UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON DC 20549

                                    FORM 10-Q/A
                                  AMENDMENT NO. 1

/X/      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the quarterly period ended        June 30, 2004
                               -------------------------------------------------

                                       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       1-9887
                       --------------------

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

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

   1000 S.W. Broadway, Suite 2200, Portland, Oregon                   97205
--------------------------------------------------------------------------------
   (Address of principal executive offices)                         (Zip Code)

                                 (503) 223-9228
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

--------------------------------------------------------------------------------
 (Former name, former address and former fiscal year, if changed since last
  report)

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

                                    Yes X     No
                                       ---      ---

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

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:

         Common Stock, $.01 Par Value                     26,677,504
         ----------------------------              -----------------------------
                    Class                          Number of Shares Outstanding
                                                      (as of July 31, 2004)

<PAGE>

                            OREGON STEEL MILLS, INC.
                                TABLE OF CONTENTS



PART I.    FINANCIAL INFORMATION...............................................2


           Item 1.   Financial Statements......................................2

                     Notes to Consolidated Financial Statements................5

           Item 2.   Management's Discussion and Analysis of Financial
                     Condition and Results of Operations......................15

           Item 3.   Quantitative and Qualitative Disclosures about
                     Market Risk..............................................20

           Item 4.   Controls and Procedures..................................20



PART II.  OTHER INFORMATION...................................................21


           Item 1.     Legal Proceedings......................................21

           Item 6.     Exhibits and Reports on Form 8-K.......................21

           SIGNATURES.........................................................22


                                      -1-

<PAGE>


PART I.    FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS
<TABLE>

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

                                                                           JUNE 30,            DECEMBER 31,
                                                                             2004                2003
                                                                        ----------------       ------------
                                          ASSETS                          (UNAUDITED)
<S>                                                                      <C>                    <C>
Current assets:
      Cash and cash equivalents                                          $  52,958              $   5,770
      Trade accounts receivable, less allowance for doubtful
       accounts of $4,497 and $3,665                                        93,013                 80,190
      Inventories                                                          154,435                139,623
      Deferred income taxes                                                  7,741                 19,545
      Other                                                                  9,551                 15,596
                                                                         ---------              ---------
          Total current assets                                             317,698                260,724
                                                                         ---------              ---------
Property, plant and equipment:
      Land and improvements                                                 33,391                 33,337
      Buildings                                                             59,207                 54,144
      Machinery and equipment                                              839,089                817,053
      Construction in progress                                              13,149                 13,654
                                                                         ---------              ---------
                                                                           944,836                918,188
      Accumulated depreciation                                            (462,647)              (440,607)
                                                                         ---------              ---------
          Net property, plant and equipment                                482,189                477,581
                                                                         ---------              ---------

Goodwill                                                                       520                    520
Intangibles, net                                                            11,662                 11,803
Other assets                                                                11,488                 15,514
                                                                         ---------              ---------
                TOTAL ASSETS                                             $ 823,557              $ 766,142
                                                                         =========              =========
                                       LIABILITIES
Current liabilities:
      Current portion of long-term debt                                  $   2,000              $      --
      Accounts payable                                                      77,880                 73,006
      Accrued expenses                                                      59,282                 60,991
                                                                         ---------              ---------
          Total current liabilities                                        139,162                133,997

Long-term debt                                                             309,550                301,832
Deferred employee benefits                                                  49,500                 49,887
Labor dispute settlement                                                    63,522                 27,844
Environmental liability                                                     27,271                 28,317
Deferred income taxes                                                        7,979                 20,442
Other long-term liabilities                                                    256                     --
                                                                         ---------              ---------
          Total liabilities                                                597,240                562,319
                                                                         ---------              ---------

Minority interests                                                          17,199                 16,571
                                                                         ---------              ---------
Contingencies (Note 10)
                                 STOCKHOLDERS' EQUITY

Preferred stock, par value $.01 per share; 1,000 shares
   authorized; none issued                                                      --                     --
Common stock, par value $.01 per share; 45,000 shares authorized,
   26,656 and 26,398 shares issued and outstanding                             266                    264
Additional paid-in capital                                                 228,747                227,703
Accumulated deficit                                                         (4,794)               (26,339)
Accumulated other comprehensive loss:
      Cumulative foreign currency translation adjustment                    (4,198)                (3,473)
      Minimum pension liability                                            (10,903)               (10,903)
                                                                         ---------              ---------
          Total stockholders' equity                                       209,118                187,252
                                                                         ---------              ---------
                TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY               $ 823,557              $ 766,142
                                                                         =========              =========

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

                                      -2-
</TABLE>

<PAGE>
<TABLE>

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

                                                                 THREE MONTHS ENDED                  SIX MONTHS ENDED
                                                                       JUNE 30,                           JUNE 30,
                                                             ----------------------------        --------------------------
                                                                  2004            2003              2004            2003
                                                             -----------        ---------        ----------      ----------
<S>                                                            <C>              <C>              <C>              <C>
Sales:
      Product Sales                                            $ 269,936        $ 179,220        $ 511,746        $ 346,151
      Freight                                                     11,833           10,674           22,419           19,425
                                                               ---------        ---------        ---------        ---------
                                                                 281,769          189,894          534,165          365,576
Costs and expenses:
      Cost of sales                                              212,772          190,006          427,372          359,607
      Labor dispute settlement adjustment (Note 10)               31,868               --           38,868               --
      Fixed and other asset impairment charges (Note 12)              --           36,113               --           36,113
      Selling, general and administrative expenses                13,774           12,434           27,683           24,925
      Gain on sale of assets                                         (30)            (213)            (293)            (274)
      Incentive compensation                                       3,042              117            5,088              339
                                                               ---------        ---------        ---------        ---------
                                                                 261,426          238,457          498,718          420,710
                                                               ---------        ---------        ---------        ---------
           Operating income (loss)                                20,343          (48,563)          35,447          (55,134)
Other income (expense):
      Interest expense, net                                       (8,461)          (8,352)         (17,029)         (16,561)
      Minority interests                                           1,259              459            1,614            2,462
      Other income                                                   836            2,204            1,472              735
                                                               ---------        ---------        ---------        ---------
           Income (loss) before income taxes                      13,977          (54,252)          21,504          (68,498)
Income tax benefit                                                    43            2,305               41            7,525
                                                               ---------        ---------        ---------        ---------
Net income (loss)                                              $  14,020        $ (51,947)       $  21,545        $ (60,973)
                                                               =========        =========        =========        =========

Basic income (loss) per share                                  $    0.53        $   (1.97)       $    0.81        $   (2.31)
Diluted income (loss) per share                                $    0.52        $   (1.97)       $    0.81        $   (2.31)
Weighted average common shares and
common share equivalents outstanding:
           Basic                                                  26,583           26,388           26,535           26,388
           Diluted                                                26,848           26,388           26,704           26,388

                         The accompanying notes are an integral part of the consolidated
                         financial statements.
</TABLE>


                                      -3-
<PAGE>
<TABLE>


                                       OREGON STEEL MILLS, INC.
                                CONSOLIDATED STATEMENTS OF CASH FLOWS
                                            (IN THOUSANDS)
                                             (UNAUDITED)
<CAPTION>
                                                                                 SIX MONTHS ENDED
                                                                                      JUNE 30,
                                                                            ---------------------------
                                                                                 2004           2003
                                                                            ------------   ------------
<S>                                                                         <C>              <C>
Cash flows from operating activities:
      Net income (loss)                                                     $  21,545        $ (60,973)
      Adjustments to reconcile net income (loss) to net cash provided
          by operating activities:
          Depreciation and amortization                                        19,499           21,691
          Labor dispute settlement adjustment (Note 10)                        35,720               --
          Fixed and other asset impairment charges (Note 12)                       --           36,113
          Deferred income taxes, net                                             (546)          (7,442)
          Gain on sale of assets                                                 (293)            (274)
          Minority interests                                                   (1,614)          (2,462)
          Changes in current assets and liabilities:
            Trade accounts receivable                                         (12,823)          23,250
            Inventories                                                       (14,812)           3,414
            Operating liabilities                                                 921          (12,390)
            Other, net                                                          8,411            1,121
                                                                            ---------        ---------
          NET CASH PROVIDED BY OPERATING ACTIVITIES                            56,008            2,048
                                                                            ---------        ---------

Cash flows from investing activities:
      Additions to property, plant and equipment                               (9,461)         (11,618)
      Proceeds from disposal of property and equipment                            115              582
      Other, net                                                                  (30)            (479)
                                                                            ---------        ---------
          NET CASH USED BY INVESTING ACTIVITIES                                (9,376)         (11,515)
                                                                            ---------        ---------

Cash flows from financing activities:
      Proceeds from bank debt                                                 186,097               --
      Payments on bank and long-term debt                                    (186,097)              --
      Minority share of subsidiary's distribution                                  --           (1,436)
      Issuance of common stock                                                    934               --
                                                                            ---------        ---------
          NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES                        934           (1,436)
                                                                            ---------        ---------

Effects of foreign currency exchange rate                                        (378)           2,619
                                                                            ---------        ---------
Net increase (decrease) in cash and cash equivalents                           47,188           (8,284)
Cash and cash equivalents at the beginning of period                            5,770           33,050
                                                                            ---------        ---------

Cash and cash equivalents at the end of period                              $  52,958        $  24,766
                                                                            =========        =========

Supplemental disclosures of cash flow information:

   Cash paid for:
   --------------
      Interest                                                              $  15,275        $  15,642
      Income taxes                                                          $     778        $     217

   Non-cash activities:
   --------------------
      See Note 11 for a description of the non-cash consolidation of Oregon Feralloy Partners

        The accompanying notes are an integral part of the consolidated
        financial statements.
</TABLE>


                                      -4-


<PAGE>


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.   BASIS OF PRESENTATION
     ---------------------

     The consolidated financial statements include the accounts of Oregon Steel
Mills, Inc. and its subsidiaries ("Company"), which include wholly-owned Camrose
Pipe Corporation ("CPC"), which does business as Columbia Structural Tubing and
which, through ownership in another corporation, holds a 60 percent interest in
Camrose Pipe Company ("Camrose"); a 60 percent interest in Oregon Feralloy
Partners ("OFP"); and 87 percent owned New CF&I, Inc. ("New CF&I") which owns a
95.2 percent interest in CF&I Steel, L.P. ("CF&I"). The Company also directly
owns an additional 4.3 percent interest in CF&I. In January 1998, CF&I assumed
the trade name Rocky Mountain Steel Mills ("RMSM"). New CF&I owns a 100 percent
interest in the Colorado and Wyoming Railway Company, which is a short-line
railroad servicing RMSM. All significant inter-company balances and transactions
have been eliminated.

