<PAGE> 1
FIRST QUARTER - 1996
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, 1996
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 1-2438
I.R.S. Employer Identification Number 36-1262880
INLAND STEEL COMPANY
(a Delaware Corporation)
30 West Monroe Street
Chicago, Illinois 60603
Telephone: (312) 346-0300
Registrant meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q and is therefore filing this Form with the reduced disclosure
format.
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: 980 shares of the Company's
Common Stock ($1.00 par value per share) were outstanding as of May 3, 1996.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INLAND STEEL COMPANY AND SUBSIDIARY COMPANIES
(A wholly owned subsidiary of Inland Steel Industries, Inc.)
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Dollars in Millions
---------------------
Three Months Ended
March 31
---------------------
1996 1995
-------- -------
<S> <C> <C>
NET SALES $ 615.7 $ 651.7
------- -------
OPERATING COSTS AND EXPENSES
Cost of goods sold 561.9 558.9
Selling, general and administrative expenses 9.9 10.4
Depreciation 31.3 31.1
------- -------
Total 603.1 600.4
------- -------
OPERATING PROFIT 12.6 51.3
General corporate expense, net of income items 3.2 4.1
Interest and other expense on debt 12.7 12.7
------- -------
INCOME (LOSS) BEFORE INCOME TAXES (3.3) 34.5
PROVISION FOR INCOME TAXES 1.2Cr. 13.3
------- -------
NET INCOME (LOSS) $ (2.1) $ 21.2
======= =======
</TABLE>
See notes to consolidated financial statements
-1-
<PAGE> 3
INLAND STEEL COMPANY AND SUBSIDIARY COMPANIES
(A wholly owned subsidiary of Inland Steel Industries, Inc.)
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Dollars in Millions
----------------------
Three Months Ended
March 31
----------------------
1996 1995
-------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (2.1) $ 21.2
Adjustments to reconcile net income (loss) to
net cash provided from operating activities:
Depreciation 31.3 31.1
Deferred employee benefit cost 5.2 2.7
Deferred income taxes (.3) 9.2
Change in: Receivables 12.4 38.2
Inventories 3.3 (26.1)
Accounts payable (21.9) (21.0)
Payables to related companies 4.2 (7.8)
Accrued salaries and wages (8.0) (8.8)
Other accrued liabilities 4.0 22.5
Other deferred items 1.5 5.8
------- ------
Net adjustments 31.7 45.8
------- ------
Net cash provided from operating activities 29.6 67.0
------- ------
INVESTING ACTIVITIES
Capital expenditures (28.8) (21.3)
Investments in and advances to joint ventures, net 5.8 (.1)
Proceeds from sales of assets .3 .3
------- ------
Net cash used for investing activities (22.7) (21.1)
------- ------
FINANCING ACTIVITIES
Long-term debt retired (.5) (.8)
Change in notes payable to related companies - (38.6)
Dividends paid (6.4) (6.5)
------- ------
Net cash used for financing activities (6.9) (45.9)
------- ------
Net change in cash and cash equivalents - -
Cash and cash equivalents - beginning of year - -
------- ------
Cash and cash equivalents - end of period $ - $ -
======= ======
SUPPLEMENTAL DISCLOSURES
Cash paid (received) during the period for:
Interest (net of amount capitalized) $ 3.3 $ 3.7
Income taxes, net (.8) 5.8
</TABLE>
See notes to consolidated financial statements
-2-
<PAGE> 4
INLAND STEEL COMPANY AND SUBSIDIARY COMPANIES
(A wholly owned subsidiary of Inland Steel Industries, Inc.)
