CALIFORNIA STEEL INDUSTRIES INC - FORM 10-K

CALIFORNIA STEEL INDUSTRIES INC - FORM 10-K - March 23, 2011

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EX-32.1 - SECTION 906 CERTIFICATION OF CHIEF EXECUTIVE OFFICER - CALIFORNIA STEEL INDUSTRIES INC	dex321.htm
EX-32.2 - SECTION 906 CERTIFICATION OF EXECUTIVE VICE PRESIDENT,FINANCE AND ADMINISTRATION - CALIFORNIA STEEL INDUSTRIES INC	dex322.htm
EX-31.1 - SECTION 302 CERTIFICATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER - CALIFORNIA STEEL INDUSTRIES INC	dex311.htm
EX-31.2 - SECTION 302 CERTIFICATION OF EXECUTIVE VICE PRESIDENT,FINANCE AND ADMINISTRATION - CALIFORNIA STEEL INDUSTRIES INC	dex312.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2010

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

For the transition period from to

Commission File Number 333-79587

CALIFORNIA STEEL INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)


Delaware		33-0051150
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

14000 San Bernardino Avenue Fontana, California		92335
(Address of principal executive offices)		(Zip Code)

(909) 350-6300

(Registrant’s telephone number including area code)

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

Title of each class:

Name of each exchange

on which registered:

None

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

None

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of March 23, 2011, the registrant had 4,000 shares of its common stock issued and outstanding.

CAUTIONARY STATEMENT PURSUANT TO THE

PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), provided a “safe harbor” for forward-looking statements to encourage companies to provide prospective information about their companies. With the exception of historical information, the matters discussed in this Annual Report on Form 10-K are forward-looking statements and may be identified by the use of words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” and other words and terms of similar meaning. Such statements reflect our current view with respect to future events and are subject to certain risks, uncertainties and assumptions. A variety of factors could cause our future results to differ materially from the anticipated results expressed in such forward-looking statements. Readers should review Item 1A, Risk Factors, of this Annual Report on Form 10-K for a description of important factors that could cause future results to differ materially from those contemplated by the forward-looking statements made in this Annual Report on Form 10-K.

CALIFORNIA STEEL INDUSTRIES, INC.

TABLE OF CONTENTS TO ANNUAL REPORT ON FORM 10-K

For The Fiscal Year Ended December 31, 2010


		Page
PART I

Item 1.	Business		1

Item 1A.	Risk Factors		7

Item 1B.	Unresolved Staff Comments		9

Item 2.	Properties		9

Item 3.	Legal Proceedings		9

Item 4.	Reserved		9

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		10

Item 6.	Selected Financial Data		10

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		11

Item 7A.	Quantitative and Qualitative Disclosures about Market Risk		17

Item 8.	Financial Statements and Supplementary Data		18

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		18

Item 9A.	Controls and Procedures		18

Item 9B.	Other Information		19

PART III

Item 10.	Directors, Executive Officers and Corporate Governance		20

Item 11.	Executive Compensation		22

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		29

Item 13.	Certain Relationships and Related Transactions, and Director Independence		30

Item 14.	Principal Accountant Fees and Services		30

PART IV

Item 15.	Exhibits and Financial Statement Schedules		31

Signatures

Exhibit Index

Exhibits

PART I

Item 1.

Business

Description of Business

Unless the context otherwise requires, the use of the terms “California Steel,” “we,” “us,” and “our” in this Annual Report on Form 10-K refers to California Steel Industries, Inc. California Steel is 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 (“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 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 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. Consolidation of the industry, through a series of mergers and acquisitions, has significantly reduced the number of steel producing companies throughout the world. However, steel, regardless of product type, responds to forces of supply and demand. Prices fluctuate 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 iron making from raw materials, which have been mined, such as iron ore and coal, followed by steelmaking, slab making, reheating and further processing into coil or other shapes. A mini-mill is a steel producer that uses an electric arc furnace to melt 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 ranged from 70% to 80% of our cost of goods sold. This year, raw material costs have increased due to higher slab costs; hence, our raw material costs were approximately 83% of our cost of goods sold, excluding the lower of cost or market adjustment. We believe we are 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

In 2010 steel demand improved from the depressed levels in 2009. The market has reached a level of stability that represents about 70% of overall U.S. industry capacity utilization. Steel prices increased during the first half of 2010 followed by price declines in the second half of the year. In December 2010, steel prices returned to the same level as February 2010. Prices are expected to increase significantly during the first quarter of 2011 due to increasing raw material costs and increasing demand. The increasing price is causing steel producers and consumers to manage inventories at lower levels. The on-going high level of unemployment and lack of consumer confidence have moderated the pace of the overall recovery from the 2008/2009 recession.

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.

We continued to make selective investments designed to keep our facilities competitive or reduce operating costs. Total capital spending in 2010 was $30.4 million on various upgrades to our production facilities as well as safety and environmental improvements. Of this amount, capital spending related to the construction of the second reheat furnace was $4.3 million which was placed in service during the second quarter of fiscal 2010 and is expected to be fully operational during the second quarter of fiscal 2011. The second reheat furnace with state-of-the-art environmental technology will increase our annual production capacity by up to one million tons. This new reheat furnace will serve as a backup to our

existing furnace and furthermore, we will be prepared for the next up turn in the market. The total cost of the project was approximately $71.0 million.

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. We continually monitor our cost and cut cost where appropriate.

Hot Strip Rolling and Finishing Mills

We produce hot rolled coil from slab in our hot strip mill. Two walking beam furnaces reheat slab, direct it to a multi-stand rolling mill to reduce thickness and roll 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 3.0 million tons annually and can produce hot rolled coil in gauges from 0.053” to 0.625”.

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

•

A walking beam furnace with a capacity of approximately 8,000 tons of slab per day; and

•

An 86” mill which consists of five roughing stands, a scale breaker, six finishing stands and two down coilers.

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

•

An 80” coil slitter line that can trim product up to 0.375” in thickness and can be easily adjusted to meet a variety of customer-specified widths; and

•

3 skin pass lines used for surface and other coil improvements.

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, acid tanks, water rinse, dryer, looper, side trimmer, coiler, oiling equipment and scale. The line can currently process up to approximately 1.45 million tons per year.

Five Stand Cold Reduction Mill

Pickled and oiled material may be further processed through the five stand cold reduction mill, which reduces the pickled steel strip from a gauge range of 0.075” to 0.225” to a range of 0.0098” to 0.1384” in thickness, with a maximum width of 60”. In the cold reduction process, pickled and oiled coils pass through five stands, arranged in tandem, with a predetermined amount of reduction taken on each stand until the final thickness is achieved upon exiting the fifth stand. Reductions are taken in one pass. The capacity of the five stand cold reduction mill is 1.5 million tons per year. Most material is further processed through the cold sheet mill or galvanized mills.

Cold Sheet Mill

Cold rolled sheet is hot rolled steel that has been further processed through the continuous pickle line and five stand cold reduction mill and is then processed through an annealing furnace and temper mill, improving uniformity, ductility and formability. Cold rolling can also impart various surface finishes and textures. Cold rolled steel is used in applications that demand higher surface quality or finish.

The cold rolled facility, with a current annual finished capacity of approximately 360 thousand tons, includes the following:

•

An electrolytic cleaning line;

•

Twenty hydrogen annealing bases; and

•

A 60” temper mill.

After cold reduction at the five stand cold reduction mill, the coil may be cleaned in a 200-feet to 1,000-feet per minute electrolytic cleaning line and then annealed. Hydrogen annealing is a process that heats steel coils to annealing temperatures in a pure hydrogen atmosphere and controls the cooling to restore ductility to our steel products that is lost as a result of cold

reduction rolling. The strip is then run through final production in a 60” temper mill, where the steel is tempered to specified finish, shape and gauge.

Galvanizing Mills

Galvanized coil and sheet represent significant 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 in-line annealing furnace and run the sheet steel, while still hot, through a pot of molten zinc. As the steel strip leaves the pot, coating controls ensure 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. The first continuous galvanizing line is horizontally configured and produces gauges from 0.016” to 0.173”, with a capacity of 482 thousand tons per year. The second continuous galvanizing line is vertically configured and produces gauges from 0.0105” to 0.057”, with a capacity of 372 thousand tons per year.

Electric Resistance Welded (ERW) Pipe Mill

We produce ERW pipe by roll forming 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 then undergoes additional hydrostatic testing, after which it receives rigorous ultrasonic and electromagnetic inspection.

We produce pipe with outside diameters ranging from 4.5” to 16” and wall thickness ranging from 0.156” to 0.406”, with lengths available up to 63 feet without mid-weld. Process coating is available through local coating applicators, one of whom leases space on our property. The ERW pipe mill has a current capacity of approximately 265 thousand tons per year.

Principal Products

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:


	Year Ended December 31,
	2010			2009			2008			2007			2006
Hot rolled coil and sheet		34.5	%		34.3	%		36.0	%		38.1	%		40.3	%
Cold rolled coil and sheet		15.8	%		13.5	%		10.1	%		9.8	%		8.7	%
Galvanized coil and sheet		36.3	%		44.7	%		34.3	%		38.1	%		39.0	%
ERW pipe		13.4	%		7.5	%		19.6	%		14.0	%		12.0	%

Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

Total tons billed, excluding scrap (in thousands)		1,335			800			1,443			1,728			1,930

Historically, hot rolled coil and sheet is one of our largest product categories 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 2010, we directed approximately 33.6% of our hot rolled production to outside sales, and we further processed approximately 66.4% 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, tubing and a variety of construction related products. In 2010, we directed approximately 31.5% of our cold rolled reduction production to outside sales, and we further processed approximately 68.5% internally for our own higher-margin, value added product needs.

During the last couple of years, galvanized coil and sheet has been our largest product category as measured by tons billed per year. 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 heating, venting and air conditioning equipment (HVAC).

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 lines. We also sell standard pipe to industrial accounts for load bearing and low-pressure applications.

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 believe we offer our customers the lowest risk option for their steel requirements.

We are the only producer of flat rolled steel products located in the western United States who 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 are well equipped to provide “one-stop shopping” for our customers to maximize sales opportunities and increase 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 customer service-oriented approach to the market. 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 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, upon request of our current and prospective customers, we offer ancillary services such as metallurgical engineering services to assist customers with specific product needs. 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 overall production efficiency. We have improved communication and information flow to our customers through exchange of electronic information. Access to order status and material information on our customer service web site has improved efficiency and timeliness, further reducing the risk of order placement compared to our competitors. These services are provided at no charge and no revenues are generated for such services.

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, raw material costs ranged from 70% to 80% of our cost of goods sold. This year, raw materials costs have been extremely volatile. Slab prices increased during the first half of 2010 and gradually decreased during the second half of the year. This volatility in the market was due to raw material costs in slab production and overall global demand. Our raw material costs were approximately 83% of our cost of goods sold, excluding the lower of cost or market adjustment. We believe we are one of the largest importers and one of the largest purchasers of slab in the world. We purchase slab from domestic and foreign suppliers to obtain high quality steel at competitive cost through reliable sources. Our main foreign vendors are located in Brazil, Mexico, Australia, Japan and Russia.

We believe that our integrated slab procurement system allows us to manage our slab inventory to meet our customers’ order specifications. We typically make our slab purchases on a quarterly basis. As of December 31, 2010 we were committed, in the form of open purchase orders, to purchase approximately $141.3 million in steel slabs, $77.5 million of which is from a related party. 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. Steel slab consumption costs include the FOB value of steel slab, quality extras, ocean transportation, rail freight, duties, unloading, insurance and handling costs. Due to increased demand for slabs in international markets, average slab consumption cost in 2010 was approximately 42% higher than 2009’s average slab consumption cost.

We are not reliant on any single slab vendor. In 2010, we purchased our slab from Arcelor Mittal Tubarão (formerly Companhia Siderurgica de Tubarão of Brazil (“CST-Arcelor Mittal”)); Arcelor Mittal Steel Lazaro Cardenas of Mexico; Bluescope Steel of Australia; Gerdau-Acominas of Brazil, and US Steel of the United States.

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 developed. 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.

Working Capital

We fund our business operations through a combination of available cash and cash equivalents and cash flows generated from operations. In addition, our credit facility is available for additional working capital or investment opportunities.

Customers

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, flexibility, timeliness of delivery and ability to meet unique customer needs. We further believe that we benefit from our strategic location in Fontana, California.

Our customers include service and processing centers, construction and building material companies, steel framing and decking manufacturers, tubing manufacturers, oil and gas producers and distributors, aftermarket automotive manufacturers, as well as various customers in other industries.

In 2010, exports represented approximately 1% of our total 2010 tons billed.

Backlog

As of December 2010, we had what we believed to be firm commitments to sell approximately 216 thousand tons. Based on our average sales price at that time, the sales value was approximately $165.8 million. As of December 2009, we had what we believed to be firm commitments to sell approximately 134 thousand tons. Based on our average sales price at that time, the sales value was approximately $88.6 million.

Competition

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 compete with domestic and foreign steel producers on the basis of customer service, product quality and price. We believe that the competitive landscape within the steel industry will continue to evolve, especially as mergers and acquisitions continue worldwide. We believe that our slab-based business model, breadth of products, non-union work environment, southern California location and long-standing customer relationships, collectively make us 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 which could exert downward pressure on prices for some of our products particularly during slow economic periods.

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. A downturn in one or more of these industries could have an adverse affect on our sales volume, prices, profitability and liquidity.

U.S. Competition

High transportation costs have historically deterred mid-western and eastern steel producers from routinely accessing the western United States market. Severe reductions in operating capacity to less than 50% have not been sufficient to balance mid-western and eastern supply and demand, thereby causing exportation of products into the western United States.

Continuing competition from these mills at any significant level can negatively impact sales tonnage and average sales prices with the western market.

In hot rolled products, our principal domestic competition comes from a number of producers located in the Midwestern and Eastern United States; however, this is cyclical in nature, based on economic conditions in the mid-western and eastern markets. Some hot rolled products are produced by Evraz Oregon Steel Mills, located in Portland, Oregon, which typically targets customers located in the northwestern 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. Additionally, we face increasing competition from producers of materials such as aluminum, composites, plastics, and concrete that compete with steel in many markets.

Foreign Competition

Historically, foreign steel producers have competed in the western United States in all of our product categories. Although imported steel has longer 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. Imported steel has a negative impact when volume levels surge or when product is sold substantially lower than the market price.

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 $1.2 million in 2010, $1.0 million in 2009 and $1.3 million in 2008. We plan to spend approximately $1.5 million in 2011.

In 1996, we entered into an Expedited Remedial Action Voluntary Enforceable Agreement with the California Environmental Protection Agency, Department of Toxic Substances Control (“DTSC”). 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, which was accrued in 2002 and is included in other liabilities in our 2010 and 2009 financial statements. The DTSC has not yet completed its review and approval of our remediation plan; however, preliminary discussions with the DTSC have not indicated the need for any significant changes to the remediation plan or to our 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, including without limitations, unknown site conditions, changes to applicable regulations or increased enforcement requirements by the regulators existing at the site.

