<PAGE>
First Quarter - 1998
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
-------------------------
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the period ended March 31, 1998
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 1-11767
I.R.S. Employer Identification Number 36-3431962
RYERSON TULL, INC.
(a Delaware Corporation)
2621 West 15th Place
Chicago, Illinois 60608
Telephone: (773) 762-2121
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 5,326,732 shares of the
Company's Class A Common Stock and 34,000,000 shares of the Company's Class B
Common Stock (each $1.00 par value per share) were outstanding as of May 4,
1998.
<PAGE>
PART I. FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements
RYERSON TULL, INC.
AND SUBSIDIARY COMPANIES
(A majority-owned subsidiary of Inland Steel Industries, Inc.)
Consolidated Statement of Operations (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Dollars in Millions (except per share data)
---------------------------------------------
Three Months Ended
March 31
-------------------
1998 1997
-------- --------
<S> <C> <C>
NET SALES $734.8 $660.7
Cost of materials sold 570.8 510.4
------ ------
GROSS PROFIT 164.0 150.3
Operating expenses 118.2 111.0
Depreciation and amortization 8.0 6.3
Gain on sale of assets -- (2.0)
------ ------
OPERATING PROFIT 37.8 35.0
General corporate and other expense,
net of income items 2.0 0.9
Interest and other expense on debt 8.6 7.2
------ ------
INCOME BEFORE INCOME TAXES 27.2 26.9
PROVISION FOR INCOME TAXES 11.2 10.3
------ ------
NET INCOME $ 16.0 $ 16.6
====== ======
EARNINGS PER SHARE
OF COMMON STOCK - BASIC
AND DILUTED (Note 4) $ 0.41 $ 0.42
====== ======
OPERATING DATA
- --------------
SHIPMENTS (Tons in Thousands) 812.1 708.8
</TABLE>
See notes to consolidated financial statements
-1-
<PAGE>
RYERSON TULL, INC.
AND SUBSIDIARY COMPANIES
(A majority-owned subsidiary of Inland Steel Industries, Inc.)
Consolidated Statement of Cash Flows (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Dollars in Millions
--------------------
Three Months Ended
March 31
--------------------
1998 1997
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 16.0 $ 16.6
------ ------
Adjustments to reconcile net income to net
cash used for operating activities:
Depreciation and amortization 8.0 6.3
Gain on sale of assets - (2.4)
Deferred employee benefit cost 1.0 1.2
Deferred income taxes .4 1.2
Change in assets and liabilities, excluding
effects of acquisitions:
Receivables (47.7) (40.1)
Inventories (28.1) (34.8)
Other assets .2 (0.5)
Accounts payable 18.7 53.4
Payables to related companies (9.0) 9.2
Accrued liabilities (13.6) (17.6)
Other deferred items .2 (0.4)
------ ------
Net adjustments (69.9) (24.5)
------ ------
Net cash used for operating activities (53.9) (7.9)
------ ------
INVESTING ACTIVITIES
Acquisitions (Note 2) - (130.2)
Capital expenditures (7.7) (6.9)
Proceeds from sales of assets 0.1 4.1
------ ------
Net cash used for investing activities (7.6) (133.0)
------ ------
FINANCING ACTIVITIES
Debt retirement (0.1) (0.4)
Reduction of debt assumed in acquisition - (22.6)
Borrowing from related company, net 61.6 132.0
Short-term borrowing under bank credit
facility, net - 8.0
------ ------
Net cash provided from financing activities 61.5 117.0
------ ------
Net decrease in cash and cash equivalents - (23.9)
Cash and cash equivalents - beginning of year - 23.9
------ ------
Cash and cash equivalents - end of period $ - $ -
====== ======
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
Interest $ 13.4 $ 12.9
Income taxes, net 10.9 10.4
Debt assumed in acquisition - 22.6
</TABLE>
See notes to consolidated financial statements
-2-
<PAGE>
RYERSON TULL, INC.
