility by rail using the services of Burlington Northern Santa Fe Railroad. Our current contract with Burlington Northern Santa Fe Railroad is effective through December 2013. This agreement provides us with transportation services at fixed rates and ensures us a dedicated level of rail availability through the term of the agreement. Additionally, Burlington Northern Santa Fe Railroad utilizes rail cars designed specifically to transport steel slab. We believe this improves the efficiency and safety of steel slab transportation through our community.

Under an agreement that we have entered into with our two shareholders, we continuously purchase slabs from Companhia Siderurgica de Tubarão as raw material for our operations according to basic terms and conditions agreed upon from time to time.

We believe that our integrated slab procurement system allows us to manage our slab inventory levels, improve tonnage levels as well as the slab quality necessary to meet our customers’ order specifications. As of December 2003, we had what we believed to be firm backlog orders of approximately 335,000 tons. Based on our average sales price at that time, the backlog value was approximately $135,000,000. As of December 2002, we had what we believed to be firm backlog orders of approximately 300,000 tons. Based on our average sales price at that time, the backlog value was approximately $132,000,000.

Marketing and Customer Service

We believe that we provide a high level of customer service and product support in the western U.S. market. Our emphasis on customer service and product quality has enabled us to establish long-standing relationships with our customers. Our relationships with 90% of our top 30 customers extend beyond 10 years. We attribute this customer loyalty, in large part, to the successful execution of our marketing strategies to provide a broad range of products and our ability to provide consistent service, reliable product availability and ancillary value added services.

We are the only producer of flat rolled steel products located in the western United States which can supply hot rolled, cold rolled and galvanized coil and sheet. We also produce ERW pipe in diameters ranging from 4.5” to 16.0”. We believe that we are well equipped to provide “one-stop shopping” for our customers and we believe that this maximizes sales opportunities and increases the convenience and value of the service we provide to customers. We will continue to invest in the quality of our products across all product lines, allowing us to market ourselves as a full-service provider of flat rolled steel in the region.

Our location in southern California not only gives us a significant freight cost advantage over our competitors, but also allows us to provide a more service-oriented approach to our customers. Our operating structure allows us to respond quickly to changes in the timing of customer requirements, adjust schedules, source stock inventory and meet specialized shipping needs. Our ability to deliver made-to-order products in a timely manner allows our customers to maximize their inventory turns and meet

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production targets. By maintaining a regional focus, we believe that we can most effectively service our customers and achieve our goal of increasing market share in higher margin value added products.

As part of our strategy to provide superior customer service, we offer our customers ancillary services such as engineering and metallurgical advice. Substantial portions of our customers are small to medium-sized businesses. As a result, many do not have the resources to employ a sophisticated metallurgical engineering staff. Our metallurgical engineers work with our customers on a daily basis, often on site, providing advisory services focused on reducing procurement costs and improving overall production efficiency. In addition to ancillary services, we also provide “service center” like operations including slitting, shearing, coating and single-billing for third party processing. We believe that these value added services help to further differentiate us from our competitors.

Competition

The steel industry is cyclical in nature and highly competitive. We compete with domestic and foreign steel producers on the basis of customer service, product quality and price. The domestic steel industry has been adversely affected in recent years by high levels of steel imports, worldwide production overcapacity, increased domestic and international competition, rising energy costs and other factors. More recently, the domestic steel industry has been affected by increased global demand for steel products (largely driven by increased demand by China) and increased freight rates. We believe that the competitive landscape within the steel industry will continue to evolve, especially as new technologies and production methods are introduced. We believe that because of our slab-based business model, breadth of products, non-union work environment, southern California location and long-standing customer relationships, we are well positioned to meet competitive threats. However, some of our competitors are larger and may have substantially greater capital resources, more modern technology and lower production costs than us, as well as excess production capacity in some products and could exert downward pressure on prices for some of our products in the future.

We are also subject to general economic trends and conditions, such as the presence or absence of sustained economic growth and currency exchange rates. We are particularly sensitive to trends in the construction, oil and gas transmission industries, because these industries are significant markets for our steel products. If there were a downturn in one or more of these industries, our sales volume, prices and profitability and liquidity could be adversely affected.

U. S. Competition

During 2003, the U. S. steel industry continued to see change among its domestic producers, as consolidation continued among the larger integrated mills with the U.S. Steel acquisition of National Steel and International Steel Group’s purchase of the assets of Bethlehem Steel. In some instances, inefficient production was shuttered on a permanent basis, while other production was brought back on-line. While high transportation costs have historically deterred mid-western and eastern steel producers from accessing the western United States market, conditions during the first half of 2003 led to excess production which producers attempted to push into the Western United States. However, by the second half of 2003, increasing order backlogs reduced excess production and generally reversed this trend.

In hot rolled products, our principal domestic competition comes from a number of producers located in the Midwestern United States, although this is cyclical in nature, based in economic conditions in the mid-western markets. Some hot rolled products are produced by Oregon Steel Mills, located in Portland, Oregon, although Oregon Steel Mills typically ships to customers located in the Northwest United States. USS-POSCO Industries (UPI), located in Pittsburg, California is our principal competitor in galvanized and cold rolled products. We also compete in the galvanized market with Steelscape, Inc., which operates facilities located in Kalama, Washington and Rancho Cucamonga, California.

We also compete with steel service and processing centers, although such centers are customers as well as competitors. Service centers serve as wholesale distributors for a broad line of sheet products, providing value-added services including slitting, shearing and painting. We face increasing competition from producers of materials such as aluminum, composites, plastics and concrete that compete with steel in many markets.

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Foreign Competition

Historically, foreign steel producers consistently competed in the western United States in all of our product categories. On March 5, 2002, pursuant to his authority under Section 201 of the Trade Act of 1974, President Bush imposed tariffs on imports of plate, hot rolled, cold rolled and coated flat-rolled products from all countries except Canada and Mexico. With the imposition of these tariffs, steel available from foreign suppliers decreased dramatically in 2002 and 2003.

Although imported steel has relatively long lead times to reach the western United States markets, economic and currency dislocations in foreign markets may encourage importers to target the United States with excess capacity at aggressive prices. Some foreign producers benefit from low labor costs, weak local currencies and government subsidies. Despite the termination of the safeguard measures, the increased demand for steel products by China, together with higher freight rates and a weaker U.S. dollar has significantly decreased the amount of foreign steel offered in the Western U.S. markets.

Employee Relations

At December 31, 2003, we had 921 full-time employees. We have the largest non-union workforce located at any one steel facility in the United States. We provide our employees with supplemental work training and education programs. Our officers also routinely discuss our business plan with them. We believe that we have a good relationship with our employees.

Environmental Matters

Compliance with environmental laws and regulations is a significant factor in our business. We are subject to various federal, state, and local environmental laws and regulations concerning, among other things, air emissions, waste water discharges and hazardous materials handling and waste disposal. We own property and conduct or have conducted operations at properties that are contaminated with hazardous materials and will require investigation and remediation according to federal, state or local environmental laws and regulations. Expenditures on environmental matters, including expenditures on pollution control equipment and remediation activities, totaled approximately $1.1 million in 1999, $0.9 million in 2000, $1.3 million in 2001, $1.4 million in 2002 and $1.4 million in 2003. We plan to spend approximately $1.7 million in 2004, with the largest component representing investigation and remediation activities at our Fontana site.

