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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2005

or



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

For the transition period from 
to

Commission File Number: 333-79587



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CALIFORNIA STEEL INDUSTRIES, INC.

(Exact name of registrant as specified in
its charter)



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



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

(909) 350-6200

(Registrants telephone number, including area code)



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



|                     |  |                                           
|-------------------- |  | ------------------------------------------
|Title of Each Class: |  | Name of Each Exchange on Which Registered:
|None                 |  | None                                      

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

None

(Title of Class)



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Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act

Yes ̈No x

Indicate by check mark
if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act

Yes ̈No x

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



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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 is a large accelerated filer, an accelerated file, or a non-accelerated filer
(as defined in Rule 12b-2 of the Act).

Large Accelerated Filer ̈Accelerated Filer ̈Non-Accelerated Filer x

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

As of March 27, 2006, there were 1,000 shares of the registrants
common stock, no par value, outstanding.



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CALIFORNIA STEEL INDUSTRIES, INC.

INDEX TO ANNUAL REPORT ON FORM 10-K

For The Fiscal Year Ended
December 31, 2005



|              |  |                                                                                       |  |   
|------------- |  | ------------------------------------------------------------------------------------- |  | --
|              |  | Page                                                                                 
|PART I        |  |                                                                                       |  |   
|              |  |                                                                                      
|Item 1.       |  | Business                                                                              |  | 1 
|              |  |                                                                                      
|Item 2.       |  | Properties                                                                            |  | 8 
|              |  |                                                                                      
|Item 3.       |  | Legal Proceedings                                                                     |  | 8 
|              |  |                                                                                      
|Item 4.       |  | Submission of Matters to a Vote of Security Holders                                   |  | 8 
|              |  |                                                                                      
|PART II       |  |                                                                                       |  |   
|              |  |                                                                                      
|Item 5.       |  | Market for Registrants Common Equity and Related Stockholder Matters                 |  | 9 
|              |  |                                                                                      
|Item 6.       |  | Selected Consolidated Financial Data                                                  |  | 9 
|              |  |                                                                                      
|Item 7.       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 10
|              |  |                                                                                      
|Item 7A.      |  | Quantitative and Qualitative Disclosures about Market Risk                            |  | 16
|              |  |                                                                                      
|Item 8.       |  | Consolidated Financial Statements and Supplementary Data                              |  | 18
|              |  |                                                                                      
|Item 9.       |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  |  | 18
|              |  |                                                                                      
|Item 9A.      |  | Controls and Procedures                                                               |  | 18
|              |  |                                                                                      
|PART III      |  |                                                                                       |  |   
|              |  |                                                                                      
|Item 10.      |  | Directors and Executive Officers of the Registrant                                    |  | 19
|              |  |                                                                                      
|Item 11.      |  | Executive Compensation                                                                |  | 21
|              |  |                                                                                      
|Item 12.      |  | Security Ownership of Certain Beneficial Owners and Management                        |  | 25
|              |  |                                                                                      
|Item 13.      |  | Certain Relationships and Related Transactions                                        |  | 25
|              |  |                                                                                      
|Item 14.      |  | Principal Accountant Fees and Services                                                |  | 26
|              |  |                                                                                      
|PART IV       |  |                                                                                       |  |   
|              |  |                                                                                      
|Item 15.      |  | Exhibits and Financial Statement Schedules                                            |  | 27
|              |  |                                                                                      
|Signatures    |  |                                                                                       |  |   
|              |  |                                                                                      
|Exhibit Index |  |                                                                                       |  |   
|              |  |                                                                                      
|Exhibits      |  |                                                                                       |  |   



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PART I



|Item 1. | Business
|------- | --------

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

Introduction

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

Industry Overview

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

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

Unlike integrated steel mills and mini-mills, we do not manufacture steel. Rather, we process steel slab manufactured by third parties. As a result, we do not have the fixed costs associated with the manufacturing of
steel. Historically, raw material costs comprise approximately 70% of our cost of goods sold. In the past few years, raw materials costs have increased due to higher slab costs and in 2005, our raw materials costs were approximately 78% of our cost
of goods sold. We believe we are one of the largest importers and one of the largest purchasers of steel slab in the world. Our purchasing power provides us with the ability to negotiate favorable terms and conditions for steel slab from low cost
and high quality producers throughout the world. Generally, prices of our flat rolled steel products have experienced a correlation to the prices of steel slab. Although we remain subject to the cyclicality inherent in the steel industry, we believe
this correlation, combined with our slab-based business model, has historically protected our operating margins when compared to other flat rolled steel producers.

Recent Industry Conditions

As noted in the Industry Overview above, the steel industry is highly cyclical in
nature. While conditions in 2004 were such that worldwide demand for steel products highly outpaced available supply, market conditions in 2005 returned to a less volatile pace as purchasers and consumers began the year with high inventory levels,
purchased in response to the supply conditions of 2004. Because of this, demand during the first half of 2005 was lower than typically seen during this period. By the third quarter of 2005 and continuing through the end of the year, demand returned
to normal levels.

During 2004, the average selling price of steel products (including semi-finished steel slabs) increased substantially,
driven particularly by higher costs of scrap steel and other steel inputs. The demand for these products was extraordinarily high from steel mills in China as that country increased steelmaking capacity and its own domestic demand for product. This
in turn also led to increases in freight rates, as global shipping capacity was insufficient to keep pace. Demand for product in China and in other Asian countries, together with these higher shipping costs and a weaker U. S. dollar limited imports
of steel products into the Western United States throughout most of 2004.



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However, in 2005, domestic policy within China resulted in a reduction of demand for steel products
towards the first half of the year, while higher US domestic prices led to more competitive market conditions for imports of steel products into the western United States. Steel prices generally decreased between the first quarter of 2005 to the
fourth quarter of 2005, although CSIs average sales price for all products for the year was slightly higher than in 2004.

As we have
historically focused on our core customers in the western United States, we do not actively pursue foreign sales, including sales to China.

Products
and Customers

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



|                                                  |  |                         |   |  |       |   |  |       |   |  |       |   |  |       |  
|------------------------------------------------- |  | ----------------------- | - |  | ----- | - |  | ----- | - |  | ----- | - |  | ----- | -
|                                                  |  | Year Ended December 31, |  
|                                                  |  | 2005                    |   |  | 2004  |   |  | 2003  |   |  | 2002  |   |  | 2001  |  
|Hot rolled coil and sheet                         |  | 41.1                    | % |  | 44.8  | % |  | 43.1  | % |  | 47.0  | % |  | 45.3  | %
|Cold rolled coil and sheet                        |  | 10.3                    | % |  | 10.7  | % |  | 11.2  | % |  | 11.6  | % |  | 13.9  | %
|Galvanized coil and sheet                         |  | 37.9                    | % |  | 35.1  | % |  | 38.0  | % |  | 35.7  | % |  | 34.2  | %
|ERW pipe                                          |  | 10.7                    | % |  | 9.4   | % |  | 7.7   | % |  | 5.7   | % |  | 6.6   | %
|                                                  |  |                         |   |  |       |   |  |       |   |  |       |   |  |       |  
|Total                                             |  | 100                     | % |  | 100   | % |  | 100   | % |  | 100   | % |  | 100   | %
|                                                  |  |                         |   |  |       |   |  |       |   |  |       |   |  |       |  
|Total tons billed, excluding scrap (in thousands) |  | 1,814                   |   |  | 2,106 |   |  | 1,885 |   |  | 2,014 |   |  | 1,828 |  
|                                                  |  |                         |   |  |       |   |  |       |   |  |       |   |  |       |  

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

We have approximately 250 active customers, with no single customer accounting for more than 5% of our 2005 net sales. Our customers include service and
processing centers, construction and building material companies, roofing and decking manufacturers, tubing manufacturers, oil and gas producers and distributors, aftermarket automotive manufacturers, as well as various customers in other
industries.

We do not actively pursue sales in foreign markets and we make foreign sales only when they are economically advantageous to
us. In 2005, we sold approximately 20,346 tons of steel products to foreign customers, primarily in Canada, which represented approximately 1% of our total 2005 tons billed.

Hot rolled coil and sheet is our largest product category as measured by tons billed per year. Our customers use hot rolled steel for a variety of
manufacturing applications, including the production of spiral weld pipe, automobile wheels and rims, strapping, tubing and a variety of construction related products. In 2005, we directed approximately 39.5% of our hot rolled production to outside
sales and we further processed approximately 60.5% internally for our own higher-margin, value added product needs.

Cold rolled coil and
sheet are used in exposed steel applications where high surface quality is important. Typically, cold rolled material is coated or painted. Applications for our cold rolled products include electronic cabinetry, lighting fixtures, metal office
furniture, water heaters, container manufacturers, tubing and a variety of construction related products. In 2005, we directed approximately 22.3% of our cold rolled production to outside sales and we further processed approximately 77.7% internally
for our own higher-margin, value added product needs.

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



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

Operations

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

Modernization Program

In 2001, we
completed a $265 million modernization program that allowed us to improve our product quality, double production volumes, and increase our percentage of high value added products to our product mix. Since the completion of our modernization program,
we have continued to make selective investments designed to keep our facilities competitive or reduce operating costs. Total capital spending in 2005 was $43.0 million, of which $23.6 million was spent on various upgrades to our production
facilities and $19.4 million for an early buy-out of the lease for our Continuous Galvanize Line #2.

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

Hot Strip Rolling and Finishing Mills

We produce hot rolled coil and sheet from slab in our hot strip mill. A walking beam furnace reheats slab, directs it to a multi-stand rolling mill to
reduce thickness and roll it into coil. Equipped with an automatic gauge control system and technologically advanced computer controls, the hot strip mill currently possesses a throughput capacity of approximately 2.2 million tons annually and
can produce hot rolled coil in gauges from 0.053 to 0.750.

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



| |  |  | A walking beam furnace with a capacity of approximately 6,900 tons of slab per day; and
| | - |  | ---------------------------------------------------------------------------------------



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

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



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



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

Continuous Pickle Line

We can further process hot rolled coil on the 62-inch continuous pickle line for direct sales to our
customers or for our own cold rolling and galvanizing production. The continuous pickle line is a conventional horizontal design with a coil entry section, welder, hot water preheat tanks, acid tanks, water rinse, dryer, looper, side trimmer,
coiler, oiling equipment and scale. The line can currently yield up to approximately 1.3 million tons per year.

Five Stand Cold
Reduction Mill

Pickled and oiled material may be further processed through the Five Stand Cold Reduction Mill, which reduces the
pickled steel strip from a gauge range of 0.0075 to 0.225 to a range of 0.010 to 0.172 in thickness, with a maximum width of 60. In the cold reduction process, pickled and oiled coils pass through five stands, arranged
in tandem, with a predetermined amount of reduction taken on each stand until the final thickness is achieved upon exiting the fifth stand. Reductions are taken in one pass. The capacity of the Five Stand Cold Reduction Mill is 1.1 million tons
per year. Direct sales to our customers account for less



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than 2% of material processed on the Five Stand Cold Reduction Mill; most material is further processed through the cold rolling or galvanized mills.

Cold Rolled Mill

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

The cold rolled facility, with a current annual finished capacity of approximately 360,000 tons, includes the following:



| |  |  | An electrolytic cleaning line;
| | - |  | ------------------------------



| |  |  | Twenty hydrogen annealing bases; and
| | - |  | ------------------------------------



| |  |  | A 60 temper mill.
| | - |  | ------------------

After cold reduction at the
Five-Stand Cold Reduction Mill, the coil may be cleaned in a 200 feet to 1,000 feet per minute electrolytic cleaning line and then annealed. Hydrogen annealing is a process that heats steel coils to annealing temperatures in a pure hydrogen
atmosphere and then slowly allows the steel coils to cool. This process restores ductility to our steel products that is lost as a result of cold reduction rolling. The strip is then run through final production in a 60 temper mill, where the
steel is tempered to specified finish, shape and gauge.

Galvanizing Mills

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

We currently operate two continuous galvanizing lines and believe that our galvanizing facilities can produce the full range of coated steel. The first
continuous galvanizing line is horizontally configured and produces gauges from 0.012 to 0.174, with a capacity of 460,000 tons per year. The second continuous galvanizing line is vertically configured and produces gauges from
0.010 to 0.060, with a capacity of 290,000 tons per year.

Electric Resistance Weld (ERW) Pipe Mill

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

The pipe mill produces pipe with outside diameters ranging from 4.5 to 16 and wall thickness ranging from 0.156 to 0.375, with
lengths available up to 63 feet without mid-weld. Process coating is available through local coating applicators, one of whom leases space on our property. The ERW pipe mill has a current capacity of approximately 210,000 tons per year.

Semi-Finished Steel Slab and Suppliers

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

Historically, raw material costs comprise approximately 70% of our cost of goods sold. In the past few years, raw materials costs
have increased due to higher slab costs and in 2005, our raw materials costs were approximately 78% of our cost of goods sold. We are one of the largest importers and one of the largest purchasers of slab in the world. We purchase slab from a
diverse group of foreign suppliers to obtain high quality steel at competitive cost through reliable sources. Our foreign vendors are located in Brazil, Mexico, Australia, Japan, Russia, Argentina, Venezuela, the United Kingdom and China.



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We typically make our slab purchases on a quarterly basis. As of December 31, 2005 we were
committed, in the form of open purchase orders, to purchase approximately $77.9 million in steel slabs. We negotiate slab procurement for longer periods when our purchasing power combined with market conditions provide us with the opportunity to
negotiate on terms which we believe are favorable to us.

Although we are not reliant on any one single vendor, in 2005, we purchased
approximately 36% of our slab from Ispat Mexicana de C. V. (Imexsa) of Mexico, now known as Mittal Steel Lazaro Cardenas and approximately 19% of our slab from Companhia Siderurgica de Tubarão of Brazil (CST) and Bluescope Steel
of Australia.

In 2005, we completed the sale of our 4% interest in the common stock of CST to Arcelor S.A. (Arcelor). All slab
purchases with CST before the sale of our interest to Arcelor were negotiated on an arms length basis and in accordance with market conditions. Accordingly, we will continue to purchase slab from CST when we believe terms are
favorable.

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

We believe that our integrated slab procurement
system allows us to manage our slab inventory levels, improve tonnage levels as well as the slab quality necessary to meet our customers order specifications. As of December 2005, we had what we believed to be firm backlog orders to sell
approximately 269,000 tons. Based on our average sales price at that time, the backlog value was approximately $169,138,000. As of December 2004, we had what we believed to be firm backlog orders of approximately 141,000 tons. Based on our average
sales price at that time, the backlog value was approximately $83,000,000.

Marketing and Customer Service

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

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

Our location in southern California not only gives us a significant freight cost advantage over our competitors, but also allows us to provide a more
service-oriented approach to our customers. Our operating structure allows us to respond quickly to changes in the timing of customer requirements, adjust schedules, source stock inventory and meet specialized shipping needs. Our ability to deliver
made-to-order products in a timely manner allows our customers to maximize their inventory turns and meet production targets. By maintaining a regional focus, we believe that we can most effectively service our customers and achieve our goal of
increasing market share in higher margin value added products.

As part of our strategy to provide superior customer service, upon request
of our current and prospective customers, we offer ancillary services such as engineering and metallurgical services to assist such customers with specific product needs. Substantial portions of our customers are small to medium-sized businesses. As
a result, many do not have the resources to employ a sophisticated metallurgical engineering staff. Our metallurgical engineers work with our customers on a daily basis, often on site, providing advisory services focused on reducing procurement
costs and improving overall production efficiency. These services are provided at no charge and no revenues are generated for such services. In addition to ancillary services, we also provide service center like operations including
slitting, shearing, coating and single-billing for third party processing. We believe that these value added services help to further differentiate us from our competitors.



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Competition

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

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

U. S.
Competition

High transportation costs have historically deterred mid-western and eastern steel producers from accessing the western
United States market, a condition that continued during 2005, along with demand for products in their markets. However, continued competition from these mills at any significant level could negatively impact sales tonnage and average sales prices.

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

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

Foreign
Competition

Historically, foreign steel producers have competed in the western United States in all of our product categories. Although
imported steel has relatively long lead times to reach the western United States markets, economic and currency dislocations in foreign markets may encourage importers to target the United States with excess capacity at aggressive prices. Some
foreign producers benefit from low labor costs, weak local currencies and government subsidies. Although moderate in volume, the importation of steel at discounted prices into the western United States impacted market conditions for our steel
products, particularly during the first half of the year, increasing inventory levels at some of our customers, especially at service centers and distributors. We think that is also cyclical and we do not believe it to be long-term in nature.

Employee Relations

At
December 31, 2005, we had 938 full-time employees. We believe we have the largest non-union workforce located at any one steel facility in the United States. We provide our employees with supplemental work training and education programs. Our
officers also routinely discuss our business plan with them. We believe that we have a good relationship with our employees.



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Environmental Matters

Compliance with environmental laws and regulations is a significant factor in our business. We are subject to various federal, state and local environmental laws and regulations concerning, among other things, air
emissions, waste water discharges and hazardous materials handling and waste disposal. We own property and conduct or have conducted operations at properties that are contaminated with hazardous materials and will require investigation and
remediation according to federal, state or local environmental laws and regulations. Expenditures on environmental matters, including expenditures on pollution control equipment and remediation activities, totaled approximately $1.4 million in 2003,
$1.4 million in 2004 and $1.4 million in 2005. We plan to spend approximately $1.6 million in 2006, with the largest component representing investigation and remediation activities at our Fontana site.