Employee Relations

At December 31, 2010, we had 872 full-time employees. We believe we have one of the largest non-union workforces located at any one steel facility in the United States. We provide competitive wages and benefits, both when compared to our industry and to other business near our location. We offer training and growth opportunities to our employees. The safety of employees is a priority to everyone who works here; we believe we have one of the best safety records in our industry. Our officers routinely discuss our business plan with all employees, part of a comprehensive communications and employee relations strategy. With these elements in place, we believe we have a very good relationship with our employees, which supports our goal to remain union-free.

Available Information

We are subject to the reporting requirements of the Exchange Act and its rules and regulations. The Exchange Act requires us to file reports and other information with the U.S. Securities and Exchange Commission (“SEC”). Copies of these reports and other information can be read and copied at the SEC’s Public Reference Room at 100 F Street, NE., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains a Web site that contains reports, proxy statements and other information regarding issuers that file electronically with the SEC. These materials may be obtained electronically by accessing the SEC’s Web site at www.sec.gov.

We make available, free of charge on our Web site, the Code of Ethics for Directors (“Board”) and Executive Officers and our Business Conduct and Ethics adopted by our Board. These documents are posted on our Web site at www.californiasteel.com – select the “CSI Executive” link and then the “Corporate Governance” link.

Item 1A.

Risk Factors

Described below are certain risks that our management believes are applicable to our business and the industry in which we operate. There may be additional risks that are not presently material or known. You should carefully consider each of the following risks and all other information set forth in this Annual Report on Form 10-K.

If any of the events described below occur, our business, financial condition, results of operations, or liquidity could be materially adversely affected. The following risks could cause our actual results to differ materially from our historical experience and from results predicted by forward-looking statements made by us or on our behalf related to conditions or events that we anticipate may occur in the future. All forward-looking statements made by us or on our behalf are qualified by the risks described below.

Our industry is cyclical and prolonged economic declines could have a material adverse affect on our business.

Demand for our product is cyclical in nature and sensitive to general economic conditions. Our business supports cyclical industries such as the commercial construction, energy, appliance and automotive industries. As a result, downturns in the United States economy or any of these industries could materially adversely affect our results of operations and cash flows. Since steel producers generally have high fixed costs, reduced volumes result in operating inefficiencies. Future economic downturns or a prolonged stagnant economy could materially adversely affect our business, results of operations, financial condition and cash flows.

Overcapacity in the global steel industry could increase the level of steel imports, which may negatively affect our business, results of operations and cash flows.

Global steel-making capacity exceeds global consumption of steel products. This excess capacity results in manufacturers in certain countries exporting significant amounts of steel and steel products at prices below their costs of production. These imports, which are also affected by demand in the domestic market, international currency conversion rates and domestic and international government actions, can result in downward pressure on steel prices, which could materially adversely affect our business, results of operations, financial condition and cash flows.

Overcapacity in China, the world’s largest producer and consumer of steel, has the potential to result in a further increase in imports of low-priced, unfairly traded steel and steel products to the United States. In recent years, capacity growth in China has significantly exceeded the growth in Chinese market demand. A continuation of this unbalanced growth trend or a significant decrease in China’s rate of economic expansion could result in China increasing steel exports.

The results of our operations are sensitive to volatility in steel prices and changes in the costs of raw materials.

We rely upon outside vendors to supply us with raw materials that are critical to the manufacturing of our products. We acquire our primary raw material, steel slabs, from numerous sources around the globe. Although, we believe the supply of steel slabs is adequate to operate our facilities, purchase prices of these critical raw materials are subject to volatility and growing demand of global competitors. At any given time, we may be unable to obtain an adequate supply of these critical raw materials with price and other terms acceptable to us.

If our suppliers increase the prices of our critical raw materials, we may not have alternative sources of supply. In addition, to the extent that we have quoted prices to our customers and accepted customer orders for our products prior to purchasing necessary raw materials, we may be unable to raise the price of our products to cover all or part of the increased cost of raw materials. Also, if we are unable to obtain adequate and timely deliveries of our required raw materials, we may be unable to timely manufacture sufficient quantities of our products. This could cause us to lose sales, incur additional costs and suffer harm to our reputation.

Changes in the availability and cost of electricity and natural gas are subject to volatile market conditions that could adversely affect our business.

Our steel mills are large consumers of electricity and natural gas. We rely upon third parties for our supply of energy resources consumed in the manufacturing of our products. The prices for and availability of electricity, natural gas oil and other energy resources are subject to volatile market conditions. These market conditions often are affected by weather and political and economic factors beyond our control. Disruptions in the supply of our energy resources could temporarily impair our ability to manufacture our products for our customers. Increases in our energy costs could materially adversely affect our business, results of operations, financial condition and cash flows.

Environmental compliance and remediation could result in increased capital requirements and operating costs.

We are subject to numerous federal, state, and local laws and regulations relating to the protection of the environment. These laws continue to evolve and are becoming increasingly stringent. The ultimate impact of complying with such laws and regulations is not always clearly known or determinable because regulations under some of these laws have not yet been promulgated or are undergoing revision. Environmental laws and regulations could result in substantially increased capital, operating and compliance costs. To the extent that competitors, particularly foreign steel producers and manufacturers of competitive steel products, are not required to incur equivalent costs, our competitive position could be materially adversely affected.

Competition from other materials may materially adversely affect our business.

In many applications, steel competes with other materials, such as aluminum, cement, composites, glass, plastic and wood. Increased use of these materials in substitution for steel products could materially adversely affect prices and demand for our steel products.

Our operations are subject to business interruptions.

Our steel production depends on the operation of critical pieces of equipment, such as our various rolling, galvanizing and finishing mills and our continuous pickle line. It is possible that we could experience prolonged periods of reduced production due to equipment failure at our facility. It is also possible that operations may be disrupted due to other unforeseen circumstances such as power outages, explosions, fires, other accidents, inclement weather and transportation interruptions. Availability of raw materials and delivery of products to customers could be affected by logistical disruptions such as shortages of ocean vessels, rail cars or truck or unavailability of rail lines. To the extent of loss production and depending on the length of the outage, our sales and unit production costs could be adversely affected.

Our business requires substantial capital investment and maintenance expenditures, and our capital resources may not be adequate to provide for all of our cash requirements.

Our operations are capital intensive. For the five-year period ended December 31, 2010, our total capital expenditures were approximately $205.0 million. Our business also requires substantial expenditures for routine maintenance. Although we expect requirements for our business needs, including the funding of capital expenditures, debt service for financing and any contingencies to be financed by internally generated funds or from borrowing under our $110.0 million credit facility, we cannot assure that this will be the case.

Increased regulation associated with climate change and greenhouse gas emissions could impose significant additional costs on steelmaking operations.

The United States government or various governmental agencies have introduced or are contemplating regulatory changes in response to the potential impacts of climate change. International treaties or agreements may also result in increasing regulation of greenhouse gas emissions, including the introduction of carbon emissions trading mechanisms. Any such regulation regarding climate change and greenhouse gas, or GHG emissions could impose significant costs on our steelmaking operations and on the operations of our customers and suppliers, including increased energy, capital equipment, environmental monitoring and reporting and other costs in order to comply with current or future laws or regulations concerning and limitations imposed on our operations by virtue of climate change and GHG emissions laws and regulations. The potential costs of “allowance,” “offsets” or “credits” that may be part of potential cap-and-trade programs or similar future regulatory measures are still uncertain. Any adopted future climate change and GHG regulations could negatively impact our ability (and that of our customers and suppliers) to compete with companies situated in areas not subject to such limitations. From a medium and long-term perspective, we are likely to see an increase in costs relating to our assets that emit significant amounts of greenhouse gases as a result of these regulatory initiatives. These regulatory initiatives will be either voluntary or mandatory and may impact our operations directly or through our suppliers or customers. Until the timing, scope and extent of any future regulation becomes known, we cannot predict the effect on our financial condition, operating performance and ability to compete.

The terms of our indebtedness contain provisions that may limit our flexibility.

Our existing agreements impose and future financing agreements are likely to impose operating and financial restriction on our activities. These restrictions require us to comply with or maintain certain financial tests and ratios, including minimum tangible net worth, minimum fixed charge coverage ratio and minimum interest charge coverage ratio, and limit or prohibit our ability to, among other things:

•

incur additional debt and issue preferred stock;

•

create liens;

•

redeem and/or prepay certain debt;

•

pay dividends on our stock, repurchase stock or make other distributions;

•

make certain investments;

•

make certain capital expenditures;

•

enter new lines of business; and

•

engage in consolidations, mergers and acquisitions.

A breach of any of the restrictions or covenants could cause a default under our senior notes and other debt. A significant portion of our indebtedness then may become immediately due and payable.

There is a possibility of deadlocks among our board of directors.

Our board of directors currently consists of four members as elected by our two stockholders, each of whom holds 50% of our stock. Important business decisions could be delayed due to a deadlock among our board of directors which could result in a competitive disadvantage. Any deadlocks could materially adversely affect our business.

Item 1B

Unresolved Staff Comments

None.

Item 2.

Properties

We are located on approximately 443 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.

Item 3.

Legal Proceedings

California Steel is subject to lawsuits, administrative proceedings and claims that arise in the ordinary course of our business. We believe that the final disposition of such lawsuits, proceedings and claims will not have a material adverse effect on our financial position, results of operations or liquidity. It is possible, however, that our future results of operations for a particular quarter or fiscal year could be impacted by changes in circumstances relating to lawsuits, proceedings or claims.

Item 4.

Reserved

Not applicable.

PART II

Item 5.

Market for Registrant’s Common Equity and Related Stockholder Matters

Not applicable.

Item 6.

Selected Consolidated Financial Data

The following table represents our selected consolidated financial data. The table should be read in conjunction with Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.


	Year Ended December 31,
	2010			2009			2008			2007			2006
	(dollars in thousands)
Statement of Income Data:
Net sales	$	1,076,168		$	551,808		$	1,510,613		$	1,282,967		$	1,358,762
Cost of sales		1,013,891			561,120			1,455,739			1,260,373			1,151,740
Gross profit (loss)		62,277			(9,312	)		54,874			22,594			207,022
Selling, general and administrative expenses		19,735			17,481			22,779			20,601			20,901
Loss on disposition of property, plant and equipment		1,093			485			3,256			1,005			1,293
Income (loss) from operations		41,449			(27,278	)		28,839			988			184,828
Interest expense, net		9,024			8,159			8,823			10,528			5,156
Income (loss) before income tax expense
(benefit)		35,332			(26,945	)		19,607			(4,270	)		179,521
Net income (loss)	$	25,394		$	(13,101	)	$	13,275		$	(906	)	$	108,985
Other Data:
Operating margin		3.9	%		-4.9	%		1.9	%		0.1	%		13.6	%
Cash flows provided by operating activities	$	21,609		$	102,458		$	62,594		$	45,278		$	17,669
Cash flows used in investing activities		(31,118	)		(46,667	)		(51,919	)		(42,526	)		(37,284	)
Cash flows (used in) provided by financing activities		(24,443	)		(5,000	)		(13,425	)		5,317			(79,118	)
Capital expenditures		30,375			48,231			48,974			41,062			36,345
Common share cash dividend declared and paid (1)		14,443			—			26,925			21,183			74,011
Total tons billed, excluding scrap (in thousands)		1,335			800			1,443			1,728			1,930
Number of employees at end of period		872			870			911			933			931
Man hours per ton produced		1.18			2.02			1.35			1.15			1.09
EBITDA, as adjusted (2)
Net income (loss)	$	25,394		$	(13,101	)	$	13,275		$	(906	)	$	108,985
Income tax expense (benefit)		9,938			(13,844	)		6,332			(3,364	)		70,536
Interest expense, net		9,024			8,159			8,823			10,528			5,156
Depreciation		31,003			32,458			32,660			31,270			29,143
EBITDA		75,359			13,672			61,090			37,528			213,820
Inventory write down for LCM adjustment		12,850			44,500			135,000			957			—
EBITDA, as adjusted	$	88,209		$	58,172		$	196,090		$	38,485		$	213,820
EBITDA, as adjusted, margin (3)		8.2	%		10.5	%		13.0	%		3.0	%		15.7	%


	Year Ended December 31,
	2010		2009		2008		2007		2006
	(dollars in thousands)
Balance Sheet Data:
Cash and cash equivalents	$	27,719	$	61,671	$	10,880	$	13,630	$	5,561
Property, plant and equipment, net		276,511		276,593		261,027		247,064		245,441
Total assets		600,866		585,447		640,829		623,418		660,594
Total long-term debt including current portion and notes payable to banks		175,000		185,000		190,000		176,500		150,000
Redeemable preferred stock		—		—		—		—		—
Total stockholders’ equity		311,622		300,671		313,772		327,422		349,846

(1)	Common share cash dividends are distributed to the holders of the shares of our common stock at the time the dividends are declared. See Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

(2)

EBITDA is defined as net income, plus income taxes, net interest expense and depreciation and amortization. In our presentation of EBITDA, as adjusted, we also included the write down of inventory to market value as our inventory values are carried at the lower of cost or market (LCM) of $12.9 million, $44.5 million, $135.0 million and $957 thousand in 2010, 2009, 2008 and 2007, respectively. EBITDA, as adjusted, is not intended to represent cash flows from operations, cash flows from investing or cash flows from financing activities as defined by accounting principles generally accepted in the United States of America and should not be considered as an alternative to cash flow or a measure of liquidity or as an alternative to net earnings (loss) as indicative of operating performance. EBITDA, as adjusted, is included because we believe that investors find it a useful tool for measuring our ability to service our debt.

EBITDA, as adjusted, is reconciled to cash flows provided by operating activities, the most comparable measure under generally accepted accounting principles as follows (in thousands):


	Year Ended December 31,
	2010			2009			2008			2007			2006
Net cash provided by (used in):
Operating activities	$	21,609		$	102,458		$	62,594		$	45,278		$	17,669
Interest expense, net		9,024			8,159			8,823			10,528			5,156
Provision for income taxes		9,938			(13,844	)		6,332			(3,364	)		70,536
Changes in other operating assets and liabilities		48,232			(44,789	)		122,905			(5,485	)		117,943
Deferred income taxes		842			6,588			(955	)		(7,113	)		4,162
Write-down of inventory		(12,850	)		(44,500	)		(135,000	)		(957	)		—
Other, net		(1,436	)		(400	)		(3,609	)		(1,359	)		(1,646	)

EBITDA	$	75,359		$	13,672		$	61,090		$	37,528		$	213,820
Write-down of inventory		12,850			44,500			135,000			957			—

EBITDA, as adjusted	$	88,209		$	58,172		$	196,090		$	38,485		$	213,820

(3)	EBITDA, as adjusted, margin represents EBITDA, as adjusted, per (2) above divided by net sales.

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

We believe transparency and clarity are the primary goals of successful financial reporting. We remain committed to increasing the transparency of our financial reporting, providing our shareholders and investors with informative financial disclosures and presenting an accurate view of our financial position and operating results.