     The unaudited financial statements include all adjustments, consisting of
normal recurring accruals and other charges as described in Note 10,
"Contingencies - Labor Matters - CF&I Labor Dispute Settlement - Accounting" and
in Note 12, "Asset Impairments," which, in the opinion of management, are
necessary for a fair presentation of the interim periods. Results for an interim
period are not necessarily indicative of results for a full year. Reference
should be made to the Company's 2003 Annual Report on Form 10-K for additional
disclosures including a summary of significant accounting policies.


RECENT ACCOUNTING PRONOUNCEMENTS

     In January 2003, the Financial Accounting Standards Board ("FASB") issued
FIN 46 (revised December 2003), "CONSOLIDATION OF VARIABLE INTEREST ENTITIES, AN
INTERPRETATION OF ARB NO. 51," ("FIN 46R") which requires a variable interest
entity to be consolidated by a company if that company is subject to a majority
of the risk of loss from the variable interest entity's activities or entitled
to receive a majority of the entity's residual returns or both. FIN 46R also
requires disclosures about variable interest entities that a company is not
required to consolidate but in which it has a significant variable interest. FIN
46R applied immediately to variable interest entities created after January 31,
2003 and to existing variable interest entities in the periods ending after
March 15, 2004. The Company adopted FIN 46R on January 1, 2004. The financial
statement impact was to increase current assets by $1.7 million, increase net
property, plant and equipment by $15 million, decrease other assets by $3.5
million, increase current liabilities by $3.4 million, increase long-term debt
by $7.5 million (consisting of bank debt) and increase minority interest by $2.3
million. See Note 11, "JOINT VENTURE AND ADOPTION OF FIN 46R - CONSOLIDATION OF
VARIABLE INTEREST ENTITIES" for additional disclosures.

     In December 2003, the FASB issued SFAS No. 132 (revised), "EMPLOYERS'
DISCLOSURES ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS." SFAS No. 132
(revised) prescribes employers' disclosures about pension plans and other
postretirement benefit plans; it does not change the measurement or recognition
of those plans. SFAS No. 132 (revised) retains and revises the disclosure
requirement contained in the original SFAS No. 132. It also requires additional
disclosures about the assets, obligations, cash flows, and net periodic benefit
cost of defined benefit pension plans and other postretirement benefit plans.
SFAS No. 132 (revised) generally is effective for fiscal years ending after
December 15, 2003. The Company discloses the requirements of SFAS No. 132
(revised) in Note 8, "Employee Benefit Plans."


RECLASSIFICATIONS

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

2.   STOCK-BASED COMPENSATION
     ------------------------

     The Company has two stock-based compensation plans to make awards of
options to officers, key employees and non-employee directors. The Company
accounts for its plans under the recognition and measurement principles of APB
Opinion No. 25, "Accounting for Stock Issued to Employees" and related
interpretations. No stock-based compensation cost is reflected in net income
from these plans, as all options granted under these plans had exercise prices
equal to the market value of the underlying common stock at the date of the
grant. Options have a term of ten years and generally vest over one to three
years from the date of the grant.

                                      -5-

<PAGE>


     The following tables illustrate the effect on net income and earnings per
share as if the Black-Scholes fair value method described in SFAS No. 123,
"ACCOUNTING FOR STOCK-BASED COMPENSATION," as amended, had been applied to the
Company's stock option plans.
<TABLE>
<CAPTION>
                                                                    THREE MONTHS ENDED JUNE 30            SIX MONTHS ENDED JUNE 30
                                                                   ----------------------------        -----------------------------
                                                                      2004               2003              2004              2003
                                                                   -----------       ----------        ----------         ----------
                                                                               (In thousands, except per share amounts)
<S>                                                                <C>               <C>               <C>               <C>

Net income (loss), as reported                                     $   14,020        $  (51,947)       $   21,545        $  (60,973)
Deduct: total stock-based compensation expense
    determined under fair value based method for
    all awards, net of related tax effects                               (281)              (70)             (311)             (125)
                                                                   ----------        ----------        ----------        ----------
Pro forma net income (loss)                                        $   13,739        $  (52,017)       $   21,234        $  (61,098)
                                                                   ==========        ==========        ==========        ==========
 Income (loss) per share:
      Basic - as reported                                                $.53            $(1.97)             $.81            $(2.31)
      Basic - pro forma                                                  $.52            $(1.97)             $.80            $(2.32)
      Diluted - as reported                                              $.52            $(1.97)             $.81            $(2.31)
      Diluted - pro forma                                                $.51            $(1.97)             $.80            $(2.32)
</TABLE>


         The fair value of options granted was estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions:
<TABLE>
<CAPTION>

                                           THREE MONTHS ENDED JUNE 30        SIX MONTHS ENDED JUNE 30
                                           --------------------------        ------------------------
                                              2004             2003            2004             2003
                                             -----            -----          -------          -------
<S>                                          <C>              <C>            <C>                <C>
     Annualized dividend yield                  0%               0%              0%                0%
     Common stock price volatility           76.6%            73.8%           76.6%             73.8%
     Risk free rate of return                 4.1%             3.5%            4.1%              3.5%
     Expected option term (in years)            7                7               7                 7

</TABLE>

3.   INVENTORIES
     -----------

     Inventories are stated at the lower of manufacturing cost or market value
with manufacturing cost determined under the average cost method. The components
of inventories are as follows:

                                                 JUNE 30,         DECEMBER 31,
                                                   2004               2003
                                                 --------         ------------
                                                       (IN THOUSANDS)

    Raw materials                                $ 15,361           $  5,214
    Semi-finished product                          64,101             55,864
    Finished product                               45,725             49,478
    Stores and operating supplies                  29,248             29,067
                                                 --------           --------
         Total inventory                         $154,435           $139,623
                                                 ========           ========


4.  COMPREHENSIVE INCOME (LOSS)
    ---------------------------
<TABLE>
<CAPTION>

                                                    THREE MONTHS ENDED JUNE 30           SIX MONTHS ENDED JUNE 30
                                                    --------------------------           ------------------------
                                                        2004            2003               2004           2003
                                                    ----------      ----------           --------      ----------
                                                          (In thousands)                      (In thousands)
<S>                                                   <C>           <C>                  <C>           <C>
Net income (loss)                                     $ 14,020      $(51,947)            $ 21,545      $(60,973)
Foreign currency translation adjustment                   (216)        2,478                 (378)        2,619
                                                      --------      --------             --------      --------
Comprehensive income (loss)                           $ 13,804      $(49,469)            $ 21,167      $(58,354)
                                                      ========      ========             ========      ========
</TABLE>


                                      -6-
<PAGE>


5.   DEBT, FINANCING ARRANGEMENTS, AND LIQUIDITY
     -------------------------------------------

     Debt balances were as follows:
<TABLE>
<CAPTION>

                                                                       JUNE 30,          DECEMBER 31,
                                                                         2004                2003
                                                                       ---------        -------------
                                                                              (IN THOUSANDS)
<S>                                                                     <C>               <C>
    10% First Mortgage Notes due 2009                                   $305,000          $305,000
    Less unamortized discount on 10% Notes                                (2,950)           (3,168)
    Oregon Feralloy Partners Term Loan                                     9,500                --
                                                                        --------          --------
         Total debt outstanding                                          311,550           301,832
    Less current portion of Oregon Feralloy Partners Term Loan            (2,000)               --
                                                                        --------          --------
         Non-current maturity of long-term debt                         $309,550          $301,832
                                                                        ========          ========
</TABLE>


     On July 15, 2002, the Company issued $305 million of 10% First Mortgage
Notes due 2009 ("10% Notes") at a discount of 98.772% and an interest rate of
10%. Interest is payable on January 15 and July 15 of each year. The 10% Notes
are secured by a lien on substantially all of the property, plant and equipment,
and certain other assets of the Company (exclusive of CPC and OFP), excluding
accounts receivable, inventory, and certain other assets. As of June 30, 2004,
the Company had outstanding $305 million of principal amount under the 10%
Notes. The Indenture under which the Notes were issued contains restrictions on
new indebtedness and various types of disbursements, including dividends, based
on the cumulative amount of the Company's net income, as defined. Under these
restrictions, there was no amount available for cash dividends at June 30, 2004.
New CF&I and CF&I (collectively, the "Guarantors") guarantee the obligations of
the 10% Notes, and those guarantees are secured by a lien on substantially all
of the property, plant and equipment and certain other assets of the Guarantors,
excluding accounts receivable, inventory, and certain other assets.

     On March 29, 2000, OFP entered into a 7-year $14 million loan agreement for
the purchase of certain processing assets and for the construction of a
processing facility. Amounts outstanding under the loan agreement bear interest
based on the prime rate plus a margin ranging from 1.84% to 3.00%, and as of
June 30, 2004, there was $9.5 million of principal outstanding of which $2.0
million was classified as current. The loan is secured by all the assets of OFP.
The creditors of OFP have no recourse to the general credit of the Company.
Effective January 1, 2004, the Company included the OFP loan balance in the
consolidated balance sheet as a result of the adoption of FIN 46R. See Note 11,
"JOINT VENTURE AND ADOPTION OF FIN 46R - CONSOLIDATION OF VARIABLE INTEREST
ENTITIES."

