SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-K

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002        COMMISSION FILE NUMBER 1-9887

                            OREGON STEEL MILLS, INC.
             (Exact name of registrant as specified in its charter)

              DELAWARE                                      94-0506370
-------------------------------------------------------------------------------
      (State or other jurisdiction of                      (IRS Employer
       incorporation or organization)                    Identification No.)

             1000 S.W. BROADWAY
                 SUITE 2200
               PORTLAND, OREGON                               97205
-------------------------------------------------------------------------------
     (Address of principal executive office)                (Zip Code)


        REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (503) 223-9228

              SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

                                                 Name of each exchange
          Title of each class                     on which registered
        ------------------------               --------------------------------

 Common Stock, $.01 par value per share           New York Stock Exchange


           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                                      None

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

      Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.

                                Yes X       No
                                   ---         ---
Indicate by check mark whether the registrant (1) is an accelerated filer (as
defined in Rule 12b-2 of the Act).

                                Yes X       No
                                   ---         ---

      The aggregate market value of the voting and non-voting common equity held
by nonaffiliates of the registrant at June 28th, 2002, was approximately
$153,460,617. The aggregate market value was computed by reference to the price
at which the common equity was last sold as of the last business day of the
registrant's most recently completed second fiscal quarter.

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

      COMMON STOCK, $.01 PAR VALUE                       25,789,854
      ----------------------------             --------------------------------
            (Title of Class)                    (Number of shares outstanding)

                      DOCUMENTS INCORPORATED BY REFERENCE:

      Proxy statement for the Registrant's Annual Meeting of Stockholders to be
held May 1, 2003 is incorporated by reference into Part III of this report.


<PAGE>





                            OREGON STEEL MILLS, INC.
                                TABLE OF CONTENTS
                                                                           PAGE
                                     PART I
ITEM

   1.      BUSINESS.........................................................   1
                 General....................................................   1
                 Products...................................................   3
                 Raw Materials and Semi-finished Slabs .....................   5
                 Marketing and Customers....................................   6
                 Competition and Other Market Factors.......................   7
                 Environmental Matters......................................   9
                 Labor Matters..............................................  12
                 Employees..................................................  14
                 Available Information......................................  14

   2.      PROPERTIES.......................................................  15

   3.      LEGAL PROCEEDINGS................................................  15

   4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..............  16
                 Executive Officers of the Registrant.......................  16

                              PART II

   5.      MARKET FOR REGISTRANT'S COMMON EQUITY AND
                 RELATED STOCKHOLDER MATTERS................................  17

   6.      SELECTED FINANCIAL DATA..........................................  18

   7.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS..............  19

   7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
                 MARKET RISK................................................  26

   8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA......................  27

   9.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                  ON ACCOUNTING AND FINANCIAL DISCLOSURE....................  55

                             PART III

   10.
 and 11.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
                 AND EXECUTIVE COMPENSATION.................................  56

   12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                 AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.............  56

   13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................  56

   14.     CONTROLS AND PROCEDURES .........................................  56

                              PART IV

   15.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
              REPORTS ON FORM 8-K.............................................57
           SIGNATURES.......................................................  61
           CERTIFICATIONS...................................................  62

<PAGE>



                                     PART I

ITEM 1.  BUSINESS

GENERAL

         Oregon Steel Mills, Inc. ("Company" or "Registrant") was founded in
1926 by William G. Gilmore and was incorporated in California in 1928. The
Company reincorporated in Delaware in 1974. The Company changed its name in
December 1987 from Gilmore Steel Corporation to Oregon Steel Mills, Inc.

         During 2002, the Company and its subsidiaries operated two steel
minimills and seven finishing facilities in the western United States and
Canada. The Company manufactures and markets one of the broadest lines of
specialty and commodity steel products of any domestic minimill company. The
Company emphasizes the cost efficient production of higher margin specialty
steel products targeted at a diverse customer base located primarily west of the
Mississippi River and in western Canada. The Company's manufacturing flexibility
allows it to manage actively its product mix in response to changes in customer
demand and individual product cycles. The Company is organized into two business
units known as the Oregon Steel Division and Rocky Mountain Steel Mills ("RMSM")
Division.

         The Oregon Steel Division is centered on the Company's steel plate
minimill in Portland, Oregon ("Portland Mill"), which supplies steel for the
Company's steel plate and large diameter pipe finishing facilities. The Oregon
Steel Division's steel pipe mill in Napa, California ("Napa Pipe Mill") is a
large diameter steel pipe mill and fabrication facility. The Oregon Steel
Division also produces large diameter pipe and electric resistance welded
("ERW") pipe at its 60% owned pipe mill in Camrose, Alberta, Canada ("Camrose
Pipe Mill").

         The RMSM Division consists of steelmaking and finishing facilities of
CF&I Steel, L.P. ("CF&I") (dba Rocky Mountain Steel Mills) located in Pueblo,
Colorado ("Pueblo Mill"). The Company owns 87% of New CF&I, Inc. ("New CF&I"),
which owns a 95.2% general partnership interest in CF&I. In addition, the
Company owns directly a 4.3% limited partnership interest in CF&I. The Pueblo
Mill is a steel minimill which supplies steel for the Company's rail, rod and
bar, and seamless tubular finishing mills.

OREGON STEEL DIVISION

         PORTLAND MILL. The Portland Mill is the only hot-rolled steel plate
minimill and steel plate production facility in the eleven western states. The
Portland Mill has the capability to produce slab thicknesses of 6", 7", 8" or 9"
and finished steel plate in widths up to 136".

         During 1997, the Company completed the construction of a Steckel
Combination Mill ("Combination Mill") at its Portland Mill. The project included
installation of a new reheat furnace, a 4-high rolling mill with coiling
furnaces, a vertical edger, a down coiler, on-line accelerated cooling, hot
leveling and shearing equipment, extended roll lines, and a fully automated
hydraulic gauge control system.

         The Combination Mill gives the Company the ability to produce steel
plate in commercially preferred dimensions and sizes, increase its manufacturing
flexibility and supply substantially all the Company's plate requirements for
large diameter line pipe, as well as coiled plate for applications such as the
smaller diameter ERW pipe manufactured at the Camrose Pipe Mill. The Combination
Mill produces discrete steel plate in widths from 48" to 136" and in thicknesses
from 3/16" to 8". Coiled plate can be produced in widths of 48" to 120" and in
thicknesses that range from 0.09" to 0.75". With the Combination Mill, the
Company is in a position to produce all grades of discrete steel plate and
coiled plate for all of the Company's commodity and specialty plate markets,
including heat-treated applications.

         NAPA PIPE MILL. The Napa Pipe Mill produces large diameter steel pipe
of a quality suitable for use in high pressure oil and gas transmission
pipelines. The Napa Pipe Mill can produce pipe with an outside diameter ranging
from 16" to 42", with wall thicknesses of up to 1-1/16" and in lengths of up to
80 feet, and can process two different sizes of pipe simultaneously in its two
finishing sections. Although the Portland Mill can supply substantially all of
the Napa Pipe Mill's specialty plate



                                      -1-
<PAGE>

requirements, due to market conditions and other considerations, the Napa Pipe
Mill may purchase steel plate from third-party suppliers.

         CAMROSE PIPE MILL. The Company acquired a 60% interest in the Camrose
Pipe Mill in June 1992 from Stelco, Inc. ("Stelco"), a large Canadian steel
producer. The Camrose Pipe Mill has two pipe manufacturing mills, a large
diameter pipe mill similar to the Napa Pipe Mill and an ERW pipe mill which
produces steel pipe used by the oil and gas industry. The large diameter pipe
mill produces pipe in lengths of up to 80 feet with a diameter ranging from 20"
to 42". The ERW mill produces pipe in sizes ranging from 4.5" to 16" in
diameter.

         See Part I, Item 2, "Properties", for discussion of the operating
capacities of the Portland Mill, the Napa Pipe Mill and the Camrose Pipe Mill.

RMSM DIVISION

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

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

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

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

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

         SEAMLESS PIPE. Seamless pipe produced at the Pueblo Mill consists of
seamless casing, coupling stock and standard and line pipe. Seamless pipe casing
is used as a structural retainer for the walls of oil or gas wells. Standard and
line pipe are used to transport liquids and gasses both above and



                                      -2-
<PAGE>

underground. The Company's seamless pipe mill is equipped to produce the most
widely used sizes of seamless pipe (7" outside diameter through 10-3/4" outside
diameter) in all standard lengths. The Company's production capability includes
carbon and heat treated tubular products. The Company also sells semi-finished
seamless pipe (referred to as green tubes) for processing and finishing by
others.

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

PRODUCTS

OVERVIEW

         The Company manufactures and markets one of the broadest lines of
specialty and commodity steel products of any domestic minimill company. Through
acquisitions and capital improvements, the Company has expanded its range of
finished products from two in 1991, discrete plate and large diameter welded
pipe, to eight currently by adding ERW pipe, rail, rod, bar, seamless pipe and
coiled plate. It has also expanded its primary selling region from the western
United States to national and international markets. (See Note 3 to the
Consolidated Financial Statements.)

         The following chart identifies the Company's principal products and the
primary markets for those products.
<TABLE>
<CAPTION>


                           PRODUCTS                             MARKETS
                           --------                             -------
<S>                        <C>                                  <C>

OREGON STEEL DIVISION      Specialty steel and coiled plate     Steel service centers
                                                                Heavy equipment manufacturers
                                                                Railcar manufacturers
                                                                Pressure vessel manufacturers
                                                                Welded pipe mills

                           Commodity steel and coiled plate     Steel service centers
                                                                Construction
                                                                Ship and barge manufacturers
                                                                Heavy equipment manufacturers

                           Large diameter steel pipe            Oil and petroleum natural
                                                                   gas transmission pipelines
                                                                Construction

                           Electric resistance welded (ERW)     Oil and natural gas line pipe
                           pipe                                 Construction


RMSM DIVISION              Rail                                 Rail transportation

                           Rod and Bar products                 Construction
                                                                Durable goods
                                                                Capital equipment
                           Seamless pipe                        Oil and petroleum producers

                           Semi-finished                        Seamless tube mills

</TABLE>
                                      -3-


<PAGE>

       The following table sets forth for the period indicated the tonnage
shipped and the Company's total shipments by product class:


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

Oregon Steel Division:
    Steel Plate                            402,000       463,100        709,900
    Coiled Plate                            65,600         8,900         16,900
    Large Diameter Steel Pipe              444,600       281,300         71,300
    Electric Resistance Welded Pipe         34,800        76,400         73,400
                                         ---------     ---------      ---------
        Total Oregon Steel Division        947,000       829,700        871,500
                                         ---------     ---------      ---------

RMSM Division:
    Rail                                   384,100       246,000        314,700
    Rod and Bar                            419,700       432,500        395,100
    Seamless Pipe (FN1)                     30,000        97,700         10,400
    Semi-finished                            2,700         4,700         36,800
                                         ---------     ---------      ---------
        Total RMSM Division                836,500       780,900        757,000
                                         ---------     ---------      ---------
        Total Company                    1,783,500     1,610,600      1,628,500
                                         =========     =========      =========

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

OREGON STEEL DIVISION

         STEEL PLATE AND COIL. The Company's specialty grade and commodity steel
plate is produced at the Portland Mill on the Combination Mill. The Combination
Mill allows for the production of discrete plate widths up to 136" and coiled
plate up to 120" wide. The majority of steel plate is commonly produced and
consumed in standard widths and lengths, such as 96" x 240". Specialty steel
plate consists of hot-rolled carbon, high-strength-low-alloy, alloy and
heat-treated steel plate. Specialty steel plate has superior strength and
performance characteristics as compared to commodity steel plate and is
typically made to order for customers seeking specific properties, such as
improved malleability, hardness or abrasion resistance, impact resistance or
toughness, higher strength and the ability to be more easily machined and
welded. These improved properties are achieved by chemically refining the steel
by either adding or removing specific elements, and by accurate temperature
control while hot-rolling or heat-treating the plate. Specialty steel plate is
used to manufacture railroad cars, mobile equipment, bridges and buildings,
pressure vessels and machinery components. Commodity steel plate is used in a
variety of applications such as the manufacture of storage tanks, machinery
parts, ships and barges, and general load bearing structures. Coiled plate is
the feeder stock for the manufacture of ERW pipe, welded tubing, spiral welded
pipe and for conversion into cut-to-length plate.

         The heat-treating process of quenching and tempering improves the
strength, toughness, and hardness of the steel. Quenched and tempered steel is
used extensively in the mining industry, the manufacture of heavy transportation
equipment, construction and logging equipment, and armored vehicles for the
military. In early 1994, the Company installed a hot leveler at the heat-treat
facility which flattens the steel plate following heat-treatment and ensures
that the steel plate will retain its desired shape after cooling. These
additions enable the Company to manufacture a superior hardened plate product.

         LARGE DIAMETER STEEL PIPE. The Company manufactures large diameter,
double submerged arc-welded ("DSAW") steel pipe at its Napa and Camrose Pipe
Mills. Large diameter pipe is manufactured to demanding specifications and is
produced in sizes ranging from 16" to 42" in outside diameter with wall
thickness of up to 1 1/16" and in lengths of up to 80 feet. At the pipe mills,
the Company  also offers  customers  several  options,  which  include  internal
linings, external coatings, double end pipe joining and, at the Napa Pipe Mill,
full body ultrasonic inspection. Ultrasonic inspection allows examination of the
ends, long seam welds and the entire pipe body for steelmaking or pipemaking
defects and records the results. The Company's large diameter pipe is used
primarily in pressurized underground or underwater oil and gas transmission
pipelines where high quality is absolutely necessary.

                                      -4-
<PAGE>

         The Company's ability to produce high-quality large diameter pipe and
other specialty steel plate products was enhanced by the installation of the
vacuum degassing facility at the Portland Mill in 1993. The vacuum degassing
process reduces the hydrogen content of the final product, which increases its
resistance to hydrogen-induced cracking. The vacuum degassing facility enables
the Company to produce some of the highest quality steel plate and line pipe
steel.

         ERW PIPE. The Company produces smaller diameter ERW pipe at the Camrose
Pipe Mill. ERW pipe is produced in sizes ranging from approximately 4.5" to 16"
in diameter. The pipe is manufactured using coiled steel formed on a high
frequency ERW mill. The principal customers for this product are oil and gas
companies that use it for gathering lines to supply product to feed larger
pipeline systems.

RMSM DIVISION

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

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

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

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

RAW MATERIALS AND SEMI-FINISHED SLABS

          The Company's principal raw material for the steel minimills at the
Portland and Pueblo Mills is ferrous scrap metal derived from, among other
sources, junked automobiles, railroad cars and railroad track materials and
demolition scrap from obsolete structures, containers and machines. In addition,
direct-reduction iron ("DRI"), hot-briquetted iron ("HBI") and pig iron
(collectively "alternate metallics") can substitute for a limited portion of the
scrap used in minimill steel production, although the sources and availability
of alternate metallics are substantially more limited than those of scrap. The
purchase prices for scrap and alternate metallics are subject to market forces
largely beyond the control of the Company, and are impacted by demand from
domestic and foreign steel producers, freight costs, speculation by scrap
brokers and other conditions. The cost of scrap and alternate metallics to the
Company can vary significantly, and the Company's product

                                      -5-
<PAGE>
prices often cannot be adjusted, especially in the short-term, to recover the
costs of increases in scrap and alternate metallics prices.

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

         With the expanded finishing capability available to the Company
from the 1997 completion of the Combination Mill, along with the manufacturing
flexibility to purchase semi-finished steel slabs at a lower cost, the Company
has consequently purchased material quantities of semi-finished steel slabs on
the open market for the Portland Mill since 1999 and each year thereafter. These
purchases are made on the spot market and are dependent upon slab availability.
The slab market and pricing are subject to significant volatility and slabs may
not be available at reasonable prices in the future.

        From mid-January to March 2003, the Company temporarily shut down its
Portland Mill melt shop in response to both adverse market conditions and a high
level of slab inventories at the end of 2002. The melt shop resumed operations
in early March 2003, however, the Company expects a further temporary closure to
occur on or about May 2003. The Company has forecasted that semi-finished slab
purchases for the Portland Mill will meet the majority of its production needs
for 2003. The Company is assessing the short and long term operation of the melt
shop and considering the feasibility of producing semi-finished slabs versus
the availability and cost of similar slabs for purchase. The book value of
assets and other commitments associated with the melt shop operations ("Melt
Shop Assets") was approximately $42 million at December 31, 2002. In the event
the Company were to permanently cease production at the Portland Mill melt shop,
the Company would expense the associated Melt Shop Assets with a charge to
operating income.

MARKETING AND CUSTOMERS

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

          The sales force is organized both geographically and by product line.
The Company has separate sales forces for plate, coiled plate, large diameter
steel pipe, ERW pipe, rod and bar, seamless pipe and rail products. Most of the
Company's sales and are initiated by contacts between sales representatives and
customers. Accordingly, the Company does not incur substantial advertising or
other promotional expenses for the sale of its products. Except for contracts
entered into from time to time to supply rail and large diameter steel pipe to
significant projects (see Part II, Item 7 "Management's Discussion and Analysis
of Financial Conditions and Results of Operation"), the Company does not have
any significant ongoing contracts with customers, and orders placed with the
Company generally are cancelable by the customer prior to production. Although
no single customer or group of affiliated customers represented more than 10% of
the Company's sales revenue in 2000 and 2001, during 2002 the Company had sales
to one customer, Kern River Gas Transmission Company, which accounted for nearly
20% of its total revenue for the year. It is not expected that sales to any
customer in 2003 will represent more than 10% of total sales.

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

         The demand for a majority of the Company's products is not generally
subject to significant seasonal trends. The Company's rail products are impacted
by seasonal demand, as dictated by the major railroads' procurement schedules.
Demand for oil country tubular goods ("OCTG"), which include both seamless pipe
and ERW pipe, can be subject to seasonal factors, particularly for sales to
Canadian customers. Overall demand for OCTG is subject to significant
fluctuations due to the volatility of oil and gas prices and North American
drilling activity as well as other factors includ-


                                      -6-
<PAGE>
ing competition from imports. The Company does not have material contracts with
the United States government and does not have any major supply contracts
subject to renegotiation.

OREGON STEEL DIVISION

       SPECIALTY STEEL PLATE. Customers for specialty steel are located
throughout the United States, but the Company is most competitive west of the
Mississippi River, where transportation costs are less of a factor. Typical
customers include steel service centers and equipment manufacturers. Typical end
uses include pressure vessels, construction and mining equipment, machine parts,
rail cars and military armor.

       COMMODITY STEEL PLATE. Most of the customers for the Company's commodity
steel plate are located in the western United States, primarily in the Pacific
Northwest. The Company's commodity steel plate is typically sold to steel
service centers, fabricators and equipment manufacturers. Service centers
typically resell to other users with or without additional processing such as
cutting to a specific shape. Frequent end uses of commodity steel plate include
the manufacture of rail cars, storage tanks, machinery parts, bridges, barges
and ships.

        LARGE DIAMETER STEEL PIPE. Large diameter steel pipe is marketed on a
global basis, and sales generally consist of a small number of large orders from
natural gas pipeline companies, public utilities and oil and gas producing
companies. The Company believes that the quality of its pipe enables it to
compete effectively in international as well as domestic markets. Domestically,
the Company has historically been most competitive in the steel pipe market west
of the Mississippi River. The Camrose Pipe Mill is most competitive in western
Canada. Sales of large diameter pipe generally involve the Company responding to
requests to submit bids.

        ERW PIPE. The principal customers for ERW pipe produced at the Camrose
Pipe Mill are in the provinces of Alberta and British Columbia, where most of
Canada's natural gas and oil reserves are located. The Company believes its
proximity to these gas fields gives the Company a competitive advantage. Demand
for ERW pipe produced at the Camrose Pipe Mill is largely dependent on the level
of exploration and drilling activity in the gas fields of western Canada.

RMSM DIVISION

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

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

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

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

COMPETITION AND OTHER MARKET FACTORS

         The steel industry is cyclical in nature, and high levels of steel
imports, worldwide production overcapacity and other factors have adversely
affected the domestic steel industry in recent years. The Company also is
subject to industry trends and conditions, such as the presence or absence of

                                      -7-


<PAGE>


sustained economic growth and construction activity, currency exchange rates and
other factors. The Company is particularly sensitive to trends in the oil and
gas, construction, capital equipment, rail transportation and durable goods
segments, because these industries are significant markets for the Company's
products.

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

OREGON STEEL DIVISION

         SPECIALTY STEEL PLATE. The Company's principal domestic competitor in
the specialty steel plate market is Bethlehem Steel Corp. ("Bethlehem"), the
largest plate producer in North America and currently operating under an October
2001 Chapter 11 bankruptcy filing. Bethlehem has reportedly accepted an $1.5
billion offer to be acquired by International Steel Group ("ISG"). In 2002, ISG
acquired LTV's steel mills and Acme Steel. ISG has not publicly revealed how
they plan to operate Bethlehem's plate mills. Bethlehem owns five plate mills
located in Indiana, Pennsylvania, and Maryland, of which three are currently
operating, with an estimated annual capacity in excess of two million tons,
including the largest plate heat treating tonnage capacity in North America.
Bethlehem aggressively markets to major national accounts in fabrication and
heavy-duty manufacturing as a single source supplier. Although not a major
competitor in the western states, U.S. Steel Corporation, located in Indiana, is
the second largest domestic specialty plate producer and does represent a
significant competitor in the Midwest.