Management’s Discussion and Analysis of Financial Conditions and Results of Operations (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the prospective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Our MD&A is presented in six sections:

•

Overview

•

Results of Operations

•

Liquidity and Capital Resources

•

Contractual Obligations and Commitments

•

Critical Accounting Policies

•

Recent Accounting Pronouncements

Our MD&A should be read in conjunction with the Financial Statements and related Notes included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Overview

California Steel is 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. 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 with a current annual shipment capability of approximately 1.3 million tons. 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 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.

Results of Operations

Financial Results

The following table represents selected financial data for each of the past three fiscal years ($ in thousands):


	Year Ended December 31,
	2010			2009			2008
Net sales	$	1,076,168		$	551,808		$	1,510,613
Net sales gain (loss) %		95	%		-63	%		18	%
Gross profit (loss) as % of net sales		5.8	%		-1.7	%		3.6	%
SG&A	$	19,735		$	17,481		$	22,779
SG&A as % of net sales		1.8	%		3.2	%		1.5	%
Operating income (loss)	$	41,449		$	(27,278	)	$	28,839
Operating income (loss) as % of net sales		3.9	%		-4.9	%		1.9	%
Net income (loss)	$	25,394		$	(13,101	)	$	13,275

The following table represents sales volume by product line (excluding scrap) for each of the past three fiscal years:


	Tons Billed Year Ended December 31,
	2010		2009		2008
Hot rolled		461,364		274,619		519,155
Cold rolled		210,696		108,048		145,958
Galvanized		484,894		357,817		495,323
ERW pipe		178,302		59,891		282,401

Total (excluding scrap)		1,335,256		800,375		1,442,837

Fiscal 2010 Results Compared With Fiscal 2009

Net sales. Net sales in fiscal year 2010 increased 95% to $1.1 billion compared to $551.8 million in fiscal 2009. The increase resulted from an increase in sales volume and a higher average selling price. Sales volume increased 67% and the average selling price increased 15% compared to fiscal 2009 due to increase demand for our products and higher raw material cost. The higher sales volume increased net sales approximately $362.8 million and the higher average selling price increased net sales approximately $73.5 million. The remaining increase in net sales was primarily from higher value product mix and

higher freight revenue compared to fiscal 2009. We are expecting the sales volume and the average selling price to be higher for fiscal 2011 due to increased demand, higher raw material costs and the improvement in the economy.

Gross (loss) profit. Our gross profit rate in fiscal 2010 increased to 5.8% of net sales, compared with a gross loss of 1.7% of net sales in fiscal 2009. The increase in our gross profit rate for fiscal 2010 is attributable to higher average selling price and a lower inventory write-down which was partially offset by increased raw material cost. The average selling price increased approximately 15% and the raw material prices increased approximately 42% during fiscal 2010. The write-down of inventory to the lower of cost or market of $12.9 million and $44.5 million for fiscal 2010 and 2009 reduced the gross profit rate by 1.2% and 8.1%, respectively.

Selling, general and administrative (SG&A) expenses. Our SG&A expense rate in fiscal 2010 decreased 1.4% to 1.8% of net sales, compared with 3.2% of net sales in fiscal 2009. The decrease in our SG&A expense rate for fiscal 2010 is largely attributable to an increase of our net sales since the majority of our SG&A expenses are fixed costs. The increase in our SG&A expense in fiscal 2010 is largely attributable to an increase in salaries and benefits due to increase wages and profit sharing and an increase in general administrative cost compared to fiscal 2009. Our SG&A expenses consist primarily of labor and various administrative expenses. Labor costs comprised of approximately 57% and 58% of our SG&A expenses for fiscal 2010 and 2009, respectively.

Net interest expense. Net interest expense in fiscal 2010 increased $865 thousand, or 10.6%, to $9.0 million compared with $8.2 million in fiscal 2009. The increase in net interest expense is largely attributable to a decrease in capitalized interest of $641 thousand and a decrease in investment income of $296 thousand when compared to fiscal 2009. The decrease in capitalized interest was largely attributable to the second reheat furnace being placed in service during the second quarter of fiscal 2010. The decrease in investment income was due to a lower cash balance maintained during fiscal 2010.

Other income (expense), net. Other income, net in fiscal 2010 was $2.9 million compared to $8.5 million in fiscal 2009. Other income is comprised of miscellaneous income items such as rental income, proceeds from legal settlements, gain on sale of environmental credits, refund from anti dumping subsidy, refund of prior years property taxes, etc. The decrease in other income, net is attributable to $3.9 million natural gas settlement received in fiscal 2009 compared to $1.3 million received in fiscal 2010 and the recording of a natural gas hedge benefit of $2.2 million in fiscal 2009. There was no natural gas hedge benefit recorded in fiscal 2010. 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). Our income tax expense was $9.9 million in fiscal 2010 compared to an income tax benefit of $13.8 million in fiscal 2009. Our effective tax rate was 28.1% in fiscal 2010 compared to an effective income tax rate benefit of 51.4% in fiscal 2009. The change in our effective tax rate was attributable to the tax benefits related to California sales tax credits and hiring credits under the Enterprise Zone (“EZ”) designation and an overall reduction to our state tax liability due to filing in lower tax rate jurisdictions.

Net income (loss). Net income was $25.4 million for fiscal 2010 compared to net loss of $13.1 million for 2009.

Fiscal 2009 Results Compared With Fiscal 2008

Net sales. Net sales in fiscal year 2009 decreased 63% to $551.8 million compared to $1.5 billion in fiscal 2008. The decrease resulted from a decrease in sales volume and a lower average selling price. Sales volume decreased 45% and the average selling price decreased 34% compared to fiscal 2008. The lower sales volume decreased net sales approximately $656.8 million and the lower average selling price decreased net sales approximately $248.2 million. The remaining decrease in net sales was primarily from lower freight revenue compared to fiscal 2008.

Gross (loss) profit. Our gross profit rate in fiscal 2009 decreased 5.3% of net sales to a negative 1.7% of net sales. The decrease was due to lower sales volume and lower average selling price. This decrease was partially offset by a decrease in the average slab costs of 44% compared to fiscal 2008. The write-down of inventory to the lower of cost or market of $44.5 million represents approximately 8.1% of net sales.

Selling, general and administrative (SG&A) expenses. Our SG&A rate in fiscal 2009 increased 1.7% of net sales to 3.2% of net sales even though there was a net decrease of $5.3 million, the majority of which was labor cost. The percentage increase in our SG&A rate is largely attributable to a decrease of our net sales since the majority of our SG&A expenses are fixed costs. Our SG&A expenses consist primarily of labor and various administrative expenses. Labor cost comprised of approximately 58% and 55% of our SG&A expenses for fiscal 2009 and 2008, respectively.

Net interest expense. During 2009, net interest expense decrease $664 thousand, or 7.5%, to $8.2 million when compared to 2008. The decrease in net interest expense was attributable to an increase in capitalized interest of $1.8 million when compared to 2008. The increase in capitalized interest was largely attributable to the construction of our second reheat furnace. The decrease was partially offset by a decrease in interest income of $1.2 million due to a lower cash balance maintained during the year and lower interest rates in fiscal 2008.

Other income (expense), net. Other income, net was $8.5 million for fiscal 2009, compared with an expense of $409 thousand in fiscal 2008. Other income is comprised of miscellaneous income items such as rental income, proceeds from legal settlements, gain on sale of environmental credits, refund from anti dumping subsidy, refund of prior years property taxes, etc. The increase in other income, net is largely attributable to $3.9 million natural gas settlement received in fiscal 2009 compared to $2.0 million received in fiscal 2008 and the recording of a natural gas hedge benefit of $2.2 million in fiscal 2009 compared to an expense of $2.3 million in fiscal 2008. 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 (benefit) expense. During 2009, our income tax benefit was $13.8 million, as compared to an income tax expense of $6.3 million during 2008. Our effective tax rate benefit was 51.4% during 2009 compared to an effective income tax rate of 32.3% during 2008. The change in the effective tax rate was attributable to a sales tax credit and hiring credit under the Enterprise Zone (“EZ”) designation. We became eligible for the EZ credits effective October 2006.

Net (loss) income. Net loss was $13.1 million for fiscal 2009 compared to net income of $13.3 million for 2008.

Liquidity and Capital Resources

We ended fiscal 2010 with $27.7 million of cash and cash equivalents compared with $61.7 million at the end of fiscal 2009. Working capital, the excess of current assets over current liabilities, was $233.6 million at the end of fiscal 2010, up from $222.0 million at the end of fiscal 2009. We ended fiscal 2010 with $110.0 million in financing available under our revolving credit facility.

Cash Flows

The following table summarizes our cash flows from operating, investing and financing activities for each of the past two fiscal years ($ in thousands):


	2010			2009
Total cash provided by (used in):
Operating activities	$	21,609		$	102,458
Investing activities		(31,118	)		(46,667	)
Financing activities		(24,443	)		(5,000	)

Increase (decrease) in cash and cash equivalents	$	(33,952	)	$	50,791

Operating Activities

Cash provided by operating activities was $21.6 million in fiscal 2010 compared with $102.5 million in fiscal 2009. The changes were due primarily due to changes in net income, operating assets and liabilities and lower of cost or market adjustment between fiscal years. The changes in operating assets and liabilities were due primarily to changes in trade accounts receivable, inventories, prepaid income taxes, accounts payable and other accrued expenses and liabilities. The increase in trade accounts receivable was primarily due to an increase in demand for our products at a higher average selling price which was a cash outflow of $41.9 million. The increase in inventories was due to an increase in the average cost which was partially offset by lower inventory levels and the write-down of inventory to the lower of cost or market which resulted in a cash outflow of $2.2 million. The increase in prepaid income taxes was attributable to estimated taxes payments due to higher taxable income which was partially offset by income tax refunds received during fiscal 2010 which resulted in a cash outflow of $1.5 million. The increase in accounts payable was primarily due to an increase in raw material purchases at a higher average price to keep up with increased demand and the timing of vendor payments which resulted in a cash inflow of $9.8 million. The increase of other accrued expenses and liabilities was due primarily to an increase in accrued salaries and benefits and the recording of uncertain tax positions which resulted in a $2.4 million cash inflow.

Investing Activities

Cash used in investing activities was $31.1 million in fiscal 2010 compared with $46.7 million in fiscal 2009. The decrease in cash used by investing activities was primarily attributable to the reduction in capital expenditures, specifically the construction of the second reheat furnace. The primary purpose of our capital expenditures were to support our expansion plans and improve our operational efficiency.

Financing Activities

Cash used in financing activities was $24.4 million in fiscal 2010 compared with $5.0 million in fiscal 2009. The financing activities during fiscal 2010 were repayments of our term loan of $10.0 million and the payment of $14.4 million in dividends to our stockholders. We repaid $5.0 million of our term loan in fiscal 2009.

Sources of Liquidity

Our business is capital intensive and requires substantial expenditure for the purchase and maintenance of our operations. Our short-term and long-term needs arise primarily from capital expenditure, working capital requirements and principal and interest payments to our outstanding indebtedness. We will meet these requirements by operating activities and borrowings for the next fiscal year. However, our ability to meet our debt service obligations and reduce our total debt will depend on future performance which, in turn, will depend on general economic, financial and business conditions, along with competition, legislation and regulatory factors that are largely beyond our control. Although, we believe our operating results, cash flows and access to capital market resources will be sufficient for repayment of our indebtedness in the future, we cannot assure that this will be the case.

In September 2010, we entered into a five year $110.0 million credit facility with Wells Fargo Bank, N.A., as administrative agent and lender. Subject to the satisfaction of customary conditions and a borrowing base, advances under this facility may be made at any time prior to the credit facility termination date. There were no borrowings under the credit facility as of December 31, 2010. The credit facility is collateralized by accounts receivable and inventory. Advances under this facility may be used for working capital, capital expenditures, payment of dividends, letters of credit and other lawful corporate purposes, including the refinancing of existing debt. This credit facility replaced the existing $110.0 million credit facility with Mizuho Corporate Bank which matured on September 29, 2010.

On March 28, 2008, we entered into a Term Loan Agreement with The Bank of Tokyo-Mitsubishi, Ltd. for a $40.0 million unsecured five-year term loan maturing April 2013 to finance construction of our second reheat furnace and other working capital needs. The Term Loan Agreement provided for a single loan disbursement of the entire principal amount on April 1, 2008. Interest on the principal balance of the loan shall accrue at a rate of 3.38% for the first two years of the loan and a rate of 3.58% for the remaining three years of the loan and is payable quarterly commencing July 2008. Quarterly principal payments commenced in July 2009 and all the payments due were made as of December 31, 2010.

In September 2005, we entered into a five year $110.0 million credit facility with a bank group led by Mizuho Corporate Bank, as administrative agent and a lender, The Bank of Tokyo-Mitsubishi, Ltd., Citibank (West), FSB and Wells Fargo Bank. Subject to the satisfaction of customary conditions and a borrowing base, advances under this credit facility may be made at any time prior to the credit facility termination date. This credit facility expired on September 29, 2010.

On March 22, 2004, we issued an aggregate of $150.0 million of ten-year, 6.125% senior unsecured notes due in March 2014. With the proceeds of this issuance and cash on hand, we retired our 8.50% senior notes due in 2009. Interest on our 6.125% senior notes is payable on March 15 and September 15 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. The indenture governing the notes contains covenants that limit our ability to incur additional indebtedness, pay dividends, redeem or repurchase capital stock and make investments, create liens, sell assets, sell capital stock of certain subsidiaries, engage in transactions with affiliates and consolidate, merge or transfer all or substantially all of our assets and the assets of certain subsidiaries on a consolidated basis. We were in compliance with all covenants and restrictions at December 31, 2010 and 2009.

The indenture governing our 6.125% senior notes allows us to redeem the notes in whole or in part at any time after March 15, 2009. On March 9, 2011, we gave notice of redemption to the holders of our senior notes pursuant to the terms of the indenture. The redemption price for the senior notes will be 101.021% of the face value of $150.0 million. The notice to redeem the notes is irrevocable and we expect to complete the redemption on April 8, 2011. On March 3, 2011, we entered into a five year $130.0 million unsecured term loan with Mizuho Corporate Bank to finance in part the redemption of the senior notes. The remaining balance of the redemption price will be financed from our credit facility with Wells Fargo Bank.

We currently have $6.9 million in material commitments for capital expenditures expected to be completed during fiscal 2011. These represent signed purchase orders for various production facility upgrades. Our total budget for capital improvements in 2011 is $32.3 million. We are committed, in the form of open purchase orders, to purchase $141.3 million in steel slabs, of which $77.5 million is from a related party.

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 meet our liquidity requirements for fiscal 2011.