In 1996, we entered into an Expedited Remedial Action Voluntary Enforceable Agreement with the California Environmental Protection Agency, Department of Toxic Substances Control. This agreement superseded a Voluntary and Enforceable Agreement and Imminent and/or Substantial Endangerment Order issued by the Department in 1992 and amended in 1994. According to the agreement, we engaged an environmental consultant to conduct a remedial investigation and develop a remediation plan and remediation cost projections based upon that plan. Utilizing the remediation plan developed by the environmental consultant, we developed an estimate for future costs of the remediation plan. The total aggregate cost of remediation was estimated to be approximately $1.8 million, was accrued in 2002 and is included in other accrued expenses in 2003 and 2002 in our consolidated financial statements. The California Department of Toxic Substances Control has not yet completed its review and approval of our plan; however, preliminary discussions between the DTSC and us have not indicated the need for any significant changes to the remediation plan or to the Company’s estimate of related costs. The estimate of costs could change as a result of changes to the remediation plan required by the DTSC or unforeseen circumstances at the site.

Forward-Looking Statements

Certain statements contained in this Form 10-K regarding matters that are not historical facts and are forward-looking statements (as such term is defined in the rules promulgated pursuant to the Securities Act of 1933, as amended). Such forward-looking statements include any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain the words “anticipate,” “believe,” “estimate,” “expect,” “project,” “imply,” “intend,” “foresee,” “will be,” “will continue,” “will likely result,” “could”, “should”, “would” and similar words and expressions. Such forward-looking statements reflect our current views about future events, but are not guarantees of future performance and are subject to risk, uncertainties and assumptions. Such risks, uncertainties and assumptions include those specifically identified in this Form 10-K and the following:

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Our actual results could differ materially from those projected in these forward-looking statements as a result of these risks, uncertainties and assumptions, many of which are beyond our control.

We are located on approximately 450 acres in Fontana, California. Our facilities are situated on approximately 115 acres of this space. The property includes a 22 mile railroad system serviced by Burlington Northern Santa Fe and Union Pacific rail lines.

We are from time to time in the ordinary course of business subject to various pending or threatened legal actions. We believe that any ultimate liability arising from pending or threatened legal actions should not have a material adverse effect on our financial position, results of operations or liquidity.

None.

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PART II

Not applicable.

The selected consolidated financial information presented below as of and for the fiscal years ended December 31, 2003, 2002, 2001, 2000 and 1999, has been derived from our audited consolidated financial statements. The consolidated balance sheets as of December 31, 2003 and 2002 and the consolidated statements of operations for the years ended December 31, 2003, 2002 and 2001 are contained elsewhere in this Form 10-K. The following selected consolidated financial information is qualified by reference to, and should be read in conjunction with the historical consolidated financial statements, including notes accompanying them and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” found elsewhere in this Form 10-K.

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Introduction

From our site in Fontana, California, we produce flat rolled steel products: hot rolled, cold rolled, and galvanized, as well as ERW pipe, with a current annual finished shipment capability of approximately 2.0 million tons. We service a broad range of customers with applications that include pipe and tubing, heating, ventilating and air conditioning, strapping, drums, steel wheels and a variety of construction related products.

We ship our products by truck and rail to manufacturers, contractors and distributors primarily in the 11 states west of the Rocky Mountains. We generally sell our products free on board (FOB), shipping point, and title is transferred when products are loaded for shipment. We recognize revenue from product sales when products are shipped or delivered to the customer, depending on the terms of the sale. For products shipped FOB, shipping point, revenue is recognized at the time of shipment and title has transferred to the customer. For products shipped FOB destination, revenue is recognized at the time of delivery and title is transferred to the customer. Our revenue is dependent on the volume, product mix and sales prices of our products. General economic conditions as well as the supply and demand of steel products within our market influence sales prices. We generally set our sales prices quarterly and we maintain no long-term sales agreements.

Cost of goods sold consists primarily of raw materials, labor, natural gas, electricity, depreciation and zinc costs. Raw material costs have historically comprised approximately 70% of our cost of goods sold. Our slab consumption unit cost in 2003 was higher compared to 2002 and 2001.

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We generally purchase steel slab in boatload quantities. Imported slab arrives on chartered vessels in the Port of Los Angeles and is transported by rail to our Fontana facility. We generally purchase steel slab on open negotiated payment terms. Steel slab consumption costs include the FOB value of steel slab, quality extras, ocean transportation, rail freight, duties, unloading, insurance and handling costs. Historically, we have negotiated slab FOB prices quarterly and other rates through contracts of varying lengths. Our purchasing power and extensive knowledge of the worldwide slab market continues to provide us with the opportunity to negotiate with slab suppliers on terms that we believe are favorable to us. We will continue to actively manage slab procurement to minimize costs and may opportunistically purchase slab in the future.

We use zinc in the production of our galvanized products. We currently purchase zinc from various suppliers. Zinc is purchased on a monthly basis with both fixed price and floating price contracts and is priced using a formula tied to the London Metals Exchange zinc index plus negotiated delivery premiums. For 2004, we have locked in pricing for more than 80% of our delivered zinc requirements.

We require an average of approximately 38 megawatts of electricity demand in operating our equipment to produce our products. We participate in the direct access program whereby electricity customers can contract directly with energy service providers for energy, rather than utilizing the full-service bundled tariff from the local utility distribution company, Southern California Edison. Our direct access agreement generally has resulted in lower electricity costs than would otherwise be available via the applicable tariff from Southern California Edison. The Public Utilities Commission of the State of California (PUC) issued an order on November 7, 2002, imposing exit fees of 2.7 cents per kilowatt hour on utility customers who entered into the direct access program during the California electricity crisis in 2001. The PUC’s stated purpose for the exit fees (officially termed as the Cost Responsibility Surcharge or “CRS”) is to recoup the substantial sums spent by the State of California and the utilities to purchase electricity during the crisis. The CRS, if continued at 2.7 cents per kwh, is projected to result in additional costs for our electricity service of approximately $9,000,000 per year at our current production levels. In 2003, our electricity costs accounted for approximately 3.7% of our cost of goods sold compared to approximately 3.2% in 2002.

For the first quarter of 2004, we purchased a fixed-price block of electricity covering about 25 percent of our energy requirements, with the remainder of requirements purchased at the floating hourly market price. In an effort to manage risk effectively, we will continue to monitor the electricity forward market pricing with the intention of locking in more physical supply volumes for 2004 and possibly 2005 as prices fall to more attractive levels against recent historical standards.

We generally utilize a daily average of about 12,000 million British thermal units, or MMBTUs, of natural gas to produce our products. We pay for the commodity and for delivery charges from the Southern California border. For the last several years natural gas prices have experienced volatility. To stabilize such volatility, we regularly use a risk management approach to fix the price on portions of our natural gas requirements up to two years ahead, through financial and/or physical hedging arrangements. These arrangements include fixed-price contracts for the New York Mercantile Exchange (NYMEX), and/or the Southern California border basis.

We currently have in place agreements to hedge the price of approximately 75% of our natural gas requirements from January through March, 2004, and about 60% for the balance of 2004. We continue to monitor the near and long term price trends of natural gas and may enter into additional purchase agreements when we deem it appropriate or when opportunities present themselves. In 2003, our natural gas costs accounted for approximately 3.8% of our cost of goods sold compared to approximately 4.8% in 2002.

Selling, general and administrative expenses consist primarily of sales and labor, various administrative expenses, and shipping costs. In 2003, labor costs comprised approximately 59% of our total selling, general and administrative expenses compared to 54% in 2002.

