<PAGE>
Second 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 June 30, 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: 5,346,495 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 August 7,
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 Income (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Dollars in Millions (except per share data)
-------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
------------------ --------------------
1998 1997 1998 1997
------ ------ -------- --------
<S> <C> <C> <C> <C>
NET SALES $715.2 $730.0 $1,450.0 $1,390.7
Cost of materials sold 553.6 569.9 1,124.4 1,080.3
------ ------ -------- --------
GROSS PROFIT 161.6 160.1 325.6 310.4
Operating expenses 116.0 117.7 234.2 228.7
Depreciation and amortization 7.9 7.0 15.9 13.3
Gain on sale of assets -- 6.9 -- 8.9
------ ------ -------- --------
OPERATING PROFIT 37.7 42.3 75.5 77.3
General corporate and other
expense, net of income items 2.2 2.0 4.2 3.0
Interest and other expense on debt 8.8 8.4 17.4 15.6
------ ------ -------- --------
INCOME BEFORE INCOME TAXES 26.7 31.9 53.9 58.7
PROVISION FOR INCOME TAXES 11.1 12.8 22.3 23.1
------ ------ -------- --------
NET INCOME $ 15.6 $ 19.1 $ 31.6 $ 35.6
====== ====== -------- ========
EARNINGS PER SHARE OF
COMMON STOCK - BASIC AND DILUTED $ 0.40 $ 0.49 $ 0.80 $ 0.91
====== ====== ======== ========
AVERAGE SHARES OF COMMON STOCK
OUTSTANDING (millions)
Basic 39.3 39.3 39.3 39.3
Diluted 39.6 39.3 39.5 39.3
OPERATING DATA
- --------------
SHIPMENTS (Tons in Thousands) 797.4 780.8 1,609.5 1,489.3
</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 Statement of Cash Flows (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Dollars in Millions
---------------------
Six Months Ended
June 30
---------------------
1998 1997
------ -------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 31.6 $ 35.6
------ -------
Adjustments to reconcile net income to net
cash provided from (used for) operating activities:
Depreciation and amortization 15.9 13.3
Gain on sale of assets - (8.9)
Deferred employee benefit cost 2.0 2.2
Deferred income taxes (1.6) 0.2
Change in assets and liabilities, excluding effects
of acquisitions:
Receivables (35.1) (46.5)
Inventories (57.0) (32.1)
Other assets (0.1) 4.8
Accounts payable 4.5 51.8
Payables to related companies (3.6) (0.2)
Accrued liabilities (7.5) (12.0)
Other deferred items 0.5 (5.6)
------ -------
Net adjustments (82.0) (33.0)
------ -------
Net cash provided from (used for) operating
activities (50.4) 2.6
------ -------
INVESTING ACTIVITIES
Acquisitions (Note 2) - (130.4)
Capital expenditures (15.0) (15.7)
Investments in and advances to joint ventures, net - (0.4)
Proceeds from sales of assets 0.3 16.7
------ -------
Net cash used for investing activities (14.7) (129.8)
------ -------
FINANCING ACTIVITIES
Debt retirement (0.2) (0.6)
Reduction of debt assumed in acquisition - (22.6)
Borrowing from related company, net 65.3 126.5
------ -------
Net cash provided from financing activities 65.1 103.3
------ -------
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 $ 16.5 $ 14.8
Income taxes, net 23.3 25.0
Debt assumed in acquisition - 22.6
</TABLE>
See notes to consolidated financial statements
3
<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 June 30, 1998 December 31, 1997
- ------ ------------------ ------------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ - $ -
Receivables 332.8 297.7
Inventories - principally at LIFO 482.8 425.7
Deferred income taxes 5.0 5.6
-------- --------
Total current assets 820.6 729.0
INVESTMENTS AND ADVANCES 20.4 20.7
PROPERTY, PLANT AND EQUIPMENT
Valued on basis of cost $557.8 $543.3
Less: accumulated depreciation 271.4 286.4 258.3 285.0
------ ------
DEFERRED INCOME TAXES 38.0 35.8
PREPAID PENSION COSTS 13.8 14.9
EXCESS OF COST OVER NET ASSETS
ACQUIRED 80.2 82.3
OTHER ASSETS 9.7 9.6
-------- --------
Total Assets $1,269.1 $1,177.3
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts payable $ 154.3 $ 149.8
Note payable to related company 186.6 121.4
Payables to related companies -
trade and other 21.7 25.3
Accrued liabilities 35.8 43.2
Long-term debt due within one year 6.1 6.3
-------- --------
Total current liabilities 404.5 346.0
LONG-TERM DEBT 257.0 257.0
DEFERRED EMPLOYEE BENEFITS AND OTHER 147.8 146.8
-------- --------
Total liabilities 809.3 749.8
STOCKHOLDERS' EQUITY (Schedule A) 459.8 427.5
-------- --------
Total Liabilities and
Stockholders' Equity $1,269.1 $1,177.3
======== ========
</TABLE>
See notes to consolidated financial statements
4
<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 June 30, 1998 and for the three-month and six-month periods
ended June 30, 1998 and 1997 are unaudited, but in the opinion of management
include all adjustments, consisting of normal recurring 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 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 $130.4 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 $3.6 million and $2.9 million by Industries for the first
six 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
June 30, 1998, $186.6 million of borrowing was outstanding under this facility.