Contractual Obligations and Commitments

The following table presents information regarding our contractual obligations and commitments as of December 31, 2010 ($ in thousands):


	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
Long Term Debt	$	175,000	$	10,000	$	15,000	$	150,000	$	—
Operating Leases		1,438		864		560		14		—
Purchase Obligations (1)		150,232		150,232		—		—		—
Estimated Interest Payments on Debt (2)		30,492		9,864		18,714		1,914		—
Planned Expenditures on Environmental Matters (3)		2,030		230		1,000		800		—
Other Long Term Liabilities Reflected on the Registrant’s Balance Sheet under GAAP		826		72		145		53		556

Total	$	360,018	$	171,262	$	35,419	$	152,781	$	556

(1)	Amounts relate to contractual commitments to purchase $141.3 million ($77.5 million from a related party) of steel slabs, material commitments for capital expenditures of $6.9 million and the remaining $2.0 million in assorted other contractual commitments.

(2)	Amounts represent the annual accrued interest on our $150.0 million ten year, 6.125% senior unsecured notes, which are due and payable in March 2014 and the interest on our $40.0 million five-year unsecured term loan maturing in April 2013.

(3)

Amounts reflect $230 thousand of self assessed environmental clean-up of our facility and $1.8 million of anticipated expenditures on environmental matters pursuant to a proposed remediation plan submitted to the California Department of Toxic Substances Control. See discussion in Item 1, Environmental Matters.

When market conditions warrant, we enter into contracts to purchase certain commodities used in the manufacturing of our products, such as electricity and natural gas. Some of these forward contracts do not require derivative accounting as we take possession of the commodities in the normal course of business whereas other forward contracts are accounted for as derivatives in accordance with the accounting literature related to derivatives and hedges by us. We currently have no contracts.

Critical Accounting Policies

Our financial statements are prepared in accordance with generally accepted accounting principles (“GAAP”). In connection with preparation of our financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

Our significant accounting policies are discussed in Note 1, Summary of Significant Accounting Policies, of the Notes to Financial Statements, included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. Management believes that the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results, and they require management’s most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain.

Allowance for Doubtful Accounts: We have attempted to reserve for expected credit losses based on 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.

Inventory Reserve: Inventory is stated at the lower of cost or market. We routinely evaluate the carrying value of inventories and make adjustments to reduce the cost of inventory to its net realizable value, if required, for market adjustments, estimated excess, obsolescence or impaired balances. Factors influencing these adjustments include change in demand, cost trends, product pricing and quality issues. Our inventory was written down to market value by $12.9 million $44.5 million and $135.0 million in 2010, 2009 and 2008, respectively.

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 was accrued in 2002 and is included in other liabilities in the 2010 and 2009 financial statements. The California Department of Toxic Substances Control (“DTSC”) has not yet completed its review and approval of our plan; however, preliminary discussions with DTSC have not indicated the need for any significant changes to the remediation plan or to our 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.

Self-insurance Liability: We are self-insured for workers’ compensation with a stop loss. The accrued liability associated with these programs is based on management’s estimate of the ultimate costs to settle known claims as well as claims incurred but not yet reported (“IBNR claims”) as of the balance sheet date. The estimated liability is not discounted and is based on information provided by our insurance brokers and insurers, combined with management’s judgments regarding a number of assumptions and factors, including the frequency and severity of claims, our claims development history, case jurisdiction, related legislation, and our claim settlement practice. Significant judgment is required to estimate IBNR claims as parties have yet to assert such claims. If actual claim trends, including the severity or frequency of claims, differ from management’s estimates, our financial results could be impacted.

Revenue Recognition: We recognize 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 when title and risk of loss are transferred to the customer. Sales to the affiliated company are at current market rates and terms. In certain cases, at the customer’s request, we 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 ASC Topic 605 have been met. As of December 31, 2010 and 2009, we had approximately 4,200 tons and 400 tons, respectively, of bill and hold product. Based on our average sales price at December 31, 2010 and 2009, the sales revenue was approximately $3.2 million and $250 thousand, respectively.

Recent Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010-6, “Improving Disclosures about Fair Value Measurements” (ASU 2010-6”). This update amended guidance and issued a clarification with regard to disclosure requirements about fair market value measurement. A reporting entity is required to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers. In addition, for measurements utilizing significant unobservable inputs, a reporting entity should present separately information about purchases, sales, issuances, and settlements. We adopted ASU 2010-6 on January 1, 2010. There was no impact upon adoption of ASU 2010-6 to our financial position or results of operations.

In February 2010, FASB issued ASU No. 2010-9, “Amendments to Certain Recognition and Disclosure Requirements” (“ASU 2010-9”). This amendment removed the requirement for a Securities and Exchange Commission (“SEC”) filer to disclose a date through which subsequent events have been evaluated in both issued and revised financial statements. This amendment is effective upon issuance date of February 24, 2010. There was no impact upon adoption of ASU 2010-9 to our financial position or results of operations.

Item 7A.

Quantitative and Qualitative Disclosures about Market Risk

In addition to the risks inherent in our operations, we are exposed to market risks, including interest rates and utility consumption rates.

Interest Rate Risk

Floating rate credit facility

At December 31, 2010, there were no borrowings on our $110.0 million floating rate credit facility. The carrying value of the floating rate credit facility approximates fair value as the interest rate is variable and resets frequently. Changes in

interest rates generally do not affect the fair value of our credit facility, but do affect earnings and cash flow. The credit facility bears interest at the Eurodollar rate or the prime rate, which was approximately 1.56% (one month rate) (including margin) and 3.25%, respectively, at December 31, 2010. We expect to borrow approximately $62.0 million from our credit facility during fiscal year 2011. We estimate that the average amount of debt outstanding under the facility for fiscal 2011 will be approximately $10.0 million. Therefore, a one-percentage point increase in interest rates would result in an increase in interest expense of $100 thousand for the year. We do not manage the interest rate risk on our credit facility through the use of derivative instruments.

Fixed rate debt

At December 31, 2010, our short-term and long-term fixed rate debt comprised of our $150.0 million senior notes and $40.0 million term loan of which $25.0 million is outstanding at December 31, 2010. Changes in interest rates generally affect the fair value of our fixed rate debt instruments. We do not have an obligation to repay our senior notes prior to maturity 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 term loan approximates the current rate available for similar types of financing and as a result the carrying amount approximates the fair value. We do not manage the interest rate risk on our fixed rate debt through the use of derivative instruments.

We do not believe that the future market rate risk related to our floating rate credit facility and fixed rate debt will have a material impact on our financial position, results of operations or liquidity.

Other Market Risks

Utility consumption rates

Our daily average electrical demand is approximately 35 megawatts to operate production equipment in manufacturing our products. We are currently a full-service bundled utility customer of Southern California Edison. Due to higher projected production in 2011, our electricity costs are expected to be higher than 2010 levels. In 2010, our electricity costs accounted for 1.9% of our cost of goods sold compared to approximately 2.8% in 2009.

At full capacity, we generally utilize a daily average of approximately 12,000 million British thermal units, or MMBTUs, of natural gas to produce our products. To stabilize price 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.

We currently have in place fixed price purchase agreements for approximately 6% of our natural gas commodity requirements for 2011. 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 2010, our natural gas costs accounted for approximately 1.6% of our cost of goods sold compared to approximately 2.4% in 2009.

Item 8.

Financial Statements and Supplementary Data

The Financial Statements required to be filed hereunder are set forth on pages F-1 through F-20.

Item 9.

Changes in and Disagreement with Accountants on Accounting and Financial Disclosure

None.

Item 9A.

Controls and Procedures

With the participation of management, our President and Chief Executive Officer and the Executive Vice President, Finance and Administration evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2010. Based upon this evaluation, the President and Chief Executive Officer and the Executive Vice President, Finance and Administration concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) were effective as of December 31, 2010.

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our fourth quarter ended December 31, 2010, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Under the supervision and with the participation of management, our President and Chief Executive Officer and the Executive Vice President, Finance and Administration conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation under the framework in Internal Control – Integrated Framework, management concluded that our internal control over financial reporting was effective as of December 31, 2010.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report on Form 10-K.

Item 9B.

Other Information

There was no information required to be disclosed in a Current Report on Form 8-K during the fourth quarter of the fiscal year covered by this Annual Report on Form 10-K that was not reported.

PART III

Item 10.

Directors and Executive Officers of the Registrant

The following table sets forth our Directors and executive officers as of December 31, 2010. Directors are elected to terms of one year. All Directors hold their positions until their term expires and until their respective successor is elected and qualified. Executive officers are elected by and serve at the discretion of the Board of Directors until their term expires and their successor is duly chosen and qualified.


Name	Age	Position
Hiroshi Adachi	55	Chairman of the Board of Directors
Aristides Corbellini	63	Director
Kazuo Fujisawa	52	Director
Renato Almeida	50	Director
Vicente Wright	58	President and Chief Executive Officer
Brett Guge	56	Executive Vice President, Finance and Administration and Corporate Secretary
Ricardo Bernardes	47	Executive Vice President, Commercial
Toshiyuki Tamai	59	Executive Vice President, Operations

Hiroshi Adachi began serving as Chairman of the Board of Directors on April 1, 2010. Before serving as Chairman of the Board of Directors, Mr. Adachi served as a Director from April 2007. He is currently President of JFE Steel America, Inc. since April 2007. From 1980 to 2006, Mr. Adachi has held various management positions at NKK Corporation, NKK America and JFE Steel Corporation with a primary focus on sales. From 1990 to 1994, he was stationed in Los Angeles, California, as Manager. He graduated from Tokyo University in 1980 with a Bachelor’s Degree in Economics and from John Molson School of Business, Concordia University in Montreal, Canada with a Master’s Degree in Business Administration in 1986.

Aristides Corbellini has served as a Director since October 2008. He also serves as Director of Vale Steel Department, a position he has held since September 2008. Before joining Vale, he was President and CEO of ThyssenKrupp Companhia Siderúrgica do Atlântico, a 5.2 billion euro joint venture of ThyssenKrupp Steel with Vale, since its incorporation in September 2004. Mr. Corbellini originally joined ThyssenKrupp Steel in 1998 to establish Galvasud S.A., a joint venture between ThyssenKrupp Steel and Companhia Siderúrgia Nacional. In his position of President and CEO, he was responsible for this $250 million investment. Mr. Corbellini started his career at Westinghouse Electric Co. In 1974, he moved onto Snamprogetti, the engineering subsidiary of E.N.I., the Italian state oil company. After two years, Mr. Corbellini joined the Petrobras Group, where he remained for eleven years, until 1987, during the last five years as the Executive Director of Petrobras International Trade arm. Between 1987 and 1998, Mr. Corbellini worked as a private entrepreneur. During this period he founded institutions such as Boss-Assessoria de Comércio International S/C, an international consulting and steel trader, and Novatrading S.A., a trading company in partnership with Thyssen Stahlunion of Dusseldorf, Germany. He graduated from Politécnico di Milano in Italy with a Doctorate Degree in Electrical Engineering and from Pontificia Universidade Católica do Rio de Janeiro – PUC in Brazil with an Electrical Engineering degree.

Kazuo Fujisawa has served as a Director since April 2010. He is currently General Manager of Overseas Business Planning within the Corporate Planning Department of JFE Steel Corporation, a position he has held since 2006. Mr. Fujisawa joined NKK Corporation in 1982, and has held management positions in sales, engineering and in an assistant role to Chief Executive Officers. After NKK Corporation merged with Kawasaki Steel to create JFE Steel in 2003, he has held positions in the Corporate Planning Department. He graduated from Seattle University, Seattle, Washington in 1980 with a Bachelor’s Degree in Liberal Arts and from Sophia University, Japan in 1982 with a Bachelor’s Degree in the Foreign Languages.

Renato Almeida has served as a Director since July 2008. He is currently Department Director n Vale’s Head Office in Brazil, since January 2011. He was Managing Director in Vale Asia Corporation in Tokyo, Japan from 2006 until December 2010. Before that position, Mr. Almeida was Commercial Director of Minerações Brasileiras Reunidas in Belo Horizonte, Brazil and General Manager of Marketing for Vale S.A. (formerly Companhia Vale do Rio Doce) in Rio de Janeiro, Brazil. He graduated from Universidade Federal de Minas Gerais in Brazil with a Mechanical Engineering degree and from Fundacão Dom Cabral in Brazil with a Master’s Degree in Business Administration.

Vicente Wright began serving as President and Chief Executive Officer of California Steel on July 1, 2008. Before serving as President and Chief Executive Officer, Mr. Wright served as Chairman of the Board of Directors from July 2004. In January 2007, he returned to Rio de Janeiro, Brazil to assume his new responsibilities Managing Director for the Iron and Pellets Sales for the Americas and Commercial Administration Department of Vale S.A. (formerly Companhia Vale do Rio Doce). From October 2004 to December 2006, he held the position of Managing Director of Rio Doce America, a subsidiary of Vale S.A. in New York, USA. Mr. Wright was named President and Chief Executive Officer of the California Steel Industries in February 2003 after serving as our 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 Vale S.A. From 1987 to 1988, he served as Iron Ore Sales General Manager for Rio Doce Asia Ltd., a subsidiary of Vale S.A. in Tokyo, Japan. 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, he served as Purchasing Executive and Slab Marketing Manager at Companhia Siderurgica de Tubarão (“CST”). Mr. Wright was a member of the Board of Directors of Companhia Siderurgica Nacional (“CSN”), 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 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.

Brett Guge began serving as Executive Vice President, Finance and Administration in 2010 overseeing all financial and administrative matters and has served as 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.

Ricardo Bernardes began serving as Executive Vice President, Commercial in 2010 overseeing slab acquisition and transportation and product sales. He joined California Steel in September 2003 as Executive Vice President, Finance and Chief Financial Officer. Mr. Bernardes 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. Bernardes holds a Master of Business Administration Degree from the University of California, Los Angeles.

Toshiyuki Tamai has served as Executive Vice President, Operations since July 2001. He has been with California Steel 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 California Steel Industries, 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.

Board Committees

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

The Compensation Committee is comprised of four members: Mr. Hiroshi Adachi, Chairman, and Mr. Kazuo Fujisawa, Director, both of JFE Steel Corporation, and Mr. Aristides Corbellini, Director, and Mr. Renato Cantanhede, both of Vale S.A. (formerly Companhia Vale do Rio Doce). This committee met once during 2010 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 Mr. Hiroshi Adachi , Chairman, and Mr. Kazuo Fujisawa, Director, both of JFE Steel Corporation, and Mr. Renato Almeida, Director, and Mr. Marcelo Tertuliano, both of Vale S.A. (formerly Companhia Vale do Rio Doce). This committee met twice during 2010. 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 as the Board has determined that such an expert is not necessary to properly carry out its oversight responsibilities.

Code of Ethics

We have adopted a written code of ethics for our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. A copy of the current Code of Ethics is attached to our Annual Statement on Form 10-K filed with the Securities and Exchange Commission on March 28, 2007.

Item 11.

Executive Compensation

Compensation Discussion and Analysis

This section discusses the compensation paid to the principal executive and principal financial officers of California Steel, as well as the three other most highly compensated executive officers of the Company (collectively, the “Executive Officers”).