         COMMODITY STEEL PLATE. The Company's principal domestic commodity plate
competitor is IPSCO Inc. ("IPSCO"). IPSCO brought into production a green field
120" wide Steckel mill in Iowa in 1998, with that mill operating to nearly the
same specifications as the Portland Mill. IPSCO also operates a smaller 72" wide
Steckel mill in Saskatchewan, Canada, and in early 2001, completed a new 120"
wide Steckel mill in Mobile, Alabama. IPSCO competes primarily in the Midwest
commodity plate market, in other selected target markets and in the coiled plate
market throughout the U.S. Nucor Corporation's new green field plate mill (circa
2001) in Hertford, North Carolina has an operating capacity of one million tons
per year, which has further increased competition in the steel plate market.

         Until its shut-down in November 2001 and subsequent Chapter 11
bankruptcy filing in January 2002, Geneva Steel ("Geneva") was a major
competitor of the Company in the commodity plate market. Geneva has not
restarted and is generally regarded as permanently shut down and a candidate for
liquidation. Geneva, located in Provo, Utah, was the only integrated steel
making facility west of the Mississippi, and had historically produced
approximately 1.8 million tons of commodity plate and coil per year.

         LARGE DIAMETER PIPE. The Company's principal domestic competitors in
the large diameter steel pipe market at this time are Berg Steel Pipe
Corporation, located in Florida, and South Texas Steel, located in Texas.
International competitors consist primarily of pipe producers from Japan, Europe
and Canada, with the principal Canadian competitor being IPSCO. Demand for the
Company's pipe in recent years is primarily a function of new construction of
oil and gas transportation pipelines and to a lesser extent maintenance and
replacement of existing pipelines. Construction of new pipelines domestically
depends to some degree on the level of oil and gas exploration and drilling
activity.

          ERW PIPE. The competition in the market for ERW pipe is based on
availability, price, product quality and responsiveness to customers. The need
for this product has a direct correlation to the number of drilling rigs in the
United States and Canada. Principal competitors in the ERW product in western
Canada are IPSCO and Prudential Steel Ltd., a wholly-owned subsidiary of
Maverick Tube Corporation, located in Calgary, Alberta.

RMSM DIVISION

         RAIL. The majority of current rail requirements in the United States
are replacement rails for existing rail lines. Imports have been a significant
factor in the domestic rail market in recent


                                      -8-
<PAGE>

years. The Company's capital expenditure program at the Pueblo Mill provided the
rail production facilities with continuous cast steel capability and in-line
head-hardening rail capabilities necessary to compete with other producers.
Pennsylvania Steel Technologies, a division of Bethlehem, is the only other
domestic rail producer at this time.

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

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

ENVIRONMENTAL MATTERS

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

       The Clean Air Act Amendments ("CAA") of 1990 imposed responsibilities on
many industrial sources of air emissions, including the Company's plants. In
addition, the monitoring and reporting requirements of the law subject all
companies with significant air emissions to increased regulatory scrutiny. The
Company submitted applications in 1995 to the Oregon Department of Environmental
Quality ("DEQ") and the Colorado Department of Public Health and Environment
("CDPHE") for permits under Title V of the CAA for the Portland and Pueblo
Mills, respectively. A Title V permit was issued for the Portland Mill and
related operations in December 2000 and modified it in April 2002. See
"Environmental Matters-RMSM Division" below for a description of CAA compliance
issues relating to the Pueblo Mill. The Company does not know the ultimate cost
of compliance with the CAA, which will depend on a number of site-specific
factors. Regardless of the outcome of the matters discussed below, the Company
anticipates that it will be required to incur additional expenses and make
additional capital expenditures as a result of the law and future laws
regulating air emissions.

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

                                      -9-
<PAGE>

OREGON STEEL DIVISION

       In May 2000, the Company entered into a Voluntary Clean-up Agreement
with the Oregon Department of Environmental Quality ("DEQ") committing the
Company to conduct an investigation of whether, and to what extent, past or
present operations at the Company's Portland Mill may have affected sediment
quality in the Willamette River. Based on preliminary findings, the DEQ has
requested the Company to begin a full remedial investigation ("RI"), including
areas of investigation throughout the Portland Mill, and implement source
control as required. The Company estimates that costs of the RI study could
range from $900,000 to $1,993,000 over the next two years. Based on a best
estimate, the Company has accrued a liability of $1,284,000 as of December 31,
2002. The Company has also recorded a $1,284,000 receivable for insurance
proceeds that are expected to cover these RI costs because the Company's insurer
is defending this matter, subject to a standard reservation of rights, and is
paying these RI costs as incurred. Based upon the results of the RI, the DEQ may
require the Company to incur costs associated with additional phases of
investigation, remedial action or implementation of source controls, which could
have a material adverse effect on the Company's results of operations because it
may cause costs to exceed available insurance or because insurance may not cover
those particular costs. The Company is unable at this time to determine if the
likelihood of an unfavorable outcome or loss is either probable or remote, or to
estimate a dollar amount range for a potential loss.

         In a related manner, in December 2000, the Company received a general
notice letter from the U.S. Environmental Protection Agency ("EPA"), identifying
it, along with 68 other entities, as a potentially responsible party ("PRP")
under the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") with respect to contamination in a portion of the Willamette River
that has been designated as the "Portland Harbor Superfund Site." The letter
advised the Company that it may be liable for costs of remedial investigation
and remedial action at the site (which liability, under CERCLA, is joint and
several with other PRPs) as well as for natural resource damages that may be
associated with any releases of contaminants (principally at the Portland Mill
site) for which the Company has liability. At this time, nine private and public
entities have signed an Administrative Order of Consent ("AOC") to perform a
remedial investigation/feasibility study ("RI/FS") of the Portland Harbor
Superfund Site under EPA oversight. The RI/FS is expected to take three to five
years to complete. The Company is a member of the Lower Willamette Group, which
is funding that investigation, and it signed a Coordination and Cooperation
Agreement with the EPA that binds it to all terms of the AOC. The Company's cost
associated with the RI/FS for 2002 is approximately $195,000, all of which has
been covered by the Company's insurer. As a best estimate of the RI/FS costs for
years after 2002, the Company has accrued $600,000 as of December 31, 2002. The
Company has also recorded a $600,000 receivable for insurance proceeds that are
expected to cover these RI/FS costs because the Company's insurer is defending
this matter, subject to a standard reservation of rights, and is paying these
RI/FS costs as incurred. Although the EPA has not yet defined the boundaries of
the Portland Harbor Superfund Site, the AOC requires the RI/FS to focus on an
"initial study area" that does not now include the portion of the Willamette
River adjacent to the Portland Mill. The study area, however, may be expanded.
At the conclusion of the RI/FS, the EPA will issue a Record of Decision setting
forth any remedial action that it requires to be implemented by identified PRPs.
A determination that the Company is a PRP could cause the Company to incur costs
associated with remedial action, natural resource damage and natural resource
restoration, the costs of which may exceed available insurance or which may not
be covered by insurance, which therefore could have a material adverse effect on
the Company's results of operations. The Company is unable to estimate a dollar
amount range for any related remedial action that may be implemented by the EPA,
or natural resource damages and restoration that may be sought by federal, state
and tribal natural resource trustees.

         On April 18, 2001, the United Steelworkers of America (the "Union"),
along with two other groups, filed suit against the Company under the citizen
suit provisions of the Clean Air Act ("CAA") in U.S. District Court in Portland,
Oregon. The suit alleges that the Company has violated various air emission
limits and conditions of its operating permits at the Portland Mill
approximately 100 times since 1995. The suit seeks injunctive relief and
unspecified civil penalties. On January 30, 2003, the federal district court
judge dismissed the majority of the plaintiffs' claims and limited the type of
relief the plaintiffs could receive if they succeeded in proving the remaining


                                      -10-
<PAGE>

allegations. Subsequently, the federal magistrate granted plaintiffs leave to
amend their complaint, but any amendments must be consistent with the judge's
ruling, which significantly limits the claims and type of relief that may be
alleged. The Company believes it has factual and legal defenses to the
allegations and intends to defend the matter vigorously. Although the Company
believes it will prevail, it is not presently possible to estimate the liability
if there is ultimately an adverse determination.

RMSM DIVISION

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

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

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

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

                                      -11-


<PAGE>

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

         In a related matter, in April 2000, the Union filed suit in U.S.
District Court in Denver, Colorado, asserting that the Company and CF&I had
violated the CAA at the Pueblo Mill for a period extending over five years. The
Union sought declaratory judgement regarding the applicability of certain
emission standards, injunctive relief, civil penalties and attorney's fees. On
July 6, 2001, the presiding judge dismissed the suit. The 10th Circuit Court of
Appeals on March 3, 2003 reversed the District Court's dismissal of the case and
remanded the case for further hearing to the District Court. No decision has
been yet reached whether to further appeal this ruling. While the Company does
not believe the suit will have a material adverse effect on its results of
operations, the result of litigation, such as this, is difficult to predict and
an adverse outcome with significant penalties is possible. It is not presently
possible to estimate the liability if there is ultimately an adverse
determination on appeal.

LABOR MATTERS

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

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

         On  February 27, 1998, the Regional Director of the National Labor
Relations Board ("NLRB") Denver office issued a complaint against CF&I, alleging
violations of several provisions of the National Labor Relations Act ("NLRA").
On August 17, 1998, a hearing on these allegations commenced before an
Administrative Law Judge ("Judge"). Testimony and other evidence were presented
at various sessions in the latter part of 1998 and early 1999, concluding on
February 25, 1999. On May 17, 2000, the Judge rendered a decision which, among
other things, found CF&I liable for certain unfair labor practices and ordered
as remedy the reinstatement of all 1,000 Unreinstated Employees, effective as of
December 30, 1997, with back pay and benefits, plus interest, less interim
earnings. Since January 1998, the Company has been returning unreinstated
strikers to jobs as positions became open. As noted above, there were
approximately 157 Unreinstated Employees as of December 31, 2002. On August 2,
2000, CF&I filed an appeal with the NLRB in Washington, D.C. A separate hearing
concluded in February 2000, with the judge for that hearing rendering a decision
on August 7, 2000, that certain of the Union's actions undertaken since the
beginning of the strike did constitute misconduct and violations of certain
provisions of


                                      -12-
<PAGE>


the NLRA. The Union has appealed this determination to the NLRB. In both cases,
the non-prevailing party in the NLRB's decision will be entitled to appeal to
the appropriate U.S. Circuit Court of Appeals. CF&I believes both the facts and
the law fully support its position that the strike was economic in nature and
that it was not obligated to displace the properly hired replacement employees.
The Company does not believe that final judicial action on the strike issues is
likely for at least two to three years.

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

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

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

         The Transportation-Communications International Union, Brotherhood
Railway Carmen Division, representing six of those former C&W employees,
asserted that their members were pro-


                                      -13-


<PAGE>


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

EMPLOYEES

         As of December 31, 2002, the Company had approximately 2,000 full-time
employees. Within the Oregon Steel Division, except as noted below, the
employees of the Portland Mill, the Napa Pipe Mill and the corporate
headquarters are not represented by a union. In December 2002, 13 employees of a
small technical department at the Portland Mill voted in favor of allowing
Northwest Metal Producers Association ("NWMPA") to represent them in collective
bargaining with management. Approximately 50 employees at the Camrose Pipe Mill
are members of the Canadian Autoworkers Union ("CAW") and are working under the
terms of a collective bargaining agreement that expires in 2003. Approximately
600 employees of the RMSM Division work under collective bargaining agreements
with several unions, including the United Steelworkers of America. The Company
and the United Steelworkers of America have been unable to agree on terms for a
new labor agreement and are operating under the terms of the Company's last
contract offer, which was implemented in 1998. See "Business-Labor Matters".

         The domestic employees of the Oregon Steel Division participate in the
Employee Stock Ownership Plan ("ESOP"). As of December 31, 2002, the ESOP owned
approximately 3% of the Company's outstanding common stock. At the discretion of
the Board of Directors, common stock is contributed to the ESOP. The Company
also has profit participation plans for its employees, with the exception of
bargaining unit employees of Camrose and executive officers of the Company,
which permit eligible employees to share in the pretax income of their operating
unit. The Company may modify, amend or terminate the plans, at any time, subject
to the terms of various labor agreements.

AVAILABLE INFORMATION

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

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

         The Company's Web site is www.oregonsteel.com. The Company makes
available free of charge, on or through its Web site, its annual, quarterly and
current reports, and any amendments to those reports, as soon as reasonably
practicable after electronically filing such reports with the Securities and
Exchange Commission ("SEC"). Information contained on the Company's Web site is
not part of this report.

                                      -14-


<PAGE>


ITEM 2.  PROPERTIES

OREGON STEEL DIVISION

         The Portland Mill is located on approximately 143 acres owned by the
Company in the Rivergate Industrial Park in Portland, Oregon, near the
confluence of the Columbia and Willamette rivers. The operating facilities
principally consist of an electric arc furnace, ladle metallurgy station, vacuum
degasser, slab casting equipment and the Combination Mill, as well as an
administrative office building. The Company's heat-treating facilities are
located nearby on a 5-acre site owned by the Company.

         The Company owns approximately 152 acres in Napa, California, with the
Napa Pipe Mill occupying approximately 92 of these acres. The Company also owns
a 325,000 square foot steel fabricating facility adjacent to the Napa Pipe Mill.
The fabricating facility is not currently operated by the Company, but is
instead leased to operators on a short-term basis, and consists of industrial
buildings containing equipment for the production and assembly of large steel
products or components.

         The Camrose Pipe Mill is located on approximately 67 acres in Camrose,
Alberta, Canada, with the large diameter pipe mill and the ERW pipe mill
occupying approximately four acres and three acres, respectively. In addition,
there is a 3,600 square foot office building on the site. The sales staff leases
office space in Calgary, Alberta, Canada. The property, plant and equipment of
Camrose, and certain other assets, are collateral for the Camrose (CDN) $15
million revolving credit facility (see Note 6 to the Consolidated Financial
Statements).

RMSM DIVISION

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

         At December 31, 2002, the Company had the following nominal capacities,
which are affected by product mix:

                                                      PRODUCTION     PRODUCTION
                                                       CAPACITY        IN 2002
                                                      ----------     ----------
                                                                (TONS)
         Portland Mill:       Melting                   840,000         456,600
                              Finishing               1,200,000         847,000
         Napa Pipe Mill:      Steel Pipe                400,000         360,700
         Camrose Pipe Mill:   Steel Pipe                320,000          26,500
         Pueblo Mill:         Melting                 1,200,000         916,600
                              Finishing Mills (FN1)   1,200,000         852,100

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

         The Company's 10% First Mortgage Notes due 2009 ("10% Notes") are
secured, in part, by a lien on substantially all of the property, plant and
equipment of the Company, exclusive of Camrose. New CF&I and CF&I (collectively,
the "Guarantors") have pledged substantially all of their property, plant and
equipment and certain other assets as security for their guarantees of the 10%
Notes. (See Note 6 to the Consolidated Financial Statements.)

ITEM 3.  LEGAL PROCEEDINGS

         See Part I, Item 1, "Business - Environmental Matters", for discussion
of (a) the lawsuits initiated by the Union alleging violations of the CAA, and
(b) the environmental issues at the Portland Mill and RMSM.

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

                                      -15-


<PAGE>


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

         The Company maintains insurance against various risks, including
certain types of tort liability arising from the sale of its products. The
Company does not maintain insurance against liability arising out of waste
disposal, on-site remediation of environmental contamination or earthquake
damage to its Napa Mill and related properties because of the high cost of that
coverage. There is no assurance that the insurance coverage carried by the
Company will be available in the future at reasonable rates, if at all.

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

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



                      EXECUTIVE OFFICERS OF THE REGISTRANT

         Officers are elected by the Board of Directors of the Company to serve
for a period ending with the next succeeding annual meeting of the Board of
Directors held immediately after the annual meeting of stockholders.

         The name of each executive officer of the Company, age as of February
1, 2003 and position(s) and office(s) held by each executive officer are as
follows:

                                                             DATE ASSUMED
NAME                    AGE    POSITION(S)                   PRESENT POSITION(S)
----------------------  ---    -------------------------     -------------------

Joe E. Corvin           58     President and                    January 2000
                               Chief Executive Officer

L. Ray Adams            52     Vice President, Finance          March 1991
                               Chief Financial Officer
                               and Treasurer

Michael D. Buckentin    41     Vice President,                  July 2001
                               Operations -
                               Oregon Steel Division

Larry R. Lawrence       55     Senior Vice President,           July 2001
                               Sales - Oregon Steel Division

Steven M. Rowan         57     Vice President,                  February 1992
                               Materials and Transportation

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

Jeff S. Stewart         41     Corporate Controller             January 2000




         Each of the executive officers named above has been employed by the
Company in an executive or managerial role for at least five years.

                                      -16-

<PAGE>



                                    PART II

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

         The Company's common stock is traded on the New York Stock Exchange. At
December 31, 2002, the number of common stockholders of record was 906.
Information on quarterly dividends and common stock prices is shown on page 27
and incorporated herein by reference.

         The Indenture under which the Company's 10% Notes were issued contains
potential restrictions on new indebtedness and various types of disbursements,
including common stock dividends. One of the restrictions on cash dividends is
based on the cumulative amount of the Company's consolidated net income, as
defined. Under that restriction, there was no amount available for cash
dividends at December 31, 2002. In addition, the Company cannot pay cash
dividends under its Credit Agreement without prior approval from its lenders.
(See Note 6 to the Consolidated Financial Statements and Part II, Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources").

                                      -17-
<PAGE>



ITEM 6.      SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>

                                                                                YEAR ENDED DECEMBER 31,
                                                    -----------------------------------------------------------------------------
                                                       2002             2001             2000             1999             1998
                                                    ---------        ---------        ---------        ---------        ---------
                                                            (IN THOUSANDS, EXCEPT TONNAGE, PER TON AND PER SHARE AMOUNTS)
   <S>                                              <C>              <C>              <C>              <C>              <C>
   INCOME STATEMENT DATA:
   Sales (FN1)                                      $ 904,950        $ 780,887        $ 672,017        $ 884,649        $ 937,400
   Cost of sales                                      783,940          694,941          619,016          756,461          826,606
   Settlement of litigation                                --           (3,391)              --           (7,027)          (7,037)
   Loss (gain) on sale of assets                       (1,283)             (10)            (290)             501           (4,746)
   Selling, general and administrative expenses        58,600           64,300           51,486           55,992           56,189
   Incentive compensation                               3,761              244              698           10,540            2,890
                                                    ---------        ---------        ---------        ---------        ---------
        Operating income                               59,932           24,803            1,107           68,182           63,498
   Interest expense                                   (36,254)         (35,595)         (34,936)         (35,027)         (38,485)
   Other income (expense), net                          2,843            3,044            4,355            1,290             (484)
   Minority interests                                  (3,036)            (339)              (7)          (1,475)          (4,213)
   Income tax benefit (expense)                       (10,032)           2,159           11,216          (13,056)          (8,387)
                                                    ---------        ---------        ---------        ---------        ---------
   Net income (loss) before extraordinary
     loss and cumulative effect of change
     in accounting principle                           13,453           (5,928)         (18,265)          19,914           11,929
   Extraordinary loss from extinguishment
     of debt, net of tax                               (1,094)              --               --               --               --
   Cumulative effect of change in accounting
     principle, net of tax                            (17,967)              --               --               --               --
                                                    ---------        ---------        ---------        ---------        ---------
          Net income (loss)                         $  (5,608)       $  (5,928)       $ (18,265)       $  19,914        $  11,929
                                                    =========        =========        =========        =========        =========
   COMMON STOCK INFORMATION:
   Basic earnings (loss) per share                  $  (0.21)        $   (0.22)       $   (0.69)        $   0.76        $    0.45
   Diluted earnings (loss) per share                $  (0.20)        $   (0.22)       $   (0.69)        $   0.76        $    0.45
   Cash dividends declared per share                $     --         $      --        $    0.06         $   0.56        $    0.56
   Weighted average common shares & common
      equivalents outstanding
      Basic                                           26,388            26,378           26,375           26,375           26,368
      Diluted                                         26,621            26,378           26,375           26,375           26,368
   BALANCE SHEET DATA (AT DECEMBER 31):
   Working capital                                  $150,377         $  53,462        $ 108,753         $101,177        $  34,428
   Total assets                                      849,362           869,576          880,354          877,254          993,970
   Current liabilities                               145,085           205,607          126,748          101,660          252,516
   Long-term debt                                    301,428           233,542          314,356          298,329          270,440
   Total stockholders' equity                        306,990           318,586          331,645          352,402          345,117

   OTHER DATA:
   Depreciation and amortization                    $ 45,868         $  46,097        $  46,506         $ 47,411        $  45,164
   Capital expenditures                             $ 18,246         $  12,933        $  16,684         $ 15,908        $  27,754
   Total tonnage sold:
      Oregon Steel Division                          947,000           829,700          871,500          969,800          808,800
      RMSM Division                                  836,500           780,900          757,000          734,900          861,700
                                                 -----------         ---------        ---------        ---------        ---------
        Total tonnage sold                         1,783,500         1,610,600        1,628,500        1,704,700        1,670,500
                                                 ===========         =========        =========        =========        =========


   Operating margin (FN2)                               6.5%              2.7%             0.1%             7.0%             5.5%
   Operating income per ton sold (FN2)                  $33               $13               $1              $36              $31

</TABLE>



----------------------------------
(FN1) Includes freight revenues of $54.5 million, $54.8 million and $36.1
      million, in 2002, 2001, and 2000, respectively, and sale of electricity
      of $19.1 million and $2.8 million in 2001 and 2000, respectively.  During
      2001 and 2000, the Portland Mill was the beneficiary of a committed power
      supply contract with a local utility company.  Under the contract, the
      utility guaranteed to supply an amount of electricity to the mill at a
      fixed rate.  During the west coast electricity shortage in 2000 and 2001,
      the Company agreed not to use a daily determined portion of the guaranteed
      supply and was compensated by the local utility at a daily-determined rate
      per megawatt/hour.  The revenue from this was included in operating income
      because the Company made an operational choice to not use power in return
      for compensation rather than to produce product.  There was no direct cost
      of sales associated with this transaction and, accordingly, the net
      revenue (compensation in excess of contracted price) fully impacted
      operating income for the period.