Results of Operations

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Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

Net sales. Net sales were $763,556,000 for the year ended December 31, 2003. This was a $9,201,000 improvement over the prior year. This increase is attributable to an improved average sales unit price and improved product mix, offset by a decrease in volume of products sold. Our average sales price increased by more than $29 per ton increasing our net sales by approximately $50,930,000 and improved product mix added more than six million dollars to our net sales. We sold over 1,885,000 net tons in 2003, a decrease of 129,000 net tons when compared to 2,014,000 net tons in 2002. This decrease in tonnage was the result of market conditions and decreased our net sales by approximately $48,435,000.

Gross profit. Gross profit decreased $53,649,000 from $97,270,000 last year to $43,621,000 this year. Gross profit as a percentage of net sales also decreased from 12.9% in 2002 to 5.7% in 2003. The main reason for the decrease in our gross profit was the result of a higher slab consumption cost per ton in 2003 compared to 2002. The higher slab consumption cost per ton was partially off set by an increase in our average selling price.

Selling, general and administrative (SG&A) expenses. Selling, general and administrative expenses decreased $406,000 from $26,013,000 last year to $25,607,000 this year, primarily due to a one time non-cash accrual in 2002 of $1,800,000 for future environmental remediation expenditures. SG&A expenses as a percentage of net sales was 3.4% in 2003 and 2002.

Gain/Loss on disposition of property, plant and equipment (PP&E). For the year ending December 31, 2003, we had a net loss of $114,000 on the disposition of PP&E compared to the net gain of $492,000 for the same period in 2002.

Equity in income of affiliate. We maintain a 1.5% ownership interest in Companhia Siderurgica de Tubarão, which is based on our ownership of 4.0% of its common stock. Our investment in Companhia Siderurgica de Tubarão is accounted for under the equity method of accounting. For the year ended December 31, 2003, we recognized income of $1,950,000 compared to the income of $150,000 last year, which consists of our pro-rata share of Companhia Siderurgica de Tubarão’s income. Companhia Siderurgica de Tubarão is a publicly traded Brazilian company engaged in the production of steel slab and hot rolled coils. Over the last three years approximately 85% of Companhia Siderurgica de Tubarão’s products were exported outside of Brazil. This high percentage of U.S. dollar denominated cash flow tends to lessen the impact of market risks related to fluctuations in currency exchange rates.

Net interest expense. Net interest expense decreased $1,007,000 from $14,127,000 last year to $13,120,000 this year. The decrease in interest expense is attributable to lower average loan balances in 2003 compared to 2002. Interest expense figures are net of interest income of $120,000 and $508,000 in 2003 and 2002 respectively and capitalized interest of $52,000 in 2003 and $319,000 in 2002.

Other income, net. Other income, net, decreased $282,000 from $367,000 last year to $85,000 this year. Other income is comprised of miscellaneous income items such as rental income, proceeds from legal settlements, refund from anti dumping subsidy, etc. As many of these items occur infrequently or result in a one-time recognition of income, this category is subject to significant fluctuation from year to year.

Income tax expense (benefit). Due to lower income before income tax of $6,815,000 in 2003 compared to last year income before income tax of $58,139,000 our income tax expense for 2003 was $2,271,000 compared to $23,138,000 last year. The effective tax rate for 2003 was 33.3% compared to an effective tax rate of 39.8% in 2002. Income tax expense is net of state manufacturing investment credit of $810,000 in 2003 and $1,116,000 in 2002.

Net income (loss). Net income for the year was $4,544,000 compared to the net income last year in the amount of $35,001,000.

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

Net sales. For the year ended December 31, 2002 net sales were $754,355,000. This was a $113,965,000 improvement over the prior year. The increase is attributable to an improved average sales unit price and a significantly higher volume of products sold. Our average sales price increased by more than $24 per ton increasing our net sales by approximately $48,600,000. We established a new volume sold record of 2,013,781 net tons, representing a 185,410 net ton increase over the prior year and further increasing our net sales by an additional $65,200,000.

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Gross profit. Gross profit increased $69,593,000 from $27,677,000 last year to $97,270,000 this year. Gross profit as a percentage of net sales increased from 4.3% in 2001 to 12.9% in 2002. Our improvement in gross profit was the result of a better margin between our average sales price and our average slab consumption cost, higher volumes and improved utility costs.

Selling, general and administrative (SG&A) expenses. Selling, general and administrative expenses increased $2,663,000, from $23,350,000 last year to $26,013,000 this year. The primary reasons for the increase in SG&A expenses was an increase in profit sharing expenses resulting from improving profits as well as a $1,800,000 non-cash accrual recorded for future environmental remediation expenditures. SG&A expenses as a percentage of net sales decreased slightly from the prior year from 3.6% last year to 3.4% this year.

Gain/Loss on disposition of property, plant and equipment (PP&E). For the year ending December 31, 2002, we had a net gain of $492,000 on the disposition of PP&E compared to the net loss of $802,000 for the same period in 2001.

Equity in income of affiliate. We maintain a 1.5% ownership interest in Companhia Siderurgica de Tubarão, which is based on our ownership of 4.0% of its common stock. Our investment in Companhia Siderurgica de Tubarão is accounted for under the equity method of accounting. For the year ended December 31, 2002, we recognized income of $150,000, which consists of our pro-rata share of Companhia Siderurgica de Tubarão’s income. Companhia Siderurgica de Tubarão is a publicly traded Brazilian company engaged in the production of steel slab and hot rolled coils. Approximately 90% of Companhia Siderurgica de Tubarão’s products are exported outside of Brazil and sold predominantly in U.S. dollars. This high percentage of U.S. dollar denominated cash flow tends to lessen the impact of market risks related to fluctuations in currency exchange rates. For the year ended December 31, 2001, we recognized income of $1,274,000 from our investment in Companhia Siderurgica de Tubarão.

Net interest expense. Net interest expense decreased $2,189,000 from $16,316,000 last year to $14,127,000 this year. The decrease in interest expense is attributable to lower average loan balances. Interest expense figures are net of interest income of $508,000 and $246,000 in 2002 and 2001 respectively and capitalized interest of $319,000 in 2002 and $118,000 in 2001.

Other income, net. Other income, net, decreased $3,833,000 from $4,200,000 last year to $367,000 this year. Other income is comprised of miscellaneous income items such as rental income, proceeds from legal settlements, etc. As many of these items occur infrequently or result in a one-time recognition of income, this category is subject to significant fluctuation from year to year.

Income tax expense (benefit). Income tax expense for the year was $23,138,000 compared to income tax benefit of $3,606,000 last year. The effective tax rate for 2002 was 39.8% compared to an effective tax rate benefit of 49.3% in 2001. Income tax expense (benefit) is net of state manufacturing investment credit of $1,113,000 in 2002 and $1,200,000 in 2001.

Net income (loss). Net income for the year was $35,001,000 compared to the net loss incurred last year in the amount of $3,711,000.

Liquidity and Capital Resources

At December 31, 2003, we had $42,647,000 in cash and cash equivalents and $100,163,000 available under our bank facility. During the year, cash flow from operations generated $80,216,000, which consisted of $4,544,000 in net income, $28,660,000 in depreciation and amortization expense and a net cash flow increase of $47,012,000 due to changes in assets and liabilities. Operating cash flow increased as a result of a $53,897,000 decrease in inventories, a $17,434,000 decrease in accounts receivable and $6,780,000 increase in deferred income taxes. Operating cash flow was decreased as a result of a $29,535,000 increase in accounts payable. Cash flow from investing activities consisted primarily of $16,484,000 of capital expenditures. Cash flow from financing activities consisted of net repayments under our bank facility in the amount of $13,000,000 and dividend payments of $10,878,000.