In 1996, we entered into an Expedited Remedial Action Voluntary Enforceable Agreement with the California Environmental Protection Agency, Department of
Toxic Substances Control (DTSC). This agreement superseded a Voluntary and Enforceable Agreement and Imminent and/or Substantial Endangerment Order issued by the Department in 1992 and amended in 1994. According to the agreement, we
engaged an environmental consultant to conduct a remedial investigation and develop a remediation plan and remediation cost projections based upon that plan. Utilizing the remediation plan developed by the environmental consultant, we developed an
estimate for future costs of the remediation plan. The total aggregate cost of remediation was estimated to be approximately $1.8 million, which was accrued in 2002 and is included in other accrued expenses in 2005, 2004 and 2003 in our consolidated
financial statements. The DTSC has not yet completed its review and approval of our plan; however, preliminary discussions with the DTSC have not indicated the need for any significant changes to the remediation plan or to the Companys
estimate of related costs. The estimate of costs could change as a result of changes to the remediation plan required by the DTSC or unforeseen circumstances at the site, including without limitations, unknown site conditions, changes to applicable
regulations or increased enforcement requirements by the regulators existing at the site.

Forward-Looking Statements

Certain information included in this Form 10-K and other materials filed or to be filed by us with the Securities and Exchange Commission (as well as
information included in oral or written statements made by us or on our behalf) may contain forward-looking statements about our current and expected performance trends, growth plans, business goals and other matters. These statements may be
contained in our filings with the Securities and Exchange Commission, in our press releases, in other written communications, and in oral statements made by or with the approval of one of our authorized officers. Words or phrases such as
believe, plan, will likely result, expect, intend, will continue, is anticipated, estimate, project, may, could,
would, should and similar expressions are intended to identify forward-looking statements. These statements, and any other statements that are not historical facts, are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, as codified in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended from time to time (the Act).

In connection with the safe harbor provisions of the Act, we are filing the following summary to identify important factors, risks and
uncertainties that could cause our actual results to differ materially from those projected in forward-looking statements made by us, or on our behalf. These cautionary statements are to be used as a reference in connection with any forward-looking
statements. The factors, risks and uncertainties identified in these cautionary statements are in addition to those contained in any other cautionary statements, written or oral, which may be made or otherwise addressed in connection with a
forward-looking statement or contained in any of our subsequent filings with the Securities and Exchange Commission. Because of these factors, risks and uncertainties, we caution against placing undue reliance on forward-looking statements. Although
we believe that the assumptions underlying forward-looking statements are reasonable, any of the assumptions could be incorrect, and there can be no assurance that forward-looking statements will prove to be accurate. Forward-looking statements
speak only as of the date on which they are made. We do not undertake any obligation to modify or revise any forward-looking statement to take into account or otherwise reflect subsequent events, or circumstances arising after the date that the
forward-looking statement was made.

The following risk factors may affect our operating results and the environment within which we
conduct our business. If our projections and estimates regarding these factors differ materially from what actually occurs, our actual results could vary significantly from any results expressed or implied by forward-looking statements. In addition
to the risks and uncertainties referenced in this Annual Report on Form 10-K, these risk factors include, but are not limited to:



| |  |  | Fluctuations in raw materials and freight prices as a result of changes in global steel consumption;
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | Our substantial indebtedness, interest expense and principal repayment obligations under our bank facility, when drawn upon, and 6.125% senior notes, which could limit our ability
to use operating cash flow in our business other than for debt-servicing obligations, obtain additional financing and react to changing market and general economic conditions, and which increase our vulnerability to interest rate increases;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



7



---

| |  |  | The possibility of deadlocks among our board of directors that could result in delays in making important business decisions which could result in a competitive disadvantage due to
the size of our board currently consisting of four members as elected by our two stockholders, each of whom holds 50% of our stock;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Fluctuations in commodity prices for our electricity and natural gas requirements, as well as the viability of the electrical power distribution system within the State of
California;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Possible adverse effects resulting from new U.S. trade measures or increases in tariffs on imported steel slab;
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | Competitive factors and pricing pressures; our ability to control costs and maintain quality;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | Future expenditures for capital projects;
| | - |  | -----------------------------------------



| |  |  | Fluctuations in the cost of management and hourly labor or other resources necessary to successfully operate the manufacturing plant of the Company;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The ability of the Company to raise prices sufficiently to offset cost increases, including increased costs for minimum wages, employee benefits and insurance arrangements;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Legal claims and litigation against the Company;
| | - |  | ------------------------------------------------



| |  |  | Changes in, or any failure to comply with, governmental regulations;
| | - |  | --------------------------------------------------------------------



| |  |  | Industry-wide market factors and general economic and business conditions; changes in general economic, demographic, geopolitical or public safety conditions which affect consumer
behavior and spending for the products which use our goods, including the ongoing ramifications of the September 11, 2001 terrorist attacks and the governmental response thereto, including the continuing armed conflict in Iraq or in other
countries; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Changes in accounting standards or interpretations of existing standards adopted by the Financial Accounting Standards Board, the Securities and Exchange Commission, and the
American Institute of Certified Public Accountants that could impact our reported financial results.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Item 2. | Properties
|------- | ----------

We are located on
approximately 443 acres in Fontana, California. Our facilities are situated on approximately 115 acres of this space. The property includes a 22 mile railroad system serviced by Burlington Northern Santa Fe and Union Pacific rail lines.



|Item 3. | Legal Proceedings
|------- | -----------------

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



|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

None.



8



---

PART II



|Item 5. | Market for Registrants Common Equity and Related Stockholder Matters
|------- | ---------------------------------------------------------------------

Not applicable.



|Item 6. | Selected Consolidated Financial Data
|------- | ------------------------------------

The selected consolidated financial information presented below as of and for the fiscal years ended December 31, 2005, 2004, 2003, 2002, and 2001, has been derived from our audited consolidated financial statements. The consolidated
balance sheets as of December 31, 2005 and 2004 and the consolidated statements of operations for the years ended December 31, 2005, 2004, and 2003 are contained elsewhere in this Form 10-K. The following selected consolidated financial
information is qualified by reference to, and should be read in conjunction with the historical consolidated financial statements, including notes accompanying them and Managements Discussion and Analysis of Financial Condition and
Results of Operations found elsewhere in this Form 10-K.



|                                                            |  |                         |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|----------------------------------------------------------- |  | ----------------------- | --------- | - | ---- | - | --------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                                            |  | Year Ended December 31, |          
|                                                            |  | 2005                    |           |   | 2004 |   |           | 2003 |  |   | 2002    |   |  | 2001 |        
|                                                            |  | (dollars in thousands)  |          
|Statement of Operations Data:                               |  |                         |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net sales                                                   |  | $                       | 1,234,386 |   |      | $ | 1,256,992 |      |  | $ | 770,787 |   |  | $    | 769,719 |   |  | $ | 652,938 |  
|Cost of sales                                               |  |                         | 1,020,268 |   |      |   | 1,020,316 |      |  |   | 727,166 |   |  |      | 672,449 |   |  |   | 625,261 |  
|Gross profit                                                |  |                         | 114,118   |   |      |   | 236,676   |      |  |   | 43,621  |   |  |      | 97,270  |   |  |   | 27,677  |  
|Selling, general and administrative expenses                |  |                         | 27,669    |   |      |   | 29,179    |      |  |   | 24,997  |   |  |      | 26,013  |   |  |   | 23,350  |  
|(Gain) loss on disposition of property, plant and equipment |  |                         | (2,071    | ) |      |   | 546       |      |  |   | 114     |   |  |      | (492    | ) |  |   | 802     |  
|Income from operations                                      |  |                         | 88,520    |   |      |   | 206,951   |      |  |   | 18,510  |   |  |      | 71,749  |   |  |   | 3,525   |  
|Interest expense, net                                       |  |                         | (11,299   | ) |      |   | (10,660   | )    |  |   | (13,730 | ) |  |      | (14,127 | ) |  |   | (16,316 | )
|Income (loss) before income tax expense (benefit)           |  |                         | 80,529    |   |      |   | 184,743   |      |  |   | 6,815   |   |  |      | 58,139  |   |  |   | (7,317  | )
|Net income (loss)                                           |  | $                       | 37,164    |   |      | $ | 109,335   |      |  | $ | 4,544   |   |  | $    | 35,001  |   |  | $ | (3,711  | )
|                                                            |  |                         |           |   |     
|Other Data:                                                 |  |                         |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|Operating margin                                            |  |                         | 7.2       | % |      |   | 16.5      | %    |  |   | 2.4     | % |  |      | 9.3     | % |  |   | 0.5     | %
|Cash flows provided by (used in) operating Activities       |  | $                       | 170,633   |   |      | $ | (355      | )    |  | $ | 78,254  |   |  | $    | 47,728  |   |  | $ | 83,720  |  
|Cash flows used in investing activities                     |  |                         | (6,660    | ) |      |   | (19,685   | )    |  |   | (14,620 | ) |  |      | (19,544 | ) |  |   | (14,510 | )
|Cash flows used in financing activities                     |  |                         | (60,480   | ) |      |   | (21,806   | )    |  |   | (23,878 | ) |  |      | (34,045 | ) |  |   | (63,000 | )
|Capital expenditures                                        |  |                         | 43,020    |   |      |   | 22,953    |      |  |   | 16,484  |   |  |      | 20,812  |   |  |   | 14,753  |  
|Common share cash dividend declared and paid (1)            |  |                         | 13,370    |   |      |   | 3,516     |      |  |   | 1,970   |   |  |      | 3,761   |   |  |   |        |  
|Total tons billed, excluding scrap (in thousands)           |  |                         | 1,814     |   |      |   | 2,106     |      |  |   | 1,885   |   |  |      | 2,014   |   |  |   | 1,828   |  
|Number of employees at end of period                        |  |                         | 938       |   |      |   | 944       |      |  |   | 921     |   |  |      | 929     |   |  |   | 952     |  
|Man hours per ton produced                                  |  |                         | 1.13      |   |      |   | 1.00      |      |  |   | 1.04    |   |  |      | 1.02    |   |  |   | 1.14    |  
|                                                            |  |                         |           |   |     
|EBITDA,as adjusted (2)                                      |  |                         |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net income (loss)                                           |  | $                       | 43,365    |   |      | $ | 109,335   |      |  | $ | 4,544   |   |  | $    | 35,001  |   |  | $ | (3,711  | )
|Income tax expense (benefit)                                |  |                         | 37,164    |   |      |   | 75,408    |      |  |   | 2,271   |   |  |      | 23,138  |   |  |   | (3,606  | )
|Interest expense, net                                       |  |                         | 11,299    |   |      |   | 10,660    |      |  |   | 13,730  |   |  |      | 14,127  |   |  |   | 16,316  |  
|Depreciation                                                |  |                         | 26,972    |   |      |   | 26,440    |      |  |   | 28,049  |   |  |      | 28,827  |   |  |   | 30,204  |  
|Unamortized deferred cost                                   |  |                         |          |   |      |   | 2,155     |      |  |   |        |   |  |      |        |   |  |   |        |  
|EBITDA, as adjusted                                         |  | $                       | 118,800   |   |      | $ | 223,998   |      |  | $ | 48,594  |   |  | $    | 101,093 |   |  | $ | 39,200  |  
|EBITDA, as adjusted, margin (3)                             |  |                         | 9.6       | % |      |   | 17.8      | %    |  |   | 6.3     | % |  |      | 13.1    | % |  |   | 6.0     | %



9



---

|                                                                          |  |                    |         |      |   |         |  |      |         |      |   |         |  |   |        
|------------------------------------------------------------------------- |  | ------------------ | ------- | ---- | - | ------- |  | ---- | ------- | ---- | - | ------- |  | - | -------
|                                                                          |  | As of December 31,
|                                                                          |  | 2005               |         | 2004 |   | 2003    |  | 2002 |         | 2001
|                                                                          |  | (in thousands)    
|Balance Sheet Data:                                                       |  |                    |         |      |   |         |  |      |         |      |   |         |  |   |        
|Cash and cash equivalents                                                 |  | $                  | 104,294 |      | $ | 801     |  | $    | 42,647  |      | $ | 2,891   |  | $ | 8,752  
|Property, plant and equipment, net                                        |  |                    | 241,774 |      |   | 229,732 |  |      | 233,612 |      |   | 245,193 |  |   | 252,796
|Total assets                                                              |  |                    | 654,801 |      |   | 637,869 |  |      | 507,345 |      |   | 552,314 |  |   | 499,198
|Total long-term debt including current portion and notes payable to banks |  |                    | 150,000 |      |   | 154,000 |  |      | 150,000 |      |   | 163,000 |  |   | 179,000
|Redeemable preferred stock                                                |  |                    | 30,000  |      |   | 30,000  |  |      | 30,000  |      |   | 30,000  |  |   | 30,000 
|Total stockholders equity                                                |  |                    | 289,979 |      |   | 303,094 |  |      | 210,820 |      |   | 217,154 |  |   | 200,198

---

|(1) | Common share cash dividends are distributed to the holders of the 1,000 shares of common stock of the Company which are issued and outstanding. See Item 12  Security
Ownership of Certain Beneficial Owners and Management.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | EBITDA is defined as net income, plus income taxes, net interest expense and depreciation and amortization. In our presentation of EBITDA , as adjusted, we also included non-cash
unamortized deferred cost of $2,155,000 on 8.5% senior notes redeemed in 2004. EBITDA, as adjusted, is not intended to represent cash flows from operations, cash flows from investing or cash flows from financing activities as defined by accounting
principles generally accepted in the United States of America and should not be considered as an alternative to cash flow or a measure of liquidity or as an alternative to net earnings (loss) as indicative of operating performance. EBITDA, as
adjusted, is included because we believe that investors find it a useful tool for measuring our ability to service our debt.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



Year ended December 31,2005


2004


2003


2002

2001(in thousands)Net cash provided by (used in):Operating activities

$
170,633


$
(355
)

$
78,254


$
47,728

$
83,720Interest expense, net


11,299



10,660



13,730



14,127


16,316Provision for income taxes


37,164



75,408



2,271



23,138


(3,606
)Changes in other operating assets and liabilities


(101,848
)


149,197



(46,886
)


15,458


(57,699
)Redemption premium on 2009 bonds






(6,870
)









Other, net


1,552



(4,042
)


1,225



642


469EBITDA, as adjusted

$
118,800


$
223,998


$
48,594


$
101,093

$
39,200




|(3) | EBITDA, as adjusted, margin represents EBITDA, as adjusted per (1) above divided by net sales.
|--- | ----------------------------------------------------------------------------------------------



|Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

Introduction

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



10



---

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

Cost of goods sold
consists primarily of raw materials, labor, natural gas, electricity, depreciation and zinc costs. Raw material costs have historically comprised approximately 70% of our cost of goods sold. In 2005, our raw material costs continued to remain above
our historical average at approximately 78% of our costs of goods sold as a result of higher slab costs. Our slab consumption unit cost in 2005 was higher compared to 2004 and 2003.

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

We use zinc in the production of our galvanized products. We currently purchase zinc from various suppliers. Zinc is purchased on a monthly basis with
both fixed price and floating price contracts and is priced using a formula tied to the London Metals Exchange zinc index plus negotiated delivery premiums. As zinc prices have been at historically high levels, we did not lock in pricing for any of
our zinc requirements for 2006.

Our daily average electrical demand is approximately 40 megawatts to operate production equipment
in manufacturing our product. During 2005, CSI changed its electricity procurement strategy from the direct access program whereby electricity customers can contract directly with energy service providers for energy; and effective November 1,
2005, became a full-service bundled utility customer of Southern California Edison. Due to high energy prices and continued regulatory charges related to the California electricity crisis in 2001, our average electricity costs are expected to
increase by approximately 3 cents per kwh during 2006, about a 30% increase from 2005. In 2005 our electricity costs accounted for approximately 2.5% of our cost of goods sold compared to approximately 3.0% in 2004.

We generally utilize a daily average of approximately 12,000 million British thermal units, or MMBTUs, of natural gas to produce our products. To
stabilize price volatility, we regularly use a risk management approach to fix the price on portions of our natural gas requirements up to two years ahead through financial and/or physical hedging arrangements. These arrangements include fixed-price
contracts for the New York Mercantile Exchange (NYMEX), and/or the Southern California border basis (basis represents the difference between the NYMEX price at Henry Hub, Louisiana and the price at the Southern California border).

We currently have in place financial swap agreements to cover approximately 50% of our natural gas commodity requirements for 2006, and
approximately 80% of basis. We continue to monitor the near and long term price trends of natural gas and may enter into additional purchase agreements when we deem it appropriate or when opportunities present themselves. In 2005, our natural gas
costs accounted for approximately 2.9% of our cost of goods sold compared to approximately 2.6% in 2004.

Selling, general and
administrative expense consist primarily of sales and labor, and various administrative expenses. In 2005, labor costs comprised approximately 57% of our total selling, general and administrative expenses compared to 62% in 2004.



11



---

Results of Operations



|                        |  |                                     |  |           |  |          
|----------------------- |  | ----------------------------------- |  | --------- |  | ---------
|                        |  | Tons Billed Year Ended December 31,
|                        |  | 2005                                |  | 2004      |  | 2003     
|Hot Rolled              |  | 744,926                             |  | 943,353   |  | 813,029  
|Cold Rolled             |  | 186,758                             |  | 225,057   |  | 210,834  
|Galvanized              |  | 688,315                             |  | 740,685   |  | 716,740  
|ERW pipe                |  | 194,032                             |  | 197,275   |  | 144,585  
|                        |  |                                     |  |           |  |          
|Total (excluding scrap) |  | 1,814,031                           |  | 2,106,370 |  | 1,885,188
|                        |  |                                     |  |           |  |          

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

Net sales. Net sales were $1,234,386,000 for the year ended December 31, 2005, a decrease of $22,606,000
or 1.8%, compared to net sales of $1,256,992,000 for the same period in 2004. Our average sales price increased by more than $82 per ton increasing our net sales by approximately $143,624,000 while the decrease in volume reduced our net sales by
approximately $174,859,000. We sold 1,814,031 net tons in 2005, a decrease of 292,339 net tons, when compared to 2,106,370 net tons in 2004. This decrease is attributable to a decrease in demand for our products as a result of market conditions. The
change in product mix when compared to prior year increased our net sales by approximately $6,346,000.

