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UNITED STATESSECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM
10-Q

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| | x | QUARTERLY REPORT PURSUANT TO SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
| | - | ---------------------------------------------------------------------------------------

| |  | For the quarterly period ended June 30, 2003
| |  | --------------------------------------------

OR

| | o | 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)

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| | Delaware(StateorOtherJurisdictionofIncorporationorOrganization) |  | 33-0051150(I.R.S.EmployerIdentificationNo.) | 
| | --------------------------------------------------------------- |  | ------------------------------------------- | 

| | 14000SanBernardinoAvenueFontana,California(AddressofprincipalexecutiveofficesofRegistrant) |  | 92335(ZipCode) | 
| | ------------------------------------------------------------------------------------------ |  | -------------- | 

(909)350-6200(Registrants
telephone number including area code)

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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. x Yes  o No

As of August 8, 2003, 1,000 shares of the
Companys common stock, no par value, were outstanding.

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CALIFORNIA STEEL INDUSTRIES, INC.

Table of Contents



|       |  |                       |    |                                                                                                                      | Page
|------ |  | --------------------- | -- | -------------------------------------------------------------------------------------------------------------------- | ----
|       |  |                       |    |                                                                                                                      |     
|PART I |  | FINANCIAL INFORMATION | 1 
|       |  |                       |    |                                                                                                                      |     
|       |  | ITEM 1.               |    | FINANCIAL STATEMENTS                                                                                                 | 1   
|       |  |                       |    |                                                                                                                      |     
|       |  |                       |    | Consolidated Balance Sheets
as of June 30, 2003 (unaudited) and December 31, 2002                                    | 1   
|       |  |                       |    |                                                                                                                      |     
|       |  |                       |    | Consolidated Statements of Operations
for the three and six months ended June 30, 2003 and June 30, 2002 (unaudited) | 2   
|       |  |                       |    |                                                                                                                      |     
|       |  |                       |    | Consolidated Statements of Cash Flows
for the six months ended June 30, 2003 and June 30, 2002 (unaudited)           | 3   
|       |  |                       |    |                                                                                                                      |     
|       |  |                       |    | Notes to Consolidated Financial Statements (unaudited)                                                               | 4   
|       |  |                       |    |                                                                                                                      |     
|       |  | ITEM 2.               |    | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                | 6   
|       |  |                       |    |                                                                                                                      |     
|       |  | ITEM 3.               |    | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                           | 10  
|       |  |                       |    |                                                                                                                      |     
|       |  | ITEM 4.               |    | CONTROLS AND PROCEDURES                                                                                              | 11  
|       |  |                       |    |                                                                                                                      |     
|PARTII |  | OTHER INFORMATION     | 12
|       |  |                       |    |                                                                                                                      |     
|       |  | ITEM 1.               |    | LEGAL PROCEEDINGS                                                                                                    | 12  
|       |  |                       |    |                                                                                                                      |     
|       |  | ITEM 5.               |    | OTHER ITEMS                                                                                                          | 12  
|       |  |                       |    |                                                                                                                      |     
|       |  | ITEM 6.               |    | EXHIBITS AND REPORTS ON FORM 8-K                                                                                     | 13  

|SIGNATURE         | 15
|----------------- | --
|                  |   
|INDEX TO EXHIBITS | 16

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| | PART I | FINANCIAL INFORMATION
| | ------ | ---------------------

| | ITEM 1. | FINANCIAL STATEMENTS
| | ------- | --------------------

CALIFORNIA STEEL INDUSTRIES, INC.AND SUBSIDIARYConsolidated Balance Sheets

(In thousands except share and per share data)