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 Six Months
Ended June 30 Ended June 30
---------------- -----------------
1998 1997 1998 1997
----- ----- ----- ------
<S> <C> <C> <C> <C>
Net Product Sales $ 2.5 $ 2.6 $ 4.9 $ 5.8
Net Product Purchases 47.6 52.7 97.4 111.8
</TABLE>
5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations - Comparison of Second Quarter 1998 to Second Quarter 1997
- --------------------------------------------------------------------------------
The Company reported consolidated net income of $15.6 million, or $.40 per
common share, in the second quarter of 1998 as compared with $19.1 million, or
$.49 per common share, in the year-ago quarter. Second quarter 1997 earnings
benefited from a $6.9 million pretax gain (eleven cents per common share) on the
sale of the Company's property in Boston. 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 6% increase in interest expense due to an increase in borrowing.
Second quarter 1998 consolidated net sales of $715.2 million were 2% lower
than the comparable year-earlier quarter. Volume increased 2% to 797,000 tons
from 780,000 tons. Average selling price declined 4% to $897 per ton from $935
per ton a year ago.
Gross profit per ton decreased to $203 from $205 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
$156 per ton from $160 per ton in the second quarter of 1997.
Operating profit of $37.7 million was 7% higher than the $35.4 million
operating profit recorded in the year-ago quarter excluding the one-time gain on
the sale of the Boston property.
Comparison of First Six Months of 1998 to First Six Months of 1997
- ------------------------------------------------------------------
For the first six months of 1998, the Company reported net income of $31.6
million, or $.80 per common share, compared to $35.6 million or $.91 per common
share for the same period a year ago. Earnings for the first six months of 1997
benefited from a $8.9 million pretax gain (fourteen cents per common share) on
the sale of the Company's property in Boston and Jersey City.
Net sales of $1.45 billion were up 4% from the year-ago level in large part
due to the inclusion of a full six months of net sales from acquisitions made by
the Company during 1997.
Operating profit increased 10% to $75.5 million in the first six months of
1998 from $68.4 million recorded in the same period a year ago excluding the
one-time gain on the sale of the Boston and Jersey City properties.
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 June 30, 1998, up to $92 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. ("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 June 30, 1998, the Company had outstanding borrowing under the
Industries line of credit of $186.6 million. On a combined basis, the Company
had committed and uncommitted lines of credit of $313.4 million unused as of
June 30, 1998. However, there can be no assurance that Industries 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 $100 million as of June 30, 1998.
6
<PAGE>
Recent Developments
- -------------------
On July 16, 1998, Industries announced that Ispat International N.V. had
acquired the Inland Steel Company. As part of the closing conditions, the
Company has agreed to provide the Pension Benefit Guaranty Corporation with a
five year guaranty in the amount of $50 million. Following the sale, Industries'
primary business is metals distribution, presently conducted by the Company.
Industries currently intends to combine with the Company into one entity.