     As of June 30, 2004, Oregon Steel Mills, Inc., New CF&I, Inc., CF&I Steel,
L.P., and Colorado and Wyoming Railway Company ("Borrowers") maintained a $65
million revolving credit agreement ("Credit Agreement"), which will expire on
June 30, 2005. At June 30, 2004, $5.0 million was restricted under the Credit
Agreement, $15.4 million was restricted under outstanding letters of credit, and
$44.6 million was available for use. Amounts under the Credit Agreement bear
interest based on either (1) the prime rate plus a margin ranging from 0.25% to
1.00%, or (2) the adjusted LIBO rate plus a margin ranging from 2.50% to 3.25%.
Unused commitment fees range from 0.25% to 0.75%. During the quarter ended June
30, 2004, there was a total of $11.5 million of short-term borrowings under the
Credit Agreement with an average daily balance of $0.3 million. As of June 30,
2004, there was no outstanding balance due under the Credit Agreement. Had there
been an outstanding balance, the average interest rate for the Credit Agreement
would have been 5.0%. The unused commitment fees were 0.75% for the quarter
ended June 30, 2004. The margins and unused commitment fees will be subject to
adjustment within the ranges discussed above based on a quarterly leverage
ratio. The Credit Agreement contains various restrictive covenants including
minimum consolidated tangible net worth amount, a minimum earnings before
interest, taxes, depreciation and amortization amount, a minimum fixed charge
coverage ratio, limitations on maximum annual capital and environmental
expenditures, a borrowing availability limitation relating to inventory,
limitations on stockholder dividends and limitations on incurring new or
additional debt obligations other than as allowed by the Credit Agreement. The
Company cannot pay cash dividends without prior approval from the lenders.

     Camrose maintains a CDN $15 million revolving credit facility with a
Canadian bank, the proceeds of which may be used for working capital and general
business purposes of Camrose. The facility is collateralized by substantially
all of the assets of Camrose, and borrowings under this facility are limited to
an amount equal to the sum of the product of specified advance rates and
Camrose's eligible trade accounts receivable and inventories. This facility
expires in September 2005. As of June 30, 2004, the interest rate of this
facility was 3.75%. Annual commitment fees are 0.25% of the unused portion of
the credit line. At June 30, 2004, there was no outstanding balance due under
the credit facility.

                                      -7-
<PAGE>


     As of June 30, 2004, principal payments on debt are due as follows (in
thousands):

                2004                                       $ 1,000
                2005                                         2,000
                2006                                         2,000
                2007                                         4,500
                2008                                            --
                2009                                       305,000
                                                          --------
                                                          $314,500
                                                          ========


6.   INCOME TAXES
     ------------

     The effective income tax benefit rate was less than 1% for the three and
six months ended June 30, 2004, as compared to a tax benefit rate of 4.2% and
11.0% in the corresponding periods in 2003. The effective income tax rate for
the three and six months ended June 30, 2004 varied from the combined state and
federal statutory rate principally because the Company reversed a portion of the
valuation allowance, established in 2003, for certain federal and state net
operating loss carry-forwards, state tax credits, and alternative minimum tax
credits.

     SFAS No. 109, "ACCOUNTING FOR INCOME TAXES," requires that tax benefits for
federal and state net operating loss carry-forwards, state tax credits, and
alternative minimum tax credits each be recorded as an asset to the extent that
management assesses the utilization of such assets to be "more likely than not";
otherwise, a valuation allowance is required to be recorded. Based on this
guidance, the Company reduced the valuation allowances by $7.3 million and $10.5
million, respectively, in the three and six months ended June 30, 2004 due to
less uncertainty regarding the realization of deferred tax assets. At June 30,
2004, the valuation allowance for deferred tax assets was $42.9 million.

     The Company will continue to evaluate the need for valuation allowances in
the future. Changes in estimated future taxable income and other underlying
factors may lead to adjustments to the valuation allowances.


7.   NET INCOME (LOSS) PER SHARE
     ---------------------------

     The Company calculates earnings per share in accordance with SFAS No. 128,
"EARNINGS PER SHARE." SFAS No. 128 requires the presentation of "basic" earnings
per share and "diluted" earnings per share. Basic earnings per share is computed
by dividing the net income available to common shareholders by the weighted
average number of shares of common stock outstanding. For purposes of
calculating diluted earnings per share, the denominator includes both the
weighted average number of shares of common stock outstanding and the number of
dilutive common stock equivalents such as stock options, as determined using the
treasury stock method.

     Shares used in calculating basic and diluted earnings per share for the
three-month and six-month periods ended June 30, are as follows:
<TABLE>
<CAPTION>
                                                   THREE MONTHS ENDED JUNE 30            SIX MONTHS ENDED JUNE 30
                                                  ----------------------------           ------------------------
                                                        2004         2003                  2004          2003
                                                     --------     --------               --------     -----------
                                                               (In thousands, except per share amounts)
<S>                                                  <C>          <C>                    <C>          <C>
Basic weighted average
   shares outstanding                                  26,583       26,388                 26,535       26,388
Dilutive effect of:
   Employee stock options                                 265           --                    169           --
                                                     --------     --------               --------     --------

Weighted average number of shares outstanding:
    Assuming dilution                                  26,848       26,388                 26,704       26,388
                                                     ========     ========               ========     ========

Net income (loss)                                    $ 14,020     $(51,947)              $ 21,545     $(60,973)
                                                     ========     ========               ========     ========

Basic income (loss) per share:                           $.53       $(1.97)                  $.81       $(2.31)
Diluted income (loss) per share:                         $.52       $(1.97)                  $.81       $(2.31)
</TABLE>
<PAGE>

                                      -8-
<PAGE>


8.   EMPLOYEE BENEFIT PLANS
     ----------------------

     The Company has noncontributory defined benefit retirement plans, certain
health care and life insurance benefits, an Employee Stock Ownership Plan, and
qualified Thrift (401(k)) plans covering all of its eligible domestic employees.

     Components of net periodic benefit cost related to the defined benefit and
certain health care and life insurance benefit plans were as follows:
<TABLE>
<CAPTION>

                                                 THREE MONTHS ENDED JUNE 30            SIX MONTHS ENDED JUNE 30
                                                 --------------------------          --------------------------
                                                     2004            2003                 2004          2003
                                                  ---------        --------          -----------     ----------
                                                         (In thousands)                     (In thousands)
<S>                                                <C>             <C>                  <C>            <C>
Service cost                                       $ 1,169         $ 1,329              $ 2,338        $ 2,658
Interest cost                                        2,152           2,090                4,305          4,181
Expected return on plan assets                      (1,748)         (1,547)              (3,497)        (3,095)
Recognized net loss                                    420             419                  840            838
Amortization of transition asset                        49              49                   98             98
Amortization of prior service cost                      31              45                   62             91
                                                   -------         -------              -------        -------
    Total net periodic benefit cost                $ 2,073         $ 2,385              $ 4,146        $ 4,771
                                                   =======         =======              =======        =======
</TABLE>

9.   CONCENTRATIONS
     --------------

     The Company's Portland mill purchases steel slab from a number of foreign
producers. Any interruption or reduction in the supply of steel slab may make it
difficult or impossible to satisfy customers' delivery requirements, which could
have a material adverse effect on the Company's results of operations. Thus far
in 2004, the Company's major suppliers of steel slab have been Ispat Mexicana
S.A. de C. V. of Mexico and Companhia Siderurgica de Tubarao of Brazil. Any
interruption of supply from these suppliers could have a material adverse effect
on the Company's results of operations. Most of the steel slabs the Company
purchases are delivered by ship. Any disruption to port operations, including
those caused by a labor dispute involving longshoreman or terrorism, could
materially impact the supply or the cost of steel slabs, which could have a
material adverse effect on the Company's production, sales levels and
profitability.


10.  CONTINGENCIES
     -------------

ENVIRONMENTAL

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

OREGON STEEL DIVISION

     In May 2000, the Company entered into a Voluntary Clean-up Agreement with
the Oregon Department of Environmental Quality ("DEQ") committing the Company to
conduct an investigation of whether, and to what extent, past or present
operations at the Company's Portland mill may have affected sediment quality in
the Willamette River. Based on preliminary findings, the Company is conducting a
full remedial investigation ("RI"), including areas of investigation throughout
the Portland mill, and has committed to implement source control if required.
The Company's best estimate for costs of the RI study is $853,000 over the next
two years. Accordingly, the Company has accrued a liability of $853,000 as of
June 30, 2004. The Company has also recorded a $853,000 receivable for insurance
proceeds that are expected to cover these RI costs because the Company's insurer
is defending this matter, subject to a standard reservation of rights, and is
paying these RI costs as incurred. Based upon the results of the RI, the DEQ may
require the Company to incur costs associated with additional phases of
investigation, remedial action or implementation of source controls, which could
have a material adverse effect on the Company's results of operations because it
may cause costs to exceed available insurance or because insurance may not cover
those particular costs. The Company is unable at this time to determine if the
likelihood of an unfavorable outcome or loss is either probable or remote, or to
estimate a dollar amount range for a potential loss.

     In a related matter, in December 2000, the Company received a general
notice letter from the U.S. Environmental Protection Agency ("EPA"), identifying
it, along with 68 other entities, as a potentially responsible party ("PRP")
under the Comprehensive

                                      -9-
<PAGE>


Environmental Response, Compensation and Liability Act ("CERCLA") with respect
to contamination in a portion of the Willamette River that has been designated
as the "Portland Harbor Superfund Site." The letter advised the Company that it
may be liable for costs of remedial investigation and remedial action at the
Portland Harbor Superfund Site (which liability, under CERCLA, is joint and
several with other PRPs) as well as for natural resource damages that may be
associated with any releases of contaminants (principally at the Portland mill
site) for which the Company has liability. At this time, nine private and public
entities have signed an Administrative Order on Consent ("AOC") to perform a
remedial investigation/feasibility study ("RI/FS") of the Portland Harbor
Superfund Site under EPA oversight. The RI/FS is expected to be completed in
2008. Although we did not sign the original AOC, the Company is a member of the
Lower Willamette Group, which is funding that investigation, and it signed a
Coordination and Cooperation Agreement with the EPA that binds it to all terms
of the AOC. The Company's cost associated with the RI/FS as of June 30, 2004 is
approximately $441,000, all of which has been covered by the Company's insurer.
As a best estimate of the Company's share of the remaining RI/FS costs, the
Company has accrued a liability of $860,000 as of June 30, 2004. The Company has
also recorded a $860,000 receivable for insurance proceeds that are expected to
cover these RI/FS costs because the Company's insurer is defending this matter,
subject to a standard reservation of rights, and is paying these RI/FS costs as
incurred. At the conclusion of the RI/FS, the EPA will issue a Record of
Decision setting forth any remedial action that it requires to be implemented by
identified PRPs. In addition, in June 2003, the Company signed a Funding and
Participating Agreement whereby the Company, with nine other industrial and
municipal parties, agreed to fund a joint effort with federal, state and tribal
trustees to study potential natural resource damages in the Portland Harbor. The
Company estimates its financial commitment in connection with this agreement to
be approximately $591,000. Based on this estimate, the Company has accrued a
liability of $591,000 as of June 30, 2004. The Company has also recorded a
$591,000 receivable for insurance proceeds that are expected to cover these
RI/FS costs because the Company's insurer is defending this matter, subject to a
standard reservation of rights, and is paying these costs as incurred. This
effort is expected to last until 2006. In connection with these matters, the
Company could incur additional costs associated with investigation, remedial
action, natural resource damage and natural resource restoration, the costs of
which may exceed available insurance or which may not be covered by insurance,
which therefore could have a material adverse effect on the Company's results of
operations. The Company is unable to estimate a dollar amount range for any
related remedial action that may be implemented by the EPA, or natural resource
damages and restoration that may be sought by federal, state and tribal natural
resource trustees.