|                                                                                                                          |  | AsofJune30,2003 |         | AsofDecember31,2002 |  
|------------------------------------------------------------------------------------------------------------------------- |  | --------------- | ------- | ------------------- | -
|                                                                                                                          |  |                 |         |                     |  
|                                                                                                                          |  | (Unaudited)     |         |                     |  
|                                                                                                                          |  |                 |         |                     |  
|Assets                                                                                                                    |  |                 |         |                     |  
|Current assets:                                                                                                           |  |                 |         |                     |  
|Cash and cash equivalents                                                                                                 |  | $               | 6,806   |                     | $
|Trade accounts receivable, less allowance for doubtful receivables of $375 at June 30, 2003 and $300 at December 31, 2002 |  |                 | 70,358  |                     |  
|Inventories                                                                                                               |  |                 | 166,232 |                     |  
|Deferred income taxes                                                                                                     |  |                 | 3,138   |                     |  
|Other receivables and prepaid expenses                                                                                    |  |                 | 2,796   |                     |  
|                                                                                                                          |  |                 |         |                     |  
|Total current assets                                                                                                      |  |                 | 249,330 |                     |  
|                                                                                                                          |  |                 |         |                     |  
|Investment in affiliated company                                                                                          |  |                 | 37,107  |                     |  
|Other assets                                                                                                              |  |                 | 2,587   |                     |  
|Property, plant and equipment, net                                                                                        |  |                 | 241,583 |                     |  
|                                                                                                                          |  |                 |         |                     |  
|Total assets                                                                                                              |  | $               | 530,607 |                     | $
|                                                                                                                          |  |                 |         |                     |  
|                                                                                                                          |  |                 |         |                     |  
|Liabilities and stockholders equity                                                                                      |  |                 |         |                     |  
|Current liabilities:                                                                                                      |  |                 |         |                     |  
|Accounts payable                                                                                                          |  | $               | 60,855  |                     | $
|Accrued interest expense                                                                                                  |  |                 | 3,454   |                     |  
|Accrued utilities                                                                                                         |  |                 | 6,097   |                     |  
|Income taxes payable                                                                                                      |  |                 | 4,972   |                     |  
|Other accrued expenses                                                                                                    |  |                 | 8,223   |                     |  
|                                                                                                                          |  |                 |         |                     |  
|Total current liabilities                                                                                                 |  |                 | 83,601  |                     |  
|                                                                                                                          |  |                 |         |                     |  
|Long-term debt                                                                                                            |  |                 | 150,000 |                     |  
|Deferred income taxes                                                                                                     |  |                 | 50,468  |                     |  
|Stockholders equity:                                                                                                     |  |                 |         |                     |  
|Class C preferred stock, $10,000 par value per share. Authorized 3,000 shares; issued and outstanding 3,000 shares        |  |                 | 30,000  |                     |  
|Common stock, no par value. Authorized 2,000 shares; issued and outstanding 1,000 shares                                  |  |                 | 10,000  |                     |  
|Retained earnings                                                                                                         |  |                 | 206,538 |                     |  
|                                                                                                                          |  |                 |         |                     |  
|Total stockholders equity                                                                                                |  |                 | 246,538 |                     |  
|Commitments and Contingencies                                                                                             |  |                 |        |                     |  
|                                                                                                                          |  |                 |         |                     |  
|Total liabilities and stockholders equity                                                                                |  | $               | 530,607 |                     | $
|                                                                                                                          |  |                 |         |                     |  

See accompanying notes to consolidated financial statements.

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CALIFORNIA STEEL INDUSTRIES, INC.AND SUBSIDIARYConsolidated Statements of Operations

(In thousands)



|                                                  |  | ThreemonthsendedJune30, |         | SixmonthsendedJune30, |  
|------------------------------------------------- |  | ----------------------- | ------- | --------------------- | -
|                                                  |  |                         |         |                       |  
|                                                  |  | (Unaudited)             |        
|                                                  |  | 2003                    |         | 2002                  |  
|                                                  |  |                         |         |                       |  
|Net sales                                         |  | $                       | 181,574 |                       | $
|Cost of sales                                     |  |                         | 173,781 |                       |  
|                                                  |  |                         |         |                       |  
|Gross profit                                      |  |                         | 7,793   |                       |  
|Selling, general and administrative expenses      |  |                         | 5,386   |                       |  
|                                                  |  |                         |         |                       |  
|Income from operations                            |  |                         | 2,407   |                       |  
|Other income (expense):                           |  |                         |         |                       |  
|Equity in income (loss) of affiliate              |  |                         | 428     |                       |  
|Interest expense, net                             |  |                         | (3,296  | )                     |  
|Other, net                                        |  |                         | 291     |                       |  
|                                                  |  |                         |         |                       |  
|Income (loss) before income tax expense (benefit) |  |                         | (170    | )                     |  
|Income tax expense (benefit)                      |  |                         | (190    | )                     |  
|                                                  |  |                         |         |                       |  
|Net income                                        |  | $                       | 20      |                       | $
|                                                  |  |                         |         |                       |  

See accompanying notes to consolidated financial statements.