In March 1999, we entered into a $130,000,000 five-year bank facility. Subject to the satisfaction of customary conditions and a borrowing base, advances under the bank facility may be made at any time prior to the bank facility termination date, which was the earlier to occur of March 10, 2004 or the date which is 60 days prior to the maturity of the 8.5% senior notes. On June 30, 2003 this bank facility was amended with the same bank group to $110,000,000 for a new period of three years expiring on June 30, 2006. There were no amounts outstanding under this facility as of December 31, 2003. The bank facility is collateralized by cash, accounts receivable, inventory and other assets. Advances under this facility may be used for working capital, capital expenditures, payment of dividends and other lawful corporate purposes, including the refinancing of existing debt.

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On April 6, 1999, we issued an aggregate of $150,000,000 of ten-year, 8.5% senior unsecured notes. Interest is payable on the notes on April 1 and October 1 of each year. The notes are senior in right of payment to all of our subordinated indebtedness and equal in right of payment to all of our existing and future indebtedness that is not by its terms subordinated to the notes. We may redeem the notes at any time after April 1, 2004. The indenture governing the notes contains covenants that limit our ability to incur additional indebtedness, pay dividends on, redeem or repurchase capital stock and make investments, create liens, sell assets, sell capital stock of certain of our subsidiaries, engage in transactions with affiliates and consolidate, merge or transfer all or substantially all of our assets and the assets of certain of our subsidiaries on a consolidated basis.

We currently have approximately $973,000 in material commitments for capital expenditures expected to be completed during fiscal 2004. These represent signed purchase orders for various production facility upgrades. Our total budget for capital improvements in 2004 is approximately $20,000,000.

We anticipate that our primary liquidity requirements will be for working capital, capital expenditures, debt service and the payment of dividends. We believe that cash generated from operations and available borrowings under our bank facility will be sufficient to enable us to meet our liquidity requirements for fiscal 2004.

Commitments and Contingencies

The following table represents a comprehensive list of the Company’s contractual obligations and commitments as of December 31, 2003:

Payments Due by Period

(amounts in thousands)

When market conditions warrant, we will also enter into contracts to purchase certain commodities used in the manufacture of our products, such as electricity and natural gas. Any such commodity commitments are expected to be purchased and used over a reasonable period of time in the normal course of business. Accordingly, pursuant to SFAS No. 133, they are not accounted for as a derivative.

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Critical Accounting Policies

In December 2001, the Securities and Exchange Commission (“SEC”) requested that all registrants list their most “critical accounting policies” in Management’s Discussion and Analysis of Financial Condition and Results of Operations. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of the company’s financial condition and results of operations and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We believe that our following accounting policies fit this definition:

Allowance for Doubtful Accounts. We have attempted to reserve for expected credit losses based on our past experience with similar accounts receivable and believe our reserves to be adequate. It is possible, however, that the accuracy of our estimation process could be materially impacted as the composition of this pool of accounts receivable changes over time. We continually review and refine the estimation process to make it as reactive to these changes as possible; however, we cannot guarantee that we will be able to accurately estimate credit losses on these accounts receivable.

Environmental reserve: We have engaged an environmental consultant to conduct a remedial investigation and develop a remediation plan and remediation cost projections based upon that plan. Utilizing the remediation plan developed by the environmental consultant, we developed an estimate for future costs of the remediation plan. The total aggregate cost of remediation is estimated to be approximately $1.8 million, which has been accrued in the 2002 and is included in accrued expenses in the 2003 and 2002 consolidated financial statements. The California Department of Toxic Substances Control has not yet completed its review and approval of our plan; however, preliminary discussions between the DTSC and us have not indicated the need for any significant changes to the remediation plan or to the Company’s estimate of related costs. The estimate of costs could change as a result of changes to the remediation plan required by the DTSC or unforeseen circumstances at the site.

Revenue Recognition: The Company recognizes revenue when products are shipped or delivered to the customer, depending on the terms of the sale. For products shipped FOB shipping point, revenue is recognized at the time of shipment when title and risk of loss are transferred to the customer. For products shipped FOB destination, revenue is recognized at the time of delivery. In certain cases, at the customer’s request, the Company will enter into bill and hold transactions whereby title transfers to the customer, but the product does not ship until a specified later date. Revenue on such transactions is recognized when the product is ready for shipment, and only after all conditions set forth under Staff Accounting Bulletin (SAB) No. 101 have been met.

Restatements of Financial Information

Background

In preparing our 2003 consolidated financial statements, we noted that our Class C preferred stock was improperly classified as stockholders’ equity due to the general right granted to the Board of Directors under our Certificate of Incorporation, as amended, to redeem the Class C preferred stock at the Board’s option. Pursuant to the guidance issued by the Emerging Issues Task Force of the Financial Accounting Standards Board in Topic No. D-98 on July 19, 2001, the Securities and Exchange Commission (“SEC”) has indicated that a preferred security which may be called by the Board of Directors of a company shall not be treated as permanent equity if the preferred stockholders control the Board of Directors. The composition of our Class C preferred stockholder and our common stockholders is identical, therefore, our Class C preferred stockholders have control over our Board of Directors. Our classification of the Class C preferred stock as stockholders’ equity was based upon our belief that the equal ownership of our two stockholders did not give either stockholder control over the Board of Directors and thus neither stockholder had control over the redemption of the Class C preferred stock. As Topic No. D-98 states that the SEC views the preferred stockholders as a class, rather than on an individual basis, we have determined that the Class C preferred stock should be removed from stockholders’ equity and separately stated on the consolidated balance sheet.

Restatement of 2001, 2002 and First, Second and Third Quarters of 2003 Financial Information

Consistent with the foregoing discussion, we are restating our consolidated financial statements for the fiscal years 2002 and 2001, as well as our consolidated financial information for the first, second and third quarters of 2003, to remove the Class C preferred stock from stockholders’ equity on the consolidated balance sheet and list it separately under “Liabilities and Stockholders’ Equity” as redeemable preferred stock. All financial information contained in this Annual Report on Form 10-K gives effect to these restatements. The restatement of this consolidated balance sheet item does not result in any change to our results of operations. We have further reviewed the financial covenants applicable to our bank facility and our 8.5% unsecured senior notes and have determined that the restatement did not have an adverse effect on the Company or its debt obligations. As our 8.5% unsecured senior notes are senior in priority to the Class C preferred stock, we do not believe that the restatement will have an adverse effect on the holders of such notes.

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The following table sets forth the relevant items of the consolidated balance sheet presentation of “Liabilities and Stockholders’ Equity” for 2002 and 2001 as originally reported and as restated.

The following tables set forth the relevant items of the consolidated balance sheet presentation of “Liabilities and Stockholders’ Equity” for the first, second and third quarters as originally reported and as restated.

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Additional information concerning the specific adjustments made on our annual and quarterly basis, see Notes 2 and 13 of the Notes to Consolidated Financial Statements.

We are exposed to market risks related to fluctuations in interest rates on our 8.5% senior notes and our $110,000,000 floating interest rate bank facility. We do not currently use interest rate swaps or other types of derivative financial instruments. The carrying value of the floating rate bank facility approximates fair value as the interest rate is variable and resets frequently. The bank facility bears interest at the Eurodollar rate or the prime rate, which was approximately 2.625% (including margin) and 4.00% respectively at December 31, 2003. We estimate that the average amount of debt outstanding under the facility for fiscal year 2004 will be approximately $22.5 million. Therefore, a one-percentage point increase in interest rates would result in an increase in interest expense of $225,000 for the year.