     In 2003, the wastewater treatment system at the Napa pipe mill overflowed
on at least two occasions. These overflows are being investigated by several
governmental agencies, including the EPA and the Napa County Department of
Environmental Management. In connection with these matters, the Company expects
to undertake certain capital improvements, and may be subject to fines or
penalties. Based on currently available information, the Company does not
believe these matters will be material to the Company's results of operations or
cash flows.

RMSM DIVISION

     In connection with the acquisition of the steelmaking and finishing
facilities located at Pueblo, Colorado ("Pueblo mill"), CF&I accrued a liability
of $36.7 million for environmental remediation related to the prior owner's
operations. CF&I believed this amount was the best estimate of costs from a
range of $23.1 million to $43.6 million. CF&I's estimate of this liability was
based on two remediation investigations conducted by environmental engineering
consultants, and included costs for the Resource Conservation and Recovery Act
facility investigation, a corrective measures study, remedial action, and
operation and maintenance associated with the proposed remedial actions. In
October 1995, CF&I and the CDPHE finalized a postclosure permit for hazardous
waste units at the Pueblo mill. As part of the postclosure permit requirements,
CF&I must conduct a corrective action program for the 82 solid waste management
units at the facility and continue to address projects on a prioritized
corrective action schedule which substantially reflects a straight-line rate of
expenditure over 30 years. The State of Colorado mandated that the schedule for
corrective action could be accelerated if new data indicated a greater threat
existed to the environment than was currently believed to exist. At June 30,
2004, the accrued liability was $27.5 million, of which $23.8 million was
classified as non-current on the Company's consolidated balance sheet.

     The CDPHE inspected the Pueblo mill in 1999 for possible environmental
violations, and in the fourth quarter of 1999 issued a Compliance Advisory
indicating that air quality regulations had been violated, which was followed by
the filing of a judicial enforcement action ("Action") in the second quarter of
2000. In March 2002, CF&I and CDPHE reached a settlement of the Action, which
was approved by the court (the "State Consent Decree"). The State Consent Decree
provided for CF&I to pay $300,000 in penalties, fund $1.5 million of community
projects, and to pay approximately $400,000 for consulting services. CF&I is
also required to make certain capital improvements expected to cost
approximately $25 million, including converting to the new single New Source
Performance Standards Subpart AAa ("NSPS AAa") compliant furnace discussed
below. The State Consent Decree provides that the two existing furnaces will be
permanently shut down approximately 16 months after the issuance of a Prevention
of Significant Deterioration ("PSD") air permit. The PSD permit was issued June
21, 2004.

     In May 2000, the EPA issued a final determination that one of the two
electric arc furnaces at the Pueblo mill was subject to federal NSPS AA. This
determination was contrary to an earlier "grandfather" determination first made
in 1996 by CDPHE. CF&I appealed the EPA determination in the federal Tenth
Circuit Court of Appeals. The issue has been resolved by entry of a Consent
Decree on November 26, 2003, and the Tenth Circuit dismissed the appeal on
December 10, 2003. In that Consent Decree and

                                      -10-
<PAGE>


overlapping with the commitments made to the CDPHE described above, CF&I
committed to the conversion to the new NSPS AAa compliant furnace (demonstrating
full compliance 21 months after permit approval and expected to cost, with all
related emission control improvements, approximately $25 million), and to pay
approximately $450,000 in penalties and fund certain supplemental environmental
projects valued at approximately $1.1 million, including the installation of
certain pollution control equipment at the Pueblo mill. The above mentioned
expenditures for supplemental environmental projects will be both capital and
non-capital expenditures. Under this settlement and the settlement with the
CDPHE, the Company is subject to certain stipulated penalties if it fails to
comply with the terms of the settlement. In March 2004, the CDPHE notified CF&I
of alleged violations of the State Consent Decree relating to opacity. In June
2004, the CDPHE assessed stipulated penalties of $270,000. On July 26, 2004,
CF&I sought judicial review of the determination. At this time, no date for a
hearing has been set. In addition to these assessed penalties, the Company may
in the future incur additional penalties related to this matter. To date, such
penalties have not been material to its results of operations and cash flows;
however, the Company cannot be assured that future penalties will not be
material.


     In response to the CDPHE settlement and subsequent alleged violations and
the resolution of the EPA action, CF&I expensed $2.8 million in 2001 and
$132,000 in the second quarter of 2004 for possible fines and non-capital
related expenditures. As of June 30, 2004, the remaining accrued liability was
approximately $306,000.

     In December 2001, the State of Colorado issued a Title V air emission
permit to CF&I under the CAA requiring that the furnace subject to the EPA
action operate in compliance with NSPS AA standards. The Title V permit has been
modified several times and gives CF&I adequate time (at least 15 1/2 months
after CDPHE issues the PSD permit) to convert to a single NSPS AAa compliant
furnace. Any decrease in steelmaking production during the furnace conversion
period when both furnaces are expected to be shut down will be offset by
increasing production prior to the conversion period by building up
semi-finished steel inventory and to a much lesser degree, if necessary,
purchasing semi-finished steel ("billets") for conversion into rod products at
spot market prices. Pricing and availability of billets is subject to
significant volatility.

     In a related matter, in April 2000, the United Steelworkers of America
("Union") filed suit in the United States District Court in Denver, Colorado,
asserting that the Company and CF&I had violated the CAA at the Pueblo mill for
a period extending over five years. The Union sought declaratory judgement
regarding the applicability of certain emission standards, injunctive relief,
civil penalties and attorney's fees. On July 6, 2001, the presiding judge
dismissed the suit. The 10th Circuit Court of Appeals on March 3, 2003 reversed
the District Court's dismissal of the case and remanded the case for further
hearing to the District Court. The parties to the above-referenced litigation
have negotiated a tentative settlement of the labor dispute and all associated
litigation, including this Union suit. See "Labor Matters" for a description of
the tentative settlement.

LABOR MATTERS

CF&I LABOR DISPUTE AND RESULTANT LITIGATION

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

     On December 30, 1997, the Union called off the strike and made an
unconditional offer on behalf of its members to return to work. At the time of
this offer, because CF&I had permanently replaced the striking employees, only a
few vacancies existed at the Pueblo mill. Since that time, vacancies have
occurred and have been filled by formerly striking employees ("Unreinstated
Employees"). As of June 30, 2004, approximately 827 Unreinstated Employees have
either returned to work or have declined CF&I's offer of equivalent work. At
June 30, 2004, approximately 123 Unreinstated Employees remain unreinstated.

     On February 27, 1998, the Regional Director of the National Labor Relations
Board ("NLRB") Denver office issued a complaint against CF&I, alleging
violations of several provisions of the National Labor Relations Act ("NLRA").
On August 17, 1998, a hearing on these allegations commenced before an
Administrative Law Judge ("Judge"). Testimony and other evidence were presented
at various sessions in the latter part of 1998 and early 1999, concluding on
February 25, 1999. On May 17, 2000, the Judge rendered a decision which, among
other things, found CF&I liable for certain unfair labor practices and ordered
as remedy the reinstatement of all 1,000 Unreinstated Employees, effective as of
December 30, 1997, with back pay and benefits, plus interest, less interim
earnings. Since January 1998, the Company has been returning unreinstated
strikers to jobs, as positions became open. As noted above, there were
approximately 123 Unreinstated Employees as of June 30, 2004. On August 2, 2000,
CF&I filed an appeal with the NLRB in Washington, D.C. A separate hearing
concluded in February 2000, with the judge for that hearing rendering a decision
on August 7, 2000, that certain of the Union's actions undertaken since the
beginning of the strike did constitute misconduct and violations of certain
provisions of the NLRA. The Union has appealed this determination to the NLRB.
In both cases, the non-prevailing party in the NLRB's decision will be entitled
to appeal to the appropriate U.S. Circuit Court of Appeals. CF&I believes both
the facts and the law fully support its position that the strike was economic in
nature and that it was not obligated to displace the properly hired replacement
employees.

     In the event there is an adverse determination on these issues,
Unreinstated Employees could be entitled to back pay, including benefits, plus
interest, from the date of the Union's unconditional offer to return to work
through the date of their reinstatement or a

                                      -11-
<PAGE>

date deemed appropriate by the NLRB or an appellate court. The number of
Unreinstated Employees entitled to back pay may be limited to the number of past
and present replacement workers; however, the Union might assert that all
Unreinstated Employees should be entitled to back pay. Back pay is generally
determined by the quarterly earnings of those working less interim wages earned
elsewhere by the Unreinstated Employees. In addition to other considerations,
each Unreinstated Employee has a duty to take reasonable steps to mitigate the
liability for back pay by seeking employment elsewhere that has comparable
working conditions and compensation. Any estimate of the potential liability for
back pay will depend significantly on the ability to assess the amount of
interim wages earned by these employees since the beginning of the strike, as
noted above. Due to the lack of accurate information on interim earnings for
both reinstated and Unreinstated Employees and sentiment of the Union towards
the Company, it is not currently possible to obtain the necessary data to
calculate possible back pay. In addition, the NLRB's findings of misconduct by
the Union may mitigate any back pay award with respect to any Unreinstated
Employees proven to have taken part or participated in acts of misconduct during
and after the strike.