CONSOLIDATED BALANCE SHEET
================================================================================
<TABLE>
<CAPTION>
Dollars in Millions
-----------------------------------------------
ASSETS March 31, 1996 December 31, 1995
- ------ -------------- -----------------
(unaudited)
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ - $ -
Receivables 228.9 241.3
Inventories - principally at LIFO
In process and finished products $ 139.2 $ 124.5
Raw materials and supplies 56.1 195.3 74.1 198.6
-------- --------
Deferred income taxes 30.6 29.9
-------- --------
Total current assets 454.8 469.8
INVESTMENTS IN AND ADVANCES
TO JOINT VENTURES 204.4 214.3
PROPERTY, PLANT AND EQUIPMENT
Valued on basis of cost 3,888.0 3,858.5
Less: Reserve for depreciation,
amortization and depletion 2,456.2 2,425.0
Allowance for terminated facilities 100.7 1,331.1 100.7 1,332.8
-------- --------
PREPAID PENSION COSTS 41.6 44.2
DEFERRED INCOME TAXES 261.1 261.5
OTHER ASSETS 22.7 21.9
-------- --------
Total Assets $2,315.7 $2,344.5
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable $ 201.5 $ 223.4
Payables to related companies
Notes 137.4 137.4
Trade & other 8.5 4.3
Accrued liabilities 170.0 174.0
Long-term debt due within one year 8.2 7.7
-------- --------
Total current liabilities 525.6 546.8
LONG-TERM DEBT 408.4 409.4
DEFERRED EMPLOYEE BENEFITS 1,091.6 1,089.0
OTHER CREDITS 53.6 54.3
-------- --------
Total liabilities 2,079.2 2,099.5
STOCKHOLDER'S EQUITY (Schedule A) 236.5 245.0
-------- --------
Total Liabilities and Stockholder's Equity $2,315.7 $2,344.5
======== ========
</TABLE>
See notes to consolidated financial statements
-3-
<PAGE> 5
INLAND STEEL COMPANY AND SUBSIDIARY COMPANIES
(A wholly 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, 1996 and for the three-month periods ended March 31, 1996 and 1995
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 year ended
December 31, 1995.
NOTE 2/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 $4.5 million and $4.7 million by Industries for the first quarters of
1996 and 1995, respectively, for management, financial and legal services
provided to the Company.
Procedures also have been established to charge interest on all intercompany
loans within the Industries group of companies. Such loans currently bear
interest at the prime rate. The Company's net intercompany interest expense
for the first three months of 1996 totaled $3.9 million as compared with $3.3
million for the first quarter of 1995.
The Company sells to and purchases products from other companies within the
Industries group of companies. Such transactions are made at prevailing market
prices. These transactions are summarized as follows:
<TABLE>
<CAPTION>
Dollars in Millions
------------------------
Three Months
Ended March 31
------------------------
1996 1995
------------ ----------
<S> <C> <C>
Net Product Sales $57.5 $44.4
Net Product Purchases 6.1 5.5
</TABLE>
NOTE 3/COMMITMENTS
The total amount of firm commitments of the Company and its subsidiaries to
contractors and suppliers, primarily in connection with additions to property,
plant and equipment, was $72 million at March 31, 1996 compared with $55
million at December 31, 1995.
-4-
<PAGE> 6
ITEM 2.
MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - Comparison of First Quarter 1996 to First Quarter 1995
The Company reported a first quarter 1996 consolidated net loss of $2.1
million compared with a consolidated net income of $21.2 million in the 1995
first quarter.
The Company's net sales of $615.7 million in the first quarter represented
a 6 percent reduction from the year-ago period. Although the volume of steel
mill products sold increased 3 percent to 1,325,000 tons, the average selling
price fell 9 percent from the year-ago period reflecting a deterioration in
prices. Operating profit decreased to $12.6 million from $51.3 million in the
comparable 1995 quarter, due primarily to the lower average selling price.
-5-
<PAGE> 7
PART II. OTHER INFORMATION
ITEM 5. LEGAL PROCEEDINGS
On March 29, 1996, the EPA filed a lawsuit against the Company in the U.S.
District Court for the Northern District of Indiana for alleged violations of
effluent limits contained in its NPDES permit and for the alleged discharge of
pollutants without the authorization of an NPDES permit. While it is not
possible at this time to predict the amount of the Company's potential
liability, this matter is not expected to materially affect the Company's
financial position. Results of operations could be materially affected for the
particular reporting periods in which expenses are incurred.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
3.(i) Copy of Restated Certificate of Incorporation of the Company.
(Filed as Exhibit 3-A to the Company's Annual Report on Form 10-K for
the year ended December 31, 1992, and incorporated by reference
herein.)
3.(ii) Copy of By-laws, as amended, of the Company. (Filed as Exhibit
3.(ii) to the Company's Annual Report on Form 10-K for the year ended
December 31, 1994, and incorporated by reference herein.)