Compensation Process

Executive compensation is the responsibility of the Board of Directors. The Board considers recommendations from the Compensation Committee of the Board with respect to the periodic review of the compensation of the Executive Officers and the design and structure of incentive compensation to reward executive performance. The Compensation Committee further 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.

Objectives of Executive Compensation

The objectives of the executive compensation system at California Steel are to (i) maximize our annual profitability, (ii) reward the achievement of Company and individual objective performance targets, (iii) develop management competency and skill in a variety of areas related to our operations, and (iv) provide a compensation package that is competitive within the steel industry and other manufacturing sectors.

Elements of Executive Compensation

The executive compensation system is designed to achieve the objectives of California Steel and reward Executive Officer performance in three ways:

•

Base Salary – California Steel seeks to provide a base salary to each of the Executive Officers which is competitive and will retain executives and thus provide stability and continuity within senior management. Base salary is benchmarked from time to time within the steel industry and other manufacturing sectors and is subject to adjustment on an annual basis in the form of cost of living adjustment applicable to all Executive Officers and/or individual changes. All Executive Officers were given a 2.0% increase in base salary in 2010.

•

Employee Profit Sharing Plan – The Executive Officers are eligible to receive profit sharing bonuses twice a year along with all other employees of the California Steel pursuant to our profit sharing plan. The purpose of this plan is to provide an incentive for all employees, including the Executive Officers, to contribute to our success and to maximize corporate profitability. Our profit sharing plan awards bonuses to all employees based on a pool amount equal to 8% of our income before taxes excluding gain or loss on disposition of fixed assets and some other adjustments. 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 California Steel 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.

•

Executive Incentive Plan – The Executive Plan for the Executive Officers is made up of two components:

(i) Executive Income Sharing – There is a separate income sharing plan for the Executive Officers which provides an additional reward and incentive to the Executive Officers for maximizing corporate profitability. The income sharing component of the Executive Incentive Plan is based on a pool amount equal to 0.5% of our income before taxes excluding gain or loss on disposition of fixed assets and some other adjustments. The Executive Officers participate in the pool based on a fixed percentage for each executive position, subject to a maximum. The percentage allocation of each executive and the basis for determining the executive income sharing pool is subject to review and approval of our Board of Directors.

(ii) Target Achievement – The second component of the Executive Incentive Plan is an individual target achievement component which rewards each Executive Officer with points for performance in a number of target areas. Target areas include general Company performance targets for all Executive Officers such as cash flow, on-

time performance and plant safety and more specific target areas for individual Executive Officers such as yield, margin, inventory, sourcing of manufacturing inputs and sales. Finally, each Executive Officer is further given targets for improving management competencies in areas such as initiative, innovation, teamwork, resource utilization, governance and adherence to our principals. Points are awarded in ranges and the point total for each Executive Officer corresponds with a range of incentive bonus values, with higher point values earning greater bonus awards, subject to a maximum amount for each officer.

Equity Compensation and Incentives

We do not have any public equity outstanding and do not award equity compensation or incentives to our Executive Officers.

Executive Officer Benefits and 401K Plan

In addition to the compensation described above, we offer certain standard benefits, including paid vacation, subsidized health and dental insurance, subsidized life insurance, and an automobile allowance.

We further maintain the California Steel Industries, Inc. 401(k) Savings Plan (“401(k) 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 $16,500 for 2010 and $5,500 as a catch-up contribution for those participants who are 50 years old or older at December 31, 2010. The 401(k) Plan provides for our discretionary matching and profit sharing contributions. We currently match 100% of the participant’s deferral equal to 4% of his or her compensation and an additional 50% of deferrals equal to the next 2% of the participant’s compensation under the 401(k) Plan each year. Deferrals made with respect to the Employee Profit-Sharing Plan are not subject to matching contributions. 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 (as defined under the Plan) 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.

Furthermore, the President and Chief Executive Officer, the Executive Vice President, Commercial and Executive Vice President, Operations, who are dispatched personnel from our two stockholders located in Japan and Brazil, receive certain additional extended paid home leave and expense reimbursements (which are described in greater detail below). These benefits are intended to compensate the dispatched personnel for the hardships of working for extended periods outside of their home country.

Summary Compensation Table

The following summary compensation table sets forth information regarding compensation earned in the fiscal years 2010, 2009 and 2008 by our Principal Executive Officer, Principal Financial Officer and each of our other three most highly compensated executive officers.

Summary Compensation Table


											Change in
											Pension
											Value
			Annual Compensation								and Non-		All
							Stock		Incentive		Qualified		Other
							and		Compens-		Deferred		Compens-
							Option		ation		Compensation		ation
Name and Principal Position	Year		Salary		Bonus		Awards		(2)		Earnings		(3)		Total
Masakazu Kurushima (1)		2008	$	195,272	$	—		n/a	$	5,159	$	—	$	11,194	$	211,625
President and Chief Executive Officer
Vicente Wright (1)		2010		398,175		—		n/a		3,519		—		114,520		516,214
President and Chief		2009		390,544		—		n/a		122,104		—		46,430		559,078
Executive Officer		2008		193,770		—		n/a		9,168		—		51,798		254,736
Brett Guge		2010		236,369		—		n/a		3,519		86,653		33,203		359,744
Executive Vice President,		2009		231,839		—		n/a		80,824		83,170		22,122		417,955
Finance & Administration & Corporate Secretary		2008		231,839		—		n/a		14,327		88,600		67,759		402,525
Ricardo Bernardes		2010		256,885		—		n/a		3,519		—		43,642		304,046
Executive Vice President,		2009		251,962		—		n/a		85,324		—		78,594		415,880
Commercial		2008		251,962		—		n/a		14,327		—		100,557		366,846
Toshiyuki Tamai		2010		256,885		—		n/a		3,519		—		76,480		336,884
Executive Vice President,		2009		251,962		—		n/a		68,449		—		55,243		375,654
Operations		2008		251,962		—		n/a		14,327		—		69,315		335,604
James Wilson (*)		2008		231,839		—		n/a		14,327		160,332		61,081		467,579
Vice President, Commercial

(*)	- James Wilson resigned from California Steel to pursue other interest on January 8, 2009.

(1)	Mr. Vicente Wright took over the position following the resignation of Mr. Masakazu Kurushima on July 1, 2008 as Mr. Kurushima became Chairman of the Board of Directors.

(2)	Incentive compensation is composed of participation by the Executive Officers in the Employee Profit Sharing Plan and the Executive Incentive Plan. The breakdown for each Executive between the two plans for fiscal years 2010, 2009 and 2008 is as follows:


Name	Year		Employee Profit Sharing Plan		Executive Incentive Plan		Total Incentive Compensation
Masakazu Kurushima		2008	$	5,159	$	—	$	5,159
Vicente Wright		2010 2009 2008		3,519 893 9,168		— 121,211 —		3,519 122,104 9,168
Brett Guge		2010 2009 2008		3,519 893 14,327		— 79,931 —		3,519 80,824 14,327
Ricardo Bernardes		2010 2009 2008		3,519 893 14,327		— 84,431 —		3,519 85,324 14,327
Toshiyuki Tamai		2010 2009 2008		3,519 893 14,327		— 67,556 —		3,519 68,449 14,327
James Wilson		2008		14,327		—		14,327

(3)	See “Summary Compensation Table – All Other Compensation” below for details of all other compensation.

Summary Compensation Table -

All Other Compensation


Name	Year		Perquisites			Tax Reimburse- ment		Lump Sum Payment (1)		Company Contributions to Defined Contribution Plan (2)		Total of All Other Compensation
Masakazu Kurushima		2008	$	6,525	(3)	$	4,669	$	—	$	—	$	11,194
Vicente Wright		2010		65,797	(4)		36,436		—		12,287		114,520
		2009		23,917	(5)		18,007		—		4,506		46,430
		2008		9,532	(6)		6,411		26,166		9,689		51,798
Brett Guge		2010		13,149	(7)		7,959		—		12,095		33,203
		2009		12,930	(7)		6,517		—		2,675		22,122
		2008		34,999	(7)		6,259		15,533		10,968		67,759
Ricardo Bernardes		2010		20,856	(8)		10,507		—		12,279		43,642
		2009		43,153	(9)		32,534		—		2,907		78,594
		2008		43,453	(10)		29,223		16,881		11,000		100,557
Toshiyuki Tamai		2010		52,966	(11)		23,514		—		—		76,480
		2009		33,380	(12)		21,863		—		—		55,243
		2008		35,247	(13)		17,187		16,881		—		69,315
James Wilson		2008		27,128	(7)		6,502		15,533		11,918		61,081

(1)	Represents a one-time special lump sum payment approved by the Board of Directors of 6.7% of the base salary.

(2)	Represents matching contributions made to the executive’s account in the Company’s 401(k) plan.

(3)	Represents $5,875 in car allowance and $650 in medical expenses and home leave reimbursements. Home leave reimbursement is paid to executives who are foreign nationals in connection with trips by them and their family members to their country of origin.

(4)	Represents $11,860 in car allowance and $53,937 in medical expenses and home leave reimbursements. Home leave reimbursement is paid to executives who are foreign nationals in connection with trips by them and their family members to their country of origin.

(5)	Represents $11,750 in car allowance and $12,167 in medical expenses and home leave reimbursements. Home leave reimbursement is paid to executives who are foreign nationals in connection with trips by them and their family members to their country of origin.

(6)	Represents $7,211 in car allowance and $2,321 in medical expenses and home leave reimbursements. Home leave reimbursement is paid to executives who are foreign nationals in connection with trips by them and their family members to their country of origin.

(7)	Represents car allowance and other fringe benefits.

(8)	Represents $12,250 in car allowance and $8,606 in medical expenses and home leave reimbursements. Home leave reimbursement is paid to executives who are foreign nationals in connection with trips by them and their family members to their country of origin.

(9)	Represents $11,832 in car allowance and $31,321 in medical expenses and home leave reimbursements. Home leave reimbursement is paid to executives who are foreign nationals in connection with trips by them and their family members to their country of origin.

(10)	Represents $9,750 in car allowance and $33,703 in medical expenses and home leave reimbursements. Home leave reimbursement is paid to executives who are foreign nationals in connection with trips by them and their family members to their country of origin.

(11)	Represents $12,250 in car allowance and $40,716 in medical expenses and home leave reimbursements. Home leave reimbursement is paid to executives who are foreign nationals in connection with trips by them and their family members to their country of origin.

(12)	Represents $11,250 in car allowance and $22,130 in medical expenses and home leave reimbursements. Home leave reimbursement is paid to executives who are foreign nationals in connection with trips by them and their family members to their country of origin.

(13)	Represents $11,250 in car allowance and $23,997 in medical expenses and home leave reimbursements. Home leave reimbursement is paid to executives who are foreign nationals in connection with trips by them and their family members to their country of origin.

Pension Benefits

We currently have no defined benefit pension plan.

Non-Qualified Defined Benefit and Deferred Compensation Plans

The following table sets forth the non-qualified deferred compensation benefits payable to the named executive officer for the fiscal year ended 2010. The benefits mentioned below are calculated under the plan as described below.

Name

Plan Name

Number of Years
Credited Service

Present Value of
Accumulated Benefits

Payment During
Last Fiscal Year

Brett Guge

SERP

556,026

—

Supplemental Executive Retirement Plan

On September 19, 2000, California Steel entered into a Supplemental Executive Retirement Plan with Brett J. Guge, Executive Vice President, Finance and Administration and Corporate Secretary, who has been employed with us since 1997, intended to induce Mr. Guge to remain in our employ. Upon his retirement, we are 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, using a 5% discounted rate. “Annual Compensation” is defined in the Plan to include average salary plus short-term incentive payments over the highest three years in the last five years. 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. Upon death of the Executive, we agree to pay the benefits to the Executive’s designated beneficiary. At December 31, 2010, he was vested 44% under this agreement. In the event of a change in control in which the successor does not assume liabilities under these Plans, we will pay to Mr. Guge a single lump sum payment equal to the present value of the retirement benefit.

Severance and Change in Control Payments

See description of Supplemental Executive Retirement Plans under the “Non-Qualified Defined Benefit and Deferred Compensation Plans” item above.

Director Compensation

No compensation payments are made to Directors or Committee Members of California Steel. However, JFE Steel Corporation and Vale S.A. (formerly Companhia Vale do Rio Doce) were paid by us for providing the services of the Directors and the Committee Members for fiscal year 2010. The payment for Directors, except the Chairman, was $3,000 per month and $1,000 per month for committee members. For services of the Chairman of the Board of Directors, we paid JFE Steel Corporation $476,430 during fiscal 2010.

Shareholders’ Agreement

We are owned 50% by JFE Steel Corporation (formerly Kawasaki Steel Corporation), a Japanese corporation, and 50% by Vale Limited (formerly Rio Doce Limited), a New York corporation and a subsidiary of Vale S.A. (formerly Companhia Vale do Rio Doce), a Brazilian corporation. In June 2004, JFE Steel USA, Inc., a Delaware corporation (formerly Kawasaki Steel Holdings (USA), Inc.), also a subsidiary of JFE Steel Corporation, transferred its shares to JFE Steel Corporation. Our two stockholders entered into a Shareholders’ Agreement dated April 1, 2008, replacing the June 27, 1995 and June 1, 1987 Shareholders’ Agreements. The Shareholders’ Agreement, among other things, establishes the threshold for decisions which are within the authority of the Board and those decisions that require stockholder approval. 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 four directors, with the chairman being elected by and among the directors. Each stockholder shall have the right to appoint two Directors. The stockholders have further agreed to instruct their representatives on the Board of Directors to appoint the executive officers of California Steel Industries as follows: the President/CEO is jointly appointed, the officers responsible for financial matters is appointed by the President/CEO in consultation with the Vale Limited (formerly Rio Doce Limited) representatives, the officers responsible for product, quality control, engineering and technology are appointed by the President/CEO in consultation with the JFE Steel Corporation representatives and all other officers are appointed by the President/CEO in consultation with the Board. The new Shareholders’ Agreement eliminates the Consultative Council as a mechanism for resolving deadlocks and stockholder disputes and replaces this mechanism with a consultation process between the stockholder representatives to resolve any deadlock among the Directors. If the stockholder representatives cannot resolve a deadlock, then no action is taken on the disputed item. Because no stockholder holds a majority of our stock and the Directors and stockholder representatives 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 and the Board of Directors. If a deadlock was to occur and the stockholder representatives could not resolve the issue, then action on the issue that is creating the deadlock is not taken and there is no further mechanism of dispute resolution. The Shareholders’ Agreement contains an arbitration clause; however, this clause does not apply to deadlocks and is limited to disputes over the enforcement of the terms of the Agreement.

The Shareholders’ Agreement provides that the stockholders shall recommend to their representatives on the Board that we distribute from our profits the maximum dividend possible after taking into account any limitations imposed by applicable law, the restrictions contained in our financing agreements, and after taking into consideration factors such as maintaining competitiveness, our financial position and cash flow. 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.