For fixed rate debt instruments such as our 8.5% senior notes, changes in interest rates generally affect the fair value of such debt instruments. For variable rate debt such as our bank facility, changes in interest rates generally do not affect the fair value of such debt, but do affect earnings and cash flow. We do not have an obligation to repay our 8.5% senior notes prior to maturity in

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2009 and, as a result, interest rate risk and changes in fair value should not have a significant impact on us. We believe that the interest rate on our 8.5% senior notes approximates the current rates available for similar types of financing and as a result the carrying amount of the 8.5% senior notes approximates fair value. The fair value of our senior notes at December 31, 2003 was approximately $157,500,000. In 2004, we will have the right to redeem the notes in accordance with the terms of the notes. We will analyze the market conditions and decide the best course of action at the appropriate time.

We do not believe that the future market rate risk related to our 8.5% senior notes and floating rate bank facility will have a material impact on our financial position, results of operations or liquidity.

We require an average of approximately 38 megawatts of electricity demand in operating our equipment to produce our products. We participate in the direct access program whereby electricity customers can contract directly with energy service providers for energy, rather than utilizing the full-service bundled tariff from the local utility distribution company, Southern California Edison. Our direct access agreement generally has resulted in lower electricity costs than would otherwise be available via the applicable tariff from Southern California Edison. The Public Utilities Commission of the State of California (PUC) issued an order on November 7, 2002, imposing exit fees of 2.7 cents per kilowatt hour on utility customers who entered into the direct access program during the California electricity crisis in 2001. The PUC’s stated purpose for the exit fees (officially termed as the Cost Responsibility Surcharge or “CRS”) is to recoup the substantial sums spent by the State of California and the utilities to purchase electricity during the crisis. The CRS, if continued at 2.7 cents per kwh, is projected to result in additional costs for our electricity service of approximately $9,000,000 per year at our current production levels. In 2003, our electricity costs accounted for approximately 3.7% of our cost of goods sold compared to approximately 3.2% in 2002.

For the first quarter of 2004, we purchased a fixed-price block of electricity covering about 25 percent of our energy requirements, with the remainder of requirements purchased at the floating hourly market price. In an effort to manage risk effectively, we will continue to monitor the electricity forward market pricing with the intention of locking in more physical supply volumes for 2004 and possibly 2005 as prices fall to more attractive levels against recent historical standards.

We generally utilize a daily average of about 12,000 million British thermal units, or MMBTUs, of natural gas to produce our products. We pay for the commodity and for delivery charges from the Southern California border. For the last several years natural gas prices have experienced volatility. To stabilize such volatility, we regularly use a risk management approach to fix the price on portions of our natural gas requirements up to two years ahead, through financial and/or physical hedging arrangements. These arrangements include fixed-price contracts for the New York Mercantile Exchange (NYMEX), and/or the Southern California border basis.

We currently have in place agreements to hedge the price of approximately 75% of our natural gas requirements from January through March, 2004, and about 60% for the balance of 2004. We continue to monitor the near and long term price trends of natural gas and may enter into additional purchase agreements when we deem it appropriate or when opportunities present themselves. In 2003, our natural gas costs accounted for approximately 3.8% of our cost of goods sold compared to approximately 4.8% in 2002.

Recently Issued Accounting Standards

In September 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations” (SFAS No. 143). SFAS No. 143 requires a company to record the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development and/or normal use of the assets. A company also records a corresponding asset which is depreciated over the life of the asset. Subsequent to the initial measurement of the asset retirement obligation, the obligation will be adjusted at the end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation. The Company adopted SFAS No. 143 on January 1, 2003, which did not have a material impact on the Company’s consolidated financial position or consolidated results of operations.

In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statement No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections” (SFAS No. 145). This statement eliminates the automatic classification of gain or loss on extinguishment of debt as an extraordinary item of income and requires that such gain or loss be evaluated for extraordinary classification under the criteria of Accounting Principles Board No. 30, “ Reporting Results of Operations.” This statement also requires sale-leaseback accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions, and makes various other technical corrections to existing pronouncements. The Company adopted SFAS No. 145 on January 1, 2003, which did not have a material effect on the Company’s results of operations or financial position.

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In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (SFAS 146). SFAS 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. SFAS 146 is effective prospectively for exit and disposal activities initiated after December 31, 2002. The Company adopted SFAS 146 on January 1, 2003, which did not have an effect on the Company’s results of operations or financial position.

In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (the “Interpretation”), which addresses the disclosure to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees. At December 31, 2003, the Company has no such guarantees.

On December 31, 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure”, which amends SFAS No. 123, “Accounting for Stock-Based Compensation.” SFAS No. 148 amends the disclosure requirements in SFAS No. 123 for stock-based compensation for annual periods ending after December 15, 2002, and for interim periods beginning after December 15, 2002, including those companies that continue to recognize stock-based compensation under APB Opinion No. 25, “Accounting for Stock Issued to Employees.” In addition, SFAS No. 148 provides three alternative transition methods for companies that choose to adopt the fair value measurement provisions of SFAS No. 123. The Company does not utilize stock based employee compensation and as a result the adoption of SFAS 148 on January 1, 2003, did not have a material effect on the Company’s results of operations or financial position.

In January 2003, the FASB issued FIN 46, “Consolidation of Variable Interest Entities,” (as amended in December, 2003) to expand upon and strengthen existing accounting guidance that addresses when a company should include the assets, liabilities and activities of another entity in its financial statements. To improve financial reporting by companies involved with variable interest entities (more commonly referred to as a special-purpose entities or off-balance sheet structures), FIN 46 requires that a variable interest entity be considered by a company if that company is subject to a majority risk of loss from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns or both. Prior to FIN 46, a company generally included another entity in its consolidated financial statements only if it controlled the entity through voting interests. The consolidation requirements of FIN 46, as amended in December, 2003, apply immediately to variable interest entities created after January 31, 2003, and to older entities in the first fiscal year or interim period beginning after June 15, 2003. The adoption of this interpretation did not have a material effect on the Company’s results of operations or financial position.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (SFAS No. 150). This pronouncement establishes standards for the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 requires classification of financial instruments within its scope as a liability, including financial instruments issued in the form of shares that are mandatorily redeemable, because those financial instruments are deemed to be, in essence, obligations of the issuer. This statement is effective for financial statements issued after May 2003 and did not have any impact on the Company’s consolidated financial position or consolidated results of operations.

The Consolidated Financial Statements required in response to this Item are included under Item 15 of Part IV of this Report.

On December 12, 2002, the Board of Directors of California Steel Industries, Inc. (the “Company”) decided to terminate the engagement of KPMG, LLP (“KPMG”) as its independent auditor upon completion of the December 31, 2002 audit and issuance of their report thereon. The decision to terminate KPMG’s engagement was based on the Board’s determination that it is in the best interests of the Company to rotate its independent auditors every five years to ensure independence.

The Company’s auditor for the 2002, 2001 and 2000 fiscal years was KPMG. KPMG’s reports on the Company’s consolidated financial statements for the years ended December 31, 2002, 2001 and 2000, did not contain an adverse opinion or disclaimer of opinion, nor were they otherwise modified as to uncertainty, audit scope or accounting principles.

During the years ended December 31, 2002, 2001 and 2000, there were no disagreements between the Company and KPMG on any matter of accounting principle or practice, financial statement disclosure, or auditing scope or procedure which, if not resolved to KPMG’s satisfaction, as applicable, would have caused it to make reference to the subject matter of the disagreement in connection with its report on the Company’s consolidated financial statements for such years.