CF&I LABOR DISPUTE SETTLEMENT

     On January 15, 2004 the Company announced a tentative agreement to settle
the labor dispute between the Union and CF&I ("Settlement"). The Settlement is
conditioned on, among other things, (1) its approval by stockholders of New
CF&I, (2) ratification of a new collective bargaining agreement being executed
between CF&I and the Union, (3) approval of the Settlement by the NLRB and the
dismissal of cases pending before the NLRB related to the labor dispute and (4)
various pending legal actions between the Company, New CF&I and CF&I and the
Union being dismissed. The Settlement, if approved, will provide remedies for
all outstanding unfair labor practices between CF&I and the Union and sets the
stage for the ratification of new five-year collective bargaining agreements.
The Settlement includes the creation of a labor dispute settlement trust
("Trust") that will hold four million shares of the Company's registered common
stock after issuance by the Company. As part of the Settlement, the Company will
agree to give the Trust certain piggy back and demand registration rights. The
Settlement also includes payment by the Company of: (1) a cash contribution of
$2,500 for each beneficiary, estimated to be in total $2.5 million and (2)
beginning on the effective date of the Settlement, a ten-year profit
participation obligation consisting of 25% of CF&I's quarterly profit, as
defined, for years 2004 and 2007 through 2013, and 30% for years 2005 and 2006,
not to exceed $3 million per year for 2004 through 2008 and $4 million per year
for 2009 through 2013. The beneficiaries are those individuals who (1) as of
October 3, 1997 were employees of CF&I and represented by the Union, (2) as of
December 31, 1997 had not separated, as defined, from CF&I and (3) are entitled
to an allocation as defined in the Trust. The Settlement, certain elements of
which will be effected through the new five-year collective bargaining
agreement, also includes: (1) early retirement with immediate enhanced pension
benefit where CF&I will offer bargaining unit employees an early retirement
opportunity based on seniority until a maximum of 200 employees have accepted
the offer, the benefit will include immediate and unreduced pension benefits for
all years of service (including the period of the labor dispute) and for each
year of service prior to March 3, 1993 (including service with predecessor
companies) an additional monthly pension of $10, (2) pension credit for the
period of the labor dispute whereby CF&I employees who went on strike will be
given pension credit for both eligibility and pension benefit determination
purposes for the period beginning October 3, 1997 and ending on the latest of
said employees actual return to work, termination of employment, retirement or
death, (3) pension credit for service with predecessor companies whereby for
retirements after January 1, 2004, effective January 2, 2006 for each year of
service prior to March 3, 1978 (including service with predecessor companies),
CF&I will provide an additional monthly benefit to employees of $12.50, and for
retirements after January 1, 2006, effective January 2, 2008 for each year of
service between March 3, 1978 and March 3, 1993 (including service with
predecessor companies), CF&I will provide an additional monthly benefit of
$12.50, and (4) individuals who are members of the bargaining units as of
October 3, 1997 will be immediately eligible to apply for and receive qualified
long-term disability ("LTD") benefits on a go forward basis, notwithstanding the
date of the injury or illness, service requirements or any filing deadlines. The
Settlement also includes the Company's agreement to nominate a director
designated by the Union on its Board of Directors, and to a broad based
neutrality clause for certain of the Company's facilities in the future.

     On March 12, 2004, the Union membership at CF&I voted to accept the
proposed Settlement and a new five-year collective bargaining agreement. The
Settlement is still conditioned on the approval of the Settlement by the NLRB
and the dismissal of cases pending before the NLRB related to the labor dispute,
and the dismissal of various pending legal actions between the Company, New CF&I
and CF&I and the Union.

CF&I LABOR DISPUTE SETTLEMENT - ACCOUNTING

     The Company recorded charges of $31.1 million in the fourth quarter of
2003, $7 million in the first quarter of 2004, and an additional charge of $31.9
million in the second quarter of 2004, of which $23.2 million, $7 million, and
$28.7 million, respectively, were non-cash, related to the tentative agreement
to issue four million shares of Company common stock to the Trust as part of the
Settlement. The non-cash portion of the charge in the second quarter of 2004 is
a result of adjusting the previously recorded value at March 31, 2004 of the
four million shares of Company common stock ($30.2 million at $7.56 per share)
to market at June 30, 2004. The closing of the Company's common stock on the New
York Stock Exchange at June 30, 2004 was $14.74 per share, resulting in an
additional labor dispute settlement charge of $28.7 million for the second
quarter of 2004. The Company will continue to adjust the common stock charge
portion of the Settlement at the end of each quarter either up or down for

                                      -12-
<PAGE>

the change in the price of the Company's common stock through the effective date
of the Settlement. In addition, as part of the Settlement, the Company agreed,
under certain circumstances, to pay on behalf of the Trust, certain expenses
that would otherwise be incurred by the Trust related to the issuance of the
four million shares. Accordingly, the Company recorded an additional charge in
the second quarter of 2004 of approximately $3.2 million as part of the cost of
Settlement related to the issuance of the shares to the Trust. As of June 30,
2004, the liability accrued for all these settlement charges totals $70.0
million, with $63.5 million classified as long-term on the balance sheet. The
accrual for the LTD benefits ($5.3 million at June 30, 2004) may also change, as
better claims information becomes available. As employees accept the early
retirement benefits, the Company expects to record an additional charge during
2004 estimated at approximately $6.8 million related to these benefits. The
enhancements to pension and post-retirement medical benefits for non-early
retirees will be accounted for prospectively on the date at which plan
amendments occur pursuant to the new five-year collective bargaining agreements
in accordance with SFAS No. 87 and SFAS No. 106. In addition to these charges,
the Company recorded $1.4 million, and $3.0 million, for the three and six
months ended June 30, 2004, for selling, general and administrative expenses
incurred under the profit participation component of the Settlement.

PURCHASE COMMITMENTS

     Effective January 8, 1990, the Company entered into an agreement, which was
subsequently amended on December 7, 1990 and again on April 3, 1991, to purchase
a base amount of oxygen produced from a facility located at the Company's
Portland mill. The oxygen facility is owned and operated by an independent third
party. The agreement expires in August 2011 and specifies that the Company will
pay a base monthly charge that is adjusted annually based upon a percentage
change in the Producer Price Index. The monthly base charge at June 30, 2004 was
approximately $129,000. See Note 12, "ASSET IMPAIRMENTS" for potential costs
related to this contract. A similar contract to purchase oxygen for the Pueblo
mill was entered into on February 2, 1993 by CF&I, and was subsequently amended
on August 4, 1994. The agreement specifies that CF&I will pay a base monthly
charge that is adjusted annually based upon a percentage change in the Producer
Price Index. The monthly base charge at June 30, 2004 was $119,000.

     The Company has entered into an agreement, which expires in May 2005, for
the purchase of electricity used at the Portland mill from an independent third
party. This commitment specifies that the Company will pay a minimum monthly
charge that fluctuates seasonally and which averages $50,000 per month.

OTHER CONTINGENCIES

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


11. JOINT VENTURE AND ADOPTION OF FIN 46R - CONSOLIDATION OF VARIABLE INTEREST
    --------------------------------------------------------------------------
    ENTITIES
    --------

     In June 1999, a wholly-owned subsidiary of the Company and Feralloy Oregon
Corporation ("Feralloy") formed OFP to construct a temper mill and a
cut-to-length ("CTL") facility ("Facility") with an annual stated capacity of
300,000 tons to process CTL plate from steel coil produced at the Company's
plate mill in Portland, Oregon. The Facility commenced operations in May 2001.
The Company has a 60% profit/loss interest and Feralloy, the managing partner,
has a 40% profit/loss interest in OFP. Each partner holds 50% voting rights as
an owner of OFP. The Company is not required to, nor does it currently
anticipate it will, make other contributions of capital to fund operations of
OFP. However, the Company is obligated to supply a quantity of steel coil for
processing through the Facility of not less than 15,000 tons per month. In the
event that the three month rolling average of steel coil actually supplied for
processing is less than 15,000 tons and OFP operates at less than breakeven (as
defined in the Joint Venture Agreement), then the Company is required to make a
payment to OFP at the end of the three-month period equal to the shortfall.
During the second quarter of 2004, the Company did not supply the minimum steel
required to OFP and OFP did not operate at breakeven. Consequently, during the
second quarter of 2004, the Company expensed and recorded an obligation to OFP
of approximately $34,000.

     The Company adopted FIN 46R "CONSOLIDATION OF VARIABLE INTEREST ENTITIES"
on January 1, 2004, for its OFP operation. The cumulative impact of the adoption
of this accounting standard on retained earnings was zero. OFP primarily owns
land improvements, a building, equipment and other operating assets, all of
which is collateral for the $9.5 million bank debt of OFP. The creditors of OFP
have no recourse to the general credit of the Company. The financial statement
impact was to increase current assets by $1.7 million, increase net property,
plant and equipment by $15 million, decrease other assets by $3.5 million,
increase current liabilities by $3.4 million, increase long-term debt by $7.5
million (consisting of bank debt) and increase minority interest by $2.3
million.

12.  ASSET IMPAIRMENTS
     -----------------

     In May 2003, the Company shut down its Portland mill melt shop. The
determination to close the melt shop was based on 1) the Company's ability to
obtain steel slab through purchases from suppliers on the open market, and 2)
high energy and raw material costs and the yield losses associated with the
inefficient casting technology in use at the Portland mill. The Company


                                      -13-
<PAGE>

continues to maintain the melt shop in operating condition but is also exploring
other alternatives and has contracted with a third party to market the melt shop
equipment to suitable buyers.

     In connection with the melt shop closure, the Company has determined the
value of the related assets to be impaired. Accordingly, in the second quarter
of 2003, the Company recorded a pre-tax impairment charge to earnings of $27.0
million for the melt shop and other related assets. Of this impairment charge
recognized, $18.3 million represented impairment of fixed assets and $8.4
million pertained to reduction of dedicated stores and operating supplies to net
realizable value. Following the impairment charge, the carrying value of the
fixed assets was approximately $1.4 million. The fair value of the impaired
fixed assets was determined using the Company's estimate of market prices for
similar assets. Associated with the operations of the melt shop is an oxygen
purchase contract which cannot be used in current operations and therefore does
not provide a current benefit to the Company unless the Company decides to
restart the melt shop. In the future, if the Company determines the melt shop
will not reopen, or decides to terminate the associated oxygen purchase
contract, it will incur an expense for contract termination costs. The Company
estimates the cancellation and buyout costs could range from $3.0 million to
$5.5 million, depending on negotiation of a settlement. None of the future costs
of the contract have been accrued as of June 30, 2004, in accordance with SFAS
No. 146, "ACCOUNTING FOR COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES" as
the Company has not effectively ceased its rights under the contract.