Dispatched Personnel

Pursuant to agreements with our stockholders Vale S.A. (formerly Companhia Vale do Rio Doce), and JFE Steel Corporation, certain of our executive officers and employees coming from the stockholders are treated as dispatched personnel, which means that these executive officers and employees retain active employment status in their home country with the stockholder who appointed them. These agreements further require that we provide certain benefits to employees who have been sent by a stockholder to work at California Steel, such as extended home leave, home leave reimbursements and some other benefits. We further have an agreement with our stockholder, JFE Steel Corporation, to reimburse JFE Steel Corporation for the salary of employees who are designated as dispatched personnel, whereas dispatched personnel from our stockholder, Vale S.A. (formerly Companhia Vale do Rio Doce), are paid directly by us.

Executive officers who in 2010 were treated as dispatched personnel from JFE Steel Corporation and its subsidiaries included only Toshiyuki Tamai. Executive officers who in 2010 were treated as dispatched personnel from Vale S.A. (formerly Companhia Vale do Rio Doce) and its subsidiaries included Vicente Wright and Ricardo Bernardes. Notwithstanding the retention of formal active status, all individuals designated as dispatched personnel are full time employees of California Steel.

The compensation and benefits of executive dispatched personnel, including any home leave reimbursement, is set forth in the Summary Compensation Table in Item 11.

Compensation Committee Interlocks and Inside Participation

Mr. Hiroshi Adachi, Chairman, Mr. Aristides Corbellini, Director, Mr. Kazuo Fujisawa, Director, and Mr. Renato Cantanhede served as members of our Compensation Committee. None of the members of the Compensation Committee was, during 2010, an officer, employee or formerly an officer or employee of California Steel.

Mr. Adachi served as President of JFE Steel America, Inc. during 2010. In 2010, Mr. Fujisawa served as General Manager of Overseas Business Planning, Corporate Planning Department of JFE Steel Corporation. In 2010, Mr. Corbellini served as Director of Vale S.A. Steel Department (Companhia Vale do Rio Doce). In 2010, Mr. Cantanhede served as Benefits Manager for Vale S.A. (formerly Companhia Vale do Rio Doce).

Board Compensation Committee Report on Executive Compensation

The Compensation Committee has reviewed and discussed with management the disclosures contained in the Compensation Discussion and Analysis section of this Item 11. Based upon this review and our discussions, the Compensation Committee recommended to its Board of Directors that the Compensation Discussion and Analysis section be included in this Annual Report on Form 10-K.

Submitted by the Compensation Committee of the Board of Directors:

Hiroshi Adachi

Aristides Corbellini

Kazuo Fujisawa

Renato Cantanhede

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth, as of December 31, 2010, information regarding the shares of our common stock beneficially owned by each stockholder that beneficially owns in excess of 5% of the outstanding shares of our common stock. No director or named executive officer beneficially owns any shares of our common stock.


	Common
Name of Beneficial Owner	Number		% of Class
Vale Limited (1)		2,000		50	%
546 5th Avenue, 12th Floor
New York, New York 10036
JFE Steel Corporation (2)		2,000		50	%
2-3 Uchisaiwai-cho 2-chome
Chiyoda-ku, Tokyo 100-0011 Japan

(1)	Vale Limited (formerly known as Rio Doce Limited) is a subsidiary of Vale S.A. (formerly Companhia Vale do Rio Doce), a Brazilian corporation.

(2)	In 2004, JFE Steel U.S.A., Inc., transferred its common stock in California Steel to JFE Steel Corporation.

Item 13.

Certain Relationships and Related Transactions, and Director Independence

Our stockholders, JFE Steel Corporation, and Vale Limited (formerly Rio Doce Limited), a subsidiary of Vale S.A. (formerly 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.

We have transactions in the normal course of business with JFE Steel Corporation, an affiliated company. During 2010, we purchased $70.0 million of goods and services and recorded revenues of $67.3 million from JFE Steel Corporation. We conducted arms-length negotiations with JFE Steel Corporation in 2010. The executive officer negotiating the market price for the steel slab was the Executive Vice President, Commercial.

We further maintain contractual relationships with our stockholders in the form of Dispatched Personnel Agreements, as described in Item 11. Executive Compensation – Dispatched Personnel. These agreements provide for certain benefits and salary reimbursements with respect to personnel who are sent by the stockholders to work at California Steel. All compensation and benefits paid to such personnel, including salary which is reimbursed, is set forth in Item 11. Executive Compensation – Summary Compensation Schedule.

On May 22, 2009, Companhia Vale do Rio Doce changed its legal name to Vale S.A.

Item 14.

Principal Accounting Fees and Services

Aggregate fees billed by principal accountant in the past two years.


	2010		2009
Ernst & Young, LLP
Audit Fees	$	230,000	$	264,000
Audit Related Fees	$	48,713	$	97,067
Tax Fees	$	131,498	$	436,370
Other Fees	$	38,942	$	18,000

Audit Fees. Audit fees consist of amounts billed for professional services rendered for the audit of our annual financial statements included in our Annual Reports on Form 10-K, and reviews of our interim financial statements included in our Quarterly Reports on Form 10-Q.

Audit Related Fees. Audit related fees consist of fees billed for professional services that are reasonably related to the performance of the audit or review or our financial statements but are not reported under “Audit Fees.”

Tax Fees. Tax fees consist of fees for professional services for tax compliance activities, including the preparation of federal and state tax returns and related compliance matters.

Other Fees. Consists of amounts billed for services other than those noted above.

PART IV

Item 15.

Exhibits and Financial Statement Schedules

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

The following financial statements and schedule of the Registrant are included in response to Item 8 of this Annual Report on Form 10-K:

Financial Statements:


	Page
Index to Financial Statements		F-1
Report of Independent Registered Public Accounting Firm		F-2
Balance Sheets as of December 31, 2010 and 2009		F-3
Statements of Operations for the years ended December 31, 2010, 2009 and 2008		F-4
Statements of Stockholders’ Equity for the years ended December 31, 2010, 2009 and 2008		F-5
Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008		F-6
Notes to Financial Statements		F-7

2. Financial Statement Schedule:

Schedule II – Valuation and Qualifying Accounts		S-1

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

(a)(3) Exhibits:

The Exhibits required to be filed with this Annual Report on Form 10-K are listed in the Exhibit Index included herein immediately following the Signature Page.

INDEX TO FINANCIAL STATEMENTS


	Page
Report of Independent Registered Public Accounting Firm		F-2
Balance Sheets as of December 31, 2010 and 2009		F-3
Statements of Operations for the years ended December 31, 2010, 2009 and 2008		F-4
Statements of Stockholders’ Equity for the years ended December 31, 2010, 2009 and 2008		F-5
Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008		F-6
Notes to Financial Statements		F-7

F-1

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

California Steel Industries, Inc.

We have audited the accompanying balance sheets of California Steel Industries, Inc. (the Company) as of December 31, 2010 and 2009, and the related statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2010. Our audits also included the information included in the financial statement schedule listed in the Index at Item 15(a)(2). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of California Steel Industries, Inc. at December 31, 2010 and 2009, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/ Ernst & Young LLP

Los Angeles, California

March 23, 2011

F-2

California Steel Industries, Inc.

Balance Sheets


	December 31,
	2010		2009
	(In Thousands, except for share amounts)
Assets
Current assets
Cash and cash equivalents	$	27,719	$	61,671
Trade accounts receivable, excluding affiliated company, less allowance for doubtful accounts of $925 and $700 in 2010 and 2009, respectively		64,992		23,916
Trade accounts receivable, affiliated company		996		192
Inventories		187,313		185,068
Prepaid income taxes		17,666		16,160
Deferred income taxes		3,258		—
Other receivables and prepaid expenses		3,661		2,201

Total current assets		305,605		289,208
Other assets		18,750		19,646
Property, plant and equipment, net		276,511		276,593

Total assets	$	600,866	$	585,447

Liabilities and stockholders’ equity
Current liabilities
Accounts payable, excluding affiliated company	$	47,169	$	39,793
Accounts payable, affiliated company		2,405		—
Accrued interest expense		2,909		3,010
Accrued utilities		2,255		1,433
Deferred income taxes		—		6,682
Other accrued expenses		7,234		6,290
Current portion of long-term debt		10,000		10,000

Total current liabilities		71,972		67,208

Other liabilities		3,112		2,506
Long-term debt		165,000		175,000
Deferred income taxes		49,160		40,062
Commitments and contingencies
Stockholders’ equity
Class A preferred stock, $10,000 par value per share. Authorized 1,000 shares; none issued		—		—
Class B preferred stock, $10,000 par value per share. Authorized 2,000 shares; none issued		—		—
Class C preferred stock, $10,000 par value per share. Authorized 3,000 shares; none issued		—		—
Common stock, no par value. Authorized 5,000 shares; 4,000 shares issued and outstanding		40,000		40,000
Retained earnings		271,622		260,671

Total stockholders’ equity		311,622		300,671

Total liabilities and stockholders’ equity	$	600,866	$	585,447

See accompanying notes.

F-3

California Steel Industries, Inc.

Statements of Operations


	Years Ended December 31,
	2010			2009			2008
	*(In Thousands)*
Net sales:
Net sales, excluding affiliated company	$	1,008,867		$	520,123		$	1,415,036
Affiliated company		67,301			31,685			95,577

Total net sales	$	1,076,168		$	551,808		$	1,510,613
Cost of sales
Cost of sales, excluding lower of cost or market adjustment		1,001,041			516,620			1,320,739
Lower of cost or market adjustment		12,850			44,500			135,000

Gross profit (loss)		62,277			(9,312	)		54,874
Selling, general and administrative expenses		19,735			17,481			22,779
Loss on disposition of property, plant and equipment		1,093			485			3,256

Income (loss) from operations		41,449			(27,278	)		28,839
Other (expense) income:
Interest expense, net		(9,024	)		(8,159	)		(8,823	)
Other, net		2,907			8,492			(409	)

Income (loss) before income tax expense (benefit)		35,332			(26,945	)		19,607
Income tax expense (benefit)		9,938			(13,844	)		6,332

Net income (loss) available to common stockholders	$	25,394		$	(13,101	)	$	13,275

See accompanying notes.

F-4

California Steel Industries, Inc.

Statements of Stockholders’ Equity


	Common Stock		Retained Earnings			Total Stockholders’ Equity
	*(In Thousands, except shares and* *per share amounts)*
Balance at December 31, 2007	$	40,000	$	287,422		$	327,422
Net income		—		13,275			13,275
Cash dividends:
Common stock, $6,731 on 4,000 shares		—		(26,925	)		(26,925	)

Balance at December 31, 2008		40,000		273,772			313,772
Net loss		—		(13,101	)		(13,101	)

Balance at December 31, 2009		40,000		260,671			300,671
Net income		—		25,394			25,394
Cash dividends:
Common stock, $3,611 on 4,000 shares		—		(14,443	)		(14,443	)

Balance at December 31, 2010	$	40,000	$	271,622		$	311,622

See accompanying notes.

F-5

California Steel Industries, Inc.

Statements of Cash Flows


	Years Ended December 31,
	2010			2009			2008
	*(In Thousands)*
Operating activities
Net income (loss)	$	25,394		$	(13,101	)	$	13,275
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		31,346			32,811			33,013
Deferred income taxes		(842	)		(6,588	)		955
Gain on sale of environmental credits		—			(438	)		—
Loss on disposition of property, plant and equipment		1,093			485			3,256
Inventory write-down		12,850			44,500			135,000
Changes in assets and liabilities:
Trade accounts receivable, excluding affiliated company, net		(41,076	)		20,972			19,204
Trade accounts receivable, affiliated company		(804	)		(136	)		3,217
Inventories		(15,095	)		(5,422	)		(101,909	)
Prepaid income taxes		(1,506	)		59,355			(61,020	)
Other receivables and prepaid expenses		(1,803	)		713			997
Accounts payable, excluding affiliated company		7,376			(26,186	)		14,295
Accounts payable, affiliated company		2,405			(30	)		(222	)
Accrued interest expense		(101	)		(64	)		236
Other accrued expenses and liabilities		2,372			(4,413	)		2,297

Net cash provided by operating activities		21,609			102,458			62,594
Investing activities
Additions to property, plant and equipment		(30,375	)		(48,231	)		(48,974	)
Proceeds received for the sale of environmental credits		—			1,519			—
(Removal costs), net of proceeds from sale of property, plant and equipment		(743	)		45			(2,037	)
Additions to intangible assets		—			—			(908	)

Net cash used in investing activities		(31,118	)		(46,667	)		(51,919	)
Financing activities
Net repayments on line-of-credit		—			—			(26,500	)
(Repayments) borrowings of long-term debt		(10,000	)		(5,000	)		40,000
Dividends paid		(14,443	)		—			(26,925	)

Net cash used in financing activities		(24,443	)		(5,000	)		(13,425	)

Net (decrease) increase in cash and cash equivalents		(33,952	)		50,791			(2,750	)
Cash and cash equivalents at beginning of year		61,671			10,880			13,630

Cash and cash equivalents at end of year	$	27,719		$	61,671		$	10,880

Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest (net of amount capitalized)	$	8,914		$	8,297		$	9,834

Income taxes (net of amount refunded)	$	11,464		$	(66,422	)	$	68,097

See accompanying notes.

F-6

California Steel Industries, Inc.

Notes to Financial Statements

1. Summary of Significant Accounting Policies

Description of Business

Unless the context otherwise requires, the use of the terms “California Steel,” “we,” “us” and “our” in these notes to financial statements refers to California Steel Industries, Inc.

California Steel was incorporated in the state of Delaware on November 3, 1983. Our stockholders consist of two companies, JFE Steel Corporation (formerly Kawasaki Steel Corporation), a Japanese corporation, and Vale Limited (formerly Rio Doce Limited), a New York corporation, which each own 50% of our stock. From our site in Fontana, California, we manufacture a wide range of flat rolled steel products, including hot rolled, cold rolled, and galvanized coil and sheet. We also produce electric resistant welded pipe.

Reclassifications

To maintain consistency and comparability, certain prior-year amounts were reclassified to conform to the current-year presentation. We reclassified:

•

to trade accounts receivable, affiliated company, $192 thousand for the year ended 2009, which were previously reported in trade accounts receivable, excluding affiliated company on our balance sheet;

•

to net sales, affiliated company, $31.7 million and $95.6 million for the years ended 2009 and 2008, respectively, which were previously reported in net sales, excluding affiliated company on our statements of operations;

•

to trade accounts receivable, affiliated company, $(136) thousand and $3.2 million for the years ended 2009 and 2008, respectively, which were previously reported in trade accounts receivable, excluding affiliated company on our statements of cash flow.

•

to accounts payable, affiliated company, $(30) thousand and $(222) thousand for the years ended 2009 and 2008, respectively, which were previously reported in accounts payable, excluding affiliated company on our statements of cash flow.

These reclassifications had no affect on previously reported income from operations, net income or stockholders’ equity.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires us to make estimates and assumptions. The estimates and assumptions affect the reported amounts in the balance sheets and statements of operations, as well as the disclosure of contingent liabilities. Future results could be materially affected if actual results were to differ from these estimates and assumptions.