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The Company has provided KPMG with a copy of the foregoing disclosures. Attached as Exhibit 16.1 is a copy of KPMG’s letter, dated December 19, 2002, stating that it agrees with such statements.

On December 12, 2002, the Board of Directors of the Company approved the engagement of PricewaterhouseCoopers, LLP (“PWC”) effective as of January 1, 2003.

During the three most recent fiscal years ended December 31, 2002, 2001 and 2000, the Company has not consulted with PWC regarding either (i) the application of accounting principles to a specific completed or contemplated transaction; or the type of audit opinion that might be rendered on the Company’s consolidated financial statements, and neither written nor oral advice was provided to the Company that PWC concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing, or financial reporting issues; or (ii) any matter that was either the subject of a disagreement, as that term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K or a reportable event as defined in Item 304(a)(1)(v).

For the period ending December 31, 2003 (the “Evaluation Date”), we carried out an evaluation, under the supervision and with the participation of our management, including our President and Chief Executive Officer and our Chief Financial Officer (the principal finance and accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon this evaluation, our President and Chief Executive Officer and our Chief Financial Officer concluded that, as of December 31, 2003, our disclosure controls and procedures were adequate to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, and summarized and reported within the time periods specified in the SEC’s rules and forms.

Additionally, our President and Chief Executive Officer and Executive Vice President of Finance determined, as of December 31, 2003, that there were no changes in our internal controls or in other factors that could significantly affect our internal controls.

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PART III

The following table sets forth our Directors and executive officers as of December 31, 2003. Directors are elected to terms of one year. All Directors hold their positions until their terms expire and until their respective successors are elected and qualified. Executive officers are elected by and serve at the discretion of the Board of Directors until their terms expire and their successors are duly chosen and qualified.

Tatsuhiko Hamamoto has served as Chairman of the Board of Directors since July 1998. From 1995 to 1998, Mr. Hamamoto was Corporate Auditor on the Board of Kawasaki Steel Corporation (now JFE Steel Corporation). From 1993 to 1995, Mr. Hamamoto was Executive Vice President of KLI, a leasing company. From 1990 to 1992, Mr. Hamamoto served as Vice President, Technology and Finance at Armco Steel. From 1987 to 1989, Mr. Hamamoto was General Manager of the Overseas Steel Business Department at Kawasaki Steel Corporation and our Executive Vice President. He graduated from Kobe University with a Bachelor of Arts Degree in Economics.

Francisco Póvoa has served as a Director since March 1998. He has worked at Companhia Vale do Rio Doce since February 1972 and has held positions as Superintendent of Technology, Mining Superintendent and General Manager of the South System, Industrial Engineering General Manager. From 1991 to 1993, Mr. Póvoa served as the Executive Director of Rio Doce International in Brussels. Since 1997, he has served as both the Chairman of the board of directors and the President of Companhia Vale do Rio Doce’s Employees Investment Club, a shareholder of Companhia Vale do Rio Doce. He served as President of SIBRA-Eletrosiderurgica Brasileira S.A. and Companhia Paulista de Ferro-Ligas, a Brazilian manganese producer, from 1997 to 1998. He has served as a member of the board of directors of Companhia Vale do Rio Doce since 1997, Société Européenne D’Alliages Pour La Sidérurgie (SEAS), a French ferro-alloy producer since 1998, Nova Era Silicon, a Brazilian ferro-silicon company, since 1998, and Companhia Vale do Rio Doce’s pension fund since 1993. Mr. Póvoa graduated from Universidade Federal de Minas Gerais with a Mining Engineering Degree.

Toshihiro Kabasawa has served as a Director since July 2000. He has been employed by Kawasaki Steel Corporation since 1977 where he has held positions as Human Development Manager, Organization & Systems Manager, Steel Business Planning Manager, and Manager of Overseas Business in Corporate Planning Department. He graduated from Tokyo University with a Bachelor’s Degree in Law.

Dalton Nosé has served as a Director since January 1, 2002. He has been employed by Companhia Vale do Rio Doce since February 2001 where he serves as the Development Director. From 1975 through 2001, Mr. Nosé held management positions, including that of President and CEO, at a number of Brazilian steel and manufacturing companies, including twenty years of working with the KORF Group and associated companies in Germany and Brazil. Mr. Nosé has specialized in operations and engineering, with a strong emphasis on implementing new technologies. Mr. Nosé graduated from Instituto Maua de Technologia with a B.S. in Metallurgical Engineering.

Vicente Wright was named President and Chief Executive Officer in February, 2003. Mr. Wright served as the Executive Vice President, Finance, from February, 1998 to February, 2003. Mr. Wright was the Steel Division General Manager, from 1992 to 1998, and Iron Ore Sales General Manager from 1991 to 1992 of Companhia Vale do Rio Doce. From 1987 to 1988, he served as Iron Ore Sales General Manager for Rio Doce Asia Ltd., a subsidiary of Companhia Vale do Rio Doce. In 1986 and 1987, he was the assistant to the President of California Steel Industries in charge of slab procurement and all of its related logistics. From 1978 to 1986, Mr. Wright served as Purchasing Executive and Slab Marketing Manager at Companhia Siderurgica de Tubarão. Mr. Wright was a member of the Board of Directors of Companhia Siderurgica Nacional, the largest steel company in Brazil, from 1993 to 1997, Acominas, a Brazilian steel mill, from 1994 to 1998, Siderar, an Argentine steel mill, from 1994 to

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1997, Chairman of Nova Era Silicon, a Brazilian ferro-silicon company mill, from 1994 to 1997 and SEAS from 1994 to 1998. He graduated from Marquette University, Milwaukee, Wisconsin with a Bachelor’s Degree in Business Administration.

Ricardo Bernandes joined the Company on September 15, 2003, as Executive Vice President and Chief Financial Officer. Mr. Bernandes held various financial and executive positions in Brazil with RBS Group from November 1995 to July 2003, including the positions of Executive Director of Business Development, CFO Media, Broadcasting Finance Director and Telecommunications Director. He is familiar with the steel industry from his work on various projects as a senior consultant for Booz Allen & Hamilton in Latin America and from his work experience with the Gerdau Group. Mr. Bernandes holds a Masters of Business Administration from the University of California, Los Angeles.

Toshiyuki Tamai has served as Executive Vice President, Operations since July 2001. He has been with CSI since 1995, previously holding positions as Manager, Hot Strip Rolling and Finishing Operations and General Manager, Hot Rolling and Tubular Products. He joined Kawasaki Steel Corporation in 1973, where he served as Manager at the No. 2 Hot Strip Mill at Chiba Works. Prior to joining CSI, he worked as Senior Staff Engineer at AK Steel, Middletown, Ohio. Mr. Tamai graduated from Kyoto University with a Bachelor’s Degree in Mechanical Engineering.

James Wilson has served as Vice President, Sales since November 2000. He has been employed by California Steel Industries since 1984 holding the positions of Manager, Galvanized Products and Manager, Cold Rolled Products. Prior to joining California Steel Industries, he worked in various segments of the metals industry, including J.T. Ryerson & Sons, a service center, and in manufacturing. He graduated from the University of California, Berkeley, with a Bachelor of Science degree in Industrial Engineering.