AND SUBSIDIARY COMPANIES
(A majority-owned subsidiary of Inland Steel Industries, Inc.)
Consolidated Balance Sheet (Unaudited)
<TABLE>
<CAPTION>
=========================================================================================
Dollars in Millions
----------------------------------------
ASSETS March 31, 1998 December 31, 1997
- ------ ------------------- -------------------
(unaudited)
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ - $ -
Receivables 345.4 297.7
Inventories - principally at LIFO 453.8 425.7
Deferred income taxes 5.1 5.6
-------- --------
Total current assets 804.3 729.0
INVESTMENTS AND ADVANCES 20.4 20.7
PROPERTY, PLANT AND EQUIPMENT
Valued on basis of cost $550.8 $ 543.3
Less: accumulated depreciation 265.0 285.8 258.3 285.0
------ --------
DEFERRED INCOME TAXES 35.9 35.8
PREPAID PENSION COSTS 14.6 14.9
EXCESS OF COST OVER NET ASSETS ACQUIRED 81.2 82.3
OTHER ASSETS 9.4 9.6
-------- --------
Total Assets $1,251.6 $1,177.3
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts payable $ 168.5 $ 149.8
Note payable to related company 183.0 121.4
Payables to related companies - trade and other 16.3 25.3
Accrued liabilities 29.6 43.2
Long-term debt due within one year 6.2 6.3
-------- --------
Total current liabilities 403.6 346.0
LONG-TERM DEBT 257.0 257.0
DEFERRED EMPLOYEE BENEFITS AND OTHER 147.5 146.8
-------- --------
Total liabilities 808.1 749.8
STOCKHOLDERS' EQUITY (Schedule A) 443.5 427.5
-------- --------
Total Liabilities and Stockholders' Equity $1,251.6 $1,177.3
======== ========
</TABLE>
See notes to consolidated financial statements
-3-
<PAGE>
RYERSON TULL, INC.
AND SUBSIDIARY COMPANIES
(A majority-owned subsidiary of Inland Steel Industries, Inc.)
Notes to Consolidated Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 1/FINANCIAL STATEMENTS
Results of operations for any interim period are not necessarily indicative of
results of any other periods or for the year. The financial statements as of
March 31, 1998 and for the three-month periods ended March 31, 1998 and 1997 are
unaudited, but in the opinion of management include all adjustments necessary
for a fair presentation of results for such periods. These financial statements
should be read in conjunction with the financial statements and related notes
contained in the Annual Report on Form 10-K for the fiscal year ended December
31, 1997.
NOTE 2/ACQUISITIONS
During the first quarter of 1997, the Company, through its subsidiaries,
acquired Thypin Steel Co., Inc., and the assets of Cardinal Metals, Inc. for an
aggregate of $130.2 million in cash plus assumption of debt. The acquisitions
have been accounted for by the purchase method of accounting and the purchase
price has been allocated to assets acquired and liabilities assumed. Results of
operations since acquisition for each company are included in the consolidated
results. The pro forma effect for 1997 had these acquisitions occurred at the
beginning of the year is not material.
NOTE 3/RELATED PARTY TRANSACTIONS
The Company has agreed to procedures established by Inland Steel Industries,
Inc. ("Industries") for charging Industries' administrative expenses to the
operating companies owned by it. Pursuant to these procedures, the Company was
charged $1.8 million and $1.4 million by Industries for the first three months
of 1998 and 1997, respectively, for management, financial and legal services
provided to the Company.
On March 27, 1997, the Company established the ability to borrow from Industries
through a five-year $250 million uncommitted line of credit. As of March 31,
1998, $183.0 million of borrowing was outstanding under this facility.