Cash and Cash Equivalents

Cash primarily consists of cash on hand and bank deposits. We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. These bank accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. As of December 31, 2010 and 2009, we had cash balances with banks in excess of the federally insured limit.

F-7

California Steel Industries, Inc.

Notes to Financial Statements (continued)

1. Summary of Significant Accounting Policies (continued)

Trade Accounts Receivable

Trade accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. We determine the allowance for doubtful accounts by identifying troubled accounts, using historical experience applied to an aging of accounts, regularly evaluating individual customer receivables and considering a customer’s financial condition and credit history, and current economic conditions. Trade accounts receivable are written off when deemed uncollectible. Recoveries of trade accounts receivable previously written off are recorded when received.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method of inventory accounting. We routinely evaluate the carrying value of inventories and provide reserves when appropriate to reduce inventories to the lower of cost or market to reflect estimated net realizable value. In 2010 and 2009, our inventory was written down to the lower of cost or market value by $12.9 million and $44.5 million, respectively.

Deferred Financing Costs

Debt issuance costs are amortized on a straight-line basis (which approximates the effective interest method) over the term of the related debt agreement. These costs are included in other assets in the 2010 and 2009 balance sheets. Amortization of issuance costs is included as a component of interest expense and amounted to $343 thousand, $353 thousand and $353 thousand for each of the years ended December 31, 2010, 2009 and 2008, respectively.

Indefinite-Lived Purchased Intangible Assets

We account for purchased intangible assets with indefinite useful lives in accordance with the accounting standard related to intangibles assets, which prohibits the amortization of purchased intangible assets with indefinite lives. This accounting standard requires that purchased intangible assets with indefinite lives be reviewed for impairment at least annually or whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If the carrying amount of an intangible asset exceeds its estimated fair value, an impairment loss is recognized by the amount by which the carrying amount of the asset exceeds the estimated fair value of the indefinite-lived purchased intangible assets. When intangible assets with indefinite useful lives are sold or otherwise disposed of, the cost is eliminated, and any related gain or loss is included in the statement of operations. The amount of purchased intangible assets with indefinite lives was approximately $2.9 million at December 31, 2010 and 2009 and is included in other assets on the balance sheets.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. The estimated useful lives of the assets are as follows:


Plant and equipment		3 to 25 years
Plant refurbishment costs		10 years
Furniture and fixtures		5 years

Assets under construction are not depreciated until placed into service. Ordinary repairs and maintenance are charged to operating costs when incurred. When assets are sold or otherwise disposed of, the cost and related accumulated depreciation are eliminated from the respective accounts, and any related gain or loss is included in the statement of operations.

F-8

California Steel Industries, Inc.

Notes to Financial Statements (continued)

1. Summary of Significant Accounting Policies (continued)

Impairment of Long-Lived Assets

We account for long-lived assets in accordance with the accounting standard related to property, plant and equipment. This accounting standard requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided against the deferred tax assets for amounts which are not considered “more likely than not” to be realized.

Environmental

Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures are capitalized if they meet one of the following criteria: (1) extend the useful life, increase the capacity, or improve the safety or efficiency of property, (2) mitigate or prevent environmental contamination that has yet to occur and that otherwise may result from future operations or activities, or (3) incurred in preparing property currently held for sale. We accrue for costs associated with environmental remediation obligations when such losses are probable and reasonably estimable. Accruals for estimated losses from environmental remediation obligations are recognized no later than completion of the remedial feasibility study. Such accruals are adjusted as further information develops or circumstances change (see Note 8). Costs of future expenditures for environmental remediation obligations are not discounted to their present value.

Derivative Financial Instruments

We account for derivative financial instruments in accordance with the accounting standard related to derivatives and hedges which establishes accounting and reporting standards for derivative instruments (including certain derivative instruments embedded in other contracts). This accounting standard requires companies to record derivatives on their balance sheets as either assets or liabilities measured at their fair value unless exempted from derivative treatment as a normal sale and purchase transaction. All changes in the fair value of derivatives are recognized currently in earnings unless specific hedge criteria are met, which requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting.

F-9

California Steel Industries, Inc.

Notes to Financial Statements (continued)

1. Summary of Significant Accounting Policies (continued)

We enter into contracts to purchase certain commodities used in the manufacturing of our products, such as electricity and natural gas. Some of these forward contracts do not require derivative accounting as we take possession of the commodities in the normal course of business whereas other forward contracts are accounted for as derivatives in accordance with the accounting standard related to derivatives and hedges by us. These derivatives did not qualify for hedge accounting treatment; therefore, these financial instruments are reported at fair value, with changes in fair value reported in current earnings. Credit risk related to the derivative financial instruments is considered minimal and is managed by requiring high credit standards for its counterparties and periodic settlements.

Self-Insurance Liability

We are self-insured for workers’ compensation with a stop loss. The accrued liability associated with these programs is based on our estimate of the ultimate costs to settle known claims as well as claims incurred but not yet reported (IBNR claims) as of the balance sheet date. The estimated liability is not discounted and is based on information provided by our insurance brokers and insurers, combined with our judgments regarding a number of assumptions and factors, including the frequency and severity of claims, our claims development history, case jurisdiction, related legislation, and our claim settlement practice. Significant judgment is required to estimate IBNR claims as parties have yet to assert such claims. If actual claim trends, including the severity or frequency of claims, differ from our estimates, our financial results could be impacted.

Fair Value Measurements

The carrying value of cash and cash equivalents, trade accounts receivable, other receivables, accounts payable, and other accrued expenses are measured at cost which approximates their fair value because of the short maturity of those instruments. The fair values of long-term indebtedness are estimated based on the quoted market prices for the same or similar issues, or the current rates offered to us for debt of similar maturities.

Revenue Recognition

Revenue is recognized 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 when title and risk of loss are transferred to the customer. Sales to the affiliated company are at current market rates and terms. In certain cases, at the customer’s request, we 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 ASC Topic 605 have been met. As of December 31, 2010 and 2009, we had approximately 4,200 tons and 400 tons, respectively, of bill and hold product. Based on our average sales price at December 31, 2010 and 2009, the sales revenue was approximately $3.2 million and $250 thousand, respectively.

Shipping Costs

We charge shipping fees to certain customers based upon the actual amounts incurred. Amounts billed for shipping costs are included in net sales. We include the associated shipping costs in cost of sales, excluding lower of cost or market adjustment.

F-10

California Steel Industries, Inc.

Notes to Financial Statements (continued)

1. Summary of Significant Accounting Policies (continued)

Recent Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010-6, “Improving Disclosures about Fair Value Measurements” (ASU 2010-6”). This update amended guidance and issued a clarification with regard to disclosure requirements about fair market value measurement. A reporting entity is required to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers. In addition, for measurements utilizing significant unobservable inputs, a reporting entity should present separately information about purchases, sales, issuances, and settlements. We adopted ASU 2010-6 on January 1, 2010. There was no impact upon adoption of ASU 2010-6 to our financial position or results of operations.

2. Inventories

Inventories consist of the following at December 31 (dollars in thousands):


	2010		2009
Finished goods	$	23,963	$	11,294
Work in process		40,942		17,164
Raw materials		101,781		137,234
Supplies		20,627		19,376

	$	187,313	$	185,068

3. Property, Plant and Equipment

Property, plant and equipment consist of the following at December 31 (dollars in thousands):


	2010			2009
Land	$	14,432		$	14,432
Plant and equipment		674,309			592,474
Plant refurbishment costs		22,220			22,220
Furniture and fixtures		14,648			13,882
Construction in progress		2,447			66,932

		728,056			709,940
Accumulated depreciation		(451,545	)		(433,347	)

	$	276,511		$	276,593

Depreciation expense was $31.0 million, $32.5 million and $32.7 million for the years ended December 31, 2010, 2009 and 2008, respectively. Capitalized interest was $1.8 million, $2.4 million and $688 thousand for the years ended December 31, 2010, 2009 and 2008, respectively.

F-11

California Steel Industries, Inc.

Notes to Financial Statements (continued)

4. Leases

We are obligated under various equipment leases that expire at various dates during the next five years. At December 31, 2010, the future minimum lease payments under non-cancelable operating leases with commitments of at least one year are as follows (dollars in thousands):


Year ending December 31:
2011	$	864
2012		415
2013		145
2014		10
2015		4

	$	1,438

Rental expense under operating leases totaled $1.2 million, $1.1 million and $1.3 million for the years ended December 31, 2010, 2009 and 2008, respectively.

5. Notes Payable and Long-Term Debt

In September 2010, we entered into a five-year $110.0 million credit facility with Wells Fargo Bank, N.A., as administrative agent and lender. Subject to the satisfaction of customary conditions and a borrowing base, advances under this facility may be made at any time prior to the credit facility termination date. The credit facility is collateralized by accounts receivable and inventory. Advances under this facility may be used for letters of credit, working capital, capital expenditures, payment of dividends and other lawful corporate purposes, including the refinancing of existing debt. This credit facility replaced the existing $110.0 million credit facility with Mizuho Corporate Bank which matured on September 29, 2010.

At our election, the amounts advanced under the credit facility bear interest at the base rate or the Eurodollar rate, plus the applicable margin. Interest is generally payable monthly and any accrued interest and principal is due and payable in September 2015. There were no outstanding borrowings as of December 31, 2010. We had $110.0 million of borrowings available under the Facility as of December 31, 2010. The credit facility requires compliance with certain covenants and restrictions with regard to the interest coverage ratio, tangible net worth and shareholder distributions. We were in compliance with all covenants and restrictions at December 31, 2010.

Fees incurred on the credit facility are being amortized over the term of the loan. The unamortized amount of financing costs were $340 thousand and $83 thousand at December 31, 2010 and 2009, respectively, and are classified as other assets in the balance sheets.

On March 28, 2008, we entered into a Term Loan Agreement with The Bank of Tokyo-Mitsubishi, Ltd. for $40.0 million unsecured five-year term loan maturing April 2013. The Term Loan Agreement provided for a single loan disbursement of the entire principal amount on April 1, 2008. Interest on the principal balance of the loan shall accrue at a rate of 3.38% for the first two years of the loan and a rate of 3.58% for the remaining three years of the loan and is payable quarterly commencing July 2008. Quarterly principal payments commence in July 2009.

F-12

California Steel Industries, Inc.

Notes to Financial Statements (continued)

5. Notes Payable and Long-Term Debt (continued)

On March 22, 2004, we issued an aggregate of $150.0 million of ten-year, 6.125% unsecured senior notes due in March 2014. The interest on these senior notes is payable on March 15 and September 15 of each year, commencing September 15, 2004. 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 in whole or in part any time after March 15, 2009. On June 24, 2004, we completed an exchange offer exchanging our unregistered 6.125% senior notes for 6.125% senior notes registered by us pursuant to a registration statement filed under the Securities Act of 1933.

The unamortized portion of the financing costs related to the 6.125% senior notes due in 2014 was $776 thousand and $1.0 million at December 31, 2010 and 2009, respectively, and is classified as other assets in the balance sheet.

Long-term debt consisted of the following at December 31 (dollars in thousands):


	2010		2009
Senior notes bearing interest at 6.125% interest payable semiannually, due March 2014	$	150,000	$	150,000
Term loan bearing interest at 3.38% throught April 2010 and 3. 58% through April 2013. Interest payable quarterly, due April 2013		25,000		35,000
Revolving line of credit payable to Wells Fargo, N.A. consists of amounts advanced under $110.0 million bank facility, bearing interest at either the Eurodollar rate or the base rate, plus the applicable margin. Interest is generally payable monthly, and any accrued interest and principal are due and payable in full in September 2015		—		—
Revolving line of credit payable to banks consists of amounts advanced under $110.0 million bank facility, bearing interest at either the Eurodollar rate or the base rate, plus the applicable margin. Interest is generally payable quarterly, and any accrued interest and principal are due and payable in full in September 2010		—		—

		175,000		185,000
Less current maturities		10,000		10,000

	$	165,000	$	175,000

F-13

California Steel Industries, Inc.

Notes to Financial Statements (continued)

5. Notes Payable and Long-Term Debt (continued)

The following are future maturities of long-term debt and credit facility for each of the next five years ending December 31 (dollars in thousands):


2011	$	10,000
2012		10,000
2013		5,000
2014		150,000

	$	175,000

Interest expense was $10.6 million, $10.7 million and $10.8 million for the years ended 2010, 2009 and 2008, respectively.

6. Redeemable Preferred Stock and Stockholders’ Equity

The Class A, B and C preferred stock is redeemable at our option, in whole or in part, at par value. Class C preferred stock has priority over the common stock in the distribution of dividends and is entitled to a dividend equivalent to 10% of the par value per annum on a cumulative basis and is thereafter entitled to participate in the distribution of dividends at the same rate and upon the same conditions as the common stock.

Each holder of common stock is entitled to one vote for each share held on record on each matter submitted to a vote of the stockholders. Holders of the common stock have no cumulative voting, conversion, or redemption rights, but are entitled to preemptive rights to subscribe for additional shares of common stock in any additional issuance of common stock or any security convertible into common stock. Subject to any preferences that may be granted to the holders of preferred stock, each holder of common stock is entitled to receive ratably dividends as may be declared by the board of directors, and in the event of liquidation, dissolution, or winding up, is entitled to share ratably in all our assets remaining after payment of liabilities.

During the years ended December 31, 2010 and 2008, dividends were declared and paid in the amount of $14.4 million and $26.9 million, respectively. No dividends were declared or paid for the year ended December 31, 2009.

7. Related-Party Transactions

We have transactions in the normal course of business with affiliated companies. We are 50% owned by JFE Steel Corporation, a Japanese corporation, and 50% owned by Vale Limited (formerly Rio Doce Limited), a subsidiary of Vale S.A. (formerly Companhia Vale do Rio Doce), a Brazilian corporation.

Purchases made from JFE Steel Corporation during the years ended December 31, 2010, 2009 and 2008 were $70.0 million, $84.6 million and $71.1 million, respectively. At December 31, 2010, we owed our affiliated company $2.4 million for goods and services. No amounts were owed our affiliated companies for goods and services at December 31, 2009.

F-14

California Steel Industries, Inc.

Notes to Financial Statements (continued)

7. Related-Party Transactions (continued)

During the years ended December 31, 2010, 2009 and 2008, we had revenues from JFE Steel Corporation, an affiliated company. Sales to the affiliated company are at current market rates and terms. At December 31, 2010, 2009 and 2008, net sales and accounts receivable to this related party were (dollars in thousands):


	Net Sales		Trade Receivables
December 31, 2010	$	67,301	$	996
December 31, 2009	$	31,685	$	192
December 31, 2008	$	95,577	$	56

8. Commitments and Contingencies

At December 31, 2010, we are committed, in the form of open purchase orders, to purchase approximately $141.3 million in steel slabs, of which $77.5 million are from a related party, material commitments for capital expenditures of $6.9 million, and the remaining $2.0 million in assorted other contractual commitments.