(FN2) Excludes settlement of litigation and gains and losses on sale of assets.

                                      -18-
<PAGE>


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

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

         The consolidated financial statements include the accounts of the
Company and its subsidiaries, which include wholly- owned Camrose Pipe
Corporation, which through ownership in another corporation holds a 60% interest
in Camrose Pipe Company ("Camrose"); and 87% owned New CF&I, which owns a 95.2%
interest in CF&I. The Company also directly owns an additional 4.3% interest in
CF&I. In January 1998, CF&I assumed the trade name Rocky Mountain Steel Mills.
All significant intercompany balances and transactions have been eliminated.

         The Company currently has two aggregated operating divisions known as
the Oregon Steel Division and the RMSM Division. (See Note 2 to the Consolidated
Financial Statements on discussion of the Company's aggregate reporting of its
operating units). The Oregon Steel Division is centered at the Portland Mill. In
addition to the Portland Mill, the Oregon Steel Division includes the Napa Pipe
Mill and the Camrose Pipe Mill. The RMSM Division consists of the steelmaking
and finishing facilities of the Pueblo Mill, as well as certain related
operations.

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

<TABLE>
<CAPTION>

                                                                                 YEAR ENDED DECEMBER 31,
                                                                      --------------------------------------------
                                                                        2002              2001              2000
                                                                      --------          --------          --------
<S>                                                                   <C>               <C>               <C>
INCOME STATEMENT DATA:
     Sales                                                               100.0%            100.0%            100.0%
     Cost of sales                                                        86.6              89.0              92.1
     Settlement of litigation                                               --              (0.4)               --
     Loss (gain) on sale of assets                                        (0.1)               --                --
     Selling, general and administrative expenses                          6.5               8.2               7.7
     Incentive compensation                                                0.4                --               0.1
                                                                      --------          --------          --------

          Operating income                                                 6.6               3.2               0.1
     Interest expense                                                     (4.0)             (4.6)             (5.2)
     Other income (expense), net                                           0.3               0.4               0.6
     Minority interests                                                   (0.3)             (0.1)               --
                                                                      --------          --------          --------
          Pretax income (loss)                                             2.6              (1.1)             (4.5)
     Income tax benefit (expense)                                         (1.1)              0.3               1.7
                                                                      --------          --------          --------
      Net income (loss) before extraordinary loss and
       cumulative effect of change in accounting principle                 1.5              (0.8)             (2.8)
     Extraordinary loss from extinguishment of debt of tax                (0.1)               --                --
     Cumulative effect of change in accounting principle,
       net of tax                                                         (2.0)               --                --
                                                                      --------          --------          --------
          Net loss                                                        (0.6)%            (0.8)%            (2.8)%
                                                                      ========          ========          ========


BALANCE SHEET DATA (AT DECEMBER 31):
     Current ratio                                                       2.0:1             1.3:1             1.9:1
     Total debt as a percentage of capitalization                         47.6%             49.3%             49.6%
     Net book value per share                                            $11.90           $12.36            $12.87


</TABLE>
                                      -19-
<PAGE>


         The following table sets forth by division, for the periods indicated,
tonnage sold, revenues and average selling price per ton.
<TABLE>
<CAPTION>


                                                       YEAR ENDED DECEMBER 31,
                                            --------------------------------------------
                                               2002             2001             2000
                                            ----------       ----------       ----------
<S>                                         <C>              <C>              <C>
TOTAL TONNAGE SOLD:
     Oregon Steel Division:
        Plate and coil                         467,600          472,000          726,800
        Welded pipe                            479,400          357,700          144,700
                                            ----------       ----------       ----------
             Total Oregon Steel Division       947,000          829,700          871,500
                                            ----------       ----------       ----------
     RMSM Division:
        Rail                                   384,100          246,000          314,700
        Rod and Bar                            419,700          432,500          395,100
        Seamless Pipe (FN1)                     30,000           97,700           10,400
        Semi-finished                            2,700            4,700           36,800
                                            ----------       ----------       ----------
             Total RMSM                        836,500          780,900          757,000
                                            ----------       ----------       ----------
             Total Company                   1,783,500        1,610,600        1,628,500
                                            ==========       ==========       ==========
PRODUCT SALES (IN THOUSANDS): (FN2)
     Oregon Steel Division                  $  535,049       $  414,994       $  363,624
     RMSM Division                             315,448          291,993          269,505
                                            ----------       ----------       ----------
             Total Company                  $  850,497       $  706,987       $  633,129
                                            ==========       ==========       ==========
AVERAGE SELLING PRICE PER TON:(2)
     Oregon Steel Division                  $      565       $      500       $      417
     RMSM Division                          $      377       $      374       $      356
            Company Average                 $      477       $      439       $      389


-----------------------
(FN1) The Company suspended operation of the seamless pipe mill from May 1999
      until October 2000, from November 2001 to April 2002 and from mid-August
      2002 to mid-September 2002.

(FN2) Product sales and average selling price per ton exclude freight revenues
      of $54.5 million, $54.8 million and $36.1 million, in 2002, 2001, and
      2000, respectively, and sale of electricity of $19.1 million and $2.8
      million in 2001 and 2000, respectively. During 2001 and 2000, the Portland
      Mill was the beneficiary of a committed power supply contract with a local
      utility company. Under the contract the utility guaranteed to supply an
      amount of electricity to the mill at a fixed rate. During the west coast
      electricity shortage in 2000 and 2001, the Company agreed not to use a
      daily determined portion of the guaranteed supply and was compensated by
      the local utility at a daily-determined rate per megawatt/hour. The
      revenue from this was included in operating income because the Company
      made an operational choice to not use power in return for compensation
      rather than to produce product. There was no direct cost of sales
      associated with this transaction and, accordingly, the net revenue
      (compensation in excess of contracted price)fully impacted operating
      income for the period.
</TABLE>


         The Company's long range strategic plan emphasizes the commitment to
increase the Company's offering of specialty products, particularly in the
plate, rail, rod and welded pipe businesses, while seeking to reduce the impact
of individual product cycles on the Company's financial performance. To achieve
these goals, the Company is developing additional product offerings and
extending its market from the western United States to a national marketing
presence.

         The Company's operating results were positively affected in 2002 by,
among other things, increased demand for welded pipe products. However,
increased pricing pressure in plate products continued in 2002. The specialty
and commodity plate markets have been impacted by both new sources of domestic
supply and continued imports from foreign suppliers, which have adversely
affected average selling prices for the Company's plate products. High fixed
costs motivate steel producers to maintain high output levels even in the face
of falling prices, thereby increasing further downward pressures on selling
prices. The domestic steel industry and the Company's business are highly
cyclical in nature and these factors have adversely affected the profitability
of the Company.

         On March 5, 2002, President Bush announced the imposition of
restrictions on a wide range of steel imports for three years, including a 30%
tariff on steel plate and hot-rolled coil and a 30% tariff on imports of steel
slabs in excess of 5.4 million tons in year one. The tariffs on steel plate,

                                      -20-
<PAGE>

coil, and slabs decline to 24% in year two and 18% in year three. The tariffs
for steel slabs are for imports in excess of 5.9 million tons in year two and
6.4 million tons in year three. Imports from Mexico, a large exporter of slab to
the U.S., and Canada and certain developing countries are exempted from these
restrictions. This action is expected to reduce the supply of certain steel
products available on the U.S. market, thereby increasing the prices domestic
steel manufacturers can charge for those products. These restrictions did not
materially impact either the supply or the cost of steel slabs which the Company
purchases on the open market to process into steel plate and coil.

         The Company expects to ship approximately 1.8 million tons of product
during 2003. The Oregon Steel Division anticipates that it will ship
approximately 270,000 tons of welded pipe and approximately 700,000 tons of
plate and coil products during 2003. The product mix is expected to shift in
terms of tons, from 51% of welded pipe and 49% of plate and coil in 2002, to
approximately 25% and 75%, respectively in 2003. This shift in product mix is
expected to have a material negative impact on the 2003 average sales price and
operating income for the division. The RMSM Division anticipates that it will
ship approximately 390,000 tons of rail, and approximately 440,000 tons of rod
and bar products. Seamless pipe shipments will be dependent on market conditions
in the drilling industry. While the Company anticipates that product category
average selling prices will be similar in 2003 as in 2002, higher raw material
and energy costs are expected to have a negative impact on the operating income
for the division. Accordingly, the Company expects consolidated operating income
to be significantly lower in 2003 versus 2002. However, the Company expects
liquidity to remain adequate through 2003 unless there is a substantial negative
change in overall economic markets.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

            The Company believes the following critical accounting policies
affect its more significant judgments and estimates used in the preparation of
its consolidated financial statements.

           ALLOWANCE FOR DOUBTFUL ACCOUNTS. The Company maintains allowances for
doubtful accounts for estimated losses resulting from the inability of its
customers to make required payments. As of December 31, 2002, the allowance of
doubtful accounts was approximately $4.4 million. In establishing a proper
allowance for doubtful accounts, the Company evaluates the collectibility of its
accounts receivable based on a combination of factors. In cases where management
is aware of the circumstances that may impair a specific customer's ability to
meet its financial obligations, the Company records a specific allowance against
amounts due from customers, and thereby reduces the net recognized receivable
amount the Company reasonably believes will be collected. For all other
customers, the Company evaluates the allowance for doubtful accounts based on
the length of time the receivables are past due, historical collection
experience, customer credit-worthiness and economic trends.


         INVENTORY. The Company's inventory consists of raw materials,
semi-finished, finished products and operating stores and supplies. At December
31, 2002, inventory was approximately $162.8 million. If appropriate, the
Company's inventory balances are adjusted to approximate the lower of
manufacturing cost or market value. No such adjustment was required in 2002.
Manufacturing cost is determined using the average cost method.


         ENVIRONMENTAL LIABILITIES. All material environmental remediation
liabilities for non-capital expenditures, which are both probable and estimable,
are recorded in the financial statements based on current technologies and
current environmental standards at the time of evaluation.

                                      -21-
<PAGE>

Adjustments are made when additional information is available that suggests
different remediation methods or when estimated time periods are changed,
thereby affecting the total cost. The best estimate of the probable cost within
a range is recorded; however, if there is no best estimate, the low end of the
range is recorded and the range is disclosed. Even though the Company has
established certain reserves for environmental remediation, additional remedial
measures may be required by environmental authorities and additional
environmental hazards, necessitating further remedial expenditures, may be
asserted by these authorities or private parties. Accordingly, the costs of
remedial measures may exceed the amounts reserved.

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

         EMPLOYEE BENEFITS PLANS AND OTHER POST-RETIREMENT BENEFITS. Annual
pension and other post-retirement benefits ("OPRB") expenses are calculated by
third party actuaries using standard actuarial methodologies. The actuaries
assist the Company in making estimates based on historical information, current
information and estimates about future events and circumstances. Significant
assumptions used in the valuation of pension and OPRB include expected return on
plan assets, discount rate, rate of increase in compensation levels and the
health care cost trend rate. The Company accounts for the defined benefit
pension plans using Statement of Financial Accounting Standards No. 87,
"EMPLOYER'S ACCOUNTING FOR PENSIONS" ("SFAS No. 87"). As a result of continuing
declines in interest rates and the market value of the Company's defined benefit
pension plans' assets, the Company was required to increase the minimum pension
liability at December 31, 2002 by $10.5 million. This adjustment did not impact
current earnings. For further details regarding the Company's benefits and
post-retirement plans, see Note 11 to the Consolidated Financial Statements.

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

COMPARISON OF 2002 TO 2001

         SALES. Consolidated sales for 2002 of $905.0 million increased $124.1
million, or 15.9%, from sales of $780.9 million for 2001. Included in 2001 sales
are $19.1 million in electricity sales; the Company did not have any sales of
electricity in 2002. Revenues from product sales increased 20.3% to $850.5
million in 2002 from $707.0 million in 2001. Shipments were up 10.7% at
1,783,500 tons for 2002 compared to 1,610,600 tons for 2001. The average product
selling price per ton increased from $439 in 2001 to $477 in 2002. Growth in
both product sales and related average selling prices were due primarily to
higher shipments of welded pipe and rail products and higher rod and bar prices
in 2002.

         OREGON STEEL DIVISION. For 2002, the division shipped 947,000 tons of
plate, coil and welded pipe products, compared to 829,700 tons in 2001. This
increase was due to significantly higher shipments of welded pipe resulting from
the supply of more than 370,000 tons of large diameter pipe to Kern River Gas
Transmission Company, for its Kern River Expansion Project. Average selling
price per ton increased in 2002 to $565 from $500 in the prior year. The
increase was mainly due to a shift in product mix towards higher priced welded
pipe products attributable to the Kern River Expansion Project pipe order.

         RMSM DIVISION. For 2002, the division shipped 836,500 tons, compared to
780,900 tons in 2001. The increase was due to higher shipments of rail products,
partially offset by decreased rod and bar shipments, as well as decreased
seamless pipe and semi-finished products. Average product selling price per ton
increased to $377 in 2002 from $374 in 2001. The shift of product mix to rail in
2002 was the principal reason for the improved pricing. In addition, the demand
for seamless pipe remained sluggish throughout 2002, and as a result, the
seamless mill was temporarily


                                      -22-


<PAGE>
shut down for the periods from November 2001 to April 2002 and from mid-August
2002 to mid-September of 2002.

         GROSS PROFITS. Gross profit was $121.0 million, or 13.4% of sales, for
2002 compared to $85.9 million, or 11.0% of sales, for 2001. The increase of
$35.1 million in gross profit was positively impacted by increased sales of
high-priced welded pipe from the Napa Pipe Mill, and increased sales of rail
products and higher rod and bar prices at the RMSM Division.

         SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses ("SG&A") of $58.6 million for 2002 decreased by 8.9%,
from $64.3 million for 2001. SG&A expenses decreased as a percentage of total
sales to 6.5% in 2002 from 8.2% in 2001. The decrease was due to higher general
adminstrative costs in 2001, including such non-recurring items as $3.1 million
of seamless pipe commission fees and $4.0 million of environmental and other
legal expenses reserves.

         INTEREST EXPENSE. Total interest expense increased $659,000, or 1.9%,
to $36.3 million in 2002, compared to $35.6 million in 2001. The Company issued
its 10% First Mortgage Notes due 2009 ("10% Notes") on July 15, 2002 in order to
refinance its 11% First Mortgage Notes due 2003 ("11% Notes"). Although the
Company's 10% Notes bear a lower interest rate than the 11% Notes, the Company
incurred increased interest expense primarily attributable to the additional
interest accrued on the 11% Notes which were outstanding concurrently with the
10% Notes for the period of July 15 to August 14, 2002. This was partially
offset by the lower average borrowing levels from the Company's credit facility
in 2002. In 2001, interest expense included additional expensed loan fees due to
the amendment of the Company's credit facility.

         INCOME TAX EXPENSE. The effective income tax expense rate was 42.7%
for 2002 versus an effective income tax benefit rate of 26.7% for 2001. The
effective income tax rate for 2002 varied principally from the combined state
and federal statutory rate due to a 1.7 million increase in the valuation
allowance for state tax credit carryforwards.

COMPARISON OF 2001 TO 2000

         SALES. Consolidated sales for 2001 of $780.9 million increased $108.9
million, or 16.2%, from sales of $672.0 million for 2000. Included in 2001 sales
are $19.1 million in electricity sales and $54.8 million in freight revenue.
Included in 2000 sales is $2.8 million in electricity sales and $36.1 million in
freight revenue. Revenues from product sales increased 11.7% to $707.0 million
in 2001 from $633.1 million in 2000. Shipments were down 1.1% at 1,610,600 tons
for 2001 compared to 1,628,500 tons for 2000. However, the average product
selling price per ton increased from $389 in 2000 to $439 in 2001. Growth in
both product sales and related average selling prices were due primarily by the
shift in product mix from plate and coil products to welded and seamless pipe
products. Freight revenue increased in response to product sales growth, as well
as the product mix and customer preference on shipping.

         OREGON STEEL DIVISION. For 2001, the division shipped 829,700 tons of
plate, coil and welded pipe products, compared to 871,500 tons in 2000. This
decrease was due to a weakness in market demand and also due, in large part, to
the 6-day temporary curtailment at the Portland Mill during August of 2001. This
curtailment was in response to the plate market decline. Despite the decline in
total shipments, average selling price per ton, net of revenues from the
electricity sales and shipping revenues, increased in 2001 to $500 from $417 in
the prior year. The increase was in large part due to greater mix of higher
priced welded pipe products attributable to the increased pipe orders at the
Napa Pipe Mill. Also included in 2001 sales is $16.9 million in electricity
sales. The Company sold approximately 50% of excess power load in its melting
facility at the Portland Mill back to the local utility under an electricity
exchange contract, which expired in October 2001.

         RMSM DIVISION. For 2001, the division shipped 780,900 tons, compared to
757,000 tons in 2000. The increase was due to higher shipments of seamless pipe
and rod and bar products, partially offset by decreased rail shipments caused by
capital program reductions by the major railroads. Average product selling price
per ton increased to $374 in 2001 from $356 in 2000. The shift of product mix to
seamless pipe in 2001 was the principal reason for the improved pricing, as
seamless pipe has the highest selling price per ton of all the division's
products. Due to the adverse market conditions in the prior year, no seamless
products were shipped during the first nine months of 2000 because the operation
was temporarily shut down. While performance of seamless products


                                      -23-
<PAGE>
for the first half of 2001 was strong, market conditions again deteriorated as
demand from oil and gas distributors decreased toward the second half of the
year, due to significant decline of oil and natural gas prices. As a result, the
seamless mill was temporarily shut down in November 2001 and for the balance of
the year. Also included in 2001 sales is $2.2 million in electricity sales.

         GROSS PROFITS. Gross profit was $85.9 million, or 11.0%, for 2001
compared to $53.0 million, or 7.9%, for 2000. The increase of $32.9 million in
gross profit was primarily related to the increased sales of high-priced welded
pipe and seamless pipe products. Additionally, the sale of electricity
positively impacted gross profit margin. This increase in gross profit was
partially offset by continued manufacturing overhead costs at the Portland Mill
that did not decline with the lower melt shop production that occurred as a
result of the sale of electricity back to the local utility.

         SETTLEMENT OF LITIGATION. In 2001, the Company recorded a $3.4 million
gain from litigation settlements with various graphite electrode suppliers.

         SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses ("SG&A") of $64.3 million for 2001 increased by 24.9%,
from $51.5 million for 2000. SG&A expenses increased as a percentage of total
sales to 8.2% in 2001 from 7.7% in 2000. The increase was due in part to $3.1
million in additional seamless pipe commission fees for 2001, as compared to
commission fees paid in 2000 when the seamless mill was shut down for the
majority of that year. In addition, shipping costs increased 18.1%, from $14.9
million in 2000 to $17.6 million in 2001. This was a direct result of higher
volume of shipments on welded and seamless pipe in 2001. The remaining increase
from the prior year was due to higher general and administrative costs. This
included an increase in bad debt expense of $2.7 million and an increase in
reserves for environmental and other legal expenses of $4.0 million.

         INTEREST EXPENSE. Total interest expense increased $700,000, or 2.0%,
to $35.6 million in 2001, compared to $34.9 million in 2000. The increase in
interest expense in 2001 was primarily due to the acceleration of amortized loan
fees, additional loan fees, and higher interest costs associated with the
amendment of the Company's credit facility in the third and fourth quarters of
2001.