Gross profit.Gross profit decreased $122,558,000 from $236,676,000 last year to $114,118,000 this year. Gross profit as a percentage of net sales also decreased from 18.8% in 2004 to 9.2% in 2005. The main reason for the decrease in our gross profit was the
result of a higher average slab consumption cost per ton in 2005 compared to 2004. The higher average slab consumption cost per ton was partially off set by the increase in the average sales price per ton in 2005.

Selling, general and administrative (SG&A) expenses.Selling, general and administrative expenses decreased $1,510,000 from
$29,179,000 last year to $27,669,000 this year, primarily due to decrease in salaries and wages, including profit sharing. However, our SG&A expenses as a percentage of net sales remained comparable, 2.2% in 2005 and 2.3% in 2004.

Gain(loss) on disposition of property, plant and equipment (PP&E). For the year ending December 31, 2005, we had a net gain of
$2,071,000 on the disposition of PP&E compared to a net loss of $546,000 for the same period in 2004. This increase was mainly attributable to the sale of surplus land for a gain of $3,600,000.

Loss on redemption of 8.5% senior notes. In 2004 we incurred a loss of $9,025,000 from the early redemption of our 8.5% senior notes due in
2009. There was no such redemption in 2005.

Income (loss) from equity investment in affiliate.During 2004, we
entered into an option and waiver agreement with Arcelor S.A. (Arcelor) regarding Arcelors acquisition of our 4% interest in the common stock (which equates to 1.5% of total shareholders equity) in Companhia Siderurgica de
Tubarão (CST). CSI and Arcelor were both shareholders in CST and were parties to the CST Shareholders Agreement governing the transfer of CSTs shares. Pursuant to the option agreement, Arcelor granted to CSI an option
to sell, and CSI granted to Arcelor an option to purchase CSIs interest in CST. These options could be exercised during the thirty day period following the termination of the CST Shareholders agreement on May 25, 2005. Under the
option agreement, all earnings or losses as well as dividends and distributions accrued to the benefit of Arcelor during the period from execution of the option agreement to the date it was exercised. In June 2005, we exercised our option and sold
our investment. There was no gain or loss on the sale in 2005 compared to a net loss of $3,047,000 in 2004.

Net interest
expense.Net interest expense increased $639,000 from $10,660,000 last year to $11,299,000 this year. The increase in interest expense represents interest on Federal and State taxes. Interest expense figures are net of interest income
and capitalized interest of $1,271,000 and $239,000 in 2005 and 2004, respectively.

Other income, net.Net other
income increased $2,784,000 from $524,000 last year to $3,308,000 this year. Other income is comprised of miscellaneous income items such as rental income, proceeds from legal settlements, refund from anti dumping subsidy, refund of property taxes,
etc. As many of these items occur infrequently or result in a one-time recognition of income, this category is subject to significant fluctuation from year to year.

Income tax expense. Income tax expense decreased $38,244,000 from $75,408,000 last year to $37,164,000 this year. This decrease is attributable to the decrease in pretax income from last year. The
effective tax rate for 2005 was 46.1% compared to an



12



---

effective tax rate of 40.8% in 2004. The increase in the effective tax rate was attributable to foreign taxes withheld on the sale of the CST stock
investment and an increase in state taxes.

Net income.Net income for 2005 was $43,365,000 compared to the net income
of $109,335,000 in 2004.

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

Net sales. Net sales were $1,256,992,000 for the year ended December 31, 2004. This was a $486,205,000 improvement over the
prior year. This increase is attributable to an increase in demand for our products as a result of market conditions and an improved average sales unit price, offset by a change in product mix. Our average sales price increased by more than $188 per
ton increasing our net sales by approximately $409,401,000 while an increase in volume added approximately $88,395,000 to our net sales. We sold 2,106,370 net tons in 2004, an increase of 221,182 net tons when compared to 1,885,188 net tons in 2003.
The change in product mix when compared to prior year reduced our net sales by approximately $7,147,000.

Gross profit.Gross profit increased $193,055,000 from $43,621,000 for the year ended December 31, 2003 to $236,676,000 for the year ended December 31, 2004. Gross profit as a percentage of net sales also increased from 5.7% in 2003 to 18.8% in
2004. The main reason for the increase in our gross profit was the result of a higher average sales unit price per ton in 2004 compared to 2003. The higher average sales unit price per ton was partially off set by an increase in slab consumption
cost per ton.

Selling, general and administrative (SG&A) expenses.Selling, general and administrative expenses
increased $4,182,000 from $24,997,000 for the year ended December 31, 2003 to $29,179,000 for the year ended December 31, 2004, primarily due to an increase in salaries and wages, including profit sharing. However, our SG&A expenses as
a percentage of net sales decreased from 3.2% in 2003 to 2.3% in 2004.

Gain(loss) on disposition of property, plant and equipment
(PP&E). For the year ending December 31, 2004, we had a net loss of $546,000 on the disposition of PP&E compared to a net loss of $114,000 for the same period in 2003.

Loss on redemption of 8.5% senior notes. We incurred a loss of $9,025,000 from early redemption of our 8.5% senior notes due in 2009. We
incurred premium costs of $6,870,000 and expensed the remaining unamortized issuance cost of $2,155,000 related to these senior notes. The redeemed senior notes were replaced by 10 year 6.125% senior notes issued in March 2004 and are due in 2014.
By early redemption of our 8.5% senior notes and the issuance of 6.125% senior notes, there will by a reduction of over $3,562,000 in our interest cost annually.

Income (loss) from equity investment in affiliate.During 2004, we entered into an option and waiver agreement with Arcelor S.A. (Arcelor) regarding Arcelors acquisition of our
4% interest in the common stock (which equates to 1.5% of total shareholders equity) in Companhia Siderurgica de Tubarão (CST). CSI and Arcelor were both shareholders in CST and were parties to the CST Shareholders
Agreement governing the transfer of CSTs shares. Pursuant to the option agreement, Arcelor granted to CSI an option to sell, and CSI granted to Arcelor an option to purchase CSIs interest in CST. These options may be exercised during the
thirty day period following the termination of the CST Shareholders agreement on May 25, 2005. In the waiver agreement, CSI further agreed to waive its right of first refusal under the CST Shareholders Agreement. This transaction
resulted in an impairment loss of approximately $5,258,000. For the year ended December 31, 2004, we recognized a net loss of $3,047,000 compared to income of $1,950,000 for the year ended December 31, 2003, which consists of our pro-rata
share of Companhia Siderurgica de Tubarãos income and the impairment loss during 2004. Companhia Siderurgica de Tubarão is a publicly traded Brazilian company engaged in the production of steel slab and hot rolled coils.

Net interest expense.Net interest expense decreased $3,070,000 from $13,730,000 for the year ended December 31,
2003 to $10,660,000 for the year ended December 31, 2004. The decrease in interest expense is attributable to a lower interest on our senior notes from 8.5% to 6.125% and a lower average loan balance in 2004 compared to 2003. Interest expense
figures are net of interest income and capitalized interest of $239,000 and $172,000 in 2004 and 2003, respectively.

Other income,
net.Net other income increased $439,000 from $85,000 for the year ended December 31, 2003 to $524,000 for the year ended December 31, 2004. Other income is comprised of miscellaneous income items such as rental income,
proceeds from legal settlements, refund from anti dumping subsidy, etc. As many of these items occur infrequently or result in a one-time recognition of income, this category is subject to significant fluctuation from year to year.

Income tax expense. Income tax expense increased $73,137,000 from $2,271,000 for the year ended December 31, 2003 to
$75,408,000 for the year ended December 31, 2004. This increase is attributable to an increase in pretax income for the year ended December 31, 2003. The effective tax rate for 2004 was 40.8% compared to an effective tax rate of 33.3% in
2003. Income tax expense for 2003 is net of a state manufacturing investment credit of $526,000, net of federal tax benefit.



13



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Net income.Net income for 2004 was $109,335,000 compared to the net income of
$4,544,000 in 2003.

Liquidity and Capital Resources

At December 31, 2005, we had $104,294,000 in cash and cash equivalents and approximately $108,555,000 available under our bank facility. During the year, cash flow from operations provided $170,633,000, which
consisted of $43,365,000 in net income, $27,491,000 in depreciation and amortization expense and a net cash flow increase of $101,848,000 due to changes in assets and liabilities. Operating cash flow increased as a result of a $41,033,000 increase
in accounts payable, $70,608,000 decrease in inventories and a $3,459,000 decrease in accounts receivable. Operating cash flow was decreased as a result of a $4,652,000 increase in other receivables and prepaid expenses, $3,498,000 decrease in other
accrued expenses and $4,989,000 change in net deferred income taxes. Cash flow from investing activities consisted primarily of $43,020,000 in capital expenditures, which includes $19,355,000 for an early buy-out of the lease for our Continuous
Galvanize Line #2, partially offset by proceeds of $30,283,000 received from the sale of our investment in affiliate company and $6,077,000 from the sale of property, plant and equipment, which was mainly attributable to the sale of our surplus
parcel of land. Cash flow from financing activities consisted of $4,000,000 net payment on our credit facility and $56,480,000 paid as dividends to our shareholders. In 2005, we also paid $9,187,500, representing payment of interest on our 6.125%
senior notes due in 2014.

In March 1999, we entered into a $130,000,000 five-year bank facility. Subject to the satisfaction of customary
conditions and a borrowing base, advances under the bank facility may be made at any time prior to the bank facility termination date. On June 30, 2003, this bank facility was amended with the bank group led by Bank of America, as an agent,
Wells Fargo Bank, The Bank of Tokyo-Mitsubishi, Ltd. and Mizuho Corporate Bank to $110,000,000 for a new period of three years expiring on June 30, 2006. This bank facility was terminated on September 29, 2005 and on the same day we
entered into a new five year $110,000,000 bank facility with a bank group led by Mizuho Corporate Bank, as administrative agent and lender, The Bank of Tokyo-Mitsubishi, Ltd., Citibank (West), FSB and Wells Fargo Bank. Subject to the satisfaction of
customary conditions and a borrowing base, advances under this new bank facility may be made at any time prior to the bank facility termination date. There were no outstanding borrowings under this facility as of December 31, 2005. The bank
facility is collateralized by accounts receivable and inventory. Advances under this facility may be used for letters of credit, working capital, capital expenditures, payment of dividends and other lawful corporate purposes, including the
refinancing of existing debt.

On March 22, 2004, we issued an aggregate of $150,000,000 of ten-year, 6.125% senior unsecured notes
due in March 2014. With the proceeds of this issuance and cash on hand, we retired our 8.50% senior notes due in 2009. Interest on our 6.125% senior notes is payable on March 15 and September 15 of each year. The notes are senior in right
of payment to all of the Companys subordinated indebtedness and equal in right of payment to all of its existing and future indebtedness that is not by its terms subordinated to the notes. We may redeem the notes at any time after
March 15, 2009. In addition, we may redeem up to 35% of the notes before March 15, 2007 with the net cash proceeds from a public equity offering. The indenture governing the notes contains covenants that limit the Companys ability to
incur additional indebtedness, pay dividends, redeem or repurchase capital stock and make investments, create liens, sell assets, sell capital stock of certain subsidiaries, engage in transactions with affiliates and consolidate, merge or transfer
all or substantially all of its assets and the assets of certain subsidiaries on a consolidated basis.

We currently have approximately
$2,675,000 in material commitments for capital expenditures expected to be completed during fiscal 2006. These represent signed purchase orders for various production facility upgrades. Our total budget for capital improvements in 2006 is
approximately $30,000,000.

We anticipate that our primary liquidity requirements will be for working capital, capital expenditures, debt
service and the payment of dividends. We believe that cash generated from operations and available borrowings under our bank facility will be sufficient to enable us to meet our liquidity requirements for fiscal 2006.



14



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Commitments and Contingencies

The following table represents a comprehensive list of the Companys contractual obligations and commitments as of December 31, 2005 (in thousands):



|                                                                                   |  |       |         |                  |   |           |  |           |        |                   |   |        |  |   |        
|---------------------------------------------------------------------------------- |  | ----- | ------- | ---------------- | - | --------- |  | --------- | ------ | ----------------- | - | ------ |  | - | -------
|                                                                                   |  | Total |         | Less Than 1 Year |   | 1-3 Years |  | 3-5 Years |        | More Than 5 Years
|Long Term Debt                                                                     |  | $     | 150,000 |                  | $ |          |  |           |        |                   | $ |       |  | $ | 150,000
|Capital Lease Obligations                                                          |  |       |        |                  |   |          |  |           |       |                   |   |       |  |   |       
|Operating Leases                                                                   |  |       | 1,092   |                  |   | 747       |  |           | 345    |                   |   |       |  |   |       
|Purchase Obligations (1)                                                           |  |       | 84,874  |                  |   | 83,428    |  |           | 1,446  |                   |   |       |  |   |       
|Estimated Interest Payments on Debt (2)                                            |  |       | 75,414  |                  |   | 9,187     |  |           | 18,375 |                   |   | 18,375 |  |   | 29,477 
|Planned Expenditures on Environmental Matters (3)                                  |  |       | 1,800   |                  |   |          |  |           | 300    |                   |   | 1,000  |  |   | 500    
|Other Long Term Liabilities Reflected On the Registrants Balance Sheet under GAAP |  |       |        |                  |   |          |  |           |       |                   |   |       |  |   |       
|                                                                                   |  |       |         |                  |   |           |  |           |        |                   |   |        |  |   |        
|Total                                                                              |  | $     | 313,180 |                  | $ | 93,362    |  | $         | 20,466 |                   | $ | 19,375 |  | $ | 179,977
|                                                                                   |  |       |         |                  |   |           |  |           |        |                   |   |        |  |   |        



|(1) | Amounts relate to contractual commitments to purchase $77.9 million ($19.8 million from related party) of steel slabs and the remaining in assorted other contractual commitments.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Amounts represent the annual accrued interest on our $150,000,000 ten year 6.125% senior unsecured notes, which are due and payable in March 2014.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Amounts reflect the anticipated expenditures on environmental matters pursuant to a proposed remediation plan submitted to the California Department of Toxic Substances Control. See
discussion in Item 1  Environmental Matters.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

When market conditions warrant, we will enter into contracts to
purchase certain commodities used in the manufacturing of our products, such as electricity and natural gas. Some of these forward contracts do not require derivative accounting as we take possession of the commodities in the normal course of
business whereas other forward contracts are accounted for as derivatives in accordance with SFAS No. 133.

Critical Accounting Policies

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

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



15



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Environmental Reserve: We have engaged an environmental consultant to conduct a remedial
investigation and develop a remediation plan and remediation cost projections based upon that plan. Utilizing the remediation plan developed by the environmental consultant, we developed an estimate for future costs of the remediation plan. The
total aggregate cost of remediation is estimated to be approximately $1.8 million, which was accrued in 2002 and is included in accrued expenses in the 2005 and 2004 consolidated financial statements. The California Department of Toxic Substances
Control has not yet completed its review and approval of our plan; however, preliminary discussions with DTSC have not indicated the need for any significant changes to the remediation plan or to the Companys estimate of related costs. The
estimate of costs could change as a result of changes to the remediation plan required by the DTSC or unforeseen circumstances at the site.

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

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



|Item 7A. | Quantitative and Qualitative Disclosures about Market Risk
|-------- | ----------------------------------------------------------

We are exposed to market risks related to fluctuations in interest rates on our 6.125% senior notes and our $110,000,000 floating interest rate bank facility. We do not currently use interest rate swaps or other types
of derivative financial instruments. The carrying value of the floating rate bank facility approximates fair value as the interest rate is variable and resets frequently. The bank facility bears interest at the Euro dollar rate or the prime rate,
which was approximately 5.09% (one month rate including margin) and 7.25%, respectively, at December 31, 2005. We do not expect to borrow any money from the banks during 2006, however, if we had to borrow and our estimate average amount of debt
outstanding under the facility for fiscal year 2006 was approximately $10.0 million, a one-percentage point increase in interest rates would result in an increase in interest expense of $100,000 for the year.

For fixed rate debt instruments such as our 6.125% senior notes, changes in interest rates generally affect the fair value of such debt instruments. For
variable rate debt such as our bank facility, changes in interest rates generally do not affect the fair value of such debt, but do affect earnings and cash flow. We do not have an obligation to repay our 6.125% senior notes prior to maturity in
2014 and, as a result, interest rate risk and changes in fair value should not have a significant impact on us. We believe that the interest rate on our 6.125% senior notes approximates the current rates available for similar types of financing and
as a result the carrying amount of the 6.125% senior notes approximates fair value. The fair value of our senior notes at December 31, 2005 was approximately $141,000,000. We do not believe that the future market rate risk related to our 6.125%
senior notes and floating rate bank facility will have a material impact on our financial position, results of operations or liquidity.