-4-
<PAGE>
The Company sells to and purchases products from related companies at prevailing
market prices. These transactions are summarized as follows:
<TABLE>
<CAPTION>
Dollars in Millions
-----------------------
Three Months
Ended March 31
-----------------------
1998 1997
------ ------
<S> <C> <C>
Net Product Sales $ 2.4 $ 3.2
Net Product Purchases 49.8 59.1
</TABLE>
NOTE 4/EARNINGS PER SHARE
For the first three months of 1998, 39.3 million shares were used in the
calculation of basic earnings per share, while 39.4 million shares were used in
the calculation of diluted earnings per share. For the first quarter of 1997,
39.3 million shares were used in the calculation of basic and diluted earnings
per share.
-5-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations - Comparison of First Quarter 1998 to First Quarter 1997
- ------------------------------------------------------------------------------
The Company reported consolidated net income of $16.0 million, or $.41 per
common share, in the first quarter of 1998 as compared with $16.6 million, or
$.42 per common share, in the year-ago quarter. First quarter 1997 earnings
benefited from a $2 million pre-tax gain (three cents per common share) on the
sale of the Company's property in Jersey City, New Jersey. Quarter-to-quarter
earnings were positively impacted by increased tonnage volumes and reduced
expenses per ton, and unfavorably affected by lower selling prices, which
pressured gross margins, and a 19% increase in interest expense due to an
increase in borrowings.
Included in the 1998 first quarter is a full quarter of net sales for
Thypin Steel Co., Inc., Cardinal Metals, Inc., and Omni Metals, Inc., which were
acquired by the Company during 1997. First quarter 1998 consolidated net sales
of $734.8 million were 11% higher than the comparable year-earlier quarter.
Volume increased 15% to 812,000 tons from 709,000 tons, as a result of market
share gains in large part due to the 1997 acquisitions, as well as increased
service center industry shipment levels. Average selling price declined 3% to
$905 per ton from $932 per ton a year ago.
Gross profit per ton decreased to $202 from $212 in the year-ago quarter
due to continued pressure from declining industrywide metals prices. Expenses,
defined as operating expenses, depreciation and amortization, were reduced to
$155 per ton from $165 per ton in the first quarter of 1997.
Operating profit of $37.8 million was 15% higher than the $33.0 million
operating profit recorded in the year-ago quarter excluding the one-time gain on
the sale of the Jersey City property.
Liquidity and Financing
- -----------------------
As part of the recapitalization that took place in 1996, the Company issued
$250 million of long term debt ("Notes") and established a committed four-year
$250 million bank revolving credit facility. During the third quarter of 1997,
the Company extended its $250 million credit facility to September 5, 2002,
while reducing both the commitment fee and interest rate related to the
facility. Restrictions contained in the bank facility and the Notes indenture
prohibit the Company from, among other things, declaring or paying dividends on
Company common stock under certain conditions. Considering these restrictions,
at March 31, 1998, up to $84 million of common dividends could have been paid.
In order to provide additional borrowing flexibility, the Company
established a five-year $250 million uncommitted line of credit with its parent,
Inland Steel Industries, Inc.
-6-
<PAGE>
("Industries") on March 27, 1997, which was amended on September 5, 1997.
Interest under this credit line is at market rates. Under terms of the
agreement, Industries may, at its sole option, demand repayment of any or all
amounts outstanding at any time.
At March 31, 1998, the Company had outstanding borrowing under the
Industries line of credit of $183.0 million. On a combined basis, the Company
had committed and uncommitted lines of credit of $317.0 million unused as of
March 31, 1998. However, there can be no assurance that Industires will continue
to make the $250 million credit line available to the company in the future.
Additionally, a covenant contained in the bank credit facility restricts the
amount of additional debt, including additional borrowings under the credit
lines that the Company can incur, to $79 million as of March 31, 1998.