         INCOME TAX EXPENSE. Effective income tax benefit rate was 26.7% and
38.0% for 2001 and 2000, respectively. The effective income tax rate for 2001
varied principally from the combined state and federal statutory rate due to the
adjustments created by structural changes in the Company's foreign operations,
and non-deductible fines and penalties.

LIQUIDITY AND CAPITAL RESOURCES

         At December 31, 2002, the Company's liquidity, comprised of cash, cash
equivalents, and funds available under its revolving credit agreement (" Credit
Agreement"), totaled approximately $94.9 million, compared to $46.3 million at
December 31, 2001.

         Cash flow provided by operations for 2002 was $54.1 million compared to
$49.5 million in 2001. The items primarily affecting the $4.6 million increase
in cash flows were - a) non-cash transactions including: 1) the write-off of
$31.9 million worth of goodwill during the first quarter of 2002 resulting in a
cumulative effect of change in accounting principle of $18.0 million (net of a
$11.3 million tax effect and $2.6 million of minority interest); 2) a non-cash
provision for deferred income taxes of $12.1 million in 2002; and 3) the
refinancing of the Company's credit facility and the 11% Notes in July 2002
resulting in a $1.1 million extraordinary loss, net of taxes, on the early
extinguishment of debt; b) changes in working capital requirements
including: 1) increased inventories of $30.4 million versus $2.6 million in
2001; 2) a decrease of $4.6 million in net accounts receivable in 2002 versus an
increase of $2.0 million in 2001; 3) a $9.1 million increase operating
liabilities in 2002 versus an $18.0 million increase in 2001.

         Net working capital at December 31, 2002 increased $96.9 million
compared to December 31, 2001, reflecting a $36.4 million increase in current
assets and a $60.5 million decrease in current liabilities. The increase in
current assets was primarily due to increased cash and inventories ($20.8
million and $30.4 million, respectively). An offset to the increase in current
assets was decreases in accounts receivable and deferred tax asset ($4.6 million
and $9.9 million, respectively). The accounts receivable for the year ended
December 31, 2002, as measured in average daily sales outstanding, decreased to
35 days, as compared to 40 days for the year ended December 31, 2001. The
decrease was attributable to a faster turnover of welded pipe and rail product
receivables from customers paying earlier in order to utilize cash discounts,
and an increased effort on collec-

                                      -24-
<PAGE>
tions of receivables. The decrease in current liabilities was primarily due to a
$61.6 million decrease in short-term borrowings from the Company's credit
facility which was paid off with the proceeds of the 10% Notes. In addition, the
Company made a series of payments totaling $14.5 million to complete the payoff
of the 10-year CF&I acquisition term loan of $67.5 million, incurred by CF&I as
part of the purchase price of certain assets of CF&I Steel Corporation on March
31, 1993.

      As of December 31, 2002, principal payments on debt are due as follows (in
thousands):

                2003                                                     -
                2004-2008                                                -
                2009                                               305,000
                                                                   -------
                                                                  $305,000
                                                                  ========

      On July 15, 2002 the Company issued $305 million of 10% Notes in a private
offering at a discount of 98.772% and an interest rate of 10%. Interest is
payable on January 15 and July 15 of each year. The proceeds of this issuance
were used to redeem the Company's 11% Notes (including interest accrued from
June 16, 2002 until the redemption date of August 14, 2002), refinance its
existing credit agreement, and for working capital and general corporate
purposes. The old credit agreement, which was to expire on September 30, 2002,
was replaced in July 2002 with a new $75 million credit facility that will
expire on June 30, 2005. As of December 31, 2002, the Company had outstanding
$305 million principal amount of 10% Notes, which bear interest at 10%. The two
subsidiaries of the Company, New CF&I, Inc., and CF&I Steel, L.P. (the
"Guarantors") guarantee the 10% Notes. The Notes and the guarantees are secured
by a lien on substantially all the property, plant and equipment and certain
other assets of the Company (exclusive of Camrose) and the Guarantors. The
collateral does not include, among other things, accounts receivable and
inventory. The Indenture under which the 10% Notes are issued contains
restrictions on new indebtedness and various types of disbursements, including
dividends, based on the cumulative amount of the Company's net income as
defined. Under these restrictions, there was no amount available for cash
dividends at December 31, 2002. In addition, the Company cannot pay cash
dividends under its Credit Agreement without prior approval from its lenders.

      As of December 31, 2002, the Company, New CF&I, Inc., CF&I Steel, L.P.,
and Colorado and Wyoming Railway Company are borrowers under the Credit
Agreement, which will expire on June 30, 2005. At December 31, 2002, the amount
available was the lesser of $70 million or the sum of the product of the
Company's eligible domestic accounts receivable and inventory balances and
specified advance rates. The Credit Agreement is secured by these assets in
addition to a security interest in certain equity and intercompany interests of
the Company. Amounts under the Credit Agreement bear interest based on either
(1) the prime rate plus a margin ranging from 0.25% to 1.00%, or (2) the
adjusted LIBO rate plus a margin ranging from 2.50% to 3.25%. Unused commitment
fees range from 0.25% to 0.50%. As of December 31, 2002, there was no
outstanding balance due under the Credit Agreement. Had there been new
borrowings in 2002, the average interest rate for the Credit Agreement would
have been 5.5%. The unused line fees were 0.50%. The margins and unused
commitment fees will be subject to adjustment within the ranges discussed above
based on a quarterly leverage ratio. The Credit Agreement contains various
restrictive covenants including a minimum consolidated tangible net worth
amount, a minimum earnings before interest, taxes, depreciation and amortization
("EBITDA") amount, a minimum fixed charge coverage ratio, limitations on maximum
annual capital and environmental expenditures, limitations on stockholder
dividends and limitations on incurring new or additional debt obligations other
than as allowed by the Credit Agreement. At December 31, 2002, $5.0 million was
restricted under the Credit Agreement, $8.2 million was restricted under
outstanding letters of credit, and $61.8 million was available for use.

      The Company is able to draw up to $15 million of the borrowings available
under the Credit Agreement to support issuance of letters of credit and similar
contracts. At December 31, 2002, $8.2 million was restricted under outstanding
letters of credit.

       Camrose maintains a (CDN) $15 million revolving credit facility with a
Canadian bank, the proceeds of which may be used for working capital and general
business purposes by Camrose. The facility is collateralized by substantially
all of the assets of Camrose, and borrowings under this facility are limited to
an amount equal to the sum of the product of specified advance rates and
Camrose's eligible trade accounts receivable and inventories. This facility
expires in September

                                      -25-
<PAGE>


2004. At the Company's election, interest is payable based on either the bank's
Canadian dollar prime rate, the bank's U.S. dollar prime rate, or LIBOR. As of
December 31, 2002, the interest rate of this facility was 4.5%. Annual
commitment fees are 0.25% of the unused portion of the credit line. At December
31, 2002, there was no outstanding balance due under the credit facility.

         During 2002, the Company expended (exclusive of capital interest)
approximately $9.0 million and $8.4 million on capital projects at the Oregon
Steel Division and the RMSM Division, respectively. Despite the unfavorable net
results for 2002, caused by a $18.0 million non-cash goodwill impairment charge
required under the new accounting provision of FAS 142, the Company has been
able to satisfy its needs for working capital and capital expenditures through
operating income and, in part, through its ability to secure adequate financing
arrangements. The Company believes that its anticipated needs for working
capital and capital expenditures for the next twelve months will be met from
funds generated from operations, and if necessary, from the available credit
facility.

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


NEW ACCOUNTING PRONOUNCEMENTS

         See Note 2, in Part II, Item 8, "Financial Statements and Supplementary
Data - Notes to Consolidated Financial Statements".


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company has entered into certain market-risk-sensitive financial
instruments for other than trading purposes, principally short-term debt.

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

 INTEREST RATE RISK

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

          All of the Company's debt is fixed-rate debt. A hypothetical 10%
decrease in interest rates with all other variables held constant would result
in an increase in the fair value of the Company's fixed-rate debt by $17.7
million. A hypothetical 10% increase in interest rates with all other variables
held constant would result in a decrease in the fair value of the Company's
fixed-rate debt by $16.3 million. The fair value of the Company's fixed-rate
debt was estimated by considering the impact of the hypothetical interest rates
on quoted market prices and current yield. While changes in interest rates
impact the fair value of this debt, there is no impact to earnings and cash
flows because the Company intends to hold these obligations to maturity unless
the Company elects to repurchase its outstanding debt securities at prevailing
market prices.

                                      -26-
<PAGE>


FOREIGN CURRENCY RISK

         In general, the Company uses a single functional currency for all
receipts, payments and other settlements at its facilities. Occasionally,
transactions will be denominated in another currency and a foreign currency
forward exchange contract is used to hedge currency gains and losses; however,
at December 31, 2002, the Company did not have any open forward contracts.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>

                                                           QUARTERLY FINANCIAL DATA - UNAUDITED

                                                     2002                                            2001
                                 ---------------------------------------------- -----------------------------------------------
                                    4TH        3RD        2ND          1ST         4TH         3RD         2ND         1ST
                                    ---        ---        ---          ---         ---         ---         ----        ---
<S>                               <C>        <C>        <C>          <C>         <C>         <C>         <C>         <C>
                                                            (IN MILLIONS EXCEPT PER SHARE AMOUNTS)

Sales                             $240.1     $234.5     $231.3       $199.1      $197.7      $199.3      $204.3      $179.6
Cost of sales                      210.1      199.0      197.4        177.4       172.3       167.1       180.0       172.2
Gross profit                        30.0       35.5       33.9         21.7        25.4        32.2        24.3         7.4
Operating income (loss)             15.0       19.8       17.0          8.1         6.8        15.4         8.9        (6.3)
Loss before extraordinary
items and cumulative effect
change in accounting principle
                                     3.3        5.1        5.2         (0.1)        0.6         3.6         (.5)       (9.6)
Net income (loss)                    3.3        4.0        5.2        (18.1)        0.6         3.6         (.5)       (9.6)
Basic income (loss) per share:
Before extraordinary  items
and cumulative effect of
change in accounting principle

Net income (loss)                 $ 0.13     $ 0.19     $ 0.20       $(0.01)     $ 0.02      $ 0.14      $(0.02)     $(0.36)
Diluted income (loss)per          $ 0.13     $ 0.15     $ 0.20       $(0.69)     $ 0.02      $ 0.14      $(0.02)     $(0.36)
   share:
Before extraordinary items
and cumulative effect of
change in accounting principle    $ 0.13     $ 0.19     $ 0.20       $(0.01)     $ 0.02      $ 0.13      $(0.02)     $(0.36)

Net income (loss)                 $ 0.13     $ 0.15     $ 0.20       $(0.69)     $ 0.02      $ 0.13      $(0.02)     $(0.36)


Dividends declared per
   common share                   $    -     $    -     $    -       $    -      $    -      $    -      $    -      $    -
Common stock price per
   share range:
      High                        $ 6.50     $ 7.46     $ 8.13       $ 7.60      $ 5.40      $ 9.30      $ 7.51      $ 5.95
      Low                         $ 3.81     $ 5.62     $ 5.00       $ 4.70      $ 3.35        5.15        3.93        1.13
Average shares and equivalents
   outstanding:
       Basic                        26.4       26.4       26.4         26.4        26.4        26.4        26.4        26.4
       Diluted                      26.5       26.7       26.7         26.4        26.5        26.6        26.4        26.4




</TABLE>
                                      -27-
<PAGE>



                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Stockholders of Oregon Steel Mills, Inc.

In our opinion, the consolidated financial statements listed in the index
appearing under Item 15(a)(ii) on page 57 present fairly, in all material
respects, the financial position of Oregon Steel Mills, Inc. and its
subsidiaries at December 31, 2002, 2001, and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2002 in conformity with accounting principles generally accepted in
the United States of America. In addition, in our opinion, the financial
statement schedule listed in the index appearing under Item 15(a)(iii) on page
57 presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
These financial statements and financial statement schedule are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

As discussed in Notes 1 and 7 to the financial statements, the Company changed
its method of accounting for goodwill in 2002.


PricewaterhouseCoopers LLP
Portland, OR
March 3, 2003


                                      -28-



<PAGE>
<TABLE>

                            OREGON STEEL MILLS, INC.
                           CONSOLIDATED BALANCE SHEETS
                     (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<CAPTION>

                                                                                           DECEMBER 31,
                                                                         -------------------------------------------
                                                                            2002             2001             2000
                                                                         ---------        ---------        ---------
<S>                                                                      <C>              <C>              <C>
                                                  ASSETS
Current assets:
      Cash and cash equivalents                                          $  33,050        $  12,278        $   3,370
      Trade accounts receivable, less allowance for
       doubtful accounts of $4,346, $4,299 and $1,528                       84,547           89,132           91,149
      Inventories                                                          162,834          132,402          129,801
      Deferred tax asset                                                     8,109           17,998            7,266
      Other                                                                  6,922            7,259            3,915
                                                                         ---------        ---------        ---------
          Total current assets                                             295,462          259,069          235,501
                                                                         ---------        ---------        ---------
Property, plant and equipment:
      Land and improvements                                                 30,936           30,177           29,869
      Buildings                                                             52,653           52,463           50,549
      Machinery and equipment                                              793,537          787,156          778,921
      Construction in progress                                              17,444            9,644           14,607
                                                                         ---------        ---------        ---------
                                                                           894,570          879,440          873,946
      Accumulated depreciation                                            (371,192)        (328,386)        (290,071)
                                                                         ---------        ---------        ---------
          Net property, plant and equipment                                523,378          551,054          583,875
                                                                         ---------        ---------        ---------

      Goodwill                                                                 520           32,384           33,421
      Intangibles, net                                                       1,106            1,227            1,349
      Other assets                                                          28,896           25,842           26,208
                                                                         ---------        ---------        ---------
                 TOTAL ASSETS                                            $ 849,362        $ 869,576        $ 880,354
                                                                         =========        =========        =========

                                               LIABILITIES
Current liabilities:
      Current portion of long-term debt                                  $      --        $   9,464        $   8,625
      Short-term debt                                                           --           61,638               --
      Accounts payable                                                      63,325           81,270           82,014
      Accrued expenses                                                      81,760           53,235           36,109
                                                                         ---------        ---------        ---------
          Total current liabilities                                        145,085          205,607          126,748

Long-term debt                                                             301,428          233,542          314,356
Deferred employee benefits                                                  23,222           24,077           22,630
Environmental liability                                                     30,482           31,350           32,577
Deferred income taxes                                                       16,895           29,102           22,627
                                                                         ---------        ---------        ---------
          Total liabilities                                                517,112          523,678          518,938
                                                                         ---------        ---------        ---------
Minority interest                                                           25,260           27,312           29,771
                                                                         ---------        ---------        ---------
Contingencies (Note 15)
                                         STOCKHOLDERS' EQUITY
Capital stock:
Preferred Stock, par value $.01 per share;
   1,000 shares authorized; none issued                                         --               --               --
Common stock, par value $.01 per share;
  authorized 30,000 shares; 25,790, 25,787
   and 25,777 shares issued and outstanding
                                                                               258              258              258
Additional paid-in capital                                                 227,639          227,618          227,584
Retained earnings                                                           99,610          105,218          111,146
                                                                         ---------        ---------        ---------
                                                                           327,507          333,094          338,988
                                                                         ---------        ---------        ---------
Accumulated other comprehensive income:
      Cumulative foreign currency
         translation adjustment                                             (8,851)          (9,003)          (7,343)
      Minimum pension liability                                            (11,666)          (5,505)              --
                                                                         ---------        ---------        ---------
          Total stockholders' equity                                       306,990          318,586          331,645
                                                                         ---------        ---------        ---------
                 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY              $ 849,362        $ 869,576        $ 880,354
                                                                         =========        =========        =========


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

</TABLE>

                                      -29-
<PAGE>
<TABLE>



                                               OREGON STEEL MILLS, INC.
                                          CONSOLIDATED STATEMENTS OF INCOME
                                       (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>

                                                                              YEAR ENDED DECEMBER 31,
                                                                     -------------------------------------------
                                                                        2002             2001             2000
                                                                     ---------        ---------        ---------
<S>                                                                  <C>              <C>              <C>

Sales
      Product sales                                                  $ 850,497        $ 706,987        $ 633,129
      Freight                                                           54,453           54,804           36,088
      Electricity sales                                                     --           19,096            2,800
                                                                     ---------        ---------        ---------
                                                                       904,950          780,887          672,017
COSTS AND EXPENSES:
      Cost of sales                                                    783,940          694,941          619,016
      Selling, general and administrative expenses                      58,600           64,300           51,486
      Settlement of litigation                                              --           (3,391)              --
      Gain on sale of assets                                            (1,283)             (10)            (290)
      Incentive Compensation                                             3,761              244              698
                                                                     ---------        ---------        ---------
                                                                       845,018          756,084          670,910
                                                                     ---------        ---------        ---------
               Operating income                                         59,932           24,803            1,107
OTHER INCOME (EXPENSE):
      Interest expense                                                 (36,254)         (35,595)         (34,936)
      Minority interests                                                (3,036)            (339)              (7)
      Other income, net                                                  2,843            3,044            4,355
                                                                     ---------        ---------        ---------
               Income (loss) before income taxes                        23,485           (8,087)         (29,481)
INCOME TAX BENEFIT (EXPENSE)                                           (10,032)           2,159           11,216
                                                                     ---------        ---------        ---------
Income (loss) before extraordinary items and
      cumulative effect of change in accounting principle               13,453           (5,928)         (18,265)
                                                                     ---------        ---------        ---------
Extraordinary loss from extinguishment of debt,
      net of tax of $788                                                (1,094)              --               --
Cumulative effect of change in accounting principle,
      net of tax of $11,264, net of minority interest of $2,632        (17,967)              --               --
                                                                     ---------        ---------        ---------
NET LOSS                                                            $  (5,608)       $  (5,928)       $ (18,265)
                                                                     =========        =========        =========
BASIC EARNINGS (LOSS) PER SHARE:
Income (loss) before extraordinary loss and
      cumulative effect of change in accounting principle            $    0.51        $   (0.22)       $   (0.69)
Extraordinary loss                                                       (0.04)              --               --
Cumulative effect of change in accounting
      principle                                                          (0.68)              --               --
                                                                     ---------        ---------        ---------
          Net loss per share                                         $   (0.21)       $   (0.22)       $   (0.69)
                                                                     =========        =========        =========
DILUTED EARNINGS (LOSS) PER SHARE:
Income (loss) before extraordinary loss and
      cumulative effect of change in accounting principle            $    0.51        $   (0.22)       $   (0.69)
Extraordinary loss                                                       (0.04)              --               --
Cumulative effect of change in accounting
      principle                                                          (0.67)              --               --
                                                                     ---------        ---------        ---------
           Net loss per share                                        $   (0.20)       $   (0.22)       $   (0.69)
                                                                     =========        =========        =========


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

</TABLE>
                                      -30-
<PAGE>
<TABLE>

                                                            OREGON STEEL MILLS, INC.
                                           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                                                 (IN THOUSANDS)
<CAPTION>

                                                                                                 ACCUMULATED
                                                                   ADDITIONAL                       OTHER
                                               COMMON STOCK         PAID-IN        RETAINED      COMPREHENSIVE
                                            -------------------
                                            SHARES      AMOUNT      CAPITAL        EARNINGS        INCOME               TOTAL
                                            ------      ------     ----------      --------      -------------        --------
<S>                                       <C>         <C>           <C>            <C>            <C>                 <C>
BALANCES, DECEMBER 31, 1999                25,777     $    258      $227,584       $130,958       $ (6,398)           $352,402
                                          -------     --------      --------       --------       --------            --------

     Net loss                                                                       (18,265)                           (18,265)
     Foreign currency translation
        adjustment                                                                                    (945)               (945)
                                                                                                                      --------
     Comprehensive loss                                                                                                (19,210)

     Dividends paid ($.06 per share)                                                 (1,547)                            (1,547)
                                          -------     --------      --------       --------       --------            --------
BALANCES, DECEMBER 31, 2000                25,777          258       227,584        111,146         (7,343)            331,645
                                          -------     --------      --------       --------       --------            --------

     Net loss                                                                        (5,928)                            (5,928)
     Foreign currency translation
        adjustment                                                                                  (1,660)             (1,660)
     Minimum liability adjustment                                                                   (5,505)             (5,505)
                                                                                                                      --------
     Comprehensive loss                                                                                                (13,093)

     Issurance of common stock                 10                         34                                                34
                                          -------     --------      --------       --------       --------            --------
BALANCES, DECEMBER 31, 2001                25,787          258       227,618        105,218        (14,508)            318,586
                                          -------     --------      --------       --------       --------            --------

     Net loss                                                                        (5,608)                            (5,608)
     Foreign currency translation
        adjustment                                                                                     152                 152
     Minimum liability adjustment
     (Note 11)                                                                                      (6,161)             (6,161)
                                                                                                                      --------
     Comprehensive loss                                                                                                (11,617)