Our daily average electrical demand is approximately 40 megawatts to operate production equipment in manufacturing our product. During 2005, CSI changed its electricity procurement strategy from the direct access program whereby
electricity customers can contract directly with energy service providers for energy; and effective November 1, 2005, became a full-service bundled utility customer of Southern California Edison. Due to high energy prices and continued
regulatory charges related to the California electricity crisis in 2001, our average electricity costs are expected to increase by approximately 3 cents per kwh during 2006, about a 30% increase from 2005.

In February 2005, we purchased a fixed-price block of electricity covering approximately 85% of our energy requirements, with the remainder of our
requirements purchased at the floating hourly market price. In an effort to manage risk effectively, we will continue to monitor the electricity forward market pricing for possible additional hedge buying. In 2005, our electricity costs accounted
for approximately 2.5% of our cost of goods sold compared to approximately 3.0% in 2004.



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We generally utilize a daily average of approximately 12,000 million British thermal units, or
MMBTUs, of natural gas to produce our products. To stabilize price volatility, we regularly use a risk management approach to fix the price on portions of our natural gas requirements up to two years ahead through financial and/or physical hedging
arrangements. These arrangements include fixed-price contracts for the New York Mercantile Exchange (NYMEX), and/or the Southern California border basis (basis represents the difference between the NYMEX price at Henry Hub, Louisiana and the price
at the Southern California border).

We currently have in place financial swap agreements for approximately 50% of our natural gas
commodity requirements for 2006, and approximately 80% of basis. We continue to monitor the near and long term price trends of natural gas and may enter into additional purchase agreements when we deem it appropriate or when opportunities present
themselves. In 2005, our natural gas costs accounted for approximately 2.9% of our cost of goods sold compared to approximately 2.6% in 2004.

Recently
Issued Accounting Standards

On October 22, 2004, the President signed the American Jobs Creation Act of 2004 (the
Act). The Act raises a number of issues with respect to accounting for income taxes. For companies that pay U.S. income taxes on manufacturing activities in the U.S., the Act provides a deduction from taxable income equal to a stipulated
percentage of qualified income from domestic production activities. On December 21, 2004, the Financial Accounting Standards Board (FASB) issued a Staff Position (FSP) regarding the accounting implications on the Act
related to the deduction for qualified domestic production activities. The FASB decided that the deduction for qualified domestic production activities should be accounted for as a special deduction under FASB Statement No. 109,
Accounting for Income Taxes. The guidance in this FSP applies to financial statements for periods ending after the date the Act was enacted.

In November 2004, the FASB issued Statement No. 151, Inventory Costs  An Amendment of ARB No. 43, Chapter 4 (SFAS 151). SFAS 151 amends the guidance in ARB No. 43,
Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Among other provisions, the new rule requires that items such as idle
facility expense, excessive spoilage, double freight, and rehandling costs be recognized as current-period charges regardless of whether they meet the criterion of so abnormal as stated in ARB No. 43. Additionally, SFAS 151 requires
that the allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS 151 is effective for fiscal years beginning after June 15, 2005 and is required to be adopted by the
Company in the first quarter of fiscal 2006, beginning on January 1, 2006. The Company is currently evaluating the effect that the adoption of SFAS 151 will have on its consolidated results of operations and financial position or cash flows,
but does not expect it to have a material impact.

On December 15, 2004, the FASB issued Statement No. 153, Exchanges of
Nonmonetary Assets  an Amendment of Accounting Principles Board Opinion No. 29 (SFAS 153). This standard requires exchanges of productive assets to be accounted for at fair value, rather than at carryover basis,
unless (1) neither the asset received nor the asset surrendered has a fair value that is determinable within reasonable limits or (2) the transactions lack commercial substance. The new standard is effective for nonmonetary asset exchanges
occurring in fiscal periods beginning after June 15, 2005. The Company expects the adoption of SFAS 153 will not have a material impact on its financial position, results of operations and cash flows.

In March 2005, the FASB issued Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB
Statement No. 143 (FIN 47), which requires an entity to recognize a liability for the fair value of a conditional asset retirement obligation when incurred if the liabilitys fair value can be reasonably estimated.
FIN 47 is effective for fiscal years ending December 15, 2005. The adoption of FIN 47 did not have a material impact on the Companys financial position, results of operation or cash flows.

In May 2005, the FASB issued Statement No. 154, Accounting Changes and Error Corrections (SFAS 154), which replaces
Accounting Principles Board Opinions No. 20, Accounting Changes and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements  An Amendment of APB Opinion No. 28. SFAS 154
provides guidance on accounting for and reporting of accounting changes and error corrections. It establishes retrospective application, or the latest practicable date, as the required method for reporting a change in accounting principle and the
reporting of a correction of an error. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005 and is required to be adopted by the Company in the first quarter of fiscal
2006. The Company is currently evaluating the effect that the adoption of SFAS 154 will have on its consolidated results of operations and financial position or cash flows, but does not expect it to have a material impact.

In November 2005, the FASB issued FSP FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments (FSP 115-1), which provides guidance on determining when investments in certain



17



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debt and equity securities are considered impaired, whether that impairment is other-than-temporary, and on measuring such impairment loss. FSP 115-1 also
includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. FSP 115-1 is required
to be applied to reporting periods beginning after December 15, 2005 and is required to be adopted by the Company in the first quarter of fiscal year 2006. The Company is currently evaluating the effect that the adoption of FSP 115-1 will have
on its consolidated results of operations and financial position but does not expect it will have a material impact.



|Item 8. | Consolidated Financial Statements and Supplementary Data
|------- | --------------------------------------------------------

The Consolidated Financial Statements required to be filed hereunder are set forth on pages F-1 through F-23.



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

None.



|Item 9A. | Controls and Procedures
|-------- | -----------------------

For
the period ending December 31, 2005 (the Evaluation Date), we carried out an evaluation, under the supervision and with the participation of our management, including our President and Chief Executive Officer and our Chief Financial
Officer (the principal finance and accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended (the Exchange
Act). Based upon this evaluation, our President and Chief Executive Officer and our Chief Financial Officer concluded that, as of December 31, 2005, our disclosure controls and procedures were effective to ensure that information required
to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, and summarized and reported within the time periods specified in the SECs rules and forms.

Additionally, our President and Chief Executive Officer and Chief Financial Officer determined, as of December 31, 2005, that there were no changes
in our internal controls or in other factors that could significantly affect our internal controls.



18



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PART III



|Item 10. | Directors and Executive Officers of the Registrant
|-------- | --------------------------------------------------

The following table sets forth our Directors and executive officers as of December 31, 2005. Directors are elected to terms of one year. All Directors hold their positions until their term expires and until their
respective successor is elected and qualified. Executive officers are elected by and serve at the discretion of the Board of Directors until their term expires and their successor is duly chosen and qualified.



|                   |  |     |  |                                                       
|------------------ |  | --- |  | ------------------------------------------------------
|Name               |  | Age |  | Position                                              
|Vicente Wright     |  | 53  |  | Chairman of the Board of Directors                    
|                   |  |    
|Hidenori Tazawa    |  | 53  |  | Director                                              
|                   |  |    
|Toshihiro Kabasawa |  | 51  |  | Director                                              
|                   |  |    
|James Pessoa       |  | 50  |  | Director                                              
|                   |  |    
|Masakazu Kurushima |  | 57  |  | President and Chief Executive Officer                 
|                   |  |    
|Ricardo Bernardes  |  | 42  |  | Executive Vice President and Chief Financial Officer  
|                   |  |    
|Toshiyuki Tamai    |  | 54  |  | Executive Vice President, Operations                  
|                   |  |    
|James Wilson       |  | 56  |  | Vice President, Commercial                            
|                   |  |    
|Brett Guge         |  | 51  |  | Vice President, Administration and Corporate Secretary

Vicente Wright has served as Chairman of the Board of Directors since July 1, 2004.
Since October 2004, he has also held the position of Managing Director of Rio Doce Limited. Mr. Wright was named President and Chief Executive Officer in February 2003. Mr. Wright served as the Executive Vice President, Finance, from
February 1998 to February 2003. Mr. Wright was the Steel Division General Manager from 1992 to 1998 and Iron Ore Sales General Manager from 1991 to 1992 of Companhia Vale do Rio Doce. From 1987 to 1988, he served as Iron Ore Sales General
Manager for Rio Doce Asia Ltd., a subsidiary of Companhia Vale do Rio Doce. In 1986 and 1987, he was the assistant to the President of California Steel Industries in charge of slab procurement and all of its related logistics. From 1978 to 1986,
Mr. Wright served as Purchasing Executive and Slab Marketing Manager at Companhia Siderurgica de Tubarão. Mr. Wright was a member of the Board of Directors of Companhia Siderurgica Nacional, the largest steel company in Brazil, from
1993 to 1997; Acominas, a Brazilian steel mill, from 1994 to 1998; Siderar, an Argentine steel mill, from 1994 to 1997; Chairman of Nova Era Silicon, a Brazilian ferro-silicon company mill, from 1994 to 1997; and SEAS from 1994 to 1998. He graduated
from Marquette University, Milwaukee, Wisconsin with a Bachelors Degree in Business Administration.

Hidenori Tazawa has
served as a Director since 2004. He has been employed by JFE Steel America since 2004 where he serves as President. From 1976 through 2003, Mr. Tazawa held various management positions at NKK and NKK America with a primary focus on sales.
Mr. Tazawa graduated from Touhoku University in 1976 with a Bachelors Degree in Law.

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

James Pessoahas served as a Director since 2005. He has been employed by Companhia Vale do Rio Doce since May 2004 where he served as a General Manager in the Development Department and was promoted to the Director of the Steel Development and Holdings
Department in April 2005. Mr. Pessoa is also President, Chief Executive Officer and member of the Board of Directors of Ferro Gusa Carajás, a joint-venture between CVRD and NUCOR in Brazil. Additionally, he is Vice-President of CSA
Companhia Siderúrgica do Atlântico, a new joint-venture between CVRD and Thyssen Krupp Stahl AG formed to build a large integrated steel plant in Brazil. During 26 years of work in the steel sector, Mr. Pessoa has held management
and executive positions at several important Brazilian and foreign companies, specializing in planning, installation, commissioning and management of steel plants, having also worked for steel equipment suppliers like Morgan Construction Co,
Worcester, Mass, USA. and SMS Schloemann Siemag AG, Düsseldorf, Germany. Born in Brazil, he graduated in 1980 from Catholic University in Rio de Janeiro, with BsC and MsC degrees in Mechanical Engineering.

Masakazu Kurushima joined the Company in July 2004 as President and Chief Executive Officer. Mr. Kurushima came to the Company from JFE Steel
America, Inc. where he served as President. Prior to his appointment to JFE Steel America, Mr. Kurushima was Staff General Manager of the Export Department of JFE Steel Corporation, Tokyo. He joined Kawasaki Steel Corporation in 1972 after
graduating from Waseda University, Japan, with a degree in Economics.



19



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

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

James Wilsonhas served as Vice President, Commercial since June, 2004,
prior to which he served as Vice President, Sales since November 2000. He has been employed by California Steel Industries since 1984 holding the positions of Manager, Galvanized Products and Manager, Cold Rolled Products. Prior to joining
California Steel Industries, he worked in various segments of the metals industry, including J.T. Ryerson & Sons, a service center, and in manufacturing. He graduated from the University of California, Berkeley, with a Bachelor of Science
degree in Industrial Engineering.

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

Board Committees

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

The Compensation Committee is comprised of four members:
Mr. Toshihiro Kabasawa, Director, and Mr. Kazuo Fujisawa, both of JFE Steel Corporation, and James Pessoa, Director, and Ms. Maria Eudoxia Gurgel, both of Companhia Vale do Rio Doce. The Compensation Committee met twice during 2005.
The Compensation Committee reviews compensation packages for our officers and prepares the executive compensation proposal to the Board.

The Operations and Finance Committee is comprised of four members including Director Mr. Hidenori Tazawa and Mr. Hiroyuki Tezuka, both of JFE Steel Corporation, and Chairman of the Board, Mr. Vicente Wright and
Mr. Leonardo Moretzsohn Andrade, both of Companhia Vale do Rio Doce. This committee met twice during 2005. The Operations and Finance Committee mainly reviews our investment plans, business plan, annual operating plan and budget. The Operations
and Finance Committee is also responsible for reviewing our operating results and performance.

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

Director Compensation

JFE Steel Corporation and Companhia Vale do Rio Doce were paid by the Company for providing the services of the Directors and the Committee Members for
fiscal year 2005. The payment for Directors, except the Chairman, was $3,000 per month and $1,000 per month for committee members. For services of the Chairman of the Board of Directors, Mr. Vicente Wright, we paid $372,747 directly to
Companhia Vale do Rio Doce.

Code of Ethics

In 2005, we adopted a written code of ethics for our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. A copy of the Code of Ethics is attached to
our Annual Statement on Form 10-K filed with the Securities and Exchange Commission on March 28, 2005.



20



---

|Item 11. | Executive Compensation
|-------- | ----------------------

The
following summary compensation table sets forth information regarding compensation earned in the fiscal years ended December 31, 2005, 2004 and 2003 by our Chief Executive Officer and each of our other four most highly compensated executive
officers whose salary and bonus exceeded $100,000.

Summary Compensation Table



|                                                                      |  |              |  |                     |                       |                        |                        |                           |                        |     |                    |              |  |     |  |     |                  |          
|--------------------------------------------------------------------- |  | ------------ |  | ------------------- | --------------------- | ---------------------- | ---------------------- | ------------------------- | ---------------------- | --- | ------------------ | ------------ |  | --- |  | --- | ---------------- | ---------
|                                                                      |  |              |  | Annual Compensation |                       |                        | Long-Term Compensation |                           | All Other Compensation |    
|Name and Principal Position                                           |  | Year         |  | Salary              |                       | Incentive Compensation |                        | Other Annual Compensation |                        |     | LTIP Payouts       |             
|Vicente Wright (1)President and Chief Executive Officer               |  | 20042003     |  | $$                  | 355,469327,081        |                        | $$                     | 33,207110,938             |                        | $$  | 179,167139,526     | (3)(4)       |  |   |  | $$  | 9,7609,260       | (2)(2)   
|                                                                      |  |              |  |                     |                       |                       
|Masakazu Kurushima (1)President and Chief Executive Officer           |  | 20052004     |  | $$                  | 368,125173,886        |                        | $$                     | 86,80711,885              |                        | $$  | 25,20125,734       | (5)(6)       |  |   |  |     |                |          
|                                                                      |  |              |  |                     |                       |                       
|Ricardo BernardesExecutive Vice President and Chief Financial Officer |  | 200520042003 |  | $$$                 | 237,498229,33460,568  |                        | $$$                    | 110,04021,354200          |                        | $$$ | 55,78281,8155,299  | (7)(8)(9)    |  |  |  | $$$ | 8,97610,0002,596 | (2)(2)(2)
|                                                                      |  |              |  |                     |                       |                       
|Mr. Toshiyuki TamaiExecutive Vice President, Operations               |  | 200520042003 |  | $$$                 | 237,498229,334224,763 |                        | $$$                    | 104,53338,226115,502      |                        | $$$ | 67,79247,70559,458 | (10)(11)(12) |  |  |  | $$$ | 10,1689,8659,973 | (2)(2)(2)
|                                                                      |  |              |  |                     |                       |                       
|Jim WilsonVice President, Commercial                                  |  | 200520042003 |  | $$$                 | 218,530211,017206,042 |                        | $$$                    | 101,79322,979106,371      |                        | $$$ | 20,93415,39617,563 | (13)(13)(13) |  |  |  | $$$ | 10,0999,7699,942 | (2)(2)(2)
|                                                                      |  |              |  |                     |                       |                       
|Brett GugeVice President, Administration & Corporate Secretary        |  | 200520042003 |  | $$$                 | 218,530211,017206,812 |                        | $$$                    | 96,72636,609102,171       |                        | $$$ | 15,92415,17515,175 | (13)(13)(13) |  |  |  | $$$ | 10,0869,7699,943 | (2)(2)(2)

---

|(1) | Mr. Masakazu Kurushima took over the position following the resignation of Mr. Vicente Wright on July 1, 2004 as Mr. Wright became Chairman of the Board of
Directors.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|(3) | Represents $10,250 in car allowance and $168,917 in medical expenses and home leave reimbursements. Home leave reimbursement is paid to our executives who are foreign nationals in
connection with trips by them and their family members to their country of origin.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Represents $10,250 in car allowance and $129,276 in medical expenses and home leave reimbursements. Home leave reimbursement is paid to our executives who are foreign nationals in
connection with trips by them and their family members to their country of origin.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | Represents $10,250 in car allowance and $14,951 in medical expenses and home leave reimbursements. Home leave reimbursement is paid to our executives who are foreign nationals in
connection with trips by them and their family members to their country of origin.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | Represents $4,268 in car allowance and $21,466 in medical expenses and home leave reimbursements. Home leave reimbursement is paid to our executives who are foreign nationals in
connection with trips by them and their family members to their country of origin.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



21



---

|(7) | Represents $10,250 in car allowance and $45,532 in medical expenses and home leave reimbursements. Home leave reimbursement is paid to our executives who are foreign nationals in
connection with trips by them and their family members to their country of origin
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(8) | Represents $10,250 in car allowance and $71,565 in medical expenses and home leave reimbursements. Home leave reimbursement is paid to our executives who are foreign nationals in
connection with trips by them and their family members to their country of origin.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(9) | Represents $3,033 in car allowance and $2,266 in medical expenses and home leave reimbursements. Home leave reimbursement is paid to our executives who are foreign nationals in
connection with trips by them and their family members to their country of origin.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(10) | Represents $10,250 in car allowance and $57,542 in medical expenses and home leave reimbursements. Home leave reimbursement is paid to our executives who are foreign nationals in
connection with trips by them and their family members to their country of origin.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(11) | Represents $9,924 in car allowance and $37,781 in medical expenses and home leave reimbursements. Home leave reimbursement is paid to our executives who are foreign nationals in
connection with trips by them and their family members to their country of origin.
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(12) | Represents $6,850 in car allowance and $52,608 in medical expenses and home leave reimbursements. Home leave reimbursement is paid to our executives who are foreign nationals in
connection with trips by them and their family members to their country of origin.
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(13) | Represents car allowance and other fringe benefits.
|---- | ---------------------------------------------------

Supplemental
Executive Retirement Plans and Separation Agreement

On January 16, 2003, the Company entered into a Supplemental Executive
Retirement Plan with James L. Wilson, Vice President, Sales, intended to induce Mr. Wilson to remain in the Companys employ. Upon his retirement, the Company is obligated to pay Mr. Wilson a monthly benefit for 180 months calculated
as follows: one-twelfth of the product of 2.5% multiplied by the number of years he is employed with us limited to 18 years, multiplied by his average annual compensation. This benefit vests at the rate of 6% for 2003 and 7% per year
thereafter, continuing yearly except for the year Mr. Wilson turns 65, when the vesting will be 24%. The payment of the vested portion of this benefit will start at the first day of the month following the month in which Mr. Wilson reaches
age 65. At December 31, 2005, he was vested 20% under this agreement.