7
<PAGE>
Part II. OTHER INFORMATION
---------------------------
Item 4. Submission of Matters to a Vote of Security Holders
(a) A meeting of stockholders was held on May 27, 1998 and was an annual
meeting.
(b) No answer is required.
(c) The election of three nominees for director of the Company was voted
upon at the meeting. The number of affirmative votes and the number of
votes withheld with respect to such approval is as follows:
<TABLE>
<CAPTION>
Nominee Affirmative Votes Votes Withheld
------- ----------------- --------------
<S> <C> <C>
Richard G. Cline 141,046,043 7,125
James A. Henderson 141,046,013 7,155
Neil S.Novich 141,051,968 1,200
</TABLE>
The results of the voting for the election of Price Waterhouse LLP to
audit the accounts of the Company and its subsidiaries for 1998 are as
follows:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
141,051,175 1,150 843
</TABLE>
There were no matters voted upon at the meeting to which broker
non-votes applied.
(d) Not applicable.
Item 5. Other Information.
Proposals of stockholders must be received in writing by the Secretary of the
Company no later than December 18, 1998 and must comply with the requirements
of the Securities and Exchange Commission in order to be considered for
inclusion in the Company's proxy statement and form of proxy relating to the
Annual Meeting of Stockholders to be held in 1999. In order for a candidate
recommended by a stockholder to be considered by the Nominating and Governance
Committee as a nominee for election at the 1999 Annual Meeting, the name of
the candidate and a written description of his or her qualifications must be
received by the Corporate Secretary of the Company prior to January 1, 1999.
Stockholders who intend to nominate persons for election as directors at
annual meetings, and proposals not included in a proxy statement for an annual
meeting, must comply with the advance notice procedures set forth in the By-
laws of the Company in order to be properly brought before that annual meeting
of stockholders. These advance notice procedures require that, if the Company
provides less than 105 days' notice or prior public disclosure to stockholders
of the date of the annual meeting, such stockholder's notice must be delivered
to or received by the Company prior to February 26, 1999; otherwise, such
stockholder's notice must be delivered to or mailed and received at the
Company's principal executive offices not less than 90 days prior to the
meeting.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. The exhibits required to be filed by Item 601 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 during the second quarter of 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: August 12, 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
----------------------------------------
June 30, 1998 December 31, 1997
------------------ ------------------
(unaudited)
<S> <C> <C>
STOCKHOLDERS' EQUITY
- --------------------
Series A common stock ($1 par value)
- 5,344,995 shares and 5,283,762
shares issued as of June 30,
1998 and December 31, 1997,
respectively $ 5.3 $ 5.3
Series B common stock ($1 par value)
- 34,000,000 shares issued and
outstanding as of June 30, 1998
and December 31, 1997 34.0 34.0
Capital in excess of par value 305.6 304.6
Retained earnings
Balance beginning of year $85.2 $22.4
Net income 31.6 116.8 62.8 85.2
----- -----
Cumulative translation adjustment (1.3) (1.3)
Restricted stock awards (0.6) (0.3)
Treasury stock, at cost
- 1,534 shares as of June 30, 1998
and 2,031 as of December 31, 1997 - -
------ ------
Total Stockholders' Equity $459.8 $427.5
====== ======
</TABLE>
10
<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 SCHEDULES.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 341,000
<ALLOWANCES> 8,200
<INVENTORY> 482,800
<CURRENT-ASSETS> 820,600
<PP&E> 557,800
<DEPRECIATION> 271,400
<TOTAL-ASSETS> 1,269,100
<CURRENT-LIABILITIES> 404,500
<BONDS> 257,000
0
0
<COMMON> 39,300
<OTHER-SE> 420,500
<TOTAL-LIABILITY-AND-EQUITY> 1,269,100
<SALES> 1,450,000
<TOTAL-REVENUES> 1,450,000
<CGS> 1,281,500
<TOTAL-COSTS> 1,281,500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,400
<INCOME-PRETAX> 53,900
<INCOME-TAX> 22,300
<INCOME-CONTINUING> 31,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,600
<EPS-PRIMARY> .80
<EPS-DILUTED> .80
</TABLE>