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CALIFORNIA STEEL INDUSTRIES, INC.AND SUBSIDIARYConsolidated Statements of Cash Flows(In thousands)



|                                                                                  |  | SixMonthsEndedJune30, |        
|--------------------------------------------------------------------------------- |  | --------------------- | -------
|                                                                                  |  |                       |        
|                                                                                  |  | 2003                  |        
|                                                                                  |  |                       |        
|                                                                                  |  | (Unaudited)           |        
|Cash flows from operating activities:                                             |  |                       |        
|Net income                                                                        |  | $                     | 5,384  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                       |        
|Depreciation and amortization                                                     |  |                       | 14,684 
|Gain on disposition of property, plant and equipment                              |  |                       | (5     
|Undistributed (earnings) losses of affiliate                                      |  |                       | (760   
|Dividends received from affiliate                                                 |  |                       | 418    
|Change in assets and liabilities:                                                 |  |                       |        
|Trade accounts receivable, net                                                    |  |                       | (2,718 
|Inventories                                                                       |  |                       | 24,477 
|Other receivables and prepaid expenses                                            |  |                       | 285    
|Accounts payable                                                                  |  |                       | (11,017
|Income taxes payable                                                              |  |                       | 2,198  
|Accrued interest expense                                                          |  |                       | 40     
|Deferred income taxes                                                             |  |                       |       
|Accrued utilities and other accrued expenses                                      |  |                       | 688    
|                                                                                  |  |                       |        
|                                                                                  |  |                       |        
|Net cash provided by operating activities                                         |  |                       | 33,674 
|                                                                                  |  |                       |        
|Cash flows from investing activities:                                             |  |                       |        
|Additions to property, plant and equipment                                        |  |                       | (10,764
|Proceeds from disposition of property, plant and equipment                        |  |                       | 5      
|                                                                                  |  |                       |        
|Net cash used in investing activities                                             |  |                       | (10,759
|                                                                                  |  |                       |        
|Cash flows from financing activities:                                             |  |                       |        
|Net repayments under line-of-credit agreement with banks                          |  |                       | (13,000
|Dividends paid                                                                    |  |                       | (6,000 
|                                                                                  |  |                       |        
|Net cash used in financing activities                                             |  |                       | (19,000
|                                                                                  |  |                       |        
|Net increase in cash and cash equivalents                                         |  |                       | 3,915  
|Cash and cash equivalents at beginning of period                                  |  |                       | 2,891  
|                                                                                  |  |                       |        
|Cash and cash equivalents at end of period                                        |  | $                     | 6,806  
|                                                                                  |  |                       |        
|Supplemental disclosures of cash flow information:                                |  |                       |        
|Cash paid (received) during the period for:                                       |  |                       |        
|Interest (net of amount capitalized)                                              |  | $                     | 6,743  
|Income taxes                                                                      |  |                       | 1,145  
|                                                                                  |  |                       |        

See accompanying notes to consolidated financial statements.

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CALIFORNIA STEEL INDUSTRIES, INC.AND SUBSIDIARYNotes To Consolidated Financial Statements (Unaudited)

1.Basis of Presentation

The
accompanying unaudited consolidated financial statements of California Steel Industries, Inc. and its subsidiary as of and for the six months ended June 30, 2003 and 2002 have been prepared in accordance with accounting principles generally accepted
in the United States of America for interim financial information and the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles
generally accepted in the United States of America for complete financial statements. However, the information reflects all adjustments (consisting only of normal recurring adjustments) that, in the opinion of our management, are necessary to
present fairly the financial position and results of operations for the periods indicated.

The accompanying consolidated financial statements should be read in conjunction with
the audited consolidated financial statements and notes thereto for the years ended December 31, 2002 and 2001 contained in California Steel Industries, Inc.s Form 10-K for the year ended December 31, 2002. Results of operations for the six
months ended June 30, 2003 are not necessarily indicative of results expected for the full year.