     Tax benefit on stock options                                         15                                                15
     Issurance of common stock                  3                          6                                                 6
                                          -------     --------      --------       --------       --------            --------
BALANCES, DECEMBER 31, 2002                25,790     $    258      $227,639       $ 99,610       $(20,517)           $306,990
                                          =======     ========      ========       ========       ========            ========


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

</TABLE>
                                      -31-

<PAGE>
<TABLE>


                                               OREGON STEEL MILLS, INC.
                                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                    (IN THOUSANDS)
<CAPTION>


                                                                            YEAR ENDED DECEMBER 31,
                                                                   --------------------------------------------
                                                                       2002             2001             2000
                                                                   ---------        ---------        ----------
<S>                                                                <C>              <C>              <C>
Cash flows from operating activities:
     Net loss                                                      $  (5,608)       $  (5,928)       $ (18,265)
     Adjustments to reconcile net loss to net cash
         provided (used) by operating activities:
           Depreciation and amortization                              45,868           46,097           46,506
           Write off of goodwill                                      17,967               --               --
           Deferred income taxes, net                                  9,104           (4,415)         (13,580)
           Tax benefit from non-employee stock option plan                15               --               --
           Gain on sale of assets and investments                     (1,283)             (10)          (2,537)
           Minority interests' share of income                         3,036              339                7
           Other, net                                                    379           (1,227)              22
         Changes in current assets and liabilities:
               Trade accounts receivable                               4,585            2,017          (28,602)
               Inventories                                           (30,432)          (2,601)         (12,486)
               Income taxes                                              609             (134)             102
               Operating liabilities                                   9,118           17,963           25,322
               Other                                                     733           (2,571)             544
                                                                   ---------        ---------        ---------
            NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES          54,091           49,530           (2,967)
                                                                   ---------        ---------        ---------
 Cash flows from investing activities:
     Additions to property, plant and equipment                      (18,246)         (12,933)         (16,684)
     Proceeds from disposal of property and equipment                  1,287              114            2,951
     Other, net                                                        3,201            1,014             (783)
                                                                   ---------        ---------        ---------
             NET CASH USED BY INVESTING ACTIVITIES                   (13,758)         (11,805)         (14,516)
                                                                   ---------        ---------        ---------
 Cash flows from financing activities:
     Net borrowings (repayments) under Canadian bank
         revolving loan facility                                        (223)          (1,530)           1,689
     Proceeds from bank debt                                         435,061          732,476          304,536
     Payments on bank and long term debt                            (513,734)        (755,613)        (282,661)
     Deferred credit facility financing costs                         (1,890)              --               --
     Dividends paid                                                       --               --           (1,547)
     Repurchase of bonds                                                  --               --           (6,750)
     Redemption of 11% notes due 2003                               (228,250)              --               --
     Issuance of 10% notes due 2009                                  301,255               --               --
     Debt issuance costs                                              (9,903)              --               --
     Issue/repurchase common stock                                         6               34               --
     Minority share of subsidiary's distribution                      (2,035)          (2,524)          (2,739)
                                                                   ---------        ---------        ---------
            NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES         (19,713)         (27,157)          12,528
                                                                   ---------        ---------        ---------

Effects of foreign currency exchange rate changes on cash                152           (1,660)            (945)
                                                                   ---------        ---------        ---------
Net increase (decrease) in cash and cash equivalents                  20,772            8,908           (5,900)
Cash and cash equivalents at the beginning of year                    12,278            3,370            9,270
                                                                   ---------        ---------        ---------
Cash and cash equivalents at the end of year                       $  33,050        $  12,278        $   3,370
                                                                   =========        =========        =========

Supplemental disclosures of cash flow information:
   Cash paid for:
   --------------
      Interest                                                     $  18,341        $  27,149        $  33,394
      Income taxes                                                 $     243        $     427        $   5,112
   Non Cash Activities:
   --------------------
      Interest applied to loan balance                             $   2,499        $   6,394        $      --



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

</TABLE>
                                      -32-

<PAGE>




                            OREGON STEEL MILLS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.       NATURE OF OPERATIONS

         Oregon Steel Mills, Inc. and subsidiaries ("Company") manufactures
various specialty and commodity steel products with operations in the United
States and Canada. The principal markets for the Company's products are steel
service centers, steel fabricators, railroads, oil and gas producers and
distributors and other industrial concerns. The Company's products are primarily
marketed in the United States west of the Mississippi River and western Canada.
The Company also markets products outside North America.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

         The consolidated financial statements include all wholly-owned and
those majority-owned subsidiaries over which the Company exerts management
control. Non-controlled majority-owned subsidiaries and affiliates are accounted
for using the equity method. Material wholly-owned and majority-owned
subsidiaries of the Company are Camrose Pipe Corporation ("CPC"), which through
ownership in another corporation holds a 60% interest in Camrose Pipe Company
("Camrose"), and 87% owned New CF&I, Inc. ("New CF&I") which owns a 95.2%
interest in CF&I Steel, L.P. ("CF&I"). The Company also owns directly an
additional 4.3% interest in CF&I. In January 1998, CF&I assumed the trade name
of Rocky Mountain Steel Mills ("RMSM"). All significant inter-company
transactions and account balances have been eliminated.

USE OF ESTIMATES

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

REVENUE RECOGNITION

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

CASH AND CASH EQUIVALENTS

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

CONCENTRATIONS OF CREDIT RISK

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

INVENTORY

         The Company's inventory consists of raw materials, semi-finished,
finished products and operating stores and supplies. At December 31, 2002,
inventory was approximately $162.8 million. If appropriate, the Company's
inventory balances are adjusted to approximate the lower of manufacturing cost
or market value. No such adjustment was required for the year ended 2002, 2001,
and 2000. Manufacturing cost is determined using the average cost method.

PROPERTY, PLANT AND EQUIPMENT

         Property, plant and equipment are stated at cost, including capitalized
interest during construction of $874,000, $683,000 and $794,000 in 2002, 2001
and 2000, respectively. Depreciation is


                                      -33-
<PAGE>
determined using principally the straight-line and the units of production
methods over the estimated useful lives of the assets. The original cost of
machinery, which is being depreciated using the units of production method, is
approximately $244 million. Total finished goods production level for the years
ended 2002, 2001 and 2000 were 2,184,000 tons, 1,942,000 tons and 1,689,000
tons, respectively. The estimated useful lives of most of the Company's
operating machinery and equipment are from 20 to 30 years. Maintenance and
repairs are expensed as incurred and costs of improvements are capitalized.
Maintenance and repair expenses for 2002, 2001 and 2000 were $68.0 million,
$53.5 million and $47.6 million, respectively. Upon disposal, cost and
accumulated depreciation are removed from the accounts and gains or losses are
reflected in results of operations.

GOODWILL AND INTANGIBLE ASSETS

         The Company adopted Statement of Financial Accounting Standard (SFAS)
No. 142, "Goodwill and other Intangible Assets," effective January 1, 2002. As
required under the transitional accounting provisions of SFAS No. 142, the
Company completed the steps required to identify and measure goodwill impairment
at each reporting unit. The reporting units were measured for impairment by
comparing implied fair value of the reporting units' goodwill with the carrying
amount of the goodwill. As a result, the entire goodwill at the RMSM Division
was written off in the amount of $31.9 million, and a net charge of $18.0
million (after tax and minority interest) was recognized as a cumulative effect
of a change in accounting principle during the first quarter of 2002. In
accordance with SFAS No. 142, goodwill is no longer amortized, but is reviewed
at least annually for impairment. Intangible assets consisted of proprietary
technology at the RMSM Division, presented at cost, net of accumulated
amortization, and are amortized over their estimated useful lives of sixteen
years using the straight-line method.

IMPAIRMENT OF LONG-LIVED ASSETS

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

INCOME TAXES

         Deferred income taxes are provided for temporary differences between
the amount of assets and liabilities for financial and tax reporting purposes.
Deferred tax assets are reduced by a valuation allowance when it is estimated to
be more likely than not that some portion of the deferred tax assets will not be
realized.

FINANCIAL INSTRUMENTS

         The Company uses foreign currency forward exchange contracts
occasionally to reduce its exposure to fluctuations in foreign currency exchange
rates. Gains and losses on these contracts are deferred and recognized in income
as part of the related transaction.

FOREIGN CURRENCY TRANSLATION

         Assets and liabilities subject to foreign currency fluctuations are
translated into U.S. dollars at the period-end exchange rate, and revenue and
expenses are translated at average rates for the period. Translation adjustments
are included in "accumulated other comprehensive income," a separate component
of stockholders' equity.

DERIVATIVE FINANCIAL INSTRUMENTS

         Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standard ("SFAS") No. 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES", which requires that all derivative instruments be recorded
on the balance sheet at fair value. The adoption of SFAS No. 133 did not have
material effect on the Company's results of operations or its financial
position. The Company did not have any derivative financial instruments
outstanding at the time of adoption. See disclosure regarding Financial
Instruments in Note 8.



                                      -34-
<PAGE>

STOCK OPTION PLAN

         In 2000, the Company adopted the 2000 Nonqualified Stock Option Plan
(the "Plan"). The Plan authorizes the Board of Directors, or a committee
appointed by the Board of Directors, to grant options to certain executives and
management personnel. 1,000,000 shares of the Company's $.01 par value common
stock are issuable under the Plan.

         In 2002, the Company adopted the 2002 Non-Employee Director Stock
Option Plan ( the "Director Plan"). The Director Plan authorizes the Board of
Directors to grant options to individuals who are Non-Employee Directors.
150,000 shares of the Company's $.01 par value common stock are issuable under
the Director Plan.

         The Company accounts for the stock option plan in accordance with
Accounting Principles Board (APB) Opinion No. 25, "ACCOUNTING FOR STOCK ISSUED
TO EMPLOYEES." The Company provides pro forma net income (loss) and pro forma
earnings (loss) per share disclosure prescribed by SFAS No. 123, "ACCOUNTING FOR
STOCK-BASED COMPENSATIOn". The Company currently discloses the effects of
stock-based employee compensation and does not intend to voluntarily change to
the alternative accounting principle prescribed in SFAS No. 148, "Accounting for
Stock-Based Compensation - transition and disclosure." The following table
illustrates the effect on net income and earnings per share if the Company had
applied the fair value recognition provisions of SFAS No. 123:
<TABLE>
<CAPTION>


                                                                          YEAR ENDED DECEMBER 31,
                                                                -------------------------------------
                                                                  2002           2001         2000
                                                                ---------      --------     ---------
<S>                                                             <C>            <C>          <C>
Net loss, as reported                                           $ (5,608)      $(5,928)     $(18,265)
Deduct: total stock-based compensation expense determined
     under fair value based method for all awards, net
     of related tax effects                                         (184)         (490)          (70)
                                                                --------       -------      --------
Pro forma net income                                            $ (5,792)      $(6,418)     $(18,335)
                                                                --------       -------      --------

Earnings per share:
      Basic - as reported                                         $(0.21)       $(0.22)       $(0.69)
      Basic - pro forma                                            (0.22)        (0.24)        (0.70)

      Diluted - as reported                                       $(0.20)       $(0.22)       $(0.69)
      Diluted - pro forma                                          (0.21)        (0.24)        (0.70)

</TABLE>


NET INCOME (LOSS) PER SHARE

         Basic EPS is determined using the weighted average number of common
shares outstanding during the period. The diluted EPS calculation assumes that
all stock options granted were exercised at the beginning of the period.

         For purposes of computing diluted EPS, stock options with an exercise
price that exceeded the average fair market value of the common stock for the
period were excluded from the diluted weighted average number of common shares.
In addition, common stock equivalent shares are excluded from the EPS
computation if their effect is antidilutive.

SEGMENT REPORTING

          In accordance with the criteria of SFAS No. 131, "DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION", the Company operates in a
single reportable segment, the steel industry. All of the products of the
Company are steel products in finished or semi-finished form. Production is the
standard "mini-mill" process where electric arc furnaces are used to melt scrap
and other metallics. Liquid steel is cast and cooled, then reheated for
additional forming. These processes occur at different locations, but are not
dissimilar. The Company markets and sells the majority of its products through
its own sales organization to customers primarily in the transportation,
construction, or oil and gas industries. The Company distributes product at
various locations in the United States and Canada, and as appropriate, through
foreign sales agents.

         The Company currently has two aggregated operating divisions: the
Oregon Steel Division and RMSM Division (see Note 3 for geographic disclosure).



                                      -35-
<PAGE>
SHIPPING AND HANDLING COST

         All shipping billed to customers is recorded as revenue with the
related cost being recorded under cost of sales. Internal handling costs
incurred to store, move, or prepare goods for shipment are recorded under
Selling, General, and Administration expenses. For the years of 2002, 2001, and
2000, internal handling costs were $17.7 million, $17.6 million and $14.9
million, respectively.

RECLASSIFICATIONS

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

NEW ACCOUNTING PRONOUNCEMENTS

          In June 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 141, "BUSINESS COMBINATIONS," and SFAS No. 142, "GOODWILL AND OTHER
INTANGIBLE ASSETS," collectively referred to as the "Standards." SFAS No. 141
supersedes Accounting Principles Board Opinion (APB) No. 16, "BUSINESS
COMBINATIONS." The provisions of SFAS No. 141 (1) require that the purchase
method of accounting be used for all business combinations initiated after June
30, 2001, and (2) provide specific criteria for the initial recognition and
measurement of intangible assets apart from goodwill. SFAS No. 141 also requires
that, upon adoption of SFAS No. 142, the Company reclassify the carrying amounts
of certain intangible assets into or out of goodwill, based on certain criteria.
SFAS No. 142 supersedes APB 17, "INTANGIBLE ASSETS," and is effective for fiscal
years beginning after December 15, 2001. SFAS No. 142 primarily addresses the
accounting for goodwill and intangible assets subsequent to their initial
recognition. The provisions of SFAS No. 142 (1) prohibit the amortization of
goodwill and indefinite-lived intangible assets, (2) require that goodwill and
indefinite-lived intangible assets be tested annually for impairment (and in
interim periods if certain events occur indicating that the carrying value of
goodwill and/or indefinite-lived intangible assets may be impaired), (3) require
that reporting units be identified for the purpose of assessing potential future
impairments of goodwill, and (4) remove the forty-year limitation on the
amortization period of intangible assets that have finite lives. The Company
adopted the provisions of SFAS No. 141 and 142 during its first quarter ended
March 31, 2002. See Note 7 for further information.

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

         On October 3, 2001, the FASB issued SFAS No. 144 "ACCOUNTING FOR THE
IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS." SFAS No. 144 supercedes SFAS No.
121 "ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF." SFAS No. 144 applies to all long-lived assets
(including discontinued operations) and consequently amends Accounting
Principles Board Opinion No. 30 (APB 30), REPORTING RESULTS OF OPERATIONS -
REPORTING THE EFFECTS OF DISPOSAL OF A SEGMENT OF A BUSINESS." SFAS No. 144
develops one accounting model for long-lived assets that are to be disposed of
by sale. SFAS No. 144 requires that long-lived assets that are to be disposed of
by sale be measured at the lower of book value or fair value less cost to sell.
Additionally, SFAS No. 144 expands the scope of discontinued operations to
include all components of an entity with operations that (1) can be
distinguished from the rest of the entity and (2) will be eliminated from the
ongoing operations of the entity in a disposal transaction. SFAS No. 144 was
effective for the Company for the year beginning January 1, 2002.

          In May 2002, the FASB issued SFAS No. 145, "RECISSION OF FAS NOS. 4,
44, AND 64, AMENDMENT OF FAS 13, AND TECHNICAL CORRECTIONS." Among other things,
SFAS No. 145 rescinds various pronouncements regarding early extinguishment of
debt and allows extraordinary accounting treatment for early extinguishment only
when the provisions of Accounting Principles Board Opinion No. 30, "REPORTING
THE RESULTS OF OPERATIONS - REPORTING THE EFFECTS OF DISPOSAL OF A SEGMENT OF A
BUSINESS, AND EXTRAORDINARY, UNUSUAL AND INFREQUENTLY OCCURRING EVENTS AND
TRANSACTIONS" are met. SFAS No. 145 provisions regarding early extinguishment of
debt are generally effective for fiscal years beginning after May 15, 2002. In
mid-July 2002, the Company refinanced its credit facil-

                                      -36-
<PAGE>
ity and redeemed its 11% First Mortgage Notes due 2003, resulting in a $1.1
million extraordinary loss, net of taxes, on the early extinguishment of debt.
The amount recognized consisted primarily of the write-off of unamortized fees
and expenses. The adoption of SFAS 145 by the Company in 2003 will cause a
reclassification of the extraordinary loss from extinguishment of debt to
interest expense.

          In July 2002, the FASB issued SFAS No. 146, "ACCOUNTING FOR THE
IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS AND FOR OBLIGATIONS ASSOCIATED WITH
DISPOSAL ACTIVITIES." SFAS No. 146 addresses the differences in accounting for
long-lived assets and operations (segments) to be disposed of under SFAS No. 121
and APB No. 30 and accounting for costs associated with those and other disposal
activities, including restructuring activities, under Emerging Issues Task Force
("EITF") Issue No. 94-3. SFAS No. 146 is effective for disposal activities after
December 31, 2002, with early application encouraged. The Company is evaluating
the impact of adoption of SFAS No. 146 on the financial position and results of
operations.

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

         In December 2002, the FASB issued SFAS No. 148, "ACCOUNTING FOR
STOCK-BASED COMPENSATION - TRANSITION AND DISCLOSURE." SFAS No. 148 amends SFAS
No. 123,  "ACCOUNTING  FOR  STOCK-BASED  COMPENSATION",  to provide  alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS No. 148
amends the disclosure requirements of SFAS No. 123 to require prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. The transition guidance and annual disclosure
provisions of SFAS No. 148 are effective for fiscal years ending after December
15, 2002. The interim disclosure provisions are effective for financial reports
containing financial statements for interim periods beginning after December 15,
2002. The Company currently discloses the effects of stock-based employee
compensation and does not intend to voluntarily change to the alternative
accounting principle.

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


                                      -37-


<PAGE>
3.       GEOGRAPHIC INFORMATION

           Geographical information was as follows:

                                         2002           2001           2000
                                       --------       --------       --------
                                                    (IN THOUSANDS)
Revenues from external customers:
    United States                      $883,462       $729,707       $624,694
    Canada (FN1)                         21,488         51,180         47,323
                                       --------       --------       --------
                                       $904,950       $780,887       $672,017
                                       ========       ========       ========
Revenues by division:
    Oregon Steel Division              $575,243       $470,098       $390,403
    RMSM Division                       329,707        310,789        281,614
                                       --------       --------       --------
                                       $904,950       $780,887       $672,017
                                       ========       ========       ========
Assets by location:
    United States                      $809,058       $792,798       $797,903
    Canada                               38,673         31,670         36,044
                                       --------       --------       --------
                                       $847,731       $824,468       $833,947
                                       ========       ========       ========
Assets by division:
    Oregon Steel Division              $539,240       $528,274       $519,204
    RMSM Division                       308,491        296,194        314,743
                                       --------       --------       --------
                                       $847,731       $824,468       $833,947
                                       ========       ========       ========



(FN1) Revenues attributed to Canada are earned by Camrose, which is domiciled
      there. Revenues attributed to other countries are insignificant.


4.       INVENTORIES

         Inventories were as follows at December 31:

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

Raw materials                        $  6,959        $ 11,419         $ 10,189
Semi-finished product                  63,431          51,777           49,816
Finished product                       56,997          41,201           43,415
Stores and operating supplies          35,447          28,005           26,381
                                     --------        --------         --------
     Total inventory                 $162,834        $132,402         $129,801
                                     ========        ========         ========


5.       ACCOUNTS PAYABLE

         Accounts payable includes book overdrafts of $5.1 million at December
31, 2001.

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

Accrued post-retirement obligations   $24,866         $21,492        $10,163
Accrued payables and expenses          21,809          21,237         15,403
Accrued interest                       14,192           1,551          1,020
Accrued sales taxes                     8,340             280            112
Other                                  12,553           8,675          9,411
                                      -------         -------        -------
     Total accrued expenses           $81,760         $53,235        $36,109
                                      =======         =======        =======

                                      -38-
<PAGE>


6.       DEBT, FINANCING ARRANGEMENTS AND LIQUIDITY

         Debt balances were as follows at December 31:
<TABLE>
<CAPTION>

                                                       2002         2001           2000
                                                       ----         ----           ----
                                                               (IN THOUSANDS)
<S>                                                <C>           <C>            <C>
11% First Mortgage Notes due 2003 ("11% Notes")    $     --      $ 228,250      $228,250

10% First Mortgage Notes due 2009 ("10% Notes")     305,000             --            --
Revolving credit facility                                --         61,638        69,756
CF&I acquisition term loan                               --         14,536        23,161
Camrose revolving bank loan                              --            220         1,814
                                                   --------      ---------      --------
                                                    305,000        304,644       322,981
Less unamortized discount on 10% Notes               (3,572)            --            --
Less current maturities and short-term debt              --         71,102         8,625
                                                   --------      ---------      --------
     Non-current maturity of long-term debt        $301,428      $ 233,542      $314,356
                                                   ========      =========      ========
</TABLE>

      On July 15, 2002, the Company issued $305 million of 10% Notes in a
private offering at a discount of 98.772% and an interest rate of 10%. Interest
is payable on January 15 and July 15 of each year. The proceeds of this issuance
were used to redeem the Company's 11% Notes (including interest accrued from
June 16, 2002 until the redemption date of August 14, 2002), refinance its
existing credit agreement, and for working capital and general corporate
purposes. The existing credit agreement was replaced with a new $75 million
credit facility that will expire on June 30, 2005. As of December 31, 2002, the
Company had outstanding $305 million principal amount of 10% Notes. The
Indenture under which the Notes were issued contains restrictions on new
indebtedness and various types of disbursements, including dividends, based on
the cumulative amount of the Company's net income, as defined. Under these
restrictions, there was no amount available for cash dividends at December 31,
2002. The New CF&I and CF&I (collectively "Guarantors") guarantee the
obligations of the 10% Notes, and those guarantees are secured by a lien on
substantially all of the property, plant and equipment and certain assets of the
Guarantors, excluding accounts receivables and inventory.