     As discussed in Note 10, "CONTINGENCIES" above, part of the settlement with
the CDPHE and the EPA requires CF&I to install one new electric arc furnace, and
thus the two existing furnaces with a combined melting and casting capacity of
approximately 1.2 million tons through two continuous casters will be shut down.
CF&I has determined that the new single furnace operation will not have the
capacity to support a two caster operation and therefore CF&I has determined
that one caster and other related assets have no future service potential.
Accordingly, in the second quarter of 2003, the Company recorded a pre-tax
impairment charge to earnings of $9.1 million. Of this impairment charge
recognized, $8.1 million represented impairment of fixed assets and $1.0 million
pertained to reduction of related stores items to net realizable value. Because
it is believed the caster has no salvage value following the impairment charge,
the carrying value of the fixed assets was zero after the effect of the
impairment charge.

                                      -14-


<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

GENERAL
-------

     The following information contains forward-looking statements, which are
subject to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Statements made in this report that are not statements of
historical fact are forward-looking statements. Forward-looking statements made
in this report can be identified by forward-looking words such as, but not
limited to, "expect," "anticipate," "believe," "intend," "plan," "seek,"
"estimate," "continue," "may," "will," "would," "could," "likely," and similar
expressions. These forward-looking statements are subject to risks and
uncertainties and actual results could differ materially from those projected.
These risks and uncertainties include, but are not limited to:
[BULLET] changes in market supply and demand for steel, including the effect of
         changes in general economic conditions and imports;
[BULLET] changes in the availability and costs of steel scrap, steel scrap
         substitute materials, steel slab and billets and other raw materials or
         supplies used by the Company, as well as the availability and cost of
         electricity and other utilities;
[BULLET] downturns in the industries the Company serves, including the rail
         transportation, construction, capital equipment, oil and gas, and
         durable goods segments;
[BULLET] increased levels of steel imports;
[BULLET] the Company's substantial indebtedness, debt service requirements, and
         liquidity constraints;
[BULLET] the Company's highly leveraged capital structure and the effect of
         restrictive  covenants in its debt  instruments on our operating and
         financial flexibility;
[BULLET] availability and adequacy of the Company's cash flow to meet its
         requirements;
[BULLET] actions by the Company's domestic and foreign competitors;
[BULLET] unplanned equipment failures and plant outages;
[BULLET] costs of environmental compliance and the impact of governmental
         regulations;
[BULLET] risks related to pending environmental matters, including the risk that
         costs associated with such matters may exceed the Company's
         expectations or available insurance coverage, if any, and the risk that
         the Company may not be able to resolve any matter as expected;
[BULLET] risks relating to the Company's relationship with its current unionized
         employees and the possibility of future unionization at its Portland
         mill;
[BULLET] changes in the Company's relationship with its workforce;
[BULLET] changes in United States or foreign trade policies affecting steel
         imports or exports, and
[BULLET] risks related to the outcome of the pending Union dispute.

OVERVIEW

     The consolidated financial statements include the accounts of the Company
and its subsidiaries, which include wholly-owned CPC, which does business as
Columbia Structural Tubing and through ownership in another corporation holds a
60 percent interest in Camrose; a 60 percent interest in OFP; and 87 percent-
owned New CF&I, which owns a 95.2 percent interest in CF&I. The Company also
directly owns an additional 4.3 percent interest in CF&I. In January 1998, CF&I
assumed the trade name Rocky Mountain Steel Mills. New CF&I owns a 100 percent
interest in the Colorado and Wyoming Railway Company. All significant
inter-company balances and transactions have been eliminated.

     The Company currently has two aggregated operating divisions known as the
Oregon Steel Division and the RMSM Division. The Oregon Steel Division is
centered at the steel plate mill in Portland, Oregon, which supplies steel for
the Company's steel plate, structural tubing, and welded pipe finishing
facilities. The Oregon Steel Division's steel pipe mill in Napa, California is a
large diameter steel pipe mill and fabrication facility. The Oregon Steel
Division also produces large diameter pipe and electric resistance welded pipe
at Camrose. In October 2003, the Oregon Steel Division began production of
structural tubing at its Columbia Structural Tubing facility. The RMSM Division
consists of the steelmaking and finishing facilities of the Pueblo mill, as well
as certain related operations.

     In June 2004, the Company announced the indefinite idling of the Napa pipe
mill. The determination to idle the Napa pipe mill was based on (1) the ability
to improve operating margins by directing production of the Portland mill to
support plate and coil customers, the structural tubing operation, and the
Canadian line pipe business instead of the Napa pipe mill, (2) the assessment
that the Company's large diameter pipe business can be effectively produced at
the Camrose pipe mill, and (3) the ability to restart the Napa pipe mill should
market conditions change.

     On January 15, 2004, the Company announced a tentative agreement to settle
the labor dispute between the Union and CF&I. The Company recorded a charge of
$31.1 million in the fourth quarter of 2003, an additional charge of $7.0
million in the first quarter of 2004, and an additional charge of $31.9 million
in the second quarter of 2004 related to the tentative Settlement. See Note 10
to the Consolidated Financial Statements, "CONTINGENCIES - LABOR MATTERS - CF&I
LABOR DISPUTE SETTLEMENT - ACCOUNTING" for a discussion of the accounting for
the tentative agreement.

                                      -15-
<PAGE>


     In May 2003, the Company shut down its Portland mill melt shop. The
determination to close the melt shop was based on (1) the Company's ability to
obtain steel slab through purchases from suppliers on the open market, and (2)
high energy and raw material costs and the yield losses associated with the
inefficient casting technology in use at the Portland mill. The Company
forecasts that future steel slab purchases for the Portland mill will meet the
production needs of the Portland mill finishing operation for the remainder of
2004 and into the foreseeable future. The Company intends to maintain the melt
shop in operating condition but is also exploring other alternatives and has
contracted with a third party to market the melt shop equipment to suitable
buyers. Associated with the operations of the melt shop is an oxygen purchase
contract which cannot be used in curent operations and therefore does not
provide a current benefit to the Company unless it decides to restart the melt
shop, See Note 12 to the Consolidated Financial Statements "ASSET IMPAIRMENTS,"
as of June 30, 2004. In the future if the Company determines to not reopen the
melt shop, or decides to terminate the associated oxygen purchase contract, the
Company will incur an expense for contract termination costs. The Company
estimates the cancellation and buyout costs could range from $3.0 million to
$5.5 million, depending on negotiation of a settlement. None of the future costs
of the contract have been accrued as of June 30, 2004, in accordance with SFAS
No. 146, "ACCOUNTING FOR COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES" as
the Company has not effectively ceased its rights under the contract. In
addition, CF&I determined in the second quarter of 2003 that the new single
furnace operation will not have the capacity to support a two caster operation
and therefore CF&I has determined that one caster and other related assets have
no future service potential. The Company recorded a pre-tax charge to earnings
of approximately $36.1 million in the second quarter of 2003 related to the melt
shop and caster and other related asset impairments. See Note 12 to the
Consolidated Financial Statements, "ASSET IMPAIRMENTS."

     On December 4, 2003, President Bush lifted the tariffs on imports of steel
that were imposed March 5, 2002. The tariffs were designed to give the U.S.
steel industry time to restructure and become competitive in the global steel
market. During the time that the tariffs were in effect, the Company believes
that the tariffs did not materially impact either the supply of, or the cost of,
steel slabs purchased by the Company on the open market for processing into
steel plate and coil. Since the lifting of the tariffs, the steel industry has
seen a dramatic increase in both the cost of raw materials and the selling price
of most steel products. The Company believes that current market conditions are
the result of the combination of a strong steel demand in Asia, a weak United
States dollar, and an increase in ocean freight costs. The Company anticipates
that market conditions will remain unsettled into the foreseeable future. During
this period of time, the Company believes that it will continue to incur
increased costs for steel scrap, slabs, and ocean freight, and achieve increased
selling prices to offset these higher costs.

2004 OUTLOOK

     For 2004, the Company expects to ship approximately 1,720,000 tons of
products and generate approximately $1 billion in sales. In the Oregon Steel
Division the product mix is expected to consist of 615,000 tons of plate and
coil, 175,000 tons of welded pipe and 70,000 tons of structural tubing. At these
shipment levels, the Company expects its Portland combination mill to run at
approximately 80 percent of its practical capacity, the welded pipe mills to run
at approximately 25 percent of their practical capacities and the structural
tubing mill at approximately 50 percent of its practical capacity. The Company's
RMSM Division expects to ship approximately 362,000 tons of rail and 500,000
tons of rod and bar products. At these shipment levels, the rail and rod mills
would be at 90 percent and 100 percent, respectively, of their practical
capacities. Seamless pipe shipments will be dependent on market conditions in
the drilling industry. At the present time the Company's large diameter welded
pipe and seamless mills are not operating.