2.New Accounting Pronouncements

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

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

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

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Companys results of operations or financial position.

In November 2002, the FASB
issued Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (the Interpretation), which addresses the disclosure to be made by
a guarantor in its interim and annual financial statements about its obligations under guarantees. At June 30, 2003, the Company has no such guarantees.

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

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

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3.Inventories

Inventories are stated at the lower of cost (determined under the first-in, first-out method of accounting) or market value.



|                |  | June30,2003    |         | December31,2002 |  
|--------------- |  | -------------- | ------- | --------------- | -
|                |  |                |         |                 |  
|                |  | (unaudited)    |         |                 |  
|                |  | (In thousands) |        
|Finished goods  |  | $              | 21,635  |                 | $
|Work-in-process |  |                | 33,061  |                 |  
|Raw materials   |  |                | 105,699 |                 |  
|Other           |  |                | 5,837   |                 |  
|                |  |                |         |                 |  
|Total           |  | $              | 166,232 |                 | $
|                |  |                |         |                 |  

| | ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
| | ------- | -------------------------------------------------------------------------------------

Forward-Looking
Statements

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

| |  | our substantial indebtedness, interest expense and principal repayment obligations under our bank facility, when drawn upon, and 8.5% 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,
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | because our board of directors consists of four members and is elected by our two stockholders, each of whom holds 50% of our stock, there is a possibility of deadlocks among our board of directors that could result in
costly delays in making important business decisions and put us at a competitive disadvantage,
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | fluctuations in commodity prices for our electricity and natural gas requirements,
| | - | ----------------------------------------------------------------------------------

| |  | competitive factors and pricing pressures,
| | - | ------------------------------------------

| |  | our ability to control costs and maintain quality,
| | - | --------------------------------------------------

| |  | future expenditures for capital projects, and
| | - | ---------------------------------------------

| |  | industry-wide market factors and general economic and business conditions.
| | - | --------------------------------------------------------------------------

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Results of Operations



|            |  | TonsBilledThreemonthsendedJune30, |  | TonsBilledSixmonthsendedJune30, | 
|----------- |  | --------------------------------- |  | ------------------------------- | 
|            |  |                                   |  |                                 | 
|            |  | 2003                              |  | 2002                            | 
|            |  |                                   |  |                                 | 
|Hot Rolled  |  | 196,485                           |  | 252,506                         | 
|Cold Rolled |  | 44,892                            |  | 61,190                          | 
|Galvanized  |  | 166,845                           |  | 193,564                         | 
|ERW Pipe    |  | 39,173                            |  | 30,078                          | 
|            |  |                                   |  |                                 | 
|Total       |  | 447,395                           |  | 537,338                         | 
|            |  |                                   |  |                                 | 

Net sales. Net sales decreased $6,980,000 or 3.7% from $188,554,000 for
the three months ended June 30, 2002 to $181,574,000 for the three months ended June 30, 2003. However the year-to-date net sales increased $34,337,000, or 9.9%, from $346,066,000 for the six months ended June 30, 2002 to $380,403,000 for the six
months ended June 30, 2003. Due to poor market conditions, our net tons billed decreased by 89,943 from 537,338 for the three months ended June 30, 2002 to 447,395 for the same period in year 2003. Our year-to-date net tons billed also decreased
122,377 or 12.1%, for the six months ended June 30, 2003 compared to the six months ended June 30, 2002. However, our unit prices increased due to better product mix for the three and six months ending June 30, 2003, compared to the same period in
2002.

Gross profit. Gross profit decreased $21,294,000 or 73.2% from $29,087,000 for the three months ending June 30, 2002 to $7,793,000 for the same
period in 2003. Year-to-date gross profit also decreased $12,845,000, or 31.4%, from $40,897,000 for the six months ended June 30, 2002 to $28,052,000 for the six months ended June 30, 2003. Gross profit as a percentage of net sales also decreased
from 15.4% for the three months ending June 30, 2002 to 4.3% for the three months ending June 30, 2003 and from 11.8% for the six months ended June 30, 2002 to 7.4% for the same period in 2003. Our gross profit decreased primarily as a result of an
increase in our slab consumption cost, higher utility costs, partially offset by increases in our average sales price.