Recent Developments
- -------------------
On March 17, 1998, Industries announced it had signed a binding letter
agreement with Ispat International N.V. ("Ispat") whereby Ispat will acquire
Inland Steel Company ("ISC"). Following the sale, Industries' primary business
will be metals distribution, presently conducted by the Company. Industries is
currently considering a plan to combine with the Company into one entity
subsequent to the closing of the sale. The sale is subject to a definitive
agreement, antitrust clearance, and other closing conditions, and the need to
give the United Steelworkers of America ("USWA") the opportunity to make an
offer to purchase ISC. In early May, Industries was informed that the USWA had
decided not to pursue its right to submit an offer for ISC.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
-7-
<PAGE>
PART II. OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. The exhibits required to be filed by Item 601 of Regulation S-K
are listed in the "Exhibit Index," which is attached hereto and
incorporated by reference herein.
(b) Reports on Form 8-K. No reports on Form 8-K were filed by the Company
during the quarter ended March 31, 1998.
-8-
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RYERSON TULL, INC.
By Lily L. May
----------------------------
Lily L. May
Controller and
Principal Accounting Officer
Date: May 11, 1998
-9-
<PAGE>
Part I -- Schedule A
RYERSON TULL, INC.
AND SUBSIDIARY COMPANIES
(A majority-owned subsidiary of Inland Steel Industries, Inc.)
SUMMARY OF STOCKHOLDERS' EQUITY
===============================================================================
<TABLE>
<CAPTION>
Dollars in Millions
-------------------------------------
March 31, 1998 December 31, 1997
-------------- -----------------
(unaudited)
<S> <C> <C> <C> <C>
STOCKHOLDERS' EQUITY
- --------------------
Series A common stock ($1 par value)
- 5,285,348 shares and 5,283,762 shares issued
as of March 31, 1998 and $ 5.3 $ 5.3
December 31, 1997, respectively
Series B common stock ($1 par value)
- 34,000,000 shares issued and outstanding
as of March 31, 1998 and December 31, 1997 34.0 34.0
Capital in excess of par value 304.6 304.6
Retained earnings
Balance beginning of year $85.2 $22.4
Net income 16.0 101.2 62.8 85.2
----- -----
Cumulative translation adjustment (1.3) (1.3)
Restricted stock awards (0.3) (0.3)
Treasury stock, at cost
- 1,667 shares as of March 31, 1998 and
2,031 as of December 31, 1997 - -
------ ------
Total Stockholders' Equity $443.5 $427.5
====== ======
</TABLE>
-10-
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page No.
- ------- ----------- ----------
<C> <S> <C>
3.1 Restated Certificate of Incorporation of the Company (Filed as Exhibit 3.1 -
to the Company's Registration Statement on Form S-1 (File No. 333-
3235), and incorporated by reference herein.)
3.2 By-Laws of the Company. (Filed as Exhibit 3.2 to the Company's -
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 and
incorporated by reference herein.)
27 Financial Data Schedule.....................................................
</TABLE>
-i-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED STATEMENT OF OPERATIONS, THE CONSOLIDATED BALANCE SHEET, AND
THE SUMMARY OF STOCKHOLDERS' EQUITY CONTAINED IN THE QUARTERLY REPORT ON FORM
10-Q TO WHICH THIS EXHIBIT IS ATTACHED AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 353,200
<ALLOWANCES> 7,800
<INVENTORY> 453,800
<CURRENT-ASSETS> 804,300
<PP&E> 550,800
<DEPRECIATION> 265,000
<TOTAL-ASSETS> 1,251,600
<CURRENT-LIABILITIES> 403,600
<BONDS> 257,000
0
0
<COMMON> 39,300
<OTHER-SE> 404,200
<TOTAL-LIABILITY-AND-EQUITY> 1,251,600
<SALES> 734,800
<TOTAL-REVENUES> 734,800
<CGS> 650,500
<TOTAL-COSTS> 650,500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,600
<INCOME-PRETAX> 27,200
<INCOME-TAX> 11,200
<INCOME-CONTINUING> 16,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,000
<EPS-PRIMARY> .41
<EPS-DILUTED> .41
</TABLE>