On September 19, 2000, the Company entered into a
Supplemental Executive Retirement Plan with Brett J. Guge, Vice President, Administration and Corporate Secretary, intended to induce Mr. Guge to remain in our employ. Upon his retirement, the Company is obligated to pay Mr. Guge a monthly
benefit for 180 months calculated as follows: one-twelfth of the product of 2.5% multiplied by the number of years he is employed with us limited to 18 years, multiplied by his average annual compensation. This benefit vests at the rate of
4% per year, continuing yearly except for the year Mr. Guge turns 65, when the vesting will be 24%. The payment of the vested portion of this benefit will start at the first day of the month following the month in which Mr. Guge
reaches age 65. At December 31, 2005, he was vested 24% under this agreement.

Shareholders Agreement

We are owned 50% by JFE Steel Corporation (formerly Kawasaki Steel Corporation), a Japanese corporation, and 50% by Rio Doce Limited, a New York
corporation and a subsidiary of Companhia Vale do Rio Doce (CVRD), a Brazilian corporation. In June 2004, JFE Steel USA, Inc., a Delaware corporation (formerly Kawasaki Steel Holdings (USA), Inc.), also a subsidiary of JFE Steel
Corporation, transferred its shares to JFE Steel Corporation. Our two stockholders entered into a Shareholders Agreement dated June 27, 1995, replacing a Shareholders Agreement dated June 1, 1987. According to the
Shareholders Agreement, the stockholders agreed to subscribe for additional shares of our stock in proportion to their respective ownership if any new stock is issued, and increases in our capital stock from time to time shall be allocated
between our common stock and preferred stock as agreed upon by the stockholders. Each of the stockholders has the right and obligation to subscribe and pay fully for the new shares in proportion to its respective ownership of the Companys
common stock. In addition, either stockholder may let its Affiliated Corporations, as defined the Shareholders Agreement, subscribe, in whole or in part, to the new shares to be issued to it under the terms described below.



22



---

The Shareholders Agreement provides that the Board of Directors shall be constituted of five
directors, one of whom shall be chairman, as elected by and among the directors. Each stockholder shall have the right to appoint two Directors and the fifth Director shall be elected by unanimous affirmative vote of the shareholders (in July 1999,
the stockholders approved a revision to the Bylaws of the Company changing the number of directors to 4, however, no corresponding change was made to the Shareholders Agreement). In addition, the stockholders shall jointly appoint a president,
who shall appoint other officers designated by the Board of Directors. The Shareholders Agreement also provides for a Consultative Council consisting of two members, one appointed by each of the stockholders. It is unclear whether the
Consultative Council provisions are valid under Delaware corporation law. The Consultative Council decides on all relevant matters submitted to it by both or either of the stockholders and specifically resolves any deadlock among the Directors.
Because no stockholder holds a majority of our stock and the Directors and members of the Consultative Council are elected by the stockholders in proportion to each of the stockholders holdings, there is a possibility that a deadlock may occur
on any issue voted on by the stockholders, Board of Directors and Consultative Council. If a deadlock were to occur and the Consultative Council could not resolve the issue, the last recourse is arbitration according to the Shareholders
Agreement. Furthermore, according to the Shareholders Agreement, we have agreed to purchase slab from Companhia Siderurgica de Tubarão and use Seamar Shipping Corporation for ocean transportation of slab at negotiated prices, however,
with the approval of the stockholders, we ceased using Seamar for ocean transportation in 2001.

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

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

Dispatched Personnel

Pursuant to agreements with our stockholders CVRD and JFE, certain of our executive officers and
employees coming from the stockholders are treated as dispatched personnel, which means that these executive officers and employees retain active employment status in their home country with the stockholder who appointed them. These agreements
further require that the Company provide certain benefits to employees who have been sent by a stockholder to work at the Company, such as extended home leave, home leave reimbursements and some other benefits. We further have an agreement with our
stockholder, JFE, to reimburse JFE for the salary of employees who are designated as dispatched personnel, whereas dispatched personnel from our stockholder, CVRD, are paid directly by the Company.

Executive officers who in 2005 were treated as dispatched personnel from JFE Steel Corporation and its subsidiaries included Masakazu Kurushima and
Toshiyuki Tamai. Executive officers who in 2005 were treated as dispatched personnel from CVRD and its subsidiaries included only Ricardo Bernardes. Mr. Hamamoto from JFE left CSI on June 30, 2004 and Mr. Vicente Wright, who left the
Company as a full time employee on December 31, 2004, is currently Chairman of the Board. Notwithstanding the retention of formal active status, all individuals designated as dispatched personnel, with the exception of Vicente Wright, are full
time employees of the Company.

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

401(k) Plan

We maintain the California Steel Industries, Inc. 401(k) Savings Plan, a tax qualified cash or deferred tax arrangement under Section 401(k) of the
Internal Revenue Code of 1986, as amended. The 401(k) Plan provides the participants with benefits upon



23



---

retirement, death, disability or termination of employment with us. Employees are eligible to participate in the salary reduction portion of the plan on the
first day of the calendar month following their date of hire.

Participants may authorize us to contribute to the 401(k) Plan on their
behalf a percentage of their compensation, not to exceed legally permissible limits, including an overall dollar limit of $14,000 for 2005. The 401(k) Plan provides for our discretionary matching and profit sharing contributions. We currently match
100% of the first 4% of the participants deferral under the 401(k) Plan each year and 50% of the next 2% of the participants deferral under the 401(k) Plan each year. Each plan year we may also elect to make an additional contribution to
the 401(k) Plan. This discretionary employer contribution, if we make it, is allocated to each participants account based on the participants compensation for the year relative to the compensation of all participants for that year. In
order to share in the allocation of the discretionary employer contribution, if any, a participant must complete 1,000 hours of service in the plan year.

Profit-Sharing Plan

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

Compensation Committee
Interlocks and Inside Participation

Mr. Toshihiro Kabasawa, Director, Mr. James Pessoa, Director, Mr. Kazuo Fujisawa,
and Ms. Maria Eudoxia Gurgel served as members of our Compensation Committee. None of the members of the Compensation Committee was, during 2005, an officer, employee or formerly an officer or employee of ours or our subsidiary.

Mr. Kabasawa served as General Manager of Overseas Business Planning of JFE Steel Corporation (formerly Kawasaki Steel Corporation) during 2005. JFE
Steel Corporation is one of our stockholders. In 2005, Mr. Fujisawa served as Deputy General Manager of Overseas Business Planning of JFE Steel Corporation. In 2005, Mr. James Pessoa served as Director of the Steel Development and Holdings
Department of Companhia Vale do Rio Doce. In 2005, Ms. Maria Eudoxia Gurgel served as International Human Resources Manager of Companhia Vale do Rio Doce.

Board Compensation Committee Report on Executive Compensation

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

Submitted by the Compensation Committee of the Board of Directors:

Toshihiro Kabasawa

James Pessoa

Kazuo Fujisawa

Maria Eudoxia Gurgel



24



---

|Item 12. | Security Ownership of Certain Beneficial Owners and Management
|-------- | --------------------------------------------------------------

The following table sets forth, as of December 31, 2005, information regarding the shares of our common stock and Class C preferred stock
beneficially owned by each stockholder that beneficially owns in excess of 5% of the outstanding shares of our common stock and Class C preferred stock. No director or named executive officer beneficially owns any shares of our common stock or Class
C preferred stock.



|                                                                                    |  |        |  |            |                   |  |        |  |            |  
|----------------------------------------------------------------------------------- |  | ------ |  | ---------- | ----------------- |  | ------ |  | ---------- | -
|                                                                                    |  | Common |  |            | Class C Preferred | 
|Name of Beneficial Owner                                                            |  | Number |  | % of Class |                   |  | Number |  | % of Class |  
|Rio Doce Limited (1)546 5th Avenue, 12th FloorNew York, New York 10036              |  | 500    |  | 50         | %                 |  | 1,500  |  | 50         | %
|                                                                                    |  |        |  |           
|JFE Steel Corporation (2)2-3 Uchisaiwaicho 2-chomeChiyoda-ku, Tokyo 100-0011 Japan |  | 500    |  | 50         | %                 |  | 1,500  |  | 50         | %



|(1) | Rio Doce Limited is a subsidiary of Companhia Vale do Rio Doce, a Brazilian corporation.
|--- | ----------------------------------------------------------------------------------------



|(2) | In 2004, JFE Steel U.S.A., Inc., transferred its common and Class C preferred stock in the Company to JFE Steel Corporation.
|--- | ----------------------------------------------------------------------------------------------------------------------------



|Item 13. | Certain Relationships and Related Transactions
|-------- | ----------------------------------------------

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

The Shareholders Agreement also provides for a Consultative Council, comprised of two members. Each stockholder is entitled to elect one member.
The Consultative Council decides on all matters submitted to it by either or both of the stockholders and resolves deadlocks among the Board of Directors. We have transactions in the normal course of business with affiliated companies. For example,
we purchase slab from Companhia Siderurgica de Tubarão, an affiliate of both Companhia Vale do Rio Doce and JFE Steel Corporation (not affiliated as of May 25, 2005). During 2005, we purchased $67,504,000 of slab from Companhia
Siderurgica de Tubarão and $13,362,000 of slab from JFE Steel Corporation. We conducted arms-length negotiations with Companhia Siderurgica de Tubarão and JFE Steel Corporation in 2005. The Shareholders Agreement provides that we
shall continuously purchase slabs from Companhia Siderurgica de Tubarão under terms and conditions as agreed upon by Companhia Siderurgica de Tubarão and us. The executive officer negotiating the market price for the steel slab was our
Executive Vice President & CFO.

We held a 4% interest in the common stock of Companhia Siderurgica de Tubarão, which
represents 1.5% of the total equity interest in the company. Companhia Siderurgica de Tubarão is an affiliate of both Companhia Vale do Rio Doce and JFE Steel Corporation, our stockholders parent companies. In October 2004, we agreed in
principal to sell our 4% interest in the common stock of CST to Arcelor S.A. (Arcelor). The Company and Arcelor are both shareholders in CST and are parties to the existing CST Shareholders Agreement governing the transfer of CST
shares. The transaction was structured by entering into an option and waiver agreement whereby Arcelor granted the Company an option to sell and the Company granted Arcelor an option to purchase the Companys interest in CST. These options were
exercised during the thirty day period following the termination of the CST shareholders agreement on May 25, 2005.

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



25



---

|Item 14. | Principal Accounting Fees and Services
|-------- | --------------------------------------

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



|                            |  |      |         |      |   |        
|--------------------------- |  | ---- | ------- | ---- | - | -------
|                            |  | 2005 |         | 2004
|PricewaterhouseCoopers, LLP |  |      |         |      |   |        
|Audit Fees                  |  | $    | 171,000 |      | $ | 225,500
|Audit Related Fees          |  | $    | 36,174  |      | $ | 15,000 
|Tax Fees                    |  | $    | 38,211  |      | $ |       
|Other Fees                  |  | $    |        |      | $ |       



26



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PART IV



|Item 15. | Exhibits and Financial Statement Schedules
|-------- | ------------------------------------------

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

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



| | 1. | Consolidated Financial Statements:
| | -- | ----------------------------------



PageIndex to Consolidated Financial Statements

F-1Report of Independent Registered Public Accounting Firm

F-2Consolidated Balance Sheets as of December 31, 2005 and 2004

F-3Consolidated Statements of Operations for the years ended December 31, 2005, 2004 and 2003

F-4Consolidated Statements of Stockholders Equity for the years ended December 31, 2005, 2004 and 2003

F-5Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003

F-6Notes to Consolidated Financial Statements

F-7




| | 2. | Consolidated Financial Statement Schedule:
| | -- | ------------------------------------------



Schedule IIValuation and Qualifying Accounts

S-1


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

(a)(3) Exhibits:

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



27



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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                     |  |     
|---------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                     |  | Page
|Report of Independent Registered Public Accounting Firm                                              |  | F-2 
|                                                                                                     | 
|Consolidated Balance Sheets as of December 31, 2005 and 2004                                         |  | F-3 
|                                                                                                     | 
|Consolidated Statements of Operations for the years ended December 31, 2005, 2004 and 2003           |  | F-4 
|                                                                                                     | 
|Consolidated Statements of Stockholders Equity for the years ended December 31, 2005, 2004 and 2003 |  | F-5 
|                                                                                                     | 
|Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003           |  | F-6 
|                                                                                                     | 
|Notes to Consolidated Financial Statements                                                           |  | F-7 



F-1



---

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

California Steel Industries, Inc.:

In our
opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of California Steel Industries, Inc. and its subsidiary (the Company)
at December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005 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)(2) 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. 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.

/s/ PricewaterhouseCoopers LLP

Los
Angeles, California

January 17, 2006



F-2



---

California Steel Industries, Inc. and Subsidiary

Consolidated Balance Sheets

December 31, 2005 and 2004

(Dollars in thousands, except for
share amounts)



|                                                                                                                   |  |      |         |      |   |        
|------------------------------------------------------------------------------------------------------------------ |  | ---- | ------- | ---- | - | -------
|                                                                                                                   |  | 2005 |         | 2004
|Assets                                                                                                             |  |      |         |      |   |        
|Current assets                                                                                                     |  |      |         |      |   |        
|Cash and cash equivalents                                                                                          |  | $    | 104,294 |      | $ | 801    
|Trade accounts receivable, less allowance for doubtful receivables of $750 and $700 in 2005 and 2004, respectively |  |      | 91,757  |      |   | 95,216 
|Inventories (Note 3)                                                                                               |  |      | 201,640 |      |   | 272,248
|Deferred income taxes (Note 11)                                                                                    |  |      | 3,501   |      |   | 1,887  
|Other receivables and prepaid expenses                                                                             |  |      | 9,320   |      |   | 5,225  
|                                                                                                                   |  |      |         |      |   |        
|Total current assets                                                                                               |  |      | 410,512 |      |   | 375,377
|Investment in affiliated company (Notes 6)                                                                         |  |      |        |      |   | 30,283 
|Other assets                                                                                                       |  |      | 2,515   |      |   | 2,477  
|Property, plant and equipment, net (Note 4)                                                                        |  |      | 241,774 |      |   | 229,732
|                                                                                                                   |  |      |         |      |   |        
|Total assets                                                                                                       |  | $    | 654,801 |      | $ | 637,869
|                                                                                                                   |  |      |         |      |   |        
|Liabilities and Stockholders Equity                                                                               |  |      |         |      |   |        
|Current liabilities                                                                                                |  |      |         |      |   |        
|Accounts payable (Note 9)                                                                                          |  | $    | 100,299 |      | $ | 59,266 
|Accrued interest expense (Note 7)                                                                                  |  |      | 2,691   |      |   | 2,731  
|Accrued utilities                                                                                                  |  |      | 4,856   |      |   | 7,354  
|Income taxes payable (Note 11)                                                                                     |  |      | 13,394  |      |   | 13,467 
|Deferred rent                                                                                                      |  |      |        |      |   | 1,812  
|Other accrued expenses (Notes 10 and 12)                                                                           |  |      | 10,990  |      |   | 10,178 
|                                                                                                                   |  |      |         |      |   |        
|Total current liabilities                                                                                          |  |      | 132,230 |      |   | 94,808 
|                                                                                                                   |  |      |         |      |   |        
|Long-term debt (Note 7)                                                                                            |  |      | 150,000 |      |   | 154,000
|Deferred income taxes (Note 11)                                                                                    |  |      | 52,592  |      |   | 55,967 
|Commitments and contingencies (Notes 5, 10 and 12)                                                                 |  |      |         |      |   |        
|Redeemable preferred stock (Note 8)                                                                                |  |      |         |      |   |        
|Class C preferred stock, $10,000 par value per share. Authorized 3,000 shares; issued and outstanding 3,000 shares |  |      | 30,000  |      |   | 30,000 
|Stockholders equity (Note 8)                                                                                      |  |      |         |      |   |        
|Class A preferred stock, $10,000 par value per share. Authorized 1,000 shares; issued none                         |  |      |        |      |   |       
|Class B preferred stock, $10,000 par value per share. Authorized 2,000 shares; issued none                         |  |      |        |      |   |       
|Common stock, no par value. Authorized 2,000 shares; issued and outstanding 1,000 shares                           |  |      | 10,000  |      |   | 10,000 
|Retained earnings                                                                                                  |  |      | 279,979 |      |   | 293,094
|                                                                                                                   |  |      |         |      |   |        
|Total stockholders equity                                                                                         |  |      | 289,979 |      |   | 303,094
|                                                                                                                   |  |      |         |      |   |        
|Total liabilities and stockholders equity                                                                         |  | $    | 654,801 |      | $ | 637,869
|                                                                                                                   |  |      |         |      |   |        