Brett Guge has served as Vice President, Administration and Corporate Secretary since May 1997. From 1994 to 1997, he served as the Manager of Administration of Gallatin Steel. From 1983 to 1994, he was employed by Alcoa where he held positions as the Superintendent of Industrial Relations and Employment, Supervisor of Employee Relations and Superintendent of Industrial Relations and Training. Mr. Guge graduated from the University of Tennessee with a Bachelor’s Degree in Communications, and from Xavier University with a Master’s Degree in Business Administration.

Board Committees

Our Board of Directors has a Compensation Committee and an Operations and Finance Committee.

The Compensation Committee is comprised of four members: Director Tatsuhiko Hamamoto, Director Francisco Póvoa, Mr. Kazuo Fujisawa of JFE Steel Corporation and Mr. Marcus Roger M.M. da Costa of Companhia Vale do Rio Doce. The Compensation Committee met twice during 2003. The Compensation Committee reviews compensation packages for our officers and prepares the executive compensation proposal to the Board.

The Operations and Finance Committee is comprised of four members including Director Toshihiro Kabasawa, Mr. Gilberto Pena and Mr. Leonardo Moretzohn of Companhia Vale do Rio Doce, and Mr. Hiroyuki Tezuka of JFE Steel Corporation. This committee met twice during 2003. The Operations and Finance Committee mainly reviews our investment plans, business plan, annual operating plan and budget. The Operations and Finance Committee is also responsible for reviewing our operating results and performance.

There is no separate Audit Committee as audit related decisions are made by the entire Board of Directors. The Board of Directors does not contain an audit committee financial expert as such term is defined in Item 401(h)(2) of Regulation S-K and has not determined that such an expert is necessary to properly carry out its oversight responsibilities.

Director Compensation

For their service as our Directors for fiscal year 2003, all Directors, except the Chairman, received $3,000 per month and committee members received $1,000 per month, each payable on a monthly basis. Mr. Hamamoto, Chairman of the Board of Directors, is paid a salary of $348,384 as our employee. In addition to his salary he received $178,386 in incentive compensation, $7,873 in other compensation and $9,552 in matching contribution to his account in our 401(k) plan.

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Code of Ethics

We have not adopted a written code of ethics for our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Ethical oversight and actual or apparent conflicts of interest have historically been handled informally by senior management and the Board of Directors. We are currently reviewing examples of written codes of ethics and will address the adoption of such a code with the Board of Directors during 2004.

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The following summary compensation table sets forth information regarding compensation earned in the fiscal years ended December 31, 2003, 2002, and 2001 by our Chief Executive Officer and each of our other four most highly compensated executive officers whose salary and bonus exceeded $100,000.

Summary Compensation Table

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Supplemental Executive Retirement Plans and Separation Agreement

On January 16, 2003, the Company entered into a Supplemental Executive Retirement Plan with James L. Wilson, Vice President, Sales, intended to induce Mr. Wilson to remain in our employ. Upon his retirement, the Company is obligated to pay Mr. Wilson a monthly benefit for 180 months calculated as follows: one-twelfth of the product of 2.5% multiplied by the number of years he is employed with us limited to 18 years, multiplied by his average annual compensation. This benefit vests at the rate of 6% for 2003 and 7% per year thereafter, continuing yearly except for the year Mr. Wilson turns 65, when the vesting will be 24%. The payment of the vested portion of this benefit will start at the first day of the month following the month in which Mr. Wilson reaches age 65. At December 31, 2003, he was vested 6% under this agreement.

On September 19, 2000, the Company entered into a Supplemental Executive Retirement Plan with Brett J. Guge, Vice President, Administration and Corporate Secretary, intended to induce Mr. Guge to remain in our employ. Upon his retirement, the Company is obligated to pay Mr. Guge a monthly benefit for 180 months calculated as follows: one-twelfth of the product of 2.5% multiplied by the number of years he is employed with us limited to 18 years, multiplied by his average annual compensation. This benefit vests at the rate of 4% per year, continuing yearly except for the year Mr. Guge turns 65, when the vesting will be 24%. The payment of the vested portion of this benefit will start at the first day of the month following the month in which Mr. Guge reaches age 65. At December 31, 2003, he was vested 16% under this agreement.

Shareholders’ Agreement

We are owned 50% by JFE Steel USA, Inc. (formerly Kawasaki Steel Holdings (USA), Inc.), a Delaware corporation and a subsidiary of JFE Steel Corporation (formerly Kawasaki Steel Corporation), a Japanese corporation, and 50% by Rio Doce Limited, a New York corporation and a subsidiary of Companhia Vale do Rio Doce (“CVRD”), a Brazilian corporation. Our two stockholders entered into a Shareholders’ Agreement dated June 27, 1995, replacing a Shareholders’ Agreement dated June 1, 1987. According to the Shareholders’ Agreement, the stockholders agreed to subscribe for additional shares of our stock in proportion to their respective ownership if any new stock is issued, and increases in our capital stock from time to time shall be allocated between our common stock and preferred stock as agreed upon by the stockholders. Each of the stockholders has the right and obligation to subscribe and pay fully for the new shares in proportion to its respective ownership of our common stock. In addition, either stockholder may let its Affiliated Corporations, as defined the Shareholders’ Agreement, subscribe, in whole or in part, to the new shares to be issued to it under the terms described below.

The Shareholders’ Agreement provides that the Board of Directors shall be constituted of five directors, one of whom shall be chairman, as elected by and among the directors. Each stockholder shall have the right to appoint two Directors and the fifth Director shall be elected by unanimous affirmative vote of the shareholders (in July 1999, the stockholders approved a revision to the Bylaws of the Company changing the number of directors to 4, however, no corresponding change was made to the Shareholders’ Agreement). In addition, the stockholders shall jointly appoint a president, who shall appoint other officers designated by the Board of Directors. The Shareholders’ Agreement also provides for a Consultative Council consisting of two members, one appointed by each of the stockholders. It is unclear whether the Consultative Council provisions are valid under Delaware corporation law. The Consultative Council decides on all relevant matters submitted to it by both or either of the stockholders and specifically resolves any deadlock among the Directors. Because no stockholder holds a majority of our stock

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and the Directors and members of the Consultative Council are elected by the stockholders in proportion to each of the stockholders’ holdings, there is a possibility that a deadlock may occur on any issue voted on by the stockholders, Board of Directors and Consultative Council. If a deadlock were to occur and the Consultative Council could not resolve the issue, the last recourse is arbitration according to the Shareholders’ Agreement. Furthermore, according to the Shareholders’ Agreement, we have agreed to purchase slab from Companhia Siderurgica de Tubarão and use Seamar Shipping Corporation for ocean transportation of slab at negotiated prices, however, with the approval of the stockholders, we ceased using Seamar for ocean transportation in 2001.

The Shareholders’ Agreement provides that, subject to any limitation on the payment of dividends contained in any agreement we are a party to, the stockholders shall cause us to distribute from our profits the maximum dividend that may be distributed under the applicable laws and regulations, provided that the profits shall first be applied to the payment of dividends on the preferred stock. We have historically paid dividends of 50% of our net income per year.

If either one of the stockholders wishes to transfer or assign their shares of our stock to a third party, other than to one of its affiliated corporations, the stockholder must first offer to sell those shares to the other stockholder upon the same terms and conditions that the third party has offered to purchase the shares. Any stockholder who sells, transfers, assigns, or creates a pledge or other encumbrance on its shares in favor a third party, other than its affiliated corporations, is obligated to obtain an undertaking letter from the third party according to which the third party undertakes unconditionally and irrevocably the obligations of the transferring stockholder under the Shareholders’ Agreement in proportion to the number of shares transferred. Either stockholder may sell, transfer or assign to its affiliated corporations all or any part of its shares or preemptive rights to subscribe for new shares of our stock by giving written notice to the other stockholder, provided that the affiliated corporation has agreed to become a party to the Shareholders’ Agreement. In this case, both the transferor and the affiliated corporation shall jointly assume all of the obligations of the transferor under the Shareholders’ Agreement.