      The Company paid approximately $12.0 million for refinancing costs
associated with the new notes and credit facility. These costs were capitalized
and will be appropriately amortized as interest expense over the respective
terms of the new note and credit facility.

      As of December 31, 2002, the Company maintained a $75 million revolving
credit facility ("Credit Agreement"), which will expire on June 30, 2005. At
December 31, 2002, $5.0 million was restricted under the Credit Agreement, $8.2
million was restricted under the outstanding letters of credit, and $61.8
million was available for use. The Credit Agreement contains various restrictive
covenants including minimum consolidated tangible net worth amount, a minimum
earnings before interest, taxes, depreciation and amortization ("EBITDA")
amount, a minimum fixed charge coverage ratio, limitations on maximum annual
capital and environmental expenditures, limitations on stockholder dividends and
limitations on incurring new or additional debt obligations other than as
allowed by the Credit Agreement. The Company was in compliance with such
covenants at December 31, 2002. In addition, the Company cannot pay cash
dividends without prior approval from the lenders.

      CF&I incurred $67.5 million in term debt in 1993 as part of the
purchase price of certain assets, principally the Pueblo, Colorado steelmaking
and finishing facilities, from CF&I Steel Corporation. This debt was unsecured
and was payable over ten years, bearing interest at 9.5%. In October of 2002,
the Company made an early payment and completed the payoff of the 10-year CF&I
acquisition term loan.

      Camrose maintains a (CDN) $15 million revolving credit facility with a
Canadian bank, the proceeds of which may be used for working capital and general
business purposes of Camrose. The facility is collateralized by substantially
all of the assets of Camrose, and borrowings under this facility are limited to
an amount equal to the sum of the product of specified advance rates and
Camrose's eligible trade accounts receivable and inventories. This facility
expires in September 2004. As of December 31, 2002, the interest rate of this
facility was 4.5%. Annual commitment fees are 0.25% of the unused portion of the
credit line. At December 31, 2002, there was no outstanding balance due under
the credit facility.

                                      -39-
<PAGE>

      As of December 31, 2002, principal payments on debt are due as follows (in
thousands):

                2003                                                 -
                2004-2008                                            -
                2009                                           305,000
                                                               -------
                                                              $305,000
                                                              ========

         The Company is able to draw up to $15 million of the borrowings
available under the Amended Credit Agreement to support issuance of letters of
credit and similar contracts. At December 31, 2002, $8.2 million was restricted
under outstanding letters of credit.

         Despite the unfavorable net results for 2002, caused by a $18.0 million
non-cash goodwill impairment charges required under the new accounting provision
of SFAS No. 142, the Company has been able to satisfy its needs for working
capital and capital expenditures, due in part on its ability to secure adequate
financing arrangements. The Company believes that its anticipated needs for
working capital and capital expenditures for the next twelve months will be met
from funds generated from operations and, if necessary, from the available
credit facility.

7.       GOODWILL AND INTANGIBLE ASSETS

         Effective January 1, 2002, the Company adopted SFAS No.142, "Goodwill
and Other Intangible Assets." As part of this adoption, the Company ceased
amortizing all goodwill and assessed goodwill for possible impairment. As an
initial step, the Company tested goodwill impairment within its two business
units - the Oregon Steel Division and the Rocky Mountain Steel Mills ("RMSM")
Division. These two business units qualify as reporting units in that they are
one level below the Company's single reportable segment (as defined in SFAS No.
131, "Disclosures About Segments of an Enterprise and Related Information"). The
aggregation of these reporting units, under SFAS No. 131, is appropriate given
that both business units operate in a single reportable segment, the steel
industry.

         As required under the transitional accounting provisions of SFAS No.
142, the Company completed the steps required to identify and measure goodwill
impairment at each reporting unit. The reporting units were measured for
impairment by comparing implied fair value of the reporting units' goodwill with
the carrying amount of the goodwill. As a result, the entire goodwill at the
RMSM Division was written off in the amount of $31.9 million, and a net charge
of $18.0 million (after tax and minority interest) was recognized as a
cumulative effect of a change in accounting principle during the first quarter
of 2002. Historical earnings and applying an earnings multiple resulted in the
identification of an impairment that was recognized at the reporting units. The
implementation of SFAS No. 142 required the use of judgements, estimates and
assumptions in the determination of fair value and impairment amounts related to
the required testing. Prior to adoption of SFAS No. 142, the Company had
historically evaluated goodwill for impairment by comparing the entity level
unamortized balance of goodwill to projected undiscounted cash flows, which did
not result in an indicated impairment.

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

         Listed below are details of the goodwill and intangibles of the
Company. Also included is a report of what adjusted earnings per share would
have been if amortization had not taken place for the year ended December 31,
2002.

GOODWILL
--------

      The changes in the carrying amount of goodwill for the twelve months ended
December 31, 2002 are as follows:
<TABLE>
<CAPTION>

                                                                       RMSM            OREGON STEEL
                                                                     DIVISION             DIVISION           TOTAL
                                                                     --------          ------------      ----------
                                                                                      (IN THOUSANDS)
<S>                                                                  <C>                   <C>           <C>
BALANCE AS OF JANUARY 1, 2002                                        $ 31,863              $520          $ 32,383


Goodwill written off related to adoption of SFAS No. 142              (31,863)                -           (31,863)
                                                                     --------              ----          --------

BALANCE AS OF DECEMBER 31, 2002                                      $      -              $520          $    520
                                                                     ========              ====          ========
</TABLE>

                                      -40-
<PAGE>

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

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

                                                   AS OF DECEMBER 31, 2002
                                            -----------------------------------
                                            GROSS CARRYING         ACCUMULATED
                                              AMOUNT               AMORTIZATION
                                            --------------         ------------
                                                        (IN THOUSANDS)
    AMORTIZED INTANGIBLE ASSETS: (FN1)
    ----------------------------
         Proprietary technology                  $1,893               $(787)

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

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

-------------
(FN1) Weighted average amortization period is 16 years.


    The following adjusts reported net income (loss) and earnings (loss) per
share to exclude goodwill amortization:
<TABLE>
<CAPTION>

                                                                   FOR THE YEAR ENDED
                                                               DECEMBER 31, (IN THOUSANDS)
                                                    --------------------------------------------
                                                       2002             2001              2000
                                                    ---------        ----------        ---------
<S>                                                 <C>              <C>               <C>
Goodwill amortization                               $      --        $  (1,036)        $  (1,036)
                                                    =========        =========         =========

Net income (loss)                                      (5,608)          (5,928)          (18,265)
Add back:  Goodwill amortization,
    net of tax, net of minority interest                   --              582               582
                                                    ---------        ---------         ---------
Adjusted net income (loss)                          $  (5,608)       $  (5,346)        $ (17,683)
                                                    =========        =========         =========

Basic income (loss) per share                       $   (0.21)       $   (0.22)        $   (0.69)
Add back:  Goodwill amortization,
    net of tax, net of minority interest            $      --        $    0.02         $    0.02
                                                    ---------        ---------         ---------
Adjusted basic income (loss) per share              $   (0.21)       $   (0.20)        $   (0.67)
                                                    =========        =========         =========

Diluted income (loss) per share                     $   (0.20)       $   (0.22)        $   (0.69)
Add back:  Goodwill amortization,
    net of tax, net of minority interest            $      --        $    0.02         $    0.02
                                                    ---------        ---------         ---------
Adjusted diluted income (loss) per share            $   (0.20)       $   (0.20)        $   (0.67)
                                                    =========        =========         =========
</TABLE>



8.       FAIR VALUES OF FINANCIAL INSTRUMENTS

         The estimated fair values of the Company's financial instruments were
as follows as of December 31:
<TABLE>
<CAPTION>

                                        2002                           2001                     2000
                             ---------------------------     ----------------------   -------------------------
                               CARRYING        FAIR          CARRYING       FAIR      CARRYING         FAIR
                                AMOUNT         VALUE          AMOUNT        VALUE      AMOUNT         VALUE
                             -------------   -----------     ----------    --------   ----------   ------------
                                                                  (IN THOUSANDS)
<S>                               <C>         <C>           <C>            <C>        <C>             <C>

Cash  and cash equivalents        $33,050     $33,050       $12,278        $12,278     $3,370          $3,370
Short-term debt                         -           -        61,638         61,959          -               -
Long-term debt, including
     current portion              301,428     284,023       304,644        295,793    322,981         250,120
</TABLE>

         The carrying amounts of cash or cash equivalents approximate fair value
due to their nature. The fair value of short-term debt and long-term debt,
including current portion, is estimated based on quoted market prices or by
discounting future cash flows based on the Company's incremental borrowing rate
for similar types of borrowing arrangements.

                                      -41-
<PAGE>


         On limited occasions, the Company uses foreign currency forward
exchange contracts to reduce its exposure to fluctuations in foreign currency
exchange rates. Such contracts are typically short-term in duration and relate
to specific transactions. At December 31, 2002, the Company had no open forward
exchange contracts. During 2002, 2001, and 2000, the use of such contracts has
been minimal.

9.       INCOME TAXES

         The geographical components of income (loss) before income taxes are
summarized below:

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

U.S.                                    $ 21,044      $(10,089)      $(29,302)
Non-U.S                                    2,441         2,002           (179)
                                        --------      --------       --------
   Total Income (loss) before taxes     $ 23,485      $ (8,087)      $(29,481)
                                        ========      ========       ========


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

                                          2002           2001             2000
                                       ---------       --------        ---------
                                                     (IN THOUSANDS)
Current:
     Federal                           $  4,646        $  1,851        $    (67)
     State                                 (236)           (235)           (167)
     Foreign                               (659)           (169)         (2,131)
                                       --------        --------        --------
                                          3,751           1,447          (2,365)
                                       --------        --------        --------
Deferred:
     Federal                            (10,816)         (3,332)         10,911
     State                               (2,891)          4,742             641
     Foreign                                (76)           (698)          2,029
                                       --------        --------        --------
                                        (13,783)            712          13,581
                                       --------        --------        --------
Income tax benefit (expense)           $(10,032)       $  2,159        $ 11,216
                                       ========        ========        ========


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

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

U.S. statutory income benefit (tax) rate       (35.0%)       35.0%        35.0%
State taxes, net                                (8.7)         5.2          1.7
Fines and penalties                             (0.1)        (9.4)          --
Permanent differences                           (0.6)         3.0           --
Tax impact of foreign operations                 3.8         (7.1)         0.9
Other                                           (2.1)          --          0.4
                                              ------         ----         ----
                                               (42.7%)       26.7%        38.0%
                                              ======         ====         ====

                                      -42-
<PAGE>


         The current and noncurrent components of the net deferred tax assets
and liabilities were as follows as of December 31:
<TABLE>
<CAPTION>

                                                            2002              2001           2000
                                                         ---------        ----------       --------
                                                                        (IN THOUSANDS)
<S>                                                      <C>              <C>             <C>
Net current deferred tax asset:
     Assets
          Inventories                                    $   2,178        $   2,423       $   1,864
          Accrued expenses                                   5,119            3,332           3,065
          Net operating loss carryforward                      284           12,073              --
          Other                                              1,662            1,351           2,644
                                                         ---------        ---------       ---------
                                                             9,243           19,179           7,573
     Liabilities
          Other                                              1,134            1,181             307
                                                         ---------        ---------       ---------
Net current deferred tax asset                           $   8,109        $  17,998       $   7,266
                                                         =========        =========       =========

Net noncurrent deferred income tax liability:
     Assets
          Postretirement benefits other than pensions    $   2,984        $   2,869       $   2,516
          State tax credits                                  5,824            5,997           5,829
          Alternative minimum tax credit                    13,494           18,131          17,923
          Environmental liability                           13,342           11,960          12,417
          Net operating loss carryforward                   75,730           68,669          73,615
          Pension mimimum liability adjustment               7,579            3,544              --
          Other                                              9,686            9,855          10,808
                                                         ---------        ---------       ---------
                                                           128,639          121,025         123,108
          Valuation allowance                               (5,162)          (3,424)         (3,105)
                                                         ---------        ---------       ---------
                                                           123,477          117,601         120,003
                                                         ---------        ---------       ---------

     Liabilities
          Property, plant and equipment                    138,826          135,324         130,428
          Cost in excess of net assets acquired                 --            9,309           9,987
          Other                                              1,546            2,070           2,215
                                                         ---------        ---------       ---------
                                                           140,372          146,703         142,630
                                                         ---------        ---------       ---------
 Net noncurrent deferred income tax liability            $  16,895        $  29,102       $  22,627
                                                         =========        =========       =========
</TABLE>


         At December 31, 2002, the Company has state tax credits of $5.8 million
expiring 2003 through 2014, which are available to reduce future income taxes
payable.

         At December 31, 2002, the Company has $190.2 million in federal net
operating loss carryforwards expiring in 2013 through 2021. In addition, the
Company has $231.8 million in state net operating loss carryforwards expiring in
2003 through 2016.

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

         The Company recorded deferred tax assets totaling $7.6 million and $3.5
million at December 31, 2002 and 2001, repectively, created by a minimum pension
liability established pursuant to SFAS No. 87, "EMPLOYER'S ACCOUNTING FOR
PENSION." The setup of the deferred tax asset has no impact on the current year
deferred tax expense calculation because of the direct impact on equity required
by SFAS No. 87.

                                      -43-
<PAGE>


10.      EARNINGS NET INCOME (LOSS) PER SHARE

         Basic and diluted net income (loss) per share was as follows:
<TABLE>
<CAPTION>

                                                               2002             2001            2000
                                                            ---------         --------        --------
                                                             (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                          <C>              <C>             <C>

Weighted average number of common
    shares outstanding                                         25,790           25,780          25,777
Shares of common stock to be issued March 2003                    598              598             598
                                                             --------         --------        --------
Basic weighted average shares outstanding                      26,388           26,378          26,375
Dilutive effect of:
   Employee stock options                                         233               --              --
                                                             --------         --------        --------
Weighted average number of common shares outstanding:
    Assuming dilution                                          26,621           26,378          26,375
                                                             ========         ========        ========

Net income (loss) before extraordinary
    items and cumulative effect of
    change in accounting principle                           $ 13,453         $ (5,928)       $(18,265)

Extraordinary items net of tax                                 (1,094)              --              --
Cumulative effect of change in
    accounting principle, net of tax,
    net of minority interest                                  (17,967)              --              --
                                                             --------         --------        --------
Net loss                                                     $ (5,608)        $ (5,928)       $(18,265)
                                                             ========         ========        ========

Basic income (loss) per share:
   Before extraordinary items
      and cumulative effect of change
      in accounting principle                                $   0.51         $  (0.22)       $  (0.69)
   Extraordinary items                                          (0.04)              --              --
   Cumulative effect of change in
      accounting principle                                      (0.68)              --              --
                                                             --------         --------        --------
Basic loss per share                                         $  (0.21)        $  (0.22)       $  (0.69)
                                                             ========         ========        ========

Diluted income (loss) per share:
   Before extraordinary items and
       cumulative effect of change
        in accounting principle                              $   0.51         $  (0.22)       $  (0.69)
   Extraordinary items                                          (0.04)              --              --
   Cumulative effect of change in
      accounting principle                                      (0.67)              --              --
                                                             --------         --------        --------
Diluted loss per share                                       $  (0.20)        $  (0.22)       $  (0.69)
                                                             ========         ========        ========

</TABLE>

         Weighted average common shares outstanding, assuming dilution, includes
the incremental shares that would be issued upon the assumed exercise of stock
options for the period they were outstanding. For the years of 2002, 2001 and
2000, approximately 32,000, 190,284 and 188,500 shares, respectively, were
excluded from the diluted earnings per share calculation, as to include them
would have been antidilutive.

11.      EMPLOYEE BENEFIT PLANS

UNITED STATES PENSION PLANS
---------------------------

         The Company has noncontributory defined benefit retirement plans
covering all of its eligible domestic employees. The plans provide benefits
based on a participant's years of service and compensation. The Company funds at
least the minimum annual contribution required by ERISA.

                                      -44-
<PAGE>


         The following table sets forth the funded status of the plans and the
amounts recognized in the Company's consolidated balance sheets at December 31:
<TABLE>
<CAPTION>


                                                                              2002            2001            2000
                                                                            --------        --------        --------
                                                                                         (IN THOUSANDS)
<S>                                                                         <C>             <C>             <C>
Change in benefit obligation:
   Projected benefit obligation at January 1                                $ 76,702        $ 64,999        $ 62,775
   Service cost                                                                3,646           3,030           3,123
   Interest cost                                                               5,253           4,765           4,599
   Benefits paid                                                              (3,135)         (3,074)         (2,789)
   Actuarial loss (gain)                                                       1,505           6,982          (2,709)
                                                                            --------        --------        --------
   Projected benefit obligation at December 31                                83,971          76,702          64,999
                                                                            --------        --------        --------

Change in plan assets:
   Fair value of plan assets at January 1                                     56,846          62,085          67,951
   Actual loss on plan assets                                                 (4,837)         (3,365)         (3,077)
   Company contribution                                                       10,512           1,200              --
   Benefits paid                                                              (3,135)         (3,074)         (2,789)
                                                                            --------        --------        --------
   Fair value of plan assets at December 31                                   59,386          56,846          62,085
                                                                            --------        --------        --------


Projected benefit obligation in excess of plan assets                        (24,585)        (19,856)         (2,914)
Unrecognized net transition obligation, amortized through 2001                    --              --              73
Unrecognized prior service cost                                                   26             146             266
Unrecognized net gain                                                         21,797          11,090          (4,409)
                                                                            --------        --------        --------
Net amount recognized                                                         (2,762)         (8,620)         (6,984)
Minimum liability                                                            (17,987)         (7,435)             --
                                                                            --------        --------        --------
Total pension liability recognized in consolidated balance sheet            $(20,749)       $(16,055)       $ (6,984)
                                                                            ========        ========        ========
</TABLE>


         Net pension cost was $4.7 million, $2.8 million and $1.9 million for
the years ended December 31, 2002, 2001 and 2000, respectively.

         Plan assets are invested in common stock and bond funds (98%), cash and
equivalents (2%) at December 31, 2002. The plans do not invest in the stock of
the Company.

                                      -45-
<PAGE>


CANADIAN PENSION PLANS
----------------------

         The Company has noncontributory defined benefit retirement plans
covering all of its eligible Camrose employees. The plans provide benefits based
on participants' years of service and compensation.

         The following table sets forth the funded status and the amounts
recognized at December 31:
<TABLE>
<CAPTION>

                                                                              2002            2001             2000
                                                                            --------        --------        --------
                                                                                        (IN THOUSANDS)
<S>                                                                         <C>             <C>             <C>
Change in benefit obligation:
   Projected benefit obligation at January 1                                $ 14,787        $ 11,678        $ 10,863
   Service cost                                                                  399             313             464
   Interest cost                                                                 925             859             834
   Plan amendments                                                                --             273              --
   Benefits paid                                                                (513)           (648)           (432)
   Actuarial loss (gain)                                                      (1,069)          3,083              55
   Foreign currency exchange rate change                                        (271)           (771)           (106)
                                                                            --------        --------        --------
   Projected benefit obligation at December 31                                14,258          14,787          11,678
                                                                            --------        --------        --------

Change in plan assets:
   Fair value of plan assets at January 1                                     12,043          14,102          12,229
   Actual return (loss) on plan assets                                          (867)         (1,315)          1,903
   Company contribution                                                          395             395             530
   Benefits paid                                                                (513)           (648)           (432)
   Foreign currency exchange rate change                                        (212)           (491)           (128)
                                                                            --------        --------        --------
   Fair value of plan assets at December 31                                   10,846          12,043          14,102
                                                                            --------        --------        --------

Projected benefit obligation less than (in excess of) plan assets             (3,412)         (2,744)          2,424
Unrecognized prior service cost                                                  474             513              --
Unrecognized net loss (gain)                                                   5,256           4,874             (58)
                                                                            --------        --------        --------
Net amount recognized                                                          2,318           2,643           2,366
Minimum liability                                                             (1,983)         (2,038)             --
                                                                            --------        --------        --------
Total Pension asset recognized in consolidated balance sheet                $    335        $    605        $  2,366
                                                                            ========        ========        ========
</TABLE>


         Net pension cost was $578,000, $24,000 and $39,000 for the years ended
December 31, 2002, 2001, and 2000, respectively.