Selling, general and administrative expenses
(SG&A). Selling, general and administrative expenses decreased $595,000 or 9.9% from $5,981,000 for the three months ending June 30, 2002 to $5,386,000 for the three months ending June 30, 2003 primarily due to lower
compensation. However our year-to-date SG&A expenses increased $2,241,000, or 19.6%, from $11,432,000 for six months ended June 30, 2002 to $13,673,000 for six months ended June 30, 2003 primarily due to higher compensation.

Equity in income (loss) of affiliate. We maintain a 1.5% ownership interest in Companhia Siderurgica de Tubarao (CST), which is based on our ownership of 4.0% of its
common stock. Our investment in Companhia Siderurgica de Tubarao is accounted for under the equity method of accounting. For the three and six months ended June 30, 2003, we recognized income from our investment in Companhia Siderurgica de Tubarao
of $ 428,000 and $760,000 compared to a loss of $464,000 and $946,000 for the same period in 2002. We also received dividends from CST in the amount of $418,000 and $384,000 for the six months ended June 30, 2003 and 2002, respectively.

Interest expense. Interest expense decreased $307,000 from $3,603,000 for three months ending June 30, 2002 to $3,296,000 for the same period in 2003. The
year-to-date interest expense also decreased $433,000, or 6.1%, from $7,137,000 for the six months ended June 30, 2002 to $6,704,000 for the same period in 2003. The decrease in interest expense for three and six months ending June 30,2003,
resulted

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from lower average outstanding debt and lower interest rates on our revolving line of credit during this period in 2003 compared to the same period in 2002.
Interest expense figures are net of interest income and reversal of capitalized interest of $63,000 for the three months ending June 30, 2003 and interest income and capitalized interest of $123,000 for the same period in 2002 and interest income
and capitalized interest of $78,000 for the six months ended June 30, 2003 and $483,000 for the same period in 2002.

Income taxes. Income tax
decreased $7,849,000 from $7,659,000 tax expense for the three months ended June 30, 2002 to $190,000 tax benefit for the three months ended June 30, 2003. Year-to-date income tax expense also decreased $5,242,000, from $8,584,000, for the six
months ended June 30, 2002 to $3,342,000, for the six months ended June 30, 2003, as a result of loss before income taxes of $170,000 for the three months ended June 30, 2003 compared to income before income taxes of $19,081,000, for the same period
in 2002 and lower income before income taxes of $8,726,000, for the six months ended June 30, 2003, compared to $21,828,000 for the same period in 2002. Our effective tax rate was 38.3% for six months ended June 30, 2003 compared to 39.3% for six
months ended June 30, 2002. During the six months period ended June 30, 2003 and 2002, our effective tax rate was influenced by State Manufacturers Investment Tax Credit (MIC) of $370,000 and $577,500 respectively.

Net income/loss. Net income for the three months ended June 30, 2003 was $20,000 compared to net income of $11,422,000 for the three months ended June 30, 2002, a decrease
of $11,402,000. Our net income for the six months ended June 30, 2003 was $5,384,000 compared to a net income of $13,244,000 for the six months ended June 30, 2002, a decrease of $7,860,000.

Liquidity and Capital Resources

At June 30, 2003, we had $6,806,000 in cash and cash equivalents and approximately $116,000,000 in
financing available under our credit facilities. During the six months ended June 30, 2003, cash flow from operations provided $33,674,000, which consisted of generation of cash flow of $5,384,000 in net income, $14,684,000 in depreciation and
amortization expense and a net cash flow increase of $13,953,000 due to changes in assets and liabilities. The majority of the net cash flow changes in assets and liabilities were attributable to a $24,477,000 decrease in inventories and a
$2,198,000 increase in income tax payable offset by a $2,718,000 increase in trade accounts receivable and a $10,289,000 decrease in payables. Cash flow from investing activities during the six months ended June 30, 2003 consisted primarily of
$10,764,000 of capital expenditures. Cash flows from financing activities during the six months ended June 30, 2003 consisted of net repayments under our credit facilities of $13,000,000 and a dividend payment of $6,000,000. During the six month
period ended June 30, 2003, we also paid $6,375,000, representing payment of six months interest on our 8.5% senior notes.