401(k) Plan

We maintain the California Steel Industries, Inc. 401(k) Savings Plan, a tax qualified cash or deferred tax arrangement under Section 401(k) of the Internal Revenue Code of 1986, as amended. The 401(k) Plan provides the participants with benefits upon retirement, death, disability or termination of employment with us. Employees are eligible to participate in the salary reduction portion of the plan on the first day of the calendar month following their date of hire.

Participants may authorize us to contribute to the 401(k) Plan on their behalf a percentage of their compensation, not to exceed legally permissible limits, including an overall dollar limit of $12,000 for 2003. The 401(k) Plan provides for our discretionary matching and profit sharing contributions. We currently match 100% of the first 4% of the participant’s deferral under the 401(k) Plan each year and 50% of the next 2% of the participant’s deferral under the 401(k) Plan each year. Each plan year we may also elect to make an additional contribution to the 401(k) Plan. This discretionary employer contribution, if we make it, is allocated to each participant’s account based on the participant’s compensation for the year relative to the compensation of all participants for that year. In order to share in the allocation of the discretionary employer contribution, if any, a participant must complete 1,000 hours of service in the plan year.

Profit-Sharing Plan

We maintain a profit sharing plan under which bonuses are awarded based on a pool amount, equal to 8% of our income before taxes excluding gain or loss on disposition of fixed assets and the results of Companhia Siderurgica de Tubarão. The basis for determining the profit sharing pool is subject to review and approval of our Board of Directors. The employee’s share in the pool amount is based on his or her length of service with us during the profit sharing period. Employees who voluntarily terminate their employment for reasons others than retirement before the end of the profit sharing period and employees whose employment is involuntarily terminated are not eligible to receive any profit sharing award.

Compensation Committee Interlocks and Inside Participation

Mr. Tatsuhiko Hamamoto, Mr. Francisco Póvoa, Mr. Yasuhiro Sakamoto, and Mr. Marcus Roger M.M. da Costa served as members of our Compensation Committee in 2003. Except for Mr. Hamamoto, none of the members of the Compensation Committee was, during 2003, an officer, employee or formerly an officer or employee of ours or our subsidiary.

Mr. Sakamoto served as Deputy General Manager, Overseas, Corporate Planning Department of JFE Steel Corporation (formerly Kawasaki Steel Corporation) during 2003. JFE Steel Corporation’s subsidiary, JFE Steel (USA), Inc. is one of our

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stockholders. During 2003, no amounts were paid to JFE Steel for participation on the committee. In 2003, Mr. Póvoa served as a board member of CVRD, as well as the President of the CVRD Employees Investment Club, a shareholder of Companhia Vale do Rio Doce. In 2003, Mr. Marcus Roger M.M. de Costa served as General Manager of Human Resources and Corporate Administration of Companhia Vale do Rio Doce.

Board Compensation Committee Report on Executive Compensation

Executive compensation at California Steel Industries, including plan design and scope, covers five corporate executive officer positions and the Chairman of the Board. Executive compensation is the responsibility of the Board of Directors. Periodically the Board, through its Compensation Committee, authorizes benchmarking surveys of executive compensation for similarly sized manufacturing companies, including private companies and those publicly traded. The surveys are conducted by recognized consulting firms, analyzing executive compensation within the steel industry and other manufacturing sectors. California Steel Industries’ executive compensation program currently includes as its major elements a base annual salary, and a management incentive program based on (i) annual performance of California Steel Industries, and (ii) individual performance measured against annual objectives.

The following table sets forth, as of December 31, 2003, information regarding the shares of our common stock and Class C preferred stock beneficially owned by each stockholder that beneficially owns in excess of 5% of the outstanding shares of our common stock and Class C preferred stock. No director or named executive officer beneficially owns any shares of our common stock or Class C preferred stock.

Rio Doce Limited is a subsidiary of Companhia Vale do Rio Doce, a Brazilian corporation, and JFE Steel (USA), Inc. is a subsidiary of JFE Steel Corporation, a Japanese corporation.

Our stockholders, JFE Steel (USA), Inc., a subsidiary of JFE Steel Corporation, and Rio Doce Limited, a subsidiary of Companhia Vale do Rio Doce, are parties to a Shareholders’ Agreement. According to the Shareholders’ Agreement, the stockholders control the election of the Board of Directors. The stockholders also indirectly control the appointment of officers through their right to jointly elect the president, who is entitled to appoint our other officers.

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The Shareholders’ Agreement also provides for a Consultative Council, comprised of two members. Each stockholder is entitled to elect one member. The Consultative Council decides on all matters submitted to it by either or both of the stockholders and resolves deadlocks among the Board of Directors. We have transactions in the normal course of business with affiliated companies. For example, we purchase slab from Companhia Siderurgica de Tubarão, a subsidiary of both Companhia Vale do Rio Doce and JFE Steel Corporation. During 2003, we purchased $87,252,000 of slab from Companhia Siderurgica de Tubarão and $6,048,000 of slab from JFE Steel Corporation. We also hold a 4% interest in the common stock of Companhia Siderurgica de Tubarão.

We conducted arms-length negotiations with Companhia Siderurgica de Tubarão and JFE Steel Corporation in 2003. The Shareholders’ Agreement provides that we shall continuously purchase slabs from Companhia Siderurgica de Tubarão under terms and conditions as agreed upon by Companhia Siderurgica de Tubarão and us. The executive officer negotiating the market price for the steel slab was our Executive Vice President—Finance & CFO.

We chartered vessels from Seamar Shipping Corporation (Seamar), in 2002 and prior years, a subsidiary of Companhia Vale do Rio Doce, for the ocean transfer of slab to the Port of Los Angeles. During 2003 we did not charter any vessels from Seamar, in 2002, we incurred $574,000 in charter fees from Seamar for its services. The Shareholders’ Agreement provided that we would charter vessels from Seamar. We entered into a 15-year contract with Seamar for shipping services that expired on May 29, 2000, which was then extended to December 31, 2001. We do not currently have a contract with Seamar or any other carrier. The executive officer responsible for negotiating the price for shipping services was our Executive Vice President—Finance & CFO.

We had a five year contract with Rio Doce Pasha Terminal (“RDP”), a joint venture of Companhia Vale do Rio Doce, to unload our ocean cargo from ships at the Port of Los Angeles that expired on December 31, 2000. During 2001, we incurred $17,254,000 for RDP’s services. In 2001, CVRD sold its interest in RDP and CSI signed a new agreement with Pasha Stevedoring Terminal (“PST”), which is not a related party. CSI’s new agreement with PST is for 10 years commencing with January, 2001.

Aggregate Fees Billed by Principal Accountants in the Past Two Years.

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PART IV

(a)(1) and (2) Financial Statements:

The following consolidated financial statements and schedule of the Registrant are included in response to Item 8 of this Report:

1. Consolidated Financial Statements:

All other schedules have been omitted since they are either not required, not applicable or the information is otherwise included.

(b) Reports on Form 8-K, filed during the last quarter of 2003:

Item 9 Regulation FD Disclosure

Item 12. Use of Non-GAAP Financial Measures

Third Quarter Financial Results disclosed in Press Release

(c) Exhibits:

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