                                      -16-





<PAGE>


DISCUSSION AND ANALYSIS OF INCOME
(Information in tables in thousands except tons, per ton, and percentages)

     During the second quarter of 2004, tons sold of 431,000 tons were up 2
percent from the second quarter of 2003. Sales were $281.8 million for the
second quarter of 2004, the highest level per quarter in the Company's history
and up 48 percent from the second quarter of 2003.
<TABLE>
<CAPTION>

                                            THREE MONTHS ENDED JUNE 30                   SIX MONTHS ENDED JUNE 30
                                     --------------------------------------      -----------------------------------------
                                       2004      2003     CHANGE    % CHANGE       2004       2003      CHANGE    % CHANGE
                                       ----      ----     ------    --------       ----       ----      ------    --------
<S>                                  <C>        <C>       <C>         <C>        <C>        <C>        <C>         <C>
Sales
-----
Oregon Steel Division                $156,433   $104,496  $51,937     49.7%      $302,059   $187,622   $114,437    61.0%
RMSM Division                         125,336     85,398   39,938     46.8%       232,106    177,954     54,152    30.4%
                                     --------   -------- --------     ----       ---------  --------   --------    ----
  Consolidated                       $281,769   $189,894  $91,875     48.4%      $534,165   $365,576   $168,589    46.1%
                                     ========   ========  =======     ====       ========   ========   ========    ====

Tons sold
---------
Oregon Steel Division:
   Plate and Coil                     135,900    125,900   10,000      7.9%       309,700     234,600    75,100    32.0%
   Welded Pipe                         49,400     79,000  (29,600)   (37.5%)      108,200     130,200   (22,000)  (16.9%)
   Structural Tubing                   18,500         --   18,500    100.0%        28,900          --    28,900   100.0%
   Steel Slabs                            300         --      300    100.0%           400          --       400   100.0%
                                     --------   --------  -------    -----       --------    --------  --------   ------
       Total Oregon Steel Division    204,100    204,900     (800)    (0.4%)      447,200     364,800    82,400    22.6%
                                     --------   --------  -------    -----       --------    --------  --------   ------

RMSM Division:
   Rail                                93,200     86,800    6,400      7.4%       193,900     199,700    (5,800)   (2.9%)
   Rod and Bar                        133,200    117,400   15,800     13.5%       263,300     232,900    30,400    13.1%
   Seamless Pipe                          500     13,300  (12,800)   (96.2%)        3,300      24,200   (20,900)  (86.4%)
                                     --------   --------  -------    ------      --------    --------  --------   ------
        Total RMSM Division           226,900    217,500    9,400      4.3%       460,500     456,800     3,700     0.8%
                                     --------   --------  -------    ------      --------    --------  --------   ------
            Consolidated              431,000    422,400    8,600      2.0%       907,700     821,600    86,100    10.5%
                                     ========   ========  =======    ======      ========    ========  ========   ======

Sales price per ton
-------------------
Oregon Steel Division                    $766       $510     $256     50.2%          $675       $514       $161     31.3%
RMSM Division                             552        393      159     40.5%           504        390        114     29.2%
                                         ----       ----     ----     -----          ----       ----       ----    -----
  Consolidated                           $654       $450     $204     45.3%          $588       $445       $143     32.1%
                                         ====       ====     ====     =====          ====       ====       ====    =====
</TABLE>


      SALES. The increase in consolidated tonnage shipments for the comparative
three and six month periods are primarily due to increased shipments of plate,
coil, structural tubing and rod and bar products partially offset by lower
welded and seamless pipe shipments. The increase in product sales and average
product sales price were primarily due to higher average selling prices for
plate, coil, welded pipe, rail and rod and bar products and the increased
shipments noted above. Increased shipments and selling prices are the result of
a combination of factors including strong steel demand in Asia, a weak United
States dollar and increased ocean freight costs, all of which makes the United
States market less attractive to foreign producers.
<TABLE>
<CAPTION>

      GROSS PROFIT

                                                 THREE MONTHS ENDED JUNE 30                      SIX MONTHS ENDED JUNE 30
                                            ----------------------------------------      ----------------------------------------
                                            2004       2003      CHANGE     % CHANGE      2004      2003      CHANGE      % CHANGE
                                            ----       ----      ------     --------      ----      ----      ------      --------
    <S>                                    <C>        <C>        <C>        <C>         <C>        <C>       <C>          <C>
    Gross Profit                           $68,997    ($112)     $69,109    61,704.4%   $106,793   $5,969    $100,824     1,689.1%
</TABLE>


      The increase in gross profit for the three months and six months ended
June 30, 2004 over the same periods ended June 30, 2003 was primarily a result
of the increased volume and higher average sales prices discussed above,
partially offset by higher steel slab and scrap costs and the inability of the
Company to fully recover its cost of raw material for rail and large diameter
pipe products.

                                      -17-



<TABLE>

      SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
<CAPTION>

                                                   THREE MONTHS ENDED JUNE 30                     SIX MONTHS ENDED JUNE 30
                                            ---------------------------------------      -----------------------------------------
                                            2004      2003      CHANGE     % CHANGE        2004       2003      CHANGE    % CHANGE
                                            ----      ----      ------     --------      -------      ----      ------    --------
    <S>                                    <C>       <C>        <C>          <C>         <C>        <C>        <C>        <C>
    Selling, General and Administrative    $13,774   $12,434    $1,340       10.8%       $27,683    $24,925    $2,758       11.1%
</TABLE>


      The increase in selling, general and administrative expenses for the three
and six months ended June 30, 2004 over the same periods ended June 30, 2003 was
primarily the result of a $1.7 million and $3.0 million, respectively, charge
due to the 10 year profit participation obligation resulting from the
Settlement. See Note 10 to the Consolidated Financial Statements, "CONTINGENCIES
- LABOR MATTERS - CF&I LABOR DISPUTE SETTLEMENT - ACCOUNTING." In addition, the
Company incurred increased costs related to the handling and loading of products
sold due to an increase in the volume of tons shipped. These increases were
partially offset by decreased costs for information technology support and
equipment and lower depreciation expense of certain information technology
assets, and for the three months ended June 30, 2004, by recovery of bad debt
previously expensed in the three months ended March 31, 2004.

<TABLE>
      INCENTIVE COMPENSATION
<CAPTION>

                                                   THREE MONTHS ENDED JUNE 30                     SIX MONTHS ENDED JUNE 30
                                           ----------------------------------------     ------------------------------------------
                                            2004      2003      CHANGE     % CHANGE      2004       2003      CHANGE      % CHANGE
                                            ----      ----      ------     --------      ----       ----      ------      --------
    <S>                                    <C>        <C>       <C>        <C>          <C>         <C>       <C>         <C>
    Incentive Compensation                 $3,042     $117      $2,925     2,500.0%     $5,088      $339      $4,749      1,400.9%
</TABLE>


      The increase in incentive compensation for the three and six months ended
June 30, 2004 over the same periods ended June 30, 2003 was the result of
increased operating income.
<TABLE>
      INTEREST EXPENSE
<CAPTION>

                                                  THREE MONTHS ENDED JUNE 30                         SIX MONTHS ENDED JUNE 30
                                           ----------------------------------------     ------------------------------------------
                                            2004      2003      CHANGE     % CHANGE      2004       2003      CHANGE      % CHANGE
                                            ----      ----      ------     --------      ----       ----      ------      --------
    <S>                                    <C>       <C>         <C>         <C>        <C>        <C>         <C>          <C>
    Interest Expense                       $8,461    $8,352      $109        1.3%       $17,029    $16,561     $468         2.8%
</TABLE>


      The increase in interest expense for the three months ended June 30, 2004
over the same period ended June 30, 2003 was due to the addition of OFP interest
expense as a result of the adoption of FASB's Interpretation No. 46R,
"CONSOLIDATION OF VARIABLE INTEREST ENTITIES, AN INTERPRETATION OF ARB NO. 51"
("FIN 46R"). See Note 11 to the Consolidated Financial Statements, "JOINT
VENTURE AND ADOPTION OF FIN 46R - CONSOLIDATION OF VARIABLE INTEREST ENTITIES."

      The increase in interest expense for the six months ended June 30, 2004
over the same period ended June 30, 2003 was due to short-term borrowings under
the credit facility in the first six months of 2004 versus no borrowings in the
same period ended June 30, 2003, and also to the addition of OFP interest
expense as a result of the adoption of FIN 46R (as noted above).

<TABLE>
      INCOME TAX BENEFIT
<CAPTION>

                                                  THREE MONTHS ENDED JUNE 30                         SIX MONTHS ENDED JUNE 30
                                            ---------------------------------------      -----------------------------------------
                                            2004      2003      CHANGE     % CHANGE      2004       2003      CHANGE      % CHANGE
                                            ----      ----      ------     --------      ----       ----      ------      --------
<S>                                          <C>     <C>       <C>          <C>           <C>      <C>
    Income Tax Benefit                       $43     $2,305    ($2,262)     (98.1%)       $41      $7,525    ($7,484)      (99.5%)
</TABLE>

      The effective income tax benefit rate was less than 1% for the three and
six months ended June 30, 2004, compared to the tax benefit rate of 4.2% and
11.0% for the three and six months ended June 30, 2003, respectively. The
effective income tax rate for the three and six months ended June 30, 2004
varied from the combined state and federal statutory rate principally because
the Company reversed a portion of the valuation allowance, established in 2003,
for certain federal and state net operating loss carry-forwards, state tax
credits, and alternative minimum tax credits. SFAS No. 109, "ACCOUNTING FOR
INCOME TAXES," requires that tax benefits for federal and state net operating
loss carry-forwards, state tax credits, and alternative minimum tax credits each
be recorded as an asset to the extent that management assesses the utilization
of such assets to be "more likely than not"; otherwise, a valuation allowance is
required to be recorded. Based on this guidance, the Company reduced its
valuation allowance by $7.3 million and $10.5 million in the three and six
months ended June 30, 2004,

                                      -18-
<PAGE>


respectively, due to less uncertainty regarding the realization of these
deferred tax assets. The Company will continue to evaluate the need for
valuation allowances in the future. Changes in estimated future taxable income
and other underlying factors may lead to adjustments to the valuation
allowances.


LIQUIDITY AND CAPITAL RESOURCES

      At June 30, 2004, the Company's liquidity, comprised of cash, cash
equivalents, and funds available under its $65 million revolving credit facility
totaled approximately $97.6 million, compared to $49.7 million at December 31,
2003.

      Net cash provided by operating activities was $56.0 million for the first
six months of 2004 compared to $2.0 million provided by operations in the same
period of 2003. The items primarily affecting the $54.0 million increase in
operating cash flows were increased operating income of $93.3 million, before
consideration of non-cash transactions of the labor dispute Settlement
adjustment and fixed asset and other impairment charges, offset by cash used for
net working capital requirements of $33.7 million.

      Net cash used by investing activities in the first six months of 2004
totaled $9.4 million compared to $11.5 million in the same period of 2003. The
decrease was in part due to a $2.2 million decrease in additions to property,
plant and equipment. During the first six months of 2004, the Company expended
approximately $5.3 million and $3.7 million on capital projects (excluding
capitalized interest) at the Oregon Steel Division and the RMSM Division,
respectively.