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

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 2003. The Company was in compliance
with all the bank covenants at the end of June 30, 2003.

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Commitment and Contingencies

The following table
represents a list of the Companys contractual obligations and commitments as of June 30, 2003:



|                            |  | PaymentsDuebyPeriod(amountsinthousands) |        
|--------------------------- |  | --------------------------------------- | -------
|                            |  |                                         |        
|                            |  | Total                                   |        
|                            |  |                                         |        
|Long Term Debt              |  | $                                       | 150,000
|Contractual Commitments     |  |                                         | 77,880 
|Operating Leases            |  |                                         | 27,803 
|                            |  |                                         |        
|Contractual Cash Obligation |  | $                                       | 255,683
|                            |  |                                         |        

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 judgements, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We believe that our following accounting policies fit this
definition:

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

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

Revenue Recognition:The Company recognizes revenue when products are shipped or delivered to the customer, depending on the terms of the sale.
For products shipped FOB shipping point, revenue is recognized at the time of shipment. 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.

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| | ITEM3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
| | ------ | ----------------------------------------------------------

We are exposed to market risks related to fluctuations in interest rates on our
$110,000,000 floating interest rate bank facility. We do not currently use interest rate swaps or other types of derivative financial instruments. The carrying value of the floating rate bank facility approximates fair value as the interest rate is
variable and resets frequently. The bank facility bears interest at the Eurodollar rate or the prime rate, which was approximately 2.125% (including margin) and 4.00% respectively at June 30, 2003. We estimate that the average amount of debt
outstanding under the facility for fiscal year 2003 will be approximately $20.0 million. Therefore, a one-percentage point increase in interest rates would result in an increase in interest expense of $200,000 for the year.

For fixed rate debt instruments such as our 8.5% senior notes, changes in interest rates generally affect the fair value of such debt instruments. For variable rate debt such as our bank facility,
changes in interest rates generally do not affect the fair value of such debt, but do affect earnings and cash flow. We do not have an obligation to repay our 8.5% senior notes prior to maturity in 2009 and, as a result, interest rate risk and
changes in fair value should not have a significant impact on us. We believe that the interest rate on our 8.5% senior notes approximates the current rates available for similar types of financing and as a result the carrying amount of the 8.5%
senior notes approximates fair value. The fair value of our senior notes at June 30, 2003 was approximately $152,250,000.

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

We require
significant volumes of electricity to operate our equipment and produce our products. We participate in the direct access program whereby electricity customers can contract directly with energy service providers, thereby bypassing the state of
California procurement system. Our direct access agreement results in lower electricity costs than would otherwise be available from Californias regulated utility providers. The Public Utilities Commission of the State of California (PUC)
issued an order on November 7, 2002, imposing exit fees of 2.7 cents per kilowatt hour on utility customers who entered into the direct access program during the California electricity crisis in 2001. The PUCs stated purpose for the exit fees
(officially termed as the Cost Responsibility Surcharge or CRS) is to recoup the substantial sums spent by the State of California to purchase electricity during the crisis. The CRS, if continued at 2.7 cents per kwh, is projected to
result in additional costs for our electricity service of approximately $9,000,000 in 2003.

Our current direct access electricity purchase agreement covers most of our
electricity requirements at pre-established prices through December 2003. However, due to the nature of our operations and normal fluctuations in our daily electricity usage, we occasionally are exposed to spot electricity prices when we sell excess
energy into, or when we buy additional energy from, the spot wholesale market. For fiscal 2002, electricity costs accounted for approximately 3% of our cost of goods sold.

We
also require significant volumes of natural gas to produce our products. We generally purchase natural gas from a physical supplier active in the California market. The price we normally pay for natural gas is based on the New York Mercantile
Exchange (NYMEX) natural gas commodity index, adjusted by the Southern California border basis, plus delivery costs. For the last several years the index price for natural gas has experienced volatility. In an effort to stabilize such costs, we have
on occasion entered into agreements whereby we hedge portions of our future costs for natural gas.