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



F-3



---

California Steel Industries, Inc. and Subsidiary

Consolidated Statements of Operations

For the Years Ended December 31, 2005, 2004 and 2003

(Dollars
in thousands)



|                                                            |  |      |           |   |      |   |           |      |  |   |         |  
|----------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | ---- |  | - | ------- | -
|                                                            |  | 2005 |           |   | 2004 |   |           | 2003 | 
|Net sales                                                   |  | $    | 1,234,386 |   |      | $ | 1,256,992 |      |  | $ | 770,787 |  
|Cost of sales (Note 9)                                      |  |      | 1,120,268 |   |      |   | 1,020,316 |      |  |   | 727,166 |  
|                                                            |  |      |           |   |      |   |           |      |  |   |         |  
|Gross profit                                                |  |      | 114,118   |   |      |   | 236,676   |      |  |   | 43,621  |  
|Selling, general and administrative expenses (Note 12)      |  |      | 27,669    |   |      |   | 29,179    |      |  |   | 24,997  |  
|(Gain) loss on disposition of property, plant and equipment |  |      | (2,071    | ) |      |   | 546       |      |  |   | 114     |  
|                                                            |  |      |           |   |      |   |           |      |  |   |         |  
|Income from operations                                      |  |      | 88,520    |   |      |   | 206,951   |      |  |   | 18,510  |  
|Other income (expense)                                      |  |      |           |   |      |   |           |      |  |   |         |  
|Loss on redemption of 8.5% senior notes (Note 7)            |  |      |          |   |      |   | (9,025    | )    |  |   |        |  
|Income (loss) from equity investment in affiliate (Note 6)  |  |      |          |   |      |   | (3,047    | )    |  |   | 1,950   |  
|Interest expense, net (Note 7)                              |  |      | (11,299   | ) |      |   | (10,660   | )    |  |   | (13,730 | )
|Other, net                                                  |  |      | 3,308     |   |      |   | 524       |      |  |   | 85      |  
|                                                            |  |      |           |   |      |   |           |      |  |   |         |  
|Income before income tax expense                            |  |      | 80,529    |   |      |   | 184,743   |      |  |   | 6,815   |  
|Income tax expense (Note 11)                                |  |      | 37,164    |   |      |   | 75,408    |      |  |   | 2,271   |  
|                                                            |  |      |           |   |      |   |           |      |  |   |         |  
|Net income                                                  |  |      | 43,365    |   |      |   | 109,335   |      |  |   | 4,544   |  
|Preferred dividends declared and paid                       |  |      | (43,110   | ) |      |   | (13,545   | )    |  |   | (8,909  | )
|                                                            |  |      |           |   |      |   |           |      |  |   |         |  
|Net income available to common stockholders                 |  | $    | 255       |   |      | $ | 95,790    |      |  | $ | (4,365  | )
|                                                            |  |      |           |   |      |   |           |      |  |   |         |  

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



F-4



---

California Steel Industries, Inc. and Subsidiary

Consolidated Statements of Stockholders Equity

For the Years Ended December 31, 2005, 2004 and 2003

(Dollars
in thousands, except per share amounts)



|                                                 |  |             |        |                  |   |         |                          |  |   |         |  
|------------------------------------------------ |  | ----------- | ------ | ---------------- | - | ------- | ------------------------ |  | - | ------- | -
|                                                 |  | CommonStock |        | RetainedEarnings |   |         | TotalStockholdersEquity | 
|Balance at December 31, 2002                     |  | $           | 10,000 |                  | $ | 207,154 |                          |  | $ | 217,154 |  
|Net income for the year ended December 31, 2003  |  |             |       |                  |   | 4,544   |                          |  |   | 4,544   |  
|Cash dividends (Note 8)                          |  |             |        |                  |   |         |                          |  |   |         |  
|Class C preferred stock, $2,970 on 3,000 shares  |  |             |       |                  |   | (8,909  | )                        |  |   | (8,909  | )
|Common stock, $1,969 on 1,000 shares             |  |             |       |                  |   | (1,969  | )                        |  |   | (1,969  | )
|                                                 |  |             |        |                  |   |         |                          |  |   |         |  
|Balance at December 31, 2003                     |  |             | 10,000 |                  |   | 200,820 |                          |  |   | 210,820 |  
|Net income for the year ended December 31, 2004  |  |             |       |                  |   | 109,335 |                          |  |   | 109,335 |  
|Cash dividends (Note 8)                          |  |             |        |                  |   |         |                          |  |   |         |  
|Class C preferred stock, $4,515 on 3,000 shares  |  |             |       |                  |   | (13,545 | )                        |  |   | (13,545 | )
|Common stock, $3,516 on 1,000 shares             |  |             |       |                  |   | (3,516  | )                        |  |   | (3,516  | )
|                                                 |  |             |        |                  |   |         |                          |  |   |         |  
|Balance at December 31, 2004                     |  |             | 10,000 |                  |   | 293,094 |                          |  |   | 303,094 |  
|Net income for the year ended December 31, 2005  |  |             |       |                  |   | 43,365  |                          |  |   | 43,365  |  
|Cash dividends (Note 8)                          |  |             |        |                  |   |         |                          |  |   |         |  
|Class C preferred stock, $14,370 on 3,000 shares |  |             |       |                  |   | (43,110 | )                        |  |   | (43,110 | )
|Common stock, $13,370 on 1,000 shares            |  |             |       |                  |   | (13,370 | )                        |  |   | (13,370 | )
|                                                 |  |             |        |                  |   |         |                          |  |   |         |  
|Balance at December 31, 2005                     |  | $           | 10,000 |                  | $ | 279,979 |                          |  | $ | 289,979 |  
|                                                 |  |             |        |                  |   |         |                          |  |   |         |  

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



F-5



---

California Steel Industries, Inc. and Subsidiary

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2005, 2004 and 2003

(Dollars
in thousands)



|                                                                                           |  |      |         |   |      |   |          |      |  |   |         |  
|------------------------------------------------------------------------------------------ |  | ---- | ------- | - | ---- | - | -------- | ---- |  | - | ------- | -
|                                                                                           |  | 2005 |         |   | 2004 |   |          | 2003 | 
|Cash flows from operating activities                                                       |  |      |         |   |      |   |          |      |  |   |         |  
|Net income                                                                                 |  | $    | 43,365  |   |      | $ | 109,335  |      |  | $ | 4,544   |  
|Adjustments to reconcile net income to net cash provided by (used in) operating activities |  |      |         |   |      |   |          |      |  |   |         |  
|Depreciation and amortization                                                              |  |      | 27,491  |   |      |   | 26,889   |      |  |   | 28,660  |  
|Loss on redemption of 8.50% senior notes                                                   |  |      |        |   |      |   | 9,025    |      |  |   |        |  
|Deferred income taxes                                                                      |  |      | (4,989  | ) |      |   | (30      | )    |  |   | 6,780   |  
|(Gain) loss on disposition of property, plant and equipment                                |  |      | (2,071  | ) |      |   | 546      |      |  |   | 114     |  
|(Income) loss from equity investments                                                      |  |      |        |   |      |   | 3,047    |      |  |   | (1,950  | )
|Changes in assets and liabilities                                                          |  |      |         |   |      |   |          |      |  |   |         |  
|Trade accounts receivable, net                                                             |  |      | 3,459   |   |      |   | (45,010  | )    |  |   | 17,434  |  
|Inventories                                                                                |  |      | 70,608  |   |      |   | (135,436 | )    |  |   | 53,897  |  
|Other receivables and prepaid expenses                                                     |  |      | (4,652  | ) |      |   | (1,577   | )    |  |   | (1,485  | )
|Accounts payable                                                                           |  |      | 41,033  |   |      |   | 16,929   |      |  |   | (29,535 | )
|Accrued interest expense                                                                   |  |      | (40     | ) |      |   | (521     | )    |  |   | (162    | )
|Income tax payable                                                                         |  |      | (73     | ) |      |   | 11,485   |      |  |   | (792    | )
|Other accrued expenses and deferred rent                                                   |  |      | (3,498  | ) |      |   | 4,963    |      |  |   | 749     |  
|                                                                                           |  |      |         |   |      |   |          |      |  |   |         |  
|Net cash provided by (used in) operating activities                                        |  |      | 170,633 |   |      |   | (355     | )    |  |   | 78,254  |  
|                                                                                           |  |      |         |   |      |   |          |      |  |   |         |  
|Cash flows from investing activities                                                       |  |      |         |   |      |   |          |      |  |   |         |  
|Additions to property, plant and equipment                                                 |  |      | (43,020 | ) |      |   | (22,953  | )    |  |   | (16,484 | )
|Proceeds (disposal costs) from sale of property, plant and equipment                       |  |      | 6,077   |   |      |   | (155     | )    |  |   | (98     | )
|Proceeds from sale of investments                                                          |  |      | 30,283  |   |      |   |         |      |  |   |        |  
|Advance on sale of investments                                                             |  |      |        |   |      |   | 1,181    |      |  |   |        |  
|Dividends received from affiliate                                                          |  |      |        |   |      |   | 2,242    |      |  |   | 1,962   |  
|                                                                                           |  |      |         |   |      |   |          |      |  |   |         |  
|Net cash used in investing activities                                                      |  |      | (6,660  | ) |      |   | (19,685  | )    |  |   | (14,620 | )
|                                                                                           |  |      |         |   |      |   |          |      |  |   |         |  
|Cash flows from financing activities                                                       |  |      |         |   |      |   |          |      |  |   |         |  
|Net advances (repayments) under line of credit agreement with banks                        |  |      | (4,000  | ) |      |   | 4,000    |      |  |   | (13,000 | )
|Net proceeds from issuance of 6.125% senior notes                                          |  |      |        |   |      |   | 148,125  |      |  |   |        |  
|Redemption of 8.50% senior notes                                                           |  |      |        |   |      |   | (150,000 | )    |  |   |        |  
|Premium on redemption of 8.50% senior notes                                                |  |      |        |   |      |   | (6,870   | )    |  |   |        |  
|Dividends paid                                                                             |  |      | (56,480 | ) |      |   | (17,061  | )    |  |   | (10,878 | )
|                                                                                           |  |      |         |   |      |   |          |      |  |   |         |  
|Net cash used in financing activities                                                      |  |      | (60,480 | ) |      |   | (21,806  | )    |  |   | (23,878 | )
|                                                                                           |  |      |         |   |      |   |          |      |  |   |         |  
|Net increase (decrease) in cash and cash equivalents                                       |  |      | 103,493 |   |      |   | (41,846  | )    |  |   | 39,756  |  
|Cash and cash equivalents at beginning of year                                             |  |      | 801     |   |      |   | 42,647   |      |  |   | 2,891   |  
|                                                                                           |  |      |         |   |      |   |          |      |  |   |         |  
|Cash and cash equivalents at end of year                                                   |  | $    | 104,294 |   |      | $ | 801      |      |  | $ | 42,647  |  
|                                                                                           |  |      |         |   |      |   |          |      |  |   |         |  
|Supplemental disclosures of cash flow information                                          |  |      |         |   |      |   |          |      |  |   |         |  
|Cash paid (received) during the year for:                                                  |  |      |         |   |      |   |          |      |  |   |         |  
|Interest (net of amount capitalized)                                                       |  | $    | 9,767   |   |      | $ | 10,972   |      |  | $ | 13,454  |  
|                                                                                           |  |      |         |   |      |   |          |      |  |   |         |  
|Income taxes                                                                               |  | $    | 44,878  |   |      | $ | 63,954   |      |  | $ | (3,718  | )
|                                                                                           |  |      |         |   |      |   |          |      |  |   |         |  

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



F-6



---

California Steel Industries, Inc. and Subsidiary

Notes to Consolidated Financial Statements



|1. | Organization and Nature of Operations
|-- | -------------------------------------

California
Steel Industries, Inc. and Subsidiary (the Company) was incorporated in the state of Delaware on November 3, 1983. Its stockholders consist of two companies, JFE Steel Corporation (formerly Kawasaki Steel Corporation), a Japanese
corporation, and Rio Doce Limited, a New York corporation, which each own 50% of the stock of the Company. From its site in Fontana, California, the Company manufactures a wide range of flat rolled steel products, including hot rolled, cold rolled,
and galvanized coil and sheet. The Company also produces electric resistant welded pipe.



|2. | Summary of Significant Accounting Policies
|-- | ------------------------------------------

Principles of consolidation:The accompanying consolidated financial statements include the accounts of the Company and its wholly owed subsidiary and are prepared on the accrual basis of accounting in accordance with accounting
principles generally accepted in the United States of America. All significant intercompany balances and transactions have been eliminated in consolidation.

Cash and cash equivalents: The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. These bank accounts are guaranteed by the Federal Deposit
Insurance Corporation (FDIC) up to $100,000. As of December 31, 2005, the Company had cash balances with banks in excess of the federally insured limit.

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

Inventories: Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method of
inventory accounting. Management routinely evaluates the carrying value of inventories and provides reserves when appropriate to reduce inventories to the lower of cost or market to reflect estimated net realizable value.

Investment in affiliated company: Investment in affiliated company consisted of 4% of the common stock of Companhia Siderurgica de Tubarao
(CST), a Brazilian semi-finished steel slab and hot rolled manufacturer. The investment is accounted for by the equity, since combined investments in CST by the Company and certain other related companies allow for significant influence
over the financing and operating activities of CST. The Companys share of earnings or losses from this investment is reflected in other income (expense) in the accompanying consolidated statements of operations. Dividends are credited against
the investment when received. The Companys interest in CST was sold in June 2005 as described in Note 6.

Deferred financing
costs: Debt issuance costs are amortized on a straight-line basis (which approximates the effective interest method) over the term of the related debt agreement. Amortization of issuance costs is included as a component of interest expense for
the fiscal period. These costs are included in the other assets in the 2005 and 2004 consolidated balance sheets.



F-7



---

California Steel Industries, Inc. and Subsidiary

Notes to Consolidated Financial Statements



|2. | Summary of Significant Accounting Policies (Continued)
|-- | ------------------------------------------------------



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



Plant and equipment

3 to 25 yearsPlant refurbishment costs

10 yearsFurniture and fixtures

5 years


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

Impairment of long-lived assets: The Company accounts for long-lived assets in accordance with the
provisions of Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This Statement requires that long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets
to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

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

Environmental: Environmental expenditures that relate to current
operations are expensed or capitalized as appropriate. Expenditures are capitalized if they meet one of the following criteria: (1) extend the useful life, increase the capacity, or improve the safety or efficiency of property,
(2) mitigate or prevent environmental contamination that has yet to occur and that otherwise may result from future operations or activities, or (3) incurred in preparing property currently held for sale. The Company accrues for costs
associated with environmental remediation obligations when such losses are probable and reasonably estimable. Accruals for estimated losses from environmental remediation obligations are recognized no later than completion of the remedial
feasibility study. Such accruals are adjusted as further information develops or circumstances change (see Note 10). Costs of future expenditures for environmental remediation obligations are not discounted to their present value.

Derivative financial instruments: Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended and interpreted by other related accounting literature, establishes accounting and reporting standards for derivative instruments (including certain derivative instruments embedded in other
contracts). SFAS No. 133 requires companies to record derivatives on their balance sheets as either assets or liabilities measured at their fair value unless exempted from derivative treatment as a normal sale and purchase transactions. All
changes in the fair value of derivatives are recognized currently in earnings unless specific hedge criteria are met, which requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge
accounting.



F-8



---

California Steel Industries, Inc. and Subsidiary

Notes to Consolidated Financial Statements



|2. | Summary of Significant Accounting Policies (Continued)
|-- | ------------------------------------------------------



The Company enters into contracts to purchase certain commodities used in the manufacturing of its
products, such as electricity and natural gas. Some of these forward contracts do not require derivative accounting as the Company takes possession of the commodities in the normal course of business whereas other forward contracts are accounted for
as derivatives in accordance with SFAS No. 133 by the Company. These derivatives did not qualify for hedge accounting treatment; therefore, these financial instruments are reported at fair value, with changes in fair value reported in current
earnings. Credit risk related to the derivative financial instruments is considered minimal and is managed by requiring high credit standards for its counterparties and periodic settlements.

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

Use of estimates:
Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity
with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.

Fair
value of financial instruments: The carrying value of cash and cash equivalents, trade accounts receivable, other receivables, accounts payable, and other accrued expenses are measured at cost which approximates their fair value because of the
short maturity of those instruments. The fair values of long-term indebtedness are estimated based on the quoted market prices for the same or similar issues, or the current rates offered to the Company for debt of similar maturities. The carrying
amounts and fair values of financial instruments at December 31, 2005 and 2004 are listed as follows (dollars in thousands):



2005

2004CarryingAmount

Fair Value

CarryingAmount

Fair ValueSenior notes

$
150,000

$
141,000

$
150,000

$
150,375Notes payable








4,000


4,000Forward contracts


772


772








Revenue recognition: The Company recognizes revenue when products are shipped or
delivered to the customer, depending on the terms of the sale. For products shipped FOB shipping point, revenue is recognized at the time of shipment and title has transferred to the customer. For products shipped FOB destination, revenue is
recognized at the time of delivery and title has transferred to the customer.