      Net working capital at June 30, 2004 increased $51.8 million compared to
December 31, 2003, reflecting a $57.0 million increase in current assets and a
$5.2 million increase in current liabilities. The increase in current assets was
primarily due to an increase in cash, accounts receivable, and inventories of
$47.2 million, $12.8 million, and $14.8 million, respectively, partially offset
by a decrease in deferred income taxes of $11.8 million and a decrease in
inventory reserved for deferred revenue of $7.2 million. The increase in
accounts receivable was primarily due to increased sales and sales prices for
plate and coil and rod and bar products. The increase in inventory is primarily
due to the accumulation of structural tubing inventory as a result of the
addition of the Columbia Structural Tubing facility in the fourth quarter of
2003. The increase in current liabilities was primarily due to an increase in
accrued incentive compensation of $6.4 million due to increased operating
income, by $3.1 million for Settlement related to common stock issuance costs,
by a $2.0 million increase in the current portion of the OFP debt, and by an
increase in trade accounts payable of $2.4 million due to increased raw material
prices, partially offset by a decrease of $7.4 million in other accrued
expenses.

      On July 15, 2002, the Company issued $305 million of 10% First Mortgage
Notes due 2009 ("10% Notes") at a discount of 98.772% and an interest rate of
10%. Interest is payable on January 15 and July 15 of each year. The 10% Notes
are secured by a lien on substantially all of the property, plant and equipment
and certain other assets of the Company (exclusive of CPC and OFP), excluding
accounts receivable, inventory, and certain other assets. As of June 30, 2004,
the Company had outstanding $305 million of principal amount under the 10%
Notes. The indenture under which the Notes were issued contains restrictions on
new indebtedness and various types of disbursements, including dividends, based
on the cumulative amount of the Company's net income, as defined. Under these
restrictions, there was no amount available for cash dividends at June 30, 2004.
New CF&I and CF&I (collectively "Guarantors") guarantee the obligations of the
10% Notes, and those guarantees are secured by a lien on substantially all of
the property, plant and equipment and certain other assets of the Guarantors,
excluding accounts receivable, inventory, and certain other assets.

     On March 29, 2000, OFP entered into a 7-year $14 million loan agreement for
the purchase of certain processing assets and for the construction of a
processing facility. Amounts under the loan agreement bear interest based on the
prime rate plus a margin ranging from 1.84% to 3.00%, and as of June 30, 2004,
there was $9.5 million of principal outstanding. The loan is secured by all the
assets of OFP. The creditors of OFP have no recourse to the general credit of
the Company. Effective January 1, 2004, the Company included the OFP loan
balance in the consolidated balance sheet as a result of the adoption of FIN
46R. See Note 11 to the Consolidated Financial Statements, "JOINT VENTURE AND
ADOPTION OF FIN 46R - CONSOLIDATION OF VARIABLE INTEREST ENTITIES."

      As of June 30, 2004, Oregon Steel Mills, Inc., New CF&I, Inc., CF&I Steel,
L.P., and Colorado and Wyoming Railway Company ("Borrowers") maintained a $65
million revolving credit agreement ("Credit Agreement"), which will expire on
June 30, 2005. At June 30, 2004, $5.0 million was restricted under the Credit
Agreement, $15.4 million was restricted under outstanding letters of credit, and
$44.6 million was available for use. Amounts under the Credit Agreement bear
interest based on either (1) the prime rate plus a margin ranging from 0.25% to
1.00%, or (2) the adjusted LIBO rate plus a margin ranging from 2.50% to 3.25%.
Unused commitment fees range from 0.25% to 0.75%. During the quarter ended June
30, 2004, there was a total of $11.5 million of short-term borrowings under the
Credit Agreement with an average daily balance of $0.3 million. As of June 30,
2004, there was no outstanding balance due under the Credit Agreement. Had there
been an outstanding balance, the average interest rate for the Credit Agreement
would have been 5.0%. The unused commitment fees were 0.75% for the quarter
ended June 30, 2004. The margins and unused commitment fees will be subject to
adjustment within the ranges discussed above based on a quarterly leverage
                                      -19-
<PAGE>


ratio. The Credit Agreement contains various restrictive covenants including
minimum consolidated tangible net worth amount, a minimum earnings before
interest, taxes, depreciation and amortization amount, a minimum fixed charge
coverage ratio, limitations on maximum annual capital and environmental
expenditures, a borrowing availability limitation relating to inventory,
limitations on stockholder dividends and limitations on incurring new or
additional debt obligations other than as allowed by the Credit Agreement. The
Company cannot pay cash dividends without prior approval from the lenders. At
June 30, 2004, the Borrowers were in compliance with the Credit Agreement
covenants.

      Camrose maintains a CDN $15 million revolving credit facility with a
Canadian bank, the proceeds of which may be used for working capital and general
business purposes of Camrose. The facility is collateralized by substantially
all of the assets of Camrose, and borrowings under this facility are limited to
an amount equal to the sum of the product of specified advance rates and
Camrose's eligible trade accounts receivable and inventories. This facility
expires in September 2005. As of June 30, 2004, the interest rate of this
facility was 3.75%. Annual commitment fees are 0.25% of the unused portion of
the credit line. At June 30, 2004, there was no outstanding balance due under
the credit facility. At June 30, 2004, Camrose was in compliance with the
revolving credit facility covenants.

      As of June 30, 2004, principal payments on debt are due as follows (in
thousands):


                2004                                    $  1,000
                2005                                       2,000
                2006                                       2,000
                2007                                       4,500
                2008                                          --
                2009                                     305,000
                                                        --------
                                                        $314,500
                                                        ========


      Due to the favorable net results for the first six months of 2004, the
Company has been able to satisfy its needs for working capital and capital
expenditures through operations and in part through its available cash on hand.
The Company believes that its anticipated needs for working capital and capital
expenditures for the next twelve months will be met from funds generated from
operations, and if necessary, from the available credit facilities.

      The Company's level of indebtedness presents other risks to investors,
including the possibility that the Company and its subsidiaries may be unable to
generate cash sufficient to pay the principal of and interest on their
indebtedness when due. In that event, the holders of the indebtedness may be
able to declare all indebtedness owing to them to be due and payable
immediately, and to proceed against their collateral, if applicable. These
actions would have a material adverse effect on the Company. In addition, the
Company faces potential costs and liabilities associated with environmental
compliance and remediation issues and the labor settlement at the Pueblo mill.
See Note 10 to the Consolidated Financial Statements, "CONTINGENCIES" for a
description of those matters. Any costs or liabilities in excess of those
expected by the Company could have a material adverse effect on the Company.


OFF BALANCE SHEET ARRANGEMENTS

      Information on the Company's off balance sheet arrangements is disclosed
in the contractual obligations table of the Company's 2003 Form 10-K.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      No material changes.


ITEM 4.  CONTROLS AND PROCEDURES

      As of June 30, 2004, the Company carried out an evaluation, under the
supervision and with the participation of the Company's management, including
the Company's Chief Executive Officer and the Company's Chief Financial Officer,
of the effectiveness of the design and operation of the Company's disclosure
controls and procedures. Based on the evaluation, the Company's Chief Executive
Officer and Chief Financial Officer have concluded that the Company's disclosure
controls and procedures are effective to ensure that information required to be
disclosed by the Company in the reports it files or submits

                                      -20-
<PAGE>


under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in Securities and Exchange Commission
rules and forms. There were no significant changes in the Company's internal
controls or in other factors that could significantly affect these controls
including any corrective actions with regard to significant deficiencies and
material weaknesses subsequent to the date the Company completed its evaluation.


PART II  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

      See Note 10, "CONTINGENCIES" for a discussion of the status of (a) the
environmental issues at the Portland mill, Napa pipe mill, and RMSM, and (b) the
tentative Settlement of the labor dispute at RMSM.

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

      The Company maintains insurance against various risks, including certain
types of tort liability arising from the sale of its products. The Company does
not maintain insurance against liability arising out of waste disposal, on-site
remediation of environmental contamination or earthquake damage to its Napa pipe
mill and related properties because of the high cost of that coverage. In
addition, our per claim deductible for workers' compensation claims is $1.0
million due to the high cost of maintaining such insurance with a lower
deductible. There is no assurance that the insurance coverage carried by the
Company will be available in the future at reasonable rates, if at all.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(A)      EXHIBITS


       31.1   Certification of Chief Executive Officer required by Rules
              13a-14(a) and 15d-14(a) as promulgated by the Securities and
              Exchange Commission and pursuant to Section 302 of the
              Sarbanes-Oxley Act of 2002.

       31.2   Certification of Chief Financial Officer required by Rules
              13a-14(a) and 15d-14(a) as promulgated by the Securities and
              Exchange Commission and pursuant to Section 302 of the
              Sarbanes-Oxley Act of 2002.

       32.1   Certification of Chief Executive Officer and Chief Financial
              Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
              Section 906 of the Sarbanes-Oxley Act of 2002.

(B)      REPORTS ON FORM 8-K

               On April 28, 2004, the Company filed a report on Form 8-K in
               relation to a press release announcing financial results for the
               first quarter ended March 31, 2004.

               On May 27, 2004, the Company filed a report on Form 8-K in
               relation to a press release updating its financial outlook for
               the second quarter ended June 30, 2004.

               On June 23, 2004, the Company filed a report on form 8-K in
               relation to a press release announcing the idling of the Napa
               pipe mill and updating the financial outlook for the second
               quarter ended June 30, 2004.



                                      -21-

<PAGE>


                                   SIGNATURES

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.



                                               OREGON STEEL MILLS, INC.



Date:   September 13, 2004                         /s/ Jeff S. Stewart
                                               ------------------------------
                                                        Jeff S. Stewart
                                                   Corporate Controller
                                               (Principal Accounting Officer)


                                      -22-
<PAGE>


                            OREGON STEEL MILLS, INC.

                                  EXHIBIT INDEX

              LIST OF EXHIBITS FILED WITH FORM 10-Q FOR THE PERIOD
                               ENDED JUNE 30, 2004



       31.1   Certification of Chief Executive Officer required by Rules
              13a-14(a) and 15d-14(a) as promulgated by the Securities and
              Exchange Commission and pursuant to Section 302 of the
              Sarbanes-Oxley Act of 2002.

       31.2   Certification of Chief Financial Officer required by Rules
              13a-14(a) and 15d-14(a) as promulgated by the Securities and
              Exchange Commission and pursuant to Section 302 of the
              Sarbanes-Oxley Act of 2002.

       32.1   Certification of Chief Executive Officer and Chief Financial
              Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
              Section 906 of the Sarbanes-Oxley Act of 2002.


                                      -23-