We have been contacted by various governmental agencies regarding specified environmental matters at our operating facility in Fontana, California. During September 1990, we reached a preliminary agreement with the California Regional Department of Health Services, which allows us to draft our own remediation agreement and move forward with our own plan of action at our operating facility. In November 1992, we entered into a Voluntary and Enforceable Agreement (the Agreement) with the California Department of Toxic Substances Control (DTSC) which sets forth certain terms and conditions related to the remediation of hazardous substances at our operating facility. The Agreement also preserves our right as to future assignment and apportionment of costs to other parties.

We are addressing environmental concerns caused by the former occupant at our Fontana site. We engaged an environmental consultant to conduct a remedial investigation and develop a remediation plan and remediation cost projections based upon the plan. Utilizing the remediation plan developed by the environmental consultant, we developed an estimate of future costs of the remediation plan. The total aggregate cost of remediation is estimated to be approximately $1.8 million, which is included in the other liabilities in the 2010 and 2009 financial statements. The DTSC has not yet completed its review and approval of our remediation plan; however, preliminary discussions between the DTSC and us have not indicated the need for any significant changes to the remediation plan or our 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, including without limitations, unknown site conditions, changes to applicable regulations or increased enforcement requirements by the regulators existing at the site.

We are involved in legal actions and claims arising in the ordinary course of business. It is of our opinion, based on advice of legal counsel, that this litigation will be resolved without material effect on our financial position, results of operations, or liquidity.

F-15

California Steel Industries, Inc.

Notes to Financial Statements (continued)

9. Income Taxes

Income tax expense (benefit) for the years ended December 31, 2010, 2009 and 2008, consists of the following (dollars in thousands):


	2010			2009			2008
Current:
Federal	$	10,157		$	(6,265	)	$	5,485
State		623			(991	)		(108	)

		10,780			(7,256	)		5,377

Deferred:
Federal		109			(1,072	)		278
State		(951	)		(5,516	)		677

		(842	)		(6,588	)		955

	$	9,938		$	(13,844	)	$	6,332

A reconciliation of income tax expense (benefit) (computed by applying the U.S. federal statutory tax rate of 35% to income before income tax expense (benefit) to actual income tax expense (benefit)) is as follows (dollars in thousands):


	2010			2009			2008
Computed statutory tax expense (benefit)	$	12,366		$	(9,431	)	$	6,863
State income taxes, net of federal expense (benefit)		1,926			(1,548	)		1,127
Enterprise zone credits, net of federal benefit		(1,138	)		(2,146	)		—
State benefit, net of nexus liability, net of federal benefit		(2,670	)		—			—
Increase (decrease) in reserve for uncertain tax positions, net of federal benefit		395			—			(1,232	)
Other		(941	)		(719	)		(426	)

	$	9,938		$	(13,844	)	$	6,332

F-16

California Steel Industries, Inc.

Notes to Financial Statements (continued)

9. Income Taxes (continued)

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2010 and 2009, are as follows (dollars in thousands):


	2010			2009
Deferred tax assets:
Inventory	$	2,213		$	401
State taxes		1,510			309
Allowance for doubtful accounts		385			307
Accrued expenses		3,420			3,155
Net operating loss carryforward		3,021			2,734
Foreign tax credit carryforward		978			978
Enterprise zone credit carryforward		2,017			3,383
Other		23			26

Total gross deferred tax assets		13,567			11,293
Valuation allowance		(978	)		(978	)

Net deferred tax assets		12,589			10,315

Deferred tax liabilities:
Property, plant and equipment		(54,511	)		(47,388	)
Prepaid expenses		(3,578	)		(3,853	)
Inventory		—			(5,346	)
Other		(402	)		(472	)

Total gross deferred tax liabilities		(58,491	)		(57,059	)

Net deferred tax liabilities	$	(45,902	)	$	(46,744	)

We recorded a valuation allowance to reduce our deferred tax asset attributable to foreign tax credits for taxes withheld on the sale of investment in an affiliated company. We considered future foreign source income in determining the need for the valuation allowance and have determined that it is more likely than not that we will not generate a significant amount of foreign source income to realize the foreign tax credits before expiration. Therefore, a valuation allowance for the full amount of the remaining foreign tax credit carry-forward was recorded as of December 31, 2010. Based on our historical pretax earnings, we believe it is more likely than not that we will realize the benefit of the remaining deferred tax assets existing at December 31, 2010.

F-17

California Steel Industries, Inc.

Notes to Financial Statements (continued)

9. Income Taxes (continued)

The accounting standard related to income taxes applies to all tax positions and defines the confidence level that a tax position must meet in order to be recognized in the financial statements. The interpretation requires that the tax effects of a position be recognized only if it is “more-likely-than-not” to be sustained by the taxing authority as of the reporting date. If a tax position is not considered “more-likely-than-not” to be sustained then no benefits of the position are to be recognized. This accounting standard requires additional disclosures. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (dollars in thousands):


	2010		2009
Unrecognized tax benefits at the beginning of the period	$	—	$	—
Gross increases for tax positions		558		—

Unrecognized tax benefits at the end of the period	$	558	$	—

We account for uncertain tax positions in accordance with the accounting standard related to income taxes. We report a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. We recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense. As of December 31, 2010, we accrued interest and penalties to unrecognized tax benefits of $193 thousand. There was no accrued interest or penalties to unrecognized tax benefits at December 31, 2009. Included in the $558 thousand balance of unrecognized tax benefits at December 31, 2010 are tax positions of $467 thousand that would reduce our effective tax rate if recognized. The tax years 2005 through 2009 remain open to examination by the major taxing jurisdictions to which we are subject.

10. Employee Benefit and Retirement Plans

401(k) Plan

We maintain a 401(k) savings plan (the 401(k) Plan), a tax qualified cash or deferred tax arrangement defined contribution plan 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 401(k) 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 the legally permissible limits.

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 and 50% of the next 2% of the participant’s deferral under the 401(k) Plan each year. Participants are immediately 100% vested in their contributions and our contributions plus actual earnings and losses thereon. Our contributions are accrued as participant contributions are withheld and are paid in full to the trustee of the 401(k) Plan on a pay period basis. Each year we may elect to make additional contributions 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 the 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. For the 2010 plan year, participants were notified that the 401(k) plan has been qualified under “Safe Harbor” provisions.

Plan expense for the three years ended December 31, 2010, 2009 and 2008, were $2.2 million, $523 thousand and $2.5 million, respectively.

F-18

California Steel Industries, Inc.

Notes to Financial Statements (continued)

10. Employee Benefit and Retirement Plans (continued)

Profit Sharing Plan

We sponsor a profit sharing plan under which contributions are established based on a pool amount, equal to 8% of our income before taxes excluding gain or loss on disposition of fixed assets and some other adjustments for the six months ended May and November. 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 other 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. Profit sharing expense for the years ended December 31, 2010, 2009 and 2008, were $3.0 million, $781 thousand and $13.0 million, respectively.

11. Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy prescribed by the accounting literature contains three levels as follows:

•

Level 1 – Inputs to the valuation based upon quoted prices (unadjusted) for identical assets or liabilities in active markets that are accessible as of the measurement date.

•

Level 2 – Inputs to the valuation include quoted prices in either markets that are not active, or in active markets for similar assets or liabilities, inputs other than quoted prices that are observable, and inputs that are derived principally from or corroborated by observable market data.

•

Level 3 – Inputs to the valuation that are unobservable inputs for the asset or liability.

Our financial instruments are primarily comprised of cash and cash equivalents, receivables, accounts payable, accrued liabilities and long-term debt. For cash and cash equivalents, receivables, accounts payable and accrued liabilities, the carrying amount approximates fair value because of the short maturity of these instruments. Our senior notes are reported at carrying value. The fair value of our senior notes is the asking price of our senior notes at the end of the fiscal year. The carrying value and fair value of our senior notes are $150.0 million and $148.7 million at December 31, 2010 and $150.0 million and $144.0 million at December 31, 2009, respectively. Management estimates that the carrying values of our other financial instruments approximate their value since their realization or satisfaction is expected to occur in the short term or have been renegotiated at a date close to year end.

F-19

California Steel Industries, Inc.

Notes to Financial Statements (continued)

12. Selected Quarterly Financial Data (Unaudited)

Summarized quarterly financial data for 2010 and 2009 is as follows (dollars in thousands):


	Quarter
	1st			2nd			3rd		4th			Total
2010
Net sales	$	232,744		$	301,665		$	313,875	$	227,884		$	1,076,168
Gross profit (loss) (1)		21,212			34,668			10,023		(3,626	)		62,277
Income (loss) from operations operations (1)		16,224			29,654			5,154		(9,583	)		41,449
Net income (loss) (1)		10,422			18,464			2,048		(5,540	)		25,394
2009
Net sales	$	147,067		$	104,195		$	146,983	$	153,563		$	551,808
Gross profit (loss) (2)		(21,253	)		(2,472	)		12,230		2,183			(9,312	)
Income (loss) from operations operations (2)		(25,659	)		(6,600	)		7,916		(2,935	)		(27,278	)
Net income (loss) (2)		(15,333	)		(2,827	)		7,350		(2,291	)		(13,101	)

(1)	Reflects an inventory adjustment to the lower of cost or market of $800 thousand, $7.5 million and $4.6 million for the second, third and fourth quarters, respectively.

(2)	Reflects an inventory adjustment to the lower of cost or market for each of the four quarters of $35.0 million, $4.8 million, $2.0 million and $2.7 million, respectively.

13. Subsequent Event

On March 9, 2011, we gave notice of redemption to the holders of our senior notes pursuant to the terms of the indenture. The redemption price for the senior notes will be 101.021% of the face value of $150.0 million. The notice to redeem the notes is irrevocable and we expect to complete the redemption on April 8, 2011. On March 3, 2011, we entered into a five year $130.0 million unsecured term loan with Mizuho Corporate Bank to finance in part the redemption of the senior notes. The remaining balance of the redemption price will be financed from our credit facility with Wells Fargo Bank.

F-20

CALIFORNIA STEEL INDUSTRIES, INC.

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS


	Balance at Beginning of Period		Additions					(1) Deductions to Reserve		Balance at End of Period
	Balance at Beginning of Period		Charged to Costs and Expenses			Charged to Other Accounts		(1) Deductions to Reserve		Balance at End of Period
A/R Allowance
Year ended December 31, 2010	$	700,000	$	225,000		$	—	$	—	$	925,000
Year ended December 31, 2009	$	1,550,000	$	173,000		$	—	$	1,023,000	$	700,000
Year ended December 31, 2008	$	400,000	$	1,150,000		$	—	$	—	$	1,550,000
Tax Valuation Allowance
Year ended December 31, 2010	$	978,000	$	—		$	—	$	—	$	978,000
Year ended December 31, 2009	$	1,036,000	$	(58,000	)	$	—	$	—	$	978,000
Year ended December 31, 2008	$	1,036,000	$	—		$	—	$	—	$	1,036,000
Inventory Reserve
Year ended December 31, 2010	$	726,000	$	(666,000	)	$	—	$	—	$	60,000
Year ended December 31, 2009	$	—	$	726,000		$	—	$	—	$	726,000

(1)	Represents write-off of customer receivables against allowance for doubtful accounts.

S-1

SIGNATURE

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

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.


Signature	Title	Date

/S/ VICENTE WRIGHT Vicente Wright	President and Chief Executive Officer (Principal Executive Officer)	March 23, 2011

/S/ BRETT GUGE Brett Guge	Executive Vice President, Finance and Administration (Principal Financial and Accounting Officer)	March 23, 2011

/S/ HIROSHI ADACHI Hiroshi Adachi	Chairman of the Board	March 23, 2011

/S/ ARISTIDES CORBELLINI Aristides Corbellini	Director	March 23, 2011

/S/ KAZUO FUJISAWA Kuzuo Fujisawa	Director	March 23, 2011

/S/ RENATO ALMEIDA Renato Almeida	Director	March 23, 2011

EXHIBIT INDEX


Exhibit Number		Description

3.1		Certificate of Incorporation of the Registrant, as amended by Amendment to the Certificate of Incorporation filed June 6, 1984 with the Delaware Secretary of State, as amended by the Certificate of Amendment to the Certificate of Incorporation filed on August 2, 1984 with the Delaware Secretary of State, as amended by the Certificate of Amendment to the Certificate of Incorporation file on January 12, 1988 with the Delaware Secretary of State, and as amended by the Certificate of Ownership merging California Steel Industries Tubular Products, Inc. into the Registrant, filed with the Delaware Secretary of State on December 20, 1993. (1)

3.2		Certificate of Amendment to the Certificate of Incorporation filed July 27, 1999, with the Delaware Secretary of State. (2)

3.3		Certificate of Amendment to the Certificate of Incorporation filed July 24, 2006, with the Delaware Secretary of State. (3)

3.4		Restated Bylaws of the Registrant dated as of April 1, 2008. (4)

4.1		Indenture, dated as of March 22, 2004, between the Registrant and U.S. Bank National Association, Trustee. (5)

4.2		Specimen Series A note – 6.125% Senior Notes due 2014 (included in Exhibit 4.4). (5)

4.3		Shareholders’ Agreement, dated April 1, 2008, by and among Vale Limited (formerly Rio Doce Limited), Vale S.A. (formerly Companhia Vale do Rio Doce), and JFE Steel Corporation. (6)

10.1		Credit Agreement dated as of September 29, 2010, by and between California Steel Industries, Inc., and Wells Fargo Bank, National Association (7)

10.2		Term Loan Agreement dated March 28, 2008 by and among California Steel Industries, Inc., and The Bank of Tokyo-Mitsubishi, Ltd. (8)

14.1		Revised Code of Ethics. (9)

31.1		Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Executive Vice President, Finance and Administration pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of President and Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Executive Vice President, Finance and Administration pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(1)	Incorporated by reference to the Registrant’s Registration Statement on Form S-4, File No. 333-79587, as filed with the Securities and Exchange Commission on May 28, 1999, as amended.

(2)	Incorporated by reference to the Registrant’s Annual Report on Form 10-K, for the year ended December 31, 2001, as filed with the Securities and Exchange Commission on March 28, 2002.

(3)	Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2006, as filed with the Securities and Exchange Commission on October 27, 2006.

(4)	Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q, for the quarter ended June 30, 2008, as filed with the Securities and Exchange Commission on July 28, 2008.

(5)	Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q, for the quarter ended March 31, 2004, as filed with the Securities and Exchange Commission on April 28, 2004.

(6)	Incorporated by reference to the Registrant’s Annual Report on Form 10-K, for the year ended December 31, 2008, as filed with the Securities and Exchange Commission on March 13, 2009.

(7)	Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2010, as filed with the Securities and Exchange Commission on October 27, 2010.

(8)	Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q, for the quarter ended March 31, 2008, as filed with the Securities and Exchange Commission on April 25, 2008.

(9)	Incorporated by reference to the Registrant’s Annual Report on Form 10-K, for the year ended December 31, 2006, as filed with the Securities and Exchange Commission on March 28, 2007.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company