           Generally weak financial market conditions resulted in poor
investment returns in the pension plans for the year 2002, thus causing pension
assets to be lower than actuarial liabilities and requiring an additional
liability of $10.5 million to be recorded for the United States plan. The
additional liability is tax-affected when recorded to retained earnings and
shown as a component of accumulated other comprehensive income.

         The following table sets forth the significant actuarial assumptions
for the United States and Canadian pension plans:

                                                       2002       2001      2000
                                                       ----       ----      ----
Discount rate
     United States Plans                               6.8%       7.0%      7.5%
     Canadian Plan                                     6.3%       6.3%      7.5%
Rate of increase in future compensation levels:
     United States Plans                               4.0%       4.0%      4.0%
     Canadian Plan                                     4.5%       4.5%      5.0%
Expected long-term rate of return on plan assets       8.5%       8.5%      8.5%

POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
------------------------------------------------------

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


                                      -46-


<PAGE>


         The following table sets forth the unfunded status and the amounts
recognized at December 31:
<TABLE>
<CAPTION>


                                                                                     2002             2001            2000
                                                                                   --------         -------         -------
                                                                                                 (IN THOUSANDS)
<S>                                                                                <C>             <C>             <C>
Change in benefit obligation:
   Accumulated postretirement benefit obligation at January 1                      $ 22,542        $ 22,672        $ 20,814
   Service cost                                                                         478             518             473
   Interest cost                                                                      1,572           1,629           1,515
   Benefits paid                                                                     (1,172)         (1,339)           (916)
   Plan amendment                                                                        --          (1,913)             --
   Actuarial loss                                                                     2,434           1,423             786
   Foreign currency exchange rate change                                                (66)           (448)             --
                                                                                   --------        --------        --------

   Accumulated postretirement benefit obligation at December 31                      25,788          22,542          22,672
                                                                                   --------        --------        --------

Accumulated benefit obligation in excess of plan assets                             (25,788)        (22,542)        (22,672)
Unrecognized transition obligation                                                    1,596           1,792           4,110
Unrecognized prior service cost                                                         486             561             636
Unrecognized net loss                                                                 4,910           2,341           1,289
                                                                                   --------        --------        --------
Postretirement liability recognized in consolidated balance sheet                  $(18,796)       $(17,848)       $(16,637)
                                                                                   ========        ========        ========
</TABLE>


         Net postretirement benefit cost was $2.4 million, $2.7 million and $2.5
million for the years ended December 31, 2002, 2001 and 2000, respectively. The
discount rate used for the United States Plans in determining the accumulated
postretirement benefit obligation was 6.8%, 7.0% and 7.5% for 2002, 2001 and
2000, respectively. In 2002, the Canadian Plan used a discount rate of 6.3%. In
2001 and 2000, the Canadian Plan used a discount rate of 6.3% and 7.5%,
respectively.

         The assumed health care cost trend rates used in measuring the
accumulated postretirement benefit obligation for the United States and Canadian
plans were 9.5% and 9.0%, respectively, for 2002 and assumed to gradually
decline to 4.5% by 2009 for both plans. In subsequent years, the health care
trend rates for both countries are assumed to remain constant at 4.5%. A
one-percentage-point change in the assumed health care cost trend rates would
have the following effect:

                                                     1 PERCENTAGE POINT CHANGE
                                                     -------------------------
                                                     INCREASE         DECREASE
                                                     --------         --------
                                                          (IN THOUSANDS)

Accumulated postretirement benefit obligation            $900            $(729)
Service and interest costs                                 87              (71)

OTHER EMPLOYEE BENEFIT PLANS
----------------------------

         The Company has an unfunded supplemental retirement plan designed to
maintain benefits for eligible nonunion domestic employees at the plan formula
level. The amount expensed for this plan in 2002, 2001 and 2000 was $254,000,
$299,000 and $318,000, respectively. The Company has a similar plan for Canadian
employees, and the amount expensed for this plan in 2002, 2001 and 2000 was
$148,000, $241,000 and $245,000, respectively.

         The Company has an Employee Stock Ownership Plan ("ESOP")
noncontributory qualified stock bonus plan for eligible domestic employees.
Contributions to the plan are made at the discretion of the Board of Directors
and are in the form of newly issued shares of the Company's common stock. Shares
are allocated to eligible employees' accounts based on annual compensation. At
December 31, 2002, the ESOP held 755,843 shares of Company common stock. The
ESOP provides that dividends paid on shares held by the ESOP are paid to
eligible employees.

         The Company has profit participation plans under which it distributes
quarterly to eligible employees 12% to 20%, depending on operating unit, of its
pretax income after adjustments for certain nonoperating items. Each eligible
employee receives a share of the distribution based upon the employee's base
compensation in relation to the total base compensation of all eligible
employees of the operating unit. The Company may modify, amend or terminate the
plans, at any time, subject to the terms of various labor agreements.

                                      -47-


<PAGE>


         The Company has qualified Thrift (401(k)) plans for eligible domestic
employees under which the Company matches 25% of the first 4% or 6%, depending
on location, of the participants' deferred compensation. Company contribution
expense in 2002, 2001 and 2000 was $0.8 million, $1.2 million and $1.3 million,
respectively.

12.    MAJOR CUSTOMERS

          Sales to a single customer, related to a significant pipeline
contract, were $166.7 million in 2002.

13.    RELATED PARTY TRANSACTIONS

STELCO, INC.

         Camrose purchases steel coil and plate under a steel supply agreement
with Stelco, Inc. ("Stelco"), a 40% owner of Camrose. Transactions under the
agreement are at negotiated market prices. The following table summarizes the
transactions between Camrose and Stelco:


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

Sales to Stelco                                  $   222     $   193    $   228
Purchases from Stelco                             12,006      23,486     35,640
Accounts receivable from Stelco at December 31         -         155          -
Accounts payable to Stelco at December 31          2,722         227      5,484

         Under the acquisition agreement for Camrose, either the Company or
Stelco may initiate a buy-sell procedure pursuant to which the initiating party
establishes a price for Camrose and the other party must either sell its
interest at that price or purchase the initiating party's interest at that
price.

14.    JOINT VENTURE

         In June 1999, a wholly-owned subsidiary of the Company and Feralloy
Oregon Corporation ("Feralloy") formed Oregon Feralloy Partners (the "Joint
Venture") to construct a temper mill and a cut-to-length ("CTL") facility
("Facility") with an annual stated capacity of 300,000 tons to process CTL plate
from steel coil produced at the Company's plate mill in Portland, Oregon. The
Facility commenced operations in May 2001. The Company owns 60% and Feralloy,
the managing partner, owns 40% of the Joint Venture. Each partner holds 50%
voting rights as owners of the Joint Venture. The Company is not required to,
nor does it currently anticipate it will, make other contributions of capital to
fund operations of the Joint Venture. However, the Company is obligated to
supply a quantity of steel coil for processing through the Facility of not less
than 15,000 tons per month. In the event that the three-month rolling average of
steel coil actually supplied for processing is less than 15,000 and the Joint
Venture operates at less than breakeven (as defined in the Joint Venture
Agreement), then the Company is required to make a payment to the Joint Venture
at the end of the three month period equal to the shortfall. As of December 31,
2002, total assets and total liabilities of the Joint Venture were $16.9 million
and $12.3 million, respectively. The Company's investment in the Joint Venture
is $3.0 million as of December 31, 2002. The investment in this non-controlled
majority-owned affiliate is accounted for by the equity method as required by
Emerging Issues Task Force No. 96-16.

15.     CONTINGENCIES

ENVIRONMENTAL

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

                                      -48-

<PAGE>

OREGON STEEL DIVISION

         In May 2000, the Company entered into a Voluntary Clean-up Agreement
with the Oregon Department of Environmental Quality ("DEQ") committing the
Company to conduct an investigation of whether, and to what extent, past or
present operations at the Company's steel plate minimill in Portland, Oregon
("Portland Mill") may have affected sediment quality in the Willamette River.
Based on preliminary findings, the DEQ has requested the Company to begin a full
remedial investigation ("RI"), including areas of investigation throughout the
Portland Mill, and imple-



ment source control as required. The Company estimates that costs of the RI
study could range from $900,000 to $1,993,000 over the next two years. Based on
a best estimate, the Company has accrued a liability of $1,284,000 as of
December 31, 2002. The Company has also recorded a $1,284,000 receivable for
insurance proceeds that are expected to cover these RI costs because the
Company's insurer is defending this matter, subject to a standard reservation of
rights, and is paying these RI costs as incurred. Based upon the results of the
RI, the DEQ may require the Company to incur costs associated with additional
phases of investigation, remedial action or implementation of source controls,
which could have a material adverse effect on the Company's results of
operations because it may cause costs to exceed available insurance or because
insurance may not cover those particular costs. The Company is unable at this
time to determine if the likelihood of an unfavorable outcome or loss is either
probable or remote, or to estimate a dollar amount range for a potential loss.

         In a related manner, in December 2000, the Company received a general
notice letter from the U.S. Environmental Protection Agency ("EPA"), identifying
it, along with 68 other entities, as a potentially responsible party ("PRP")
under the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") with respect to contamination in a portion of the Willamette River
that has been designated as the "Portland Harbor Superfund Site." The letter
advised the Company that it may be liable for costs of remedial investigation
and remedial action at the site (which liability, under CERCLA, is joint and
several with other PRPs) as well as for natural resource damages that may be
associated with any releases of contaminants (principally at the Portland Mill
site) for which the Company has liability. At this time, nine private and public
entities have signed an Administrative Order of Consent ("AOC") to perform a
remedial investigation/feasibility study ("RI/FS") of the Portland Harbor
Superfund Site under EPA oversight. The RI/FS is expected to take three to five
years to complete. The Company is a member of the Lower Willamette Group, which
is funding that investigation, and it signed a Coordination and Cooperation
Agreement with the EPA that binds it to all terms of the AOC. The Company's cost
associated with the RI/FS for 2002 is approximately $195,000, all of which has
been covered by the Company's insurer. As a best estimate of the RI/FS costs for
years after 2002, the Company has accrued $600,000 as of December 31, 2002. The
Company has also recorded a $600,000 receivable for insurance proceeds that are
expected to cover these RI/FS costs because the Company's insurer is defending
this matter, subject to a standard reservation of rights, and is paying these
RI/FS costs as incurred. Although the EPA has not yet defined the boundaries of
the Portland Harbor Superfund Site, the AOC requires the RI/FS to focus on an
"initial study area" that does not now include the portion of the Willamette
River adjacent to the Portland Mill. The study area, however, may be expanded.
At the conclusion of the RI/FS, the EPA will issue a Record of Decision setting
forth any remedial action that it requires to be implemented by identified PRPs.
A determination that the Company is a PRP could cause the Company to incur costs
associated with remedial action, natural resource damage and natural resource
restoration, the costs of which may exceed available insurance or which may not
be covered by insurance, which therefore could have a material adverse effect on
the Company's results of operations. The Company is unable to estimate a dollar
amount range for any related remedial action that may be implemented by the EPA,
or natural resource damages and restoration that may be sought by federal, state
and tribal natural resource trustees.

         On April 18, 2001, the United Steelworkers of America (the "Union"),
along with two other groups, filed suit against the Company under the citizen
suit provisions of the Clean Air Act ("CAA") in U.S. District Court in Portland,
Oregon. The suit alleges that the Company has violated various air emission
limits and conditions of its operating permits at the Portland Mill
approximately 100 times since 1995. The suit seeks injunctive relief and
unspecified civil penalties. On January 30, 2003, the federal district court
judge dismissed the majority of the plaintiffs' claims

                                      -49-


<PAGE>
and limited the type of relief the plaintiffs could receive if they succeeded in
proving the remaining allegations. Subsequently, the federal magistrate granted
plaintiffs leave to amend their complaint, but any amendments must be consistent
with the judge's ruling, which significantly limits the claims and type of
relief that may be alleged. The Company believes it has factual and legal
defenses to the allegations and intends to defend the matter vigorously.
Although the Company believes it will prevail, it is not presently possible to
estimate the liability if there is ultimately an adverse determination.

RMSM DIVISION

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

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

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

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

                                      -50-
<PAGE>

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

         In a related matter, in April 2000, the Union filed suit in U.S.
District Court in Denver, Colorado, asserting that the Company and CF&I had
violated the CAA at the Pueblo Mill for a period extending over five years. The
Union sought declaratory judgement regarding the applicability of certain
emission standards, injunctive relief, civil penalties and attorney's fees. On
July 6, 2001, the presiding judge dismissed the suit. The 10th Circuit Court of
Appeals on March 3, 2003 reversed the District Court's dismissal of the case and
remanded the case for further hearing to the District Court. No decision has
been yet reached whether to further appeal this ruling. While the Company does
not believe the suit will have a material adverse effect on its results of
operations, the result of litigation, such as this, is difficult to predict and
an adverse outcome with significant penalties is possible. It is not presently
possible to estimate the liability if there is ultimately an adverse
determination on appeal.

LABOR MATTERS

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

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

         On February 27, 1998, the Regional Director of the National Labor
Relations Board ("NLRB") Denver office issued a complaint against CF&I, alleging
violations of several provisions of the National Labor Relations Act ("NLRA").
On August 17, 1998, a hearing on these allegations commenced before an
Administrative Law Judge ("Judge"). Testimony and other evidence were presented
at various sessions in the latter part of 1998 and early 1999, concluding on
February 25, 1999. On May 17, 2000, the Judge rendered a decision which, among
other things, found CF&I liable for certain unfair labor practices and ordered
as remedy the reinstatement of all 1,000 Unreinstated Employees, effective as of
December 30, 1997, with back pay and benefits, plus interest, less interim
earnings. Since January 1998, the Company has been returning unreinstated
strikers to jobs as positions became open. As noted above, there were
approximately 157 Unreinstated Employees as of December 31, 2002. On August 2,
2000, CF&I filed an appeal with the NLRB in Washington, D.C. A separate hearing
concluded in February 2000, with the judge for that hearing rendering a decision
on August 7, 2000, that certain of the Union's actions undertaken since the
beginning of the strike did constitute misconduct and violations of certain
provisions of the NLRA. The Union has appealed this determination to the NLRB.
In both cases, the non-

                                      -51-


<PAGE>
prevailing party in the NLRB's decision will be entitled to appeal to the
appropriate U.S. Circuit Court of Appeals. CF&I believes both the facts and the
law fully support its position that the strike was economic in nature and that
it was not obligated to displace the properly hired replacement employees. The
Company does not believe that final judicial action on the strike issues is
likely for at least two to three years.

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

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

         The United Transportation Union, representing thirty of those former
employees, asserted that their members were protected under the FRSA and pursued
their claim before the Public Law Board ("PLB"). A hearing was held in November
1999, and the PLB, with one member dissenting, rendered an award on January 8,
2001 against C&W, ordering the reinstatement of those claimants who intend to
return to work for C&W, at their prior seniority, with back pay and benefits,
net of interim wages and benefits received elsewhere. On February 6, 2001, C&W
filed a petition for review of that award and has referred the matter back to
the PLB to determined the specific release which should be granted as to each
claimant in accordance with the terms of the award. On May 23, 2002, C&W filed
an appeal of the District Court's order in the United States Court of Appeals.
The appeal was dismissed as being premature given that the hearing on back pay
had not yet occurred. Given the uncertantity as to the methodology which will be
used to determine the amount of back pay and the extent to which the adverse and
mitigating factors discussed above will impact the liability for back pay and
benefits, it is not presently possible to estimate the liability if there is
ultimately an adverse determination against C&W.

         The Transportation-Communications International Union, Brotherhood
Railway Carmen Division, representing six of those former C&W employees,
asserted that their members were protected under the terms of the collective
bargaining agreement and pursued their claim before a separate PLB. A hearing
was held in January 2001, and that PLB, with one member dissenting,

                                      -52-


<PAGE>
rendered an award on March 14, 2001 against C&W, ordering the reinstatement of
those claimants who intend to return to work for C&W, at their prior seniority,
with back pay and benefits, net of interim wages earned elsewhere. As of
December 31, 2002, two of the six former employees have accepted a settlement
from C&W. The Company does not an adverse determination against C&W of this
matter has a material adverse effect on the Company's results of operations.

PURCHASE COMMITMENTS

         Effective January 8, 1990, the Company entered into an agreement, which
was subsequently amended on December 7, 1990 and again on April 3, 1991, to
purchase a base amount of oxygen produced at a facility located at the Company's
Portland Mill. The oxygen facility is owned and operated by an independent third
party. The agreement expires in August 2011 and specifies that the Company will
pay a base monthly charge that is adjusted annually based upon a percentage
change in the Producer Price Index. The monthly base charge at December 31, 2002
was approximately $122,000. A similar contract for the Pueblo Mill to purchase
oxygen was entered into on February 2, 1993 by CF&I, which was subsequently
amended on August 4, 1994. The agreement specifies that CF&I will pay a base
monthly charge that is adjusted annually based upon a percentage change in the
Producer Price Index. The monthly base charge at December 31, 2002 was $116,000.

CONTRACTS WITH KEY EMPLOYEES

         The Company has agreements with certain officers, which provide for
severance compensation in the event their employment with the Company is
terminated subsequent to a defined change in control of the Company.

OTHER CONTINGENCIES

         The Company is party to various other claims, disputes, legal actions
and other proceedings involving contracts, employment and various other matters.
In the opinion of management, the outcome of these matters would not have a
material adverse effect on the consolidated financial condition of the Company,
its results of operations, and liquidity.

16.    CAPITAL STOCK

COMMON STOCK

         In connection with the 1993 acquisition of the assets of CF&I, the
Company agreed to issue 598,400 shares of its common stock in March 2003 to
specified creditors of CF&I Steel. At the date of acquisition, the stock was
valued at $11.2 million using the Black-Scholes option pricing model.

STOCKHOLDER RIGHTS PLAN

         The Company has issued preferred stock purchase rights ("Rights") to
its common stockholders. The Rights generally become exercisable after a person
or group announces a tender offer that would result in that person or group
owning 15% or more of the Company's common stock. In that event, a holder will
be entitled to buy from the Company a unit consisting of one one-thousandth of a
share of participating preferred stock of the Company at a purchase price of
$42. The Rights also become exercisable after a person or group acquires 15% or
more of the Company's outstanding common stock. In that event, each Right,
excluding those held by the acquirer, would become exercisable for preferred
stock of the Company having a market value equal to twice the exercise price of
the Right. Alternatively, if the Company is acquired in a merger or other
business combination, each Right, excluding those held by the acquirer, would be
exercisable for common stock of the acquirer having a market value equal to
twice the exercise price of the Right. The Company may redeem the Rights prior
to a change in control at a price of $.001 per Right. The Rights will expire
December 22, 2009 if not exercised prior to that date.

STOCK OPTIONS

         The Company maintains a Non-Qualified Stock Option Plan ("Plan"),
effective January 1, 2000. As of December 31, 2002, the Company has granted
options to purchase 620,000 shares to certain senior management employees under
the provisions of the Plan. The exercise price is the fair value per share on
the date of grant. The term of each option is 10 years from grant date. One-half
of the options granted vest immediately upon grant, and the remaining one-half
vest ratably under a three-year schedule. At December 31, 2002, there were
380,000 shares reserved for future issuance under the Plan.

         The Company also maintains a Non-Employee Director Stock Option Plan
("Directors Plan"), effective April 26, 2002. As of December 31, 2002, the
Company has granted options to purchase 32,000 shares of its common stock to
individuals who are Non-Employee Directors under the provisions of the Directors
Plan, at future dates, at fair market value on the date of the grant. Options
vest over one to three years, one-third of the options granted vest ratably
under a three -year schedule, and expire no later than ten years from the date
of the grant. At December 31, 2002, there were 118,000 shares reserved for
future issuance under the Director Plan.