Domestic events, including but not limited to, severe weather in certain parts
of the United States, low natural gas inventory storage, and a lack of new natural gas drilling activity, as well as international event, such as the war in Iraq have resulted in very high natural gas costs over the last several months.
Our

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production costs have marginally been affected by such price fluctuations. We currently have in place agreements to hedge the price of approximately 85% of
our natural gas requirements through December, 2003. 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
fiscal year 2002, natural gas costs represented less than 5% of our cost of goods sold.

| | ITEM4. | CONTROLS AND PROCEDURES
| | ------ | -----------------------

For the period ending June 30, 2003 (the Evaluation Date), we carried out an evaluation, under the
supervision and with the participation of our management, including our President and Chief Executive Officer and our Executive Vice President of Finance (the principal finance and accounting officer)(both of which positions are currently held by
Vicente B. Wright until a new Executive Vice President of Finance is named), 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 Executive Vice President of Finance concluded that, as of June 30, 2003, our disclosure controls and procedures were adequate to ensure that
information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, and summarized and reported within the time periods specified in the SECs rules and forms.

Additionally, our President and Chief Executive Officer and Executive Vice President of Finance determined, as of June 30, 2003, that there were no significant changes in our internal controls or in
other factors that could significantly affect our internal controls subsequent to the date of their evaluation.

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PART IIOTHER INFORMATION

| | ITEM1. | LEGAL PROCEEDINGS
| | ------ | -----------------

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

| | ITEM5. | OTHER ITEMS
| | ------ | -----------

On June 4, 2003, Kawasaki Steel Holdings (USA), Inc, one of the shareholders of the Company, changed its corporate name to JFE
Steel U.S.A., Inc.

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| | ITEM6. | EXHIBITS AND REPORTS ON FORM 8-K
| | ------ | --------------------------------

| | (a) | Exhibits.
| | --- | ---------



|ExhibitNumber | 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 CSI Tubular Products, Inc. into the Registrant filed with the Delaware Secretary of State on December 20, 1993.(1)
|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|3.2           | Certificate of Amendment to the Certificate of Incorporation filed July 27, 1999, with the Delaware Secretary of State.(2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|3.3           | Bylaws of the Registrant, as amended on July 16, 1999. (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|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 1/2%
Senior Notes due April 6, 2009.(1)                                                                                                                                                                                                                                                                                                                                                                                                                              
|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.2           | Specimen Series A note (included in Exhibit 4.1).(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.3           | 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)                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|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.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | (b) | Reports on Form 8-K.
| | --- | --------------------

| | (1) | Form 8-K filed on April 9, 2003Item 5. Other InformationVicente Wright named as new President and CEO
| | --- | -----------------------------------------------------------------------------------------------------

| | (2) | Form 8-K filed on April 15, 2003Item 9. Regulation FD DisclosureItem 12. Use of Non-GAAP Financial MeasureFirst Quarter Financial Results disclosed
in Press Release
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | (3) | Form 8-K filed on May 2, 2003Item 9. Regulation FD Disclosure906 Certification for 1st Quarter Form 10Q
| | --- | -------------------------------------------------------------------------------------------------------

| | (4) | Form 8-K filed on July 22, 2003Item 9. Regulation FD DisclosureItem 12. Use of Non-GAAP Financial MeasureSecond Quarter Financial Results disclosed
in Press Release
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

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SIGNATURE

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

August 12, 2003



| |  | CALIFORNIASTEELINDUSTRIES,INC.
| |  | ------------------------------
| |  | By:                           
| |  |                               
| |  |                               



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INDEX TO EXHIBITS



|ExhibitNumber | 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 CSI Tubular Products, Inc. into the Registrant filed with the Delaware Secretary of State on December 20, 1993.(1)
|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|3.2           | Certificate of Amendment to the Certificate of Incorporation filed July 27, 1999, with the Delaware Secretary of State.(2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|3.3           | Bylaws of the Registrant, as amended on July 16, 1999. (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|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 1/2%
Senior Notes due April 6, 2009.(1)                                                                                                                                                                                                                                                                                                                                                                                                                              
|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.2           | Specimen Series A note (included in Exhibit 4.1).(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.3           | 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)                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|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.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

16