Shipping costs: The Company charges shipping fees to
certain customers based upon the actual amounts incurred. Amounts billed for shipping costs are included in net sales for 2005, 2004 and 2003. The Company includes the associated shipping costs in cost of sales, which were approximately $9,494,000,
$7,061,000 and $7,231,000 during 2005, 2004 and 2003, respectively.

Reclassifications: Certain items in prior year financial
statements have been reclassified to conform to the current year presentation.



F-9



---

California Steel Industries, Inc. and Subsidiary

Notes to Consolidated Financial Statements



|2. | Summary of Significant Accounting Policies (Continued)
|-- | ------------------------------------------------------



Recent accounting pronouncements: On October 22, 2004, the President signed the American
Jobs Creation Act of 2004 (the Act). The Act raises a number of issues with respect to accounting for income taxes. For companies that pay U.S. income taxes on manufacturing activities in the U.S., the Act provides a deduction from
taxable income equal to a stipulated percentage of qualified income from domestic production activities. On December 21, 2004, the Financial Accounting Standards Board (FASB) issued a Staff Position (FSP) regarding the
accounting implications on the Act related to the deduction for qualified domestic production activities. The FASB decided that the deduction for qualified domestic production activities should be accounted for as a special deduction under FASB
Statement No. 109, Accounting for Income Taxes. The guidance in this FSP applies to financial statements for periods ending after the date the Act was enacted.

In November 2004, the FASB issued Statement No. 151, Inventory Costs  An Amendment of ARB No. 43, Chapter 4 (SFAS
151). SFAS 151 amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Among
other provisions, the new rule requires that items such as idle facility expense, excessive spoilage, double freight, and rehandling costs be recognized as current-period charges regardless of whether they meet the criterion of so
abnormal as stated in ARB No. 43. Additionally, SFAS 151 requires that the allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS 151 is effective for fiscal
years beginning after June 15, 2005 and is required to be adopted by the Company in the first quarter of fiscal 2006, beginning on January 1, 2006. The Company is currently evaluating the effect that the adoption of SFAS 151 will have on
its consolidated results of operations and financial position or cash flows, but does not expect it to have a material impact.

On
December 15, 2004, the FASB issued Statement No. 153, Exchanges of Nonmonetary Assets  an Amendment of Accounting Principles Board Opinion No. 29 (SFAS 153). This standard requires exchanges of
productive assets to be accounted for at fair value, rather than at carryover basis, unless (1) neither the asset received nor the asset surrendered has a fair value that is determinable within reasonable limits or (2) the transactions
lack commercial substance. The new standard is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The Company expects the adoption of SFAS 153 will not have a material impact on its financial
position, results of operations and cash flows.

In March 2005, the FASB issued Interpretation No. 47, Accounting for
Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143 (FIN 47), which requires an entity to recognize a liability for the fair value of a conditional asset retirement obligation when
incurred if the liabilitys fair value can be reasonably estimated. FIN 47 is effective for fiscal years ending December 15, 2005. The adoption of FIN 47 did not have a material impact on the Companys financial position, results of
operation or cash flows.

In May 2005, the FASB issued Statement No. 154, Accounting Changes and Error Corrections
(SFAS 154), which replaces Accounting Principles Board Opinions No. 20, Accounting Changes and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements  An Amendment of APB
Opinion No. 28. SFAS 154 provides guidance on accounting for and reporting of accounting changes and error corrections. It establishes retrospective application, or the latest practicable date, as the required method for reporting a
change in accounting principle and the reporting of a correction of an error. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005 and is required to be adopted by the
Company in the first quarter of fiscal 2006. The Company is currently evaluating the effect that the adoption of SFAS 154 will have on its consolidated results of operations and financial position or cash flows, but does not expect it to have a
material impact.



F-10



---

California Steel Industries, Inc. and Subsidiary

Notes to Consolidated Financial Statements



|2. | Summary of Significant Accounting Policies (Continued)
|-- | ------------------------------------------------------



In November 2005, the FASB issued FSP FAS 115-1 and FAS 124-1, The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments (FSP 115-1), which provides guidance on determining when investments in certain debt and equity securities are considered impaired, whether that
impairment is other-than-temporary, and on measuring such impairment loss. FSP 115-1 also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses
that have not been recognized as other-than-temporary impairments. FSP 115-1 is required to be applied to reporting periods beginning after December 15, 2005 and is required to be adopted by the Company in the first quarter of fiscal year 2006.
The Company is currently evaluating the effect that the adoption of FSP 115-1 will have on its consolidated results of operations and financial position but does not expect it will have a material impact.



|3. | Inventories
|-- | -----------

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



2005

2004Finished goods

$
16,696

$
36,665Work in process


31,971


33,528Raw materials


142,466


194,243Supplies


10,507


7,812$
201,640

$
272,248




|4. | Property, Plant and Equipment
|-- | -----------------------------

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



2005

2004Land

$
14,432

$
17,682Plant and equipment


512,088


484,766Plant refurbishment costs


22,220


22,220Furniture and fixtures


11,251


10,924Construction in progress


16,733


11,580576,724


547,172Less accumulated depreciation


334,950


317,440$
241,774

$
229,732


Capitalized interest was approximately $106,000 and $52,000 for the years ended 2005 and
2003, respectively. There was no capitalized interest for the year ended 2004. During 2005, the Company sold a surplus parcel of land for a total of $7,100,000, which resulted in a net gain of $3,600,000. The gain is reflected in the consolidated
statements of operations.



F-11



---

California Steel Industries, Inc. and Subsidiary

Notes to Consolidated Financial Statements



|5. | Leases
|-- | ------

The Company is obligated under various
equipment leases that expire at various dates during the next three years. At December 31, 2005, the future minimum lease payments under noncanceable operating leases with commitments of at least one year are as follows (dollars in thousands):



Year Ending December 31,2006

$
7472007


2702008


75$
1,092


Rental expense under operating leases totaled approximately $4,536,000, $5,575,000 and
$5,687,000 for the years ended December 31, 2005, 2004 and 2003, respectively.

The Company had leased a galvanizing line (#2
CGL) which was treated as an operating lease. The original term of the lease was ten years with an early buy-out option after seven years. In 2005, the Company exercised its buy-out option per the terms of the agreement and purchased the
equipment for cash. The lease had varied rental payments which were recognized on the straight-line method over the original term of the lease. The Company continued to expense rental payments on the straight-line method on the #2 CGL through
September 30, 2005, the date of purchase. Subsequent to the purchase, the deferred rent liability was credited against the purchase price of the #2 CGL.



|6. | Investment in Affiliated Company
|-- | --------------------------------

The investment in
the net assets of Companhia Siderurgica de Tubarao (CST) accounted for under the equity method amounted to $30,283,000 at December 31, 2004. The investment was sold in June 2005 as described below.

The Company received $2,242,000 and $1,962,000 in dividends from CST during the years ended December 31, 2004 and 2003, respectively. No dividends
were received in 2005.

In October 2004, the Company agreed in principal to sell its 4% interest in the common stock of CST to Arcelor S.A.
(Arcelor). The transaction was structured by entering into an option and waiver agreement whereby Arcelor granted the Company an option to sell and the Company granted Arcelor an option to purchase the Companys interest in CST.
These options were exercised during the thirty day period following the termination of the CST shareholders agreement on May 25, 2005. Under the option agreement, all earnings or losses as well as dividends and distributions accrued to the
benefit of Arcelor during the period from the execution of the option agreement to the date of exercise.

As a result of these agreements,
the Company evaluated the carrying value of its investment in CST and recognized an impairment loss of approximately $5,258,000 in 2004. The impairment loss was determined by comparing the carrying value of the investment to the ultimate cash flow
to be generated to the Company as a result of the option agreement. The Company determined that this cash flow would essentially be the sales proceeds as agreed to in the option agreement. The impairment loss recognized in 2004 was offset by
earnings of CST recognized by the Company prior to executing the option agreement in the amount of $2,211,000, resulting in a net loss of $3,047,000 in equity of affiliate in the 2004 consolidated statement of operations. As of December 31,
2004, the Company had received $1,181,000 as a cash advance, which was classified as a reduction of the investment in CST in the 2004 consolidated balance sheet. The remaining $30,283,000 was received in 2005 upon exercise of the option.



F-12



---

California Steel Industries, Inc. and Subsidiary

Notes to Consolidated Financial Statements



|7. | Notes Payable and Long-term Debt
|-- | --------------------------------

In March 1999,
the Company entered into a five-year revolving credit facility with a syndicate of three financial institutions. The credit facility provided for an aggregate principal amount of up to $130,000,000, including a $25,000,000 sublimit for letters of
credit, subject in all respects to a borrowing base coverage requirement. The Company drew a substantial portion of the advances available under the credit facility on the closing date to repay advances under its previously existing credit
agreement.

On June 30, 2003, the credit facility was amended with the then existing syndication of four financial institutions for an
aggregate principal amount of up to $110,000,000. The term of the credit facility was also extended for a period of three years expiring on June 30, 2006. This credit facility was terminated on September 29, 2005 and on the same day, the
Company entered into a new five-year revolving credit facility (the Facility) with a syndicate of four financial institutions. The Facility provided for an aggregate principal amount of up to $110,000,000 subject in all respects to a
borrowing base coverage requirement. Advances under this Facility may be used for letters of credit, working capital, capital expenditures, payment of dividends and other lawful corporate purposes, including the refinancing of existing debt.

Under the Facility, a commitment fee is applied on the average daily undrawn portion of the commitments at a rate equal to the applicable
margin. The applicable margin in effect from time to time will range from 0.1% to 0.3%, based upon the leverage ratio.

At the
Companys election, the amounts advanced under the Facility bear interest at the base rate or the Eurodollar rate, plus the applicable margin. Interest is generally payable quarterly and any accrued interest and principal is due and payable in
September 2010.

There were no outstanding borrowings as of December 31, 2005. As of December 31, 2005, the Company had three
outstanding letters of credit in the amount of $1,445,400 which expire on various dates through August 2006. This outstanding balance reduces the borrowing base. The Company had $108,554,600 of borrowings available under the Facility as of
December 31, 2005.

Fees incurred on the Facility are being amortized over the term of the life of the loan. The unamortized amount of
financing costs was approximately $529,000 and $249,000 at December 31, 2005 and 2004, respectively, and are classified as other assets in the consolidated balance sheet.

The Facility is collateralized by the Companys accounts receivable and inventories. The Facility requires compliance with certain covenants and
restrictions with regard to the interest coverage ratio, tangible net worth and shareholder distributions. At December 31, 2005 and 2004, the Company was in compliance with all covenants and restrictions.

On March 22, 2004, the Company issued an aggregate of $150,000,000 of ten-year, 6.125% unsecured senior notes due in March 2014. The interest on
these senior notes is payable on March 15 and September 15 of each year, commencing September 15, 2004.

The notes are senior
in right of payment to all of the Companys subordinated indebtedness and equal in right of payment to all of the Companys existing and future indebtedness that is not by its terms subordinated to the notes. The Company may redeem the
notes at any time after March 15, 2009. In addition, the Company my redeem up to 35% of the notes before March 15, 2007 with the net cash proceeds from a public equity offering.



F-13



---

California Steel Industries, Inc. and Subsidiary

Notes to Consolidated Financial Statements



|7. | Notes Payable and Long-term Debt (Continued)
|-- | --------------------------------------------



With the proceeds of the 6.125% senior notes and cash on hand, the Company retired the 8.5% senior
notes due in 2009. Of the total $150,000,000 payable, the Company redeemed $132,140,000 in March 2004, with the remaining $17,860,000 in April 2004. The Company also incurred a loss of $9,025,000 from early redemption of the 8.5% senior notes due in
2009, which included premium costs of $6,870,000 and expensing the unamortized issuance costs of $2,155,000. The unamortized portion of the financing costs related to the 6.125% senior notes due in 2014 was approximately $1,986,000 and 2,228,000 at
December 31, 2005 and 2004, respectively, and are classified as other assets in the consolidated balance sheet.

On June 24, 2004,
the Company completed an exchange offer exchanging its unregistered 6.125% senior notes for 6.125% senior notes registered by the Company pursuant to a registration statement filed under the Securities Act of 1933.

Long-term debt at December 31, 2005 and 2004 consisted of the following (dollars in thousands):



2005

2004Senior Notes bearing interest at 6.125% interest payable semi-annually, due March 2014

$
150,000

$
150,000Revolving Line of Credit payable to banks consist of amounts advanced under a $110,000,000 bank facility, bearing interest at either the
Eurodollar rate or the base rate, plus the applicable margin. Interest is generally payable quarterly and any accrued interest and principal are due and payable in full in September 2010





Revolving Line of Credit payable to banks consist of amounts advanced under a $110,000,000 bank facility, bearing interest at either the
Eurodollar rate or the base rate, plus the applicable margin. Accrued interest and principal was paid in full on September 29, 2005, the termination date.





4,000$
150,000

$
154,000




|8. | Redeemable Preferred Stock and Stockholders Equity
|-- | ---------------------------------------------------

The Class A, B and C preferred stock is redeemable by the Company at its option, in whole or in part, at par value. The Class C preferred stock has been classified outside of equity as the preferred stockholders control a majority of
the board of directors and therefore control the redemption rights.

Class C preferred stock has priority over the common stock in the
distribution of dividends and is entitled to a dividend equivalent to 10% of the par value per annum on a cumulative basis and is thereafter entitled to participate in the distribution of dividends at the same rate and upon the same conditions as
the common stock.

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

During the years ended December 31, 2005, 2004 and 2003, $56,480,000, $17,061,000 and $10,878,000, respectively, in dividends were declared and paid.



F-14



---

California Steel Industries, Inc. and Subsidiary

Notes to Consolidated Financial Statements



|9. | Related Party Transactions
|-- | --------------------------

The Company has
transactions in the normal course of business with affiliated companies. The Company is 50% owned by JFE Steel Corporation, a Japanese corporation, and 50% owned by Rio Doce Limited, a subsidiary of Companhia Vale do Rio Doce (CVRD), a
Brazilian corporation.

The Company purchases steel slab from CST, a former investee, and JFE Steel. CST was considered an affiliated
company until the investment was sold in June 2005 (Note 6). The following represents total purchases made from affiliated companies for the years ended December 31 (dollars in thousands):



2005

2004

2003CST

$
67,504

$
151,863

$
87,252JFE Steel


13,362


14,611


6,048


At December 31, 2005, the Company owed affiliated companies $12,987,000 for goods and
services. No amounts were owed to affiliated companies at December 31, 2004.



|10. | Commitments and Contingencies
|--- | -----------------------------

At December 31,
2005, the Company is committed, in the form of open purchase orders, to purchase approximately $84,874,000 in steel slabs and other commitments, of which $19,800,000 is from related parties.

When market conditions warrant, the Company enters into contracts to purchase certain commodities used in the manufacturing of its products, such as
electricity and natural gas. Some of these forward contracts do not require derivative accounting as the Company takes possession of the commodities in the normal course of business whereas other forward contracts are accounted for as derivatives in
accordance with SFAS No. 133 by the Company.

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

The Company is addressing environmental concerns caused by the former occupant at
the Companys Fontana site. The Company engaged an environmental consultant to conduct a remedial investigation and develop a remediation plan and remediation cost projections based upon the plan. Utilizing the remediation plan developed by the
environmental consultant, the Company developed an estimate of future costs of the remediation plan. The total aggregate cost of remediation is estimated to be approximately $1,800,000, which is included in the other accrued expenses in the 2005 and
2004 consolidated financial statements. The DTSC has not yet completed its review and approval of the Companys remediation plan; however, preliminary discussions between the DTSC and the Company have not indicated the need for any significant
changes to the remediation plan or the Companys estimate of related costs. The estimate of costs could change as a result of changes to the remediation plan required by the DTSC or unforeseen circumstances, including without limitations,
unknown site conditions, changes to applicable regulations or increased enforcement requirements by the regulators existing at the site.