                                      -53-


<PAGE>


         The Company has elected to account for the stock options consistent
with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations. Therefore, no additional compensation
expense has been recognized for the Plan or Directors Plan within the
Consolidated Statements of Income. If the Company had accounted for the options
in a manner consistent with SFAS No. 123, "ACCOUNTING FOR STOCK-BASED
COMPENSATION," estimating the fair value of the options at grant date using the
Black-Scholes option pricing model, the Company's pro forma net loss from
continuing operations and pro forma diluted loss per common share would have
been increased to the amounts indicated below:

<TABLE>
<CAPTION>

                                                           2002            2001              2000
                                                         --------       ----------       -----------
<S>                                                      <C>            <C>              <C>
Net loss from continuing operations:
     As reported                                         $(5,608)       $  (5,928)       $  (18,265)
     SFAS No. 123 pro forma                               (5,792)          (6,418)          (18,335)

Basic loss per share from continuing operations:
     As reported                                         $ (0.21)       $   (0.22)       $   (0.69)
     SFAS No. 123 pro forma                                (0.22)           (0.24)           (0.70)


Diluted loss per share from continuing operations:
     As reported                                         $ (0.20)       $   (0.22)       $   (0.69)
     SFAS No. 123 pro forma                                (0.21)           (0.24)           (0.70)
</TABLE>



     A summary of option activity is as follows:
<TABLE>
<CAPTION>

                                           2002                     2001                    2000
                                   -----------------------------------------------------------------------
                                               WEIGHTED                  WEIGHTED                WEIGHTED
                                               AVERAGE                   AVERAGE                 AVERAGE
                                               EXERCISE                  EXERCISE                EXERCISE
OPTIONS OUTSTANDING                 SHARES      PRICE         SHARES      PRICE       SHARES      PRICE
-------------------                --------   ----------     --------   ----------   --------   ----------
<S>                                 <C>          <C>          <C>          <C>        <C>          <C>
Outstanding at beginning
   of period                        599,900      $3.64        188,500     $1.94            --        $  --
New Grants                           32,000       7.25        431,500      4.37       188,500         1.94
Exercised                            (3,000)      1.94        (10,050)     3.37            --           --
Terminated                               --         --        (10,050)     3.37            --           --
                                   --------      -----       --------      ----       -------        -----
Outstanding at end of period        628,900       3.83        599,900      3.64       188,500         1.94
Outstanding but not exercisable    (181,193)      4.26       (270,333)     3.82       (94,250)        1.94
                                   --------      -----       --------     -----       -------        -----
Exercisable at end of period        447,707      $3.66        329,567     $3.48        94,250        $1.94
                                   ========      =====       ========     =====       =======        =====
</TABLE>


         The estimated fair value as of grant date of options granted in 2002,
2001 and 2000, using the Black-Scholes option pricing model, was as follows:

                                           2002        2001        2000
                                        ---------    --------     -------
The weighted average fair value
   of options granted during the
   year per share                         $4.72       $2.97        $1.20
Assumptions:
   Annualized Dividend Yield                  0%          0%           0%
   Common Stock Price Volatility           64.4%       66.1%        54.0%
   Risk-free Rate of Return                 4.9%        4.7%         5.7%
   Expected option term (in years)            7           7            7

                                      -54-
<PAGE>



         A summary of options outstanding at December 31, 2002, was as follows:
<TABLE>
<CAPTION>

                           OPTIONS OUTSTANDING                                   OPTIONS EXERCISABLE
                 ------------------------------------------------------     ----------------------------
                                           WEIGHTED
                                           AVERAGE                              NUMBER          WEIGHTED
   RANGE OF            NUMBER              REMAINING        WEIGHTED        EXERCISABLE AT      AVERAGE
   EXERCISE       OUTSTANDING AT          CONTRACTUAL       AVERAGE          DECEMBER 31,       EXERCISE
     PRICE       DECEMBER 31, 2002           LIFE        EXERCISE PRICE         2002             PRICE
--------------   ------------------      -------------   --------------     --------------      --------
<S>                    <C>                   <C>             <C>                <C>               <C>
$0.01 to $2.00         174,700               7.82            $1.94              148,684           $1.94
$2.01 to $4.00         221,800               8.71            $3.78              147,870           $3.78
$4.01 to $6.00         200,400               8.30            $4.99              135,153           $4.99
$6.01 to $7.25          32,000               9.32            $7.25               16,000           $7.25
</TABLE>


17.      SALES OF SUBSIDIARY'S COMMON STOCK

         In 1994, New CF&I sold a 10% equity interest to a subsidiary of Nippon
Steel Corporation ("Nippon"). In connection with the sale, New CF&I and the
Company entered into a stockholders' agreement with Nippon pursuant to which
Nippon was granted a right to sell all, but not less than all, of its equity
interest in New CF&I back to New CF&I at the then fair market value in certain
circumstances. Those circumstances include, among other things, a change of
control, as defined, in New CF&I, certain changes involving the composition of
the board of directors of New CF&I, and the occurrence of certain other events
that are within the control of New CF&I or the Company. The Company also agreed
not to transfer voting control of New CF&I to a nonaffiliate except in those
circumstances where Nippon is offered the opportunity to sell its interest in
New CF&I to the transferee at the same per share price obtained by the Company.
New CF&I retains a right of first refusal in the event that Nippon desires to
transfer its interest in New CF&I to a nonaffiliate. During 1995, the Company
sold a 3% equity interest in New CF&I to the Nissho Iwai Group under
substantially the same terms and conditions of the Nippon transaction. The
Company believes that it is not probable that the conditions that would permit a
subsidiary stock redemption will occur.


18.      UNUSUAL AND NONRECURRING ITEMS

SETTLEMENT OF LITIGATION

         Operating income for 2001 includes $3.4 million in proceeds from a
settlement of outstanding litigated claims with certain graphite electrode
suppliers.

PROCEEDS FROM INSURANCE COMPANY

         Other income for 2001 includes $2.3 million received from the Company's
life insurance provider due to its de-mutualization capital structure change
into a public company.



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

         None.

                                      -55-


<PAGE>

                                    PART III


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

         In addition to the information under the caption "Executive Officers of
the Registrant" in "Part I, Item 4" of this Report, the information required by
these Items is incorporated herein by reference from the material under the
headings "Nomination and Election of Class C Directors", "Directors'
Compensation, Meetings and Standing Committees," "Executive Compensation,"
"Option Grants During Fiscal 2002," "Aggregated Option Exercises in Last Fiscal
Year and FY-End Option Values," "Defined Benefit Retirement Plans," "Employment
Contracts and Termination of Employment and Change in Control Arrangements,"
"Board Compensation Committee Report on Executive Compensation," and "Section
16(a) Beneficial Ownership Reporting Compliance" in the Company's Proxy
Statement for the 2003 Annual Meeting of Stockholders, which will be filed with
the Securities and Exchange Commission.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         Part of the information required by this Item is incorporated by
reference from the material under the caption "Principal Stockholders" in the
Company's Proxy Statement for the 2003 Annual Meeting of Stockholders.

         The following table summarizes information with respect to options
under the Company's equity compensation plans at December 31, 2002:
<TABLE>
<CAPTION>

                                                                                                   NUMBER OF SECURITIES
                                                                                                  REMAINING AVAILABLE FOR
                                  NUMBER OF SECURITIES TO BE        WEIGHTED-AVERAGE EXERCISE   FUTURE ISSUANCE UNDER EQUITY
                                   ISSUED UPON EXERCISE OF            PRICE OF OUTSTANDING          COMPENSATION PLANS
                                     OUTSTANDING OPTIONS,             OPTIONS, WARRANTS, AND       (EXCLUDING SECURITIES
                                     WARRANTS, AND RIGHTS                   RIGHTS               REFLECTED IN COLUMN (A))
                                             (A)                             (B)                            (C)


<S>                                        <C>                              <C>                           <C>

Equity compensation plans
   approved by security holders            596,900                          $3.65                         380,000

Equity compensation plans not
   approved by security holders             32,000                          $7.25                         118,000
                                           -------                          -----                         -------

                                           628,900                                                        498,000
       Total                               =======                                                        =======

</TABLE>


         The equity compensation plans not approved by security holders have
generally the same features as those approved by security holders. For further
details regarding the Company's equity compensation plans, including the
Non-Employee Director Stock Option Plan which was not approved by security
holders, see Note 16 to the Consolidated Financial Statements.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by this Item is incorporated by reference from
the material under the captions "Nomination and Election of Class C Directors,"
"Executive Compensation," "Option Grants During Fiscal 2002," "Aggregated Option
Exercises in Last Fiscal Year and FY-End Option Values," and "Employment
Contracts and Termination of Employment and Change in Control Arrangements" in
the Company's Proxy Statement for the 2003 Annual Meeting of Stockholders.

ITEM 14. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
------------------------------------------------

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

CHANGES IN INTERNAL CONTROLS
----------------------------

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


                                      -56-

<PAGE>



                                     PART IV


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


(A)           FINANCIAL STATEMENTS:
      (i)     Report of Independent Accountants - 2002, 2001 and  2000  .... 28
      (ii)    Consolidated Financial Statements:
                  Balance Sheets at December 31, 2002, 2001 and  2000 ...... 29
                  Statements of Income for each of the three years
                    in the period ended December 31, 2002................... 30
                  Statements of Changes in Stockholders' Equity for
                    each of the three years in the period ended
                    December 31, 2002....................................... 31
                  Statements of Cash Flows for each of the three years
                    in the period ended December 31, 2002................... 32
                  Notes to Consolidated Financial Statements................ 33
      (iii)       Financial Statement Schedule for each of the three
                  years in the period ended December 31, 2002:
                  Schedule II - Valuation and Qualifying Accounts........... 58
      (iv)    Exhibits:  Reference is made to the list on pages 57 and 58
                  of the exhibits filed with this report.

(B)           REPORTS ON FORM 8-K:
              No reports on Form 8-K were required to be filed by the
              Registrant during the quarter ended December 31, 2002.


                                      -57-
<PAGE>

<TABLE>


                                                  OREGON STEEL MILLS, INC.
                                       SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                                               FOR THE YEARS ENDED DECEMBER 31
                                                       (IN THOUSANDS)

<CAPTION>

COLUMN A                                         COLUMN B               COLUMN C                  COLUMN D        COLUMN E
--------                                         --------        ----------------------------     --------        --------
                                                                 ADDITIONS
                                                 BALANCE AT      CHARGED TO       CHARGED                        BALANCE AT
                                                 BEGINNING       COSTS AND        TO OTHER                         END OF
CLASSIFICATION                                   OF PERIOD        EXPENSES        ACCOUNTS       DEDUCTIONS        PERIOD
--------------                                   ----------      ----------      ---------     -------------     -----------
<S>                                                 <C>             <C>             <C>           <C>               <C>
   2002
   ----
Allowance for doubtful accounts                     $4,299          $2,535          $ -           $ (2,488)         $4,346
Valuation allowance for impairment
   of non-current deferred income tax assets         3,424           1,738            -                  -           5,162

   2001
   ----
Allowance for doubtful accounts                     $1,528          $3,127          $ -           $   (356)         $4,299
Valuation allowance for impairment
   of non-current deferred income tax assets         3,105             319            -                  -           3,424

   2000
   ----
Allowance for doubtful accounts                     $1,994           $ 441          $ -           $   (907)         $1,528
Valuation allowance for impairment
  of non-current deferred income  tax assets         3,282               -            -               (177)          3,105

</TABLE>


                                      -58-
<PAGE>


LIST OF EXHIBITS (ASTERISK)

   2.0           Asset Purchase Agreement dated as of January 2, 1992, by and
                 between Camrose Pipe Company (a partnership) and Stelco Inc.
                 (Filed as exhibit 2.0 to Form 8-K dated June 30, 1992 and
                 incorporated by reference herein.)
   2.1           Asset Purchase Agreement dated as of March 3, 1993, among CF&I
                 Steel Corporation, Denver Metals Company, Albuquerque Metals
                 Company, CF&I Fabricators of Colorado, Inc., CF&I Fabricators
                 of Utah, Inc., Pueblo Railroad Service Company, Pueblo Metals
                 Company, Colorado & Utah Land Company, the Colorado and Wyoming
                 Railway Company, William J. Westmark as trustee for the estate
                 of The Colorado and Wyoming Railway Company, CF&I Steel, L.P.,
                 New CF&I, Inc. and Oregon Steel Mills, Inc. (Filed as exhibit
                 2.1 to Form 8-K dated March 3, 1993, and incorporated by
                 reference herein.)
   3.1           Restated Certificate of Incorporation of the Company, as
                 amended. (Filed as exhibit 3.2 to Form 10-K dated December 31,
                 1999, and incorporated by reference herein.)
   3.2           Bylaws of the Company as amended. (Filed as exhibit 3.2 to
                 Form 10-K dated December 31, 2001, and incorporated by
                 reference herein.)
   4.1           Specimen Common Stock Certificate.  (Filed as exhibit 4.1 to
                 Form S-1 Registration Statement 33-38379 and incorporated by
                 reference herein.)
   4.2           Rights Agreement between Oregon Steel Mills, Inc. and
                 ChaseMellon Shareholder Services, LLC (now Mellon Investor
                 Services, LLC), as Rights Agent. (Filed as Exhibit 1 to the
                 Company's  Registration  Statement on Form 8-A (SEC Reg.
                 No. 1-9987) and incorporated by reference herein.)
   4.3           Indenture,  dated as of July 15, 2002, by and among Oregon
                 Steel Mills, U.S. Bank National Association, as trustee, and
                 New CF&I, Inc., and CF&I Steel, L.P., as guarantors.  (Filed as
                 exhibit 4.1 to the Registration statement on Form S-4 (SEC
                 Reg. No. 333-98249) and incorporated by reference herein).
   4.4           First Amendment to Oregon Steel Mills, Inc. Indenture.  (Filed
                 as Exhibit 4.2 to Form 10-Q dated September 30, 2002, and
                 incorporated by reference herein.)
   4.5           Exchange and Registration Rights Agreement, dated July 15,
                 2002, between Oregon Steel Mills and Goldman, Sachs & Co.
                 (Filed as exhibit 4.2 to the Registration Statement on Form S-4
                 (SEC Reg. No. 333-98249) and incorporated by reference herein.)
   4.6           Security  Agreement, dated as of July 15, 2002, between Oregon
                 Steel Mills and U.S. Bank National Association.  (Filed as
                 exhibit 4.3 to the Registration Statement on Form S-4 (SEC Reg.
                 No. 333-98249) and incorporated by reference herein.)
   4.7           Security  Agreement, dated as of July 15, 2002, between
                 CF&I Steel, L.P. and U.S. Bank National Association.  (Filed as
                 exhibit 4.4 to the Registration Statement on Form S-4
                 (SEC Reg. No. 333-98249) and incorporated by reference herein.)
   4.8           Security Agreement, dated as of July 15, 2002, between
                 New CF&I, Inc. and U.S. Bank National Association.  (Filed as
                 exhibit 4.5 to the Registration Statement on Form S-4 (SEC Reg.
                 No. 333-98249) and incorporated by reference herein.)
   4.9           Intercreditor Agreement, dated July 15, 2002 between U.S. Bank
                 National Association and Textron Financial Corporation.
                 (Filed as exhibit 4.6 to the  Registration Statement on
                 Form S-4 (SEC Reg. No. 333-98249) and incorporated  by
                 reference herein.)
   4.10          Form of Deed of Trust, Assignment of Rents and Leases and
                 Security Agreement.  (Filed as exhibit 4.7 to the Registration
                 Statement on Form S-4 (SEC Reg. No. 333-98249) and incorporated
                 by reference herein.)
   4.11          Form of Global Note.  (Filed as exhibit 4.8 to the Registration
                 Statement on Form S-4 (SEC Reg. No. 333-98249) and incorporated
                 by reference herein.)
   4.12          Guarantee of CF&I Steel, L.P. (Filed as exhibit 4.9 to the
                 Registration Statement on Form S-4 (SEC Reg. No. 333-98249) and
                 incorporated by reference herein.)
   4.13          Guarantee of New CF&I, Inc.  (Filed as exhibit 4.10 to the
                 Registration  Statement on Form S-4 (SEC Reg. No. 333-98249)
                 and incorporated by reference herein.)

                                      -59-


<PAGE>

  10.1**         Form of Indemnification Agreement between the Company and its
                 directors.  (Filed as exhibit 10.6 to Form S-1 Registration
                 Statement 33-20407 and incorporated by reference herein.)
  10.2**         Form of  Indemnification Agreement  between the Company and its
                 executive officers. (Filed as exhibit 10.7 to Form S-1
                 Registration Statement 33-20407 and incorporated by reference
                 herein.)
  10.3           Agreement for Electric Power Service between registrant and
                 Portland General Electric Company. (Filed as exhibit 10.20 to
                 Form S-1 Registration Statement 33-20407 and incorporated by
                 reference herein.)
  10.4**         Form of Key Employee Contract between the Company and its
                 executive officers. (Filed as exhibit 10.2 to Form 10-Q dated
                 September 30, 2000, and incorporated by reference herein.)
  10.5           Summary of Rights to Purchase Participating Preferred Stock.
                 (Filed as exhibit 2 to the Company's Registration Statement on
                 Form 8-A (SEC Reg. No. 1-9987) and incorporated by reference
                 herein.)
  10.6           Form of Rights Certificate and Election to Purchase.  (Filed as
                 exhibit 3 to the Company's  Registration  Statement on Form 8-A
                 (SEC Reg. No. 1-9987) and incorporated by reference herein.)
  10.7**         2002 Annual Incentive Plan for certain of the Company's
                 management employees.  (Filed as exhibit 10.11 to Form 10-K
                 dated December 31, 2001, and incorporated by reference herein.)
  10.8**         2000  Non-Qualified  Stock Option Plan.  (Filed as exhibit 99.1
                 to the Company's Registration Statement on Form S-8 (see Reg.
                 No. 333-68732) and incorporated by reference herein.)
  10.9**         2002  Non-Employee  Director's Stock Option Plan. (Filed as
                 exhibit 99.1 to the Company's  Registration  Statement on
                 Form S-8 (SEC Reg. No. 333-86980) and incorporated by reference
                 herein.)
  10.10***       Credit Agreement, dated as of July 12, 2002, among Oregon Steel
                 Mills, Inc., New CF&I, Inc., CF&I Steel, L.P. and Colorado &
                 Wyoming Railway Company as borrowers, the financial
                 institutions that are or may from time to time become parties
                 thereto, as Lenders, Textron Financial Corporation, as Agent
                 for the Lenders, and GMAC Business Credit LLC, as Co-Managing
                 Agent. (Filed as exhibit 10.1 to the Registration Statement on
                 Form S-4 (SEC Reg. No. 333-98249) and incorporated by reference
                 herein).
  10.11          Amendment No. 1 to Credit Agreement dated as of December 13,
                 2002,  among Oregon Steel Mills, Inc., New CF&I, Inc., CF&I
                 Steel, L.P. and Colorado & Wyoming Railway Company as
                 borrowers,  the financial institutions that are or may from
                 time to time become parties thereto, as Lenders, Textron
                 Financial Corporation, as Agent for the Lenders, and GMAC
                 Business Credit LLC, as Co-Managing Agent.
  10.12          Security  Agreement,  dated as of July 12, 2002, among Oregon
                 Steel Mills, Inc., New CF&I, Inc., CF&I Steel, L.P. and
                 the Agent for the Lenders. (Filed as exhibit 10.2 to the
                 Registration Statement on Form S-4 (SEC Reg. No. 333-98249)
                 and incorporated by reference herein).
  21.0           Subsidiaries of registrant.
  23.0           Consent of Independent Accountants - PricewaterhouseCoopers
                 LLP.
  99.0           Partnership Agreement dated as of January 2, 1992, by and
                 between Camrose Pipe Corporation and Stelcam Holding, Inc.
                 (Filed as exhibit 28.0 to Form 8-K dated June 30, 1992, and
                 incorporated by reference herein.)
  99.1           CEO Certification pursuant to Section 906 of the Sarbanes-Oxley
                 Act of 2002.
  99.2           CFO Certification pursuant to Section 906 of the Sarbanes-Oxley
                 Act of 2002.

----------------------

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

**   Management contract or compensatory plan.

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


                                      -60-
<PAGE>



                        SIGNATURES REQUIRED FOR FORM 10-K

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Oregon Steel Mills, Inc. has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

                                         OREGON STEEL MILLS, INC.
                                         (Registrant)

                                         By    /s/ Joe E. Corvin
                                            ---------------------------------
                                         Chief Executive Officer

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


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


  /s/ Joe E. Corvin            President, Chief Executive        March 17, 2003
--------------------------
    (Joe E. Corvin)            Officer and Director
                               (Principal Executive Officer)

/s/ L. Ray Adams               Vice President Finance,           March 17, 2003
--------------------------
    (L. Ray Adams)             Chief Financial Officer, and
                               Treasurer
                               (Principal Financial Officer)

 /s/ Jeff S. Stewart           Corporate Controller              March 17, 2003
--------------------------
    (Jeff S. Stewart)          (Principal Accounting Officer)

/s/ William Swindells          Chairman of the Board             March 17, 2003
--------------------------
    (William Swindells)        and Director

/s/  James E. Declusin         Director                          March 17, 2003
--------------------------
    (James E. Declusin)

/s/ Harry L. Demorest          Director                          March 17, 2003
--------------------------
    (Harry L. Demorest)

/s/ Carl W. Neun               Director                          March 17, 2003
--------------------------
    (Carl W. Neun)

/s/ David L. Parkinson         Director                          March 17, 2003
--------------------------
    (David L. Parkinson)

/s/ Stephen P. Reynolds        Director                          March 17, 2003
--------------------------
    (Stephen P. Reynolds)

/s/ John A. Sproul             Director                          March 17, 2003
--------------------------
    (John A. Sproul)

/s/ Frank M. Walker            Director                          March 17, 2003
--------------------------
    (Frank M. Walker)



                                      -61-