California Steel Industries, Inc. (CSI) reported its best quarterly results in the company's 20-year history, with net income of $46.1 million on sales of $388.6 million for the third quarter.

Third Quarter Results—Net income of $46.1 million compares to a net loss of $3.96 million for the third quarter of 2003. Sales, $388.6 million, compare to sales of $191.2 million for the third quarter of 2003. Shipments of 557,980 net tons are second only to first quarter 2004 shipments of 566,630 tons. EBITDA for the quarter totaled $87.1 million.

Average sales prices were up 29% when compared to second quarter 2004, and up 86% compared to third quarter 2003, indicative of steel market conditions and of higher levels of sales of ERW pipe products.

Nine Month Results—Year-to-date sales are $910.2 million, on shipments of 1,654,571 tons, for year-to-date net income of $74.2 million. Shipments are 18% higher than the same period in 2003, with net sales running 59 percent higher. Net income also rose significantly.

Comments—President and CEO Masakazu Kurushima said, "As with the first half of this year, we continue to be pleased with our results. Favorable market conditions, coupled with CSI's long-standing practice of prudent cash management, operating efficiencies, and an outstanding team of employees combine to return our best quarterly results ever."

Liquidity continues to remain strong, as the balance under the company's Revolving Credit Agreement remains at zero as of September 30, 2004, with availability of more than $108 million and a cash balance of $20.6 million.

Arcelor Acquisition of CST Shares—On October 14, CSI entered into option and waiver agreements with Arcelor SA regarding Arcelor's acquisition of CSI's 4% interest in the common stock in Companhia Siderurgica de Tubarao (CST). CSI and Arcelor are both shareholders in CST and are parties to the existing CST Shareholders' Agreement governing the transfer of CST shares. Pursuant to the option agreement, Arcelor granted to CSI an option to sell and CSI granted to Arcelor an option to purchase CSI's interest in CST. These options may be exercised during the thirty day period following termination of the CST shareholders agreement on May 25, 2005. In the waiver agreement, CSI further agreed to waive its right of first refusal under the CST Shareholders' Agreement.

CSI's results for the third quarter reflect an adjustment of pretax loss of $5.3 million to the value of CSI's interest in CST consistent with the Arcelor agreement. CST is one of CSI's suppliers of steel slab, a relationship that both CSI and CST expect to continue following the transfer.

California Steel Industries is the leading producer of flat rolled steel products in the western United States (the 11 states located west of the Rocky Mountains) based on tonnage billed, with a broad range of products, including hot rolled, cold rolled, electric resistant weld pipe and galvanized coil and sheet. Located in Fontana, Calif., CSI has about 1000 employees.