F-15



---

California Steel Industries, Inc. and Subsidiary

Notes to Consolidated Financial Statements



|10. | Commitments and Contingencies (Continued)
|--- | -----------------------------------------



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

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



|11. | Income Taxes
|--- | ------------

Income tax expense (benefit) for the
years ended December 31, 2005, 2004 and 2003 consists of the following (dollars in thousands):



2005


2004


2003Current:Federal

$
33,672


$
61,258


$
(3,393
)State


8,481



14,180



(1,116
)42,153



75,438



(4,509
)Deferred:Federal


(4,865
)


(2,206
)


5,840State


(124
)


2,176



940(4,989
)


(30
)


6,780$
37,164


$
75,408


$
2,271


Actual tax expense from the expected tax expense (computed by applying the U.S.
federal statutory tax rate of 35% to income before income tax expense) is as follows (dollars in thousands):



2005

2004

2003Computed expected tax expense

$
28,185

$
64,660

$
2,385State income taxes, net of federal benefit


6,052


10,615


412Foreign withholding taxes


2,189





State manufacturing investment credit, net of federal benefit








(526
)Other


738


133


$
37,164

$
75,408

$
2,271




F-16



---

California Steel Industries, Inc. and Subsidiary

Notes to Consolidated Financial Statements



|11. | Income Taxes (Continued)
|--- | ------------------------



The tax effects of temporary differences that give rise to significant portions of the deferred tax
assets and deferred tax liabilities at December 31, 2005 and 2004 are as follows (dollars in thousands):



2005


2004Deferred tax assets:Inventory

$
261


$
1,030State taxes


4,462



7,130Allowance for doubtful accounts


329



307Accrued expenses


3,908



2,517Total gross deferred tax assets


8,960



10,984Less valuation allowance






Net deferred tax assets


8,960



10,984Deferred tax liabilities:Property, plant and equipment


(54,575
)


(57,671
)Under distributed earnings of affiliate






(2,624
)Other


(3,476
)


(4,769
)Total gross deferred tax liabilities


(58,051
)


(65,064
)Net deferred tax liabilities

$
(49,091
)

$
(54,080
)


Based on the Companys historical pretax earnings, management believes it is more likely
than not that the Company will realize the benefit of the deferred tax assets existing at December 31, 2005. Management believes the existing deductible temporary differences will reverse during periods in which the Company generates net
taxable income.



|12. | Employee Benefit and Retirement Plans
|--- | -------------------------------------

401(k)
plan: The Company maintains a 401(k) savings plan (the 401(k) Plan), a tax qualified cash or deferred tax arrangement defined contribution plan under Section 401(k) of the Internal Revenue Code of 1986, as amended. The 401(k)
Plan provides the participants with benefits upon retirement, death, disability or termination of employment with the Company. Employees are eligible to participate in the salary reduction portion of the 401(k) Plan on the first day of the calendar
month following their date of hire. Participants may authorize the Company to contribute to the 401(k) Plan on their behalf a percentage of their compensation, not to exceed the legally permissible limits.

The 401(k) Plan provides for the Companys discretionary matching and profit sharing contributions. The Company currently matches 100% of the first
4% of the participants deferral under the 401(k) Plan and 50% of the next 2% of the participants deferral under the 401(k) Plan each year. Participants are immediately 100% vested in both their contributions and Company contributions
plus actual earnings and losses thereon. Company contributions are accrued as participant contributions are withheld and are paid in full to the trustee of the 401(k) Plan on a pay period basis. Each year the Company may elect to make additional
contributions to the 401(k) Plan. This discretionary employer contribution, if the Company makes it, is allocated to each participants account based on the participants compensation for the year relative to the compensation of all the
participants for that year. In order to share in the allocation of the discretionary employer contribution, if any, a participant must complete 1,000 hours of service in the plan year.

Plan expense for the three years ended December 31, 2005, 2004 and 2003 were approximately $2,393,000, $2,446,000 and $2,247,000, respectively.



F-17



---

California Steel Industries, Inc. and Subsidiary

Notes to Consolidated Financial Statements



|12. | Employee Benefit and Retirement Plans (Continued)
|--- | -------------------------------------------------



Profit sharing plan: The Company sponsors a profit sharing plan under which contributions are
established based on a pool amount, equal to 8% of the Companys income before taxes, gain or loss on disposition of fixed assets, and equity in income (loss) of affiliate. The basis for determining the profit sharing pool is subject to review
and approval of the Companys board of directors. The employees share in the pool amount is based on his or her length of service with the Company during the profit sharing period. Employees who voluntarily terminate their employment for
reasons other than retirement before the end of the profit sharing period and employees whose employment is involuntarily terminated are not eligible to receive any profit sharing award. Profit sharing expense for the years ended December 31,
2005, 2004 and 2003 was approximately $6,775,000, $17,772,000 and $891,000, respectively.



|13. | Selected Quarterly Financial Data (Unaudited)
|--- | ---------------------------------------------

Summarized quarterly financial data for 2005 and 2004 is as follows (dollars in thousands):



Quarter

Total1st

2nd

3rd


4th2005:Net sales

$
339,314

$
306,595

$
287,698


$
300,779

$
1,234,386Gross profit


48,414


22,446


4,486



38,772


114,118Income (loss) for operations


41,121


19,139


(1,536
)


29,796


88,520Net income (loss)


22,074


9,673


(1,065
)


12,683


43,3652004:Net sales

$
234,798

$
290,048

$
390,255


$
341,891

$
1,256,992Gross profit


20,406


52,654


95,004



68,612


236,676Income for operations


14,071


46,059


86,106



60,715


206,951Net income


1,819


26,302


46,111



35,103


109,335




F-18



---

CALIFORNIA STEEL INDUSTRIES, INC.

AND SUBSIDIARY

SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS



|                                           |  |                                |                             |           |                          |                       |  |   |                          |  |   |          |   |  |   |        
|------------------------------------------ |  | ------------------------------ | --------------------------- | --------- | ------------------------ | --------------------- |  | - | ------------------------ |  | - | -------- | - |  | - | -------
|                                           |  | Balance at Beginning of Period |                             | Additions |                          | Deductions to Reserve |  |   | Balance at End of Period
|                                           |  |                                | Charged to CostsandExpenses |           | Charged to otheraccounts |                       | 
|Year ended December 31, 2005 A/R Allowance |  | $                              | 700,000                     |           | $                        | 50,000                |  | $ |                         |  | $ |         |   |  | $ | 750,000
|                                           |  |                                |                             |           |                         
|Year ended December 31, 2004 A/R Allowance |  | $                              | 400,000                     |           | $                        | 300,000               |  | $ |                         |  | $ |         |   |  | $ | 700,000
|                                           |  |                                |                             |           |                         
|Year ended December 31, 2003 A/R Allowance |  | $                              | 300,000                     |           | $                        | 322,859               |  | $ |                         |  | $ | (222,859 | ) |  | $ | 400,000



S-1



---

SIGNATURES

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

March 27, 2006



CALIFORNIA STEEL INDUSTRIES, INC.By:

/s/ MASAKAZU KURUSHIMAMasakazu Kurushima, President and 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 the Registrant and in the capacities and on the dates indicated.



|                                             |  |                                                                                                   |  |               
|-------------------------------------------- |  | ------------------------------------------------------------------------------------------------- |  | --------------
|Signature                                    |  | Title                                                                                             |  | Date          
|                                             |  |                                                                                                  
|/S/    MASAKAZU
KURUSHIMA Masakazu Kurushima |  | President and Chief Executive Officer (Principal Executive Officer)                               |  | March 27, 2006
|                                             |  |                                                                                                  
|/S/    RICARDO
BERNARDES Ricardo Bernardes   |  | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |  | March 27, 2006
|                                             |  |                                                                                                  
|/S/    VICENTE
WRIGHT Vicente Wright         |  | Chairman of the Board                                                                             |  | March 27, 2006
|                                             |  |                                                                                                  
|/S/    TOSHIHIRO
KABASAWA Toshihiro Kabasawa |  | Director                                                                                          |  | March 27, 2006
|                                             |  |                                                                                                  
|/S/    JAMES
PESSOA James Pessoa             |  | Director                                                                                          |  | March 27, 2006
|                                             |  |                                                                                                  
|/S/    HIDENORI
TAZWA Hidenori Tazwa         |  | Director                                                                                          |  | March 27, 2006



---

EXHIBIT INDEX



|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|            | 
|3.1         |  | Certificate of Incorporation of the Registrant as amended by Amendment to the Certificate of Incorporation filed June 6, 1984, with Delaware Secretary of State, as amended by the Certificate
of Amendment to the Certificate of Incorporation filed August 2, 1984, with the Delaware Secretary of State, as amended by the Certificate of Amendment to the Certificate of Incorporation, filed January 12, 1988, with the Delaware Secretary of
State, and as amended by the Certificate of Ownership merging California Steel Industries Tubular Products, Inc. into the Registrant, filed with the Delaware Secretary of State on December 20, 1993.(1)
|            | 
|3.2         |  | Certificate of Amendment to the Certificate of Incorporation filed July 27, 1999, with the Delaware Secretary of State.(6)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|            | 
|3.3         |  | Bylaws of the Registrant, as amended on July 16, 1999.(6)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|            | 
|4.1         |  | Indenture dated as of April 6, 1999 between the Registrant and State Street Bank Trust Company of California, N.A., Trustee, relating to the Registrants 8% Senior Notes due April 6,
2009.(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|            | 
|4.2         |  | Specimen Series B note.(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|            | 
|4.3         |  | Indenture, dated as of March 22, 2004, between the Registrant and U.S. Bank National Association, Trustee.(8)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|            | 
|4.4         |  | Specimen Series A note  6.125% Senior Notes due 2014 (included in Exhibit 4.4).(8)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|            | 
|4.5         |  | First Supplemental Indenture dated March 19, 2004 between the Registrant and U.S. Bank National Association, a national banking association, as successor Trustee to State Street Bank and
Trust Company of California, N.A.(8)                                                                                                                                                                                                                                                                                                                                                                                                                             
|            | 
|4.6         |  | Shareholders Agreement, dated June 27, 1995, by and among Rio Doce Limited, Companhia Vale do Rio Doce, Kawasaki Steel Holdings (USA), Inc. and Kawasaki Steel
Corporation.(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|            | 
|10.1        |  | Revolving Credit Agreement, dated as of March 10, 1999, among the Registrant, the Lending Institutions from time to time party thereto as lenders, BankBoston, N.A., in its capacity as Loan
and Collateral Agent, and Bank of America National Trust and Savings Association, in its capacity as Letter of Credit and Documentation Agent and BancBoston Robertson Stephens Inc. and NationsBanc Montgomery Securities LLC, as the
Arrangers.(1)                                                                                                                                                                                                           
|            | 
|10.2        |  | Agreement for the Purchase of Carbon Steel Slabs, dated as of December 5, 1984, by and between the Registrant and Companhia Siderurgica de Tubarão, as amended by Memorandum of
Agreement, dated as of June 7, 1985, Memorandum of Agreement No. MA-02, dated as of December 9, 1986, Memorandum of Agreement No. MA-03, dated as of December 11, 1986, Memorandum of Agreement No. MA-04, dated as of December 11, 1986, Memorandum of
Agreement No. MA-05, dated as of May 22, 1987 and Memorandum of Agreement No. MA-06, dated as of December 11, 1996.(1)                                                                                              
|            | 
|10.3        |  | Contract, dated August 20, 1990, by and between the Registrant and Seamar Shipping Corporation of Monrovia, Liberia.(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|            | 
|10.4        |  | The Burlington Northern and Santa Fe Railway Company BNSFC 302606 Regulated Transportation Contract, dated as of November 19, 1998, by and between the Registrant and Burlington Northern
Railroad Company.(1)                                                                                                                                                                                                                                                                                                                                                                                                                                              



---

|      |  |                                                                                                                                                                                                                                                                                                                                                                            
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|10.5  |  | Equipment Lease Agreement, dated as of September 30, 1998, by and between the Registrant and State Street Bank and Trust Company of California, National Association.(1)                                                                                                                                                                                                   
|      | 
|10.6  |  | Settlement Agreement, dated as of June 1, 1995, by and among the Registrant, Kaiser Ventures, Inc., KSC Recovery, Inc. and Kaiser Steel Land Development, Inc.(1)                                                                                                                                                                                                          
|      | 
|10.7  |  | Groundwater Indemnity Agreement, dated as of June 1, 1995, between the Registrant and Kaiser Ventures, Inc.(1)                                                                                                                                                                                                                                                             
|      | 
|10.8  |  | A 1996 Expedited Remedial Action Voluntary Enforceable Agreement, by and among the Registrant and the California Environmental Protection Agency, Department of Toxic Substances
Control.(1)                                                                                                                                                                               
|      | 
|10.9  |  | Purchase Agreement dated March 30, 1999 by and among the Registrant, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, BancBoston Robertson Stephens Inc. and
NationsBanc Montgomery Securities LLC.(1)                                                                                                                                             
|      | 
|10.10 |  | Registration Rights Agreement dated as of April 6, 1999 by and among the Registrant, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, BancBoston Robertson
Stephens Inc. and NationsBanc Montgomery Securities LLC.(1)                                                                                                                             
|      | 
|10.11 |  | Addendum No. 39, dated May 31, 2000, to Contract, dated August 20, 1990, by and between the Registrant and Seamar Shipping Corporation of Monrovia, Liberia.(2)                                                                                                                                                                                                            
|      | 
|10.12 |  | First Amendment, dated as of April 28, 2000, to Revolving Credit Agreement, dated as of March 10, 1999, among the Registrant, the Banks named therein, Fleet National Bank (f/k/a BancBoston,
N.A.), as loan and collateral agent for the Banks, and Bank of America National Trust and Savings Association, as documentation and letter of credit agent for the Banks.(2) 
|      | 
|10.13 |  | Amendment to Supplemental Executive Retirement Plan, dated October 10, 2000, between the Registrant and James E. Declusin.(3)                                                                                                                                                                                                                                              
|      | 
|10.14 |  | Supplemental Executive Retirement Plan, dated as of September 19, 2000, between the Registrant and Brett J. Guge.(3)                                                                                                                                                                                                                                                       
|      | 
|10.15 |  | The Burlington Northern and Santa Fe Railway Company BNSFC 302606Amendment 1 Regulated Transportation Contract, dated as of January 15, 2001, by and between the Registrant and The
Burlington Northern and Santa Fe Railway Company.(4)                                                                                                                                  
|      | 
|10.16 |  | Second Amendment, dated as of March 12, 2001, to Revolving Credit Agreement, dated as of March 10, 1999, among the Registrant, the Banks named therein, Fleet National Bank (f/k/a BankBoston,
N.A.), as loan and collateral agent for the Banks, and Bank of America National Trust and Savings Association, as documentation and letter of credit agent for the Banks.(5)
|      | 
|10.17 |  | Fourth Amendment to Revolving Credit Agreement dated September 26, 2001, among the Registrant, the Banks named therein, Bank of America, N.A., as loan and collateral agent for the Banks, and
Bank of America, N.A., as documentation and letter of credit agent for the Banks.(5)                                                                                        
|      | 
|10.18 |  | Fifth Amendment, dated as of March 22, 2002, to Revolving Credit Agreement, dated as of March 10, 1999, among the Registrant, the Banks named therein, and Bank of America National Trust and
Savings Association, as loan and collateral agent and as documentation and letter of credit agent for the Banks.(7)                                                          



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|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|10.19 |  | The Burlington Northern and Santa Fe Railway Company BNSFC 302606Amendment 2 Regulated Transportation Contract, dated as of September 4, 2002, by and between the Registrant and The
Burlington Northern and Santa Fe Railway Company.(10)                                                                      
|      | 
|10.20 |  | Sixth Amendment, dated as of July 17, 2003, to Revolving Credit Agreement, dated as of March 10, 1999, among the Registrant, the Banks named therein, and Bank of America National Trust and
Savings Association, as loan and collateral agent and as documentation and letter of credit agent for the Banks.(10)
|      | 
|10.21 |  | Supplemental Executive Retirement Plan, dated as of January 16, 2003, between the Registrant and James L. Wilson (10)                                                                                                                                                                                            
|      | 
|10.22 |  | Call and Put Option Agreement dated October 14, 2004 between Arcelor (a company organized under the laws of the Luxembourg) and California Steel Industries, Inc.(9)                                                                                                                                             
|      | 
|10.23 |  | Waiver dated October 14, 2004 executed by California Steel Industries, Inc., in favor of Arcelor.(9)                                                                                                                                                                                                             
|      | 
|10.24 |  | Senior Secured Revolving Credit Agreement dated as of September 29, 2005 by and among California Steel Industries, Inc., Mizuho Corporate Bank, The Bank of Tokyo-Mitsubishi, Ltd., Citibank
(West), FSB and Wells Fargo Bank.(11)                                                                               
|      | 
|14.1  |  | Code of Ethics.(12)                                                                                                                                                                                                                                                                                              
|      | 
|21.1  |  | Subsidiaries of the Registrant.                                                                                                                                                                                                                                                                                  
|      | 
|31.1  |  | Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                
|      | 
|31.2  |  | Certification of Executive Vice President, Finance pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                    
|      | 
|32.1  |  | Certification of President and Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                
|      | 
|32.2  |  | Certification of Executive Vice President, Finance pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                    



|(1) | Incorporated by reference to the Registrants Registration Statement on Form S-4, File No. 333-79587, as filed with the Securities and Exchange Commission on May 28,
1999, as amended.
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|(2) | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q, for the period ended June 30, 2000, as filed with the Securities and Exchange Commission on
August 4, 2000.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q, for the period ended September 30, 2000, as filed with the Securities and Exchange Commission
on October 27, 2000.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Incorporated by reference to the Registrants Annual Report on Form 10-K, for the year ended December 31, 2000, as filed with the Securities and Exchange Commission on
March 29, 2001.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q, for the period ended September 30, 2001, as filed with the Securities and Exchange Commission
on November 9, 2001.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | Incorporated by reference to the Registrants Annual Report on Form 10-K, for the year ended December 31, 2001, as filed with the Securities and Exchange Commission on
March 28, 2002.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---

|(7) | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q, for the period ended March 31, 2002, as filed with the Securities and Exchange Commission on
April 29, 2002.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(8) | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q, for the quarter ended March 31, 2004, as filed with the Securities and Exchange Commission on
April 28, 2004.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(9) | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q, for the period ended September 30, 2004, as filed with the Securities and Exchange Commission
on October 15, 2004.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(10) | Incorporated by reference to the Registrants Annual Report on Form 10-K, for the year ended December 31, 2003, as filed with the Securities and Exchange Commission on
March 8, 2004.
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(11) | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q, for the period ended September 30, 2005, as filed with the Securities and Exchange Commission
on October 28, 2005.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(12) | Incorporated by reference to the Registrants Annual Report on Form 10-K, for the year ended December 31, 2004, as filed with the Securities and Exchange Commission on
March 28, 2005.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------