4.A Copy of First Mortgage Indenture, dated April 1, 1928, between the
Company and First Trust and Savings Bank and Melvin A. Traylor, as
Trustees, and of supplemental indentures thereto, to and including the
Thirty-Fourth Supplemental Indenture, incorporated by reference from the
following Exhibits: (i) Exhibits B-1(a), B-1(b), B-1(c), B-1(d) and
B-1(e), filed with the Company's Registration Statement on Form A-2
(No. 2-1855); (ii) Exhibits D-1(f) and D-1(g), filed with the Company's
Registration Statement on Form E-1 (No. 2-2182); (iii) Exhibit B-1(h),
filed with the Company's Current Report on Form 8-K dated January 18,
1937; (iv) Exhibit B-1(i), filed with the Company's Current Report on
Form 8-K, dated February 8, 1937; (v) Exhibits B-1(j) and B-1(k), filed
with the Company's Current Report on Form 8-K for the month of April,
1940; (vi) Exhibit B-2, filed with the Company's Registration Statement
on Form A-2 (No. 2-4357); (vii) Exhibit B-1(l), filed with the
Company's Current Report on Form 8-K for the month of January, 1945;
(viii) Exhibit 1, filed with the Company's Current Report on Form 8-K
for the month of November, 1946; (ix) Exhibit 1, filed with the
Company's Current Report on Form 8-K for the months of July and August,
1948; (x) Exhibits B and C, filed with the Company's Current Report on
Form 8-K for the month of March, 1952; (xi) Exhibit A, filed with the
Company's Current Report on Form 8-K for the month of July, 1956; (xii)
Exhibit A, filed with the Company's Current Report on Form 8-K for the
month of July, 1957; (xiii) Exhibit B, filed with the Company's Current
Report on Form 8-K for the month of January, 1959; (xiv) the Exhibit
filed with the Company's Current Report on Form 8-K for the month of
December, 1967; (xv) the Exhibit filed with the Company's Current
Report on Form 8-K for the month of April, 1969; (xvi) the Exhibit
filed with the Company's Current Report on Form 8-K for the month of
July, 1970; (xvii) the Exhibit filed with the amendment on Form 8 to
the Company's Current Report on Form 8-K for the month of April 1974;
(xviii) Exhibit B, filed with the Company's Current Report on Form 8-K
for the month of September, 1975; (xix) Exhibit B, filed with the
Company's Current Report on Form 8-K for the month of January, 1977;
(xx) Exhibit C, filed with the Company's Current Report on Form 8-K for
the month of February, 1977; (xxi) Exhibit B, filed with the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1978;
(xxii) Exhibit B, filed with the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1980; (xxiii) Exhibit 4-D, filed
with the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1980; (xxiv) Exhibit 4-D, filed with the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
-6-
<PAGE> 8
1982; (xxv) Exhibit 4-E, filed with the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1983; (xxvi) Exhibit 4(i)
filed with the Steel Company's Registration Statement on Form S-2 (No.
33-43393); (xxvii) Exhibit 4 filed with the Company's Current Report on
Form 8-K dated June 23, 1993; and (xxviii) Exhibit 4.C filed with the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1995; and (xxix) Exhibit 4.H filed with the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1995.
4.B Copy of consolidated reprint of First Mortgage Indenture, dated
April 1, 1928, between the Company and First Trust and Savings Bank and
Melvin A. Traylor, as Trustees, as amended and supplemented by all
supplemental indentures thereto, to and including the Thirteenth
Supplemental Indenture. (Filed as Exhibit 4-E to Form S-1 Registration
Statement No. 2-9443, and incorporated by reference herein.)
4.C Copy of the Thirty-Fourth Supplemental Indenture dated as of August
1, 1995 from Inland Steel Company to First National Bank and John G.
Finley as Trustees to the First Mortgage Indenture dated April 1, 1928
between Inland Steel Company and First Trust and Savings Bank and
Melvin A. Traylor, as Trustees. (Filed as Exhibit 4.C to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1995,
and incorporated by reference herein.)
27 Financial Data Schedule.
(b) Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the quarter
ended March 31, 1996.
-7-
<PAGE> 9
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.
INLAND STEEL COMPANY
By Lily L. May
-----------------------------
Lily L. May
Vice President -
Finance and Purchasing,
Principal Financial Officer
and Controller
Date: May 6, 1996
-8-
<PAGE> 10
Part I -- Schedule A
INLAND STEEL COMPANY AND SUBSIDIARY COMPANIES
(A wholly owned subsidiary of Inland Steel Industries, Inc.)
SUMMARY OF STOCKHOLDER'S EQUITY
================================================================================
<TABLE>
<CAPTION>
Dollars in Millions
-------------------------------------
March 31, 1996 December 31, 1995
---------------- -----------------
(unaudited)
<S> <C> <C> <C> <C>
STOCKHOLDER'S EQUITY
Series A preferred stock ($1 par value)
- 10 shares issued and outstanding $ - $ -
Series B preferred stock ($1 par value)
- 50 shares issued and outstanding - -
Series C preferred stock ($1 par value)
- 50 shares issued and outstanding - -
Common stock ($1 par value)
- 980 shares issued and outstanding - -
Additional paid-in capital 1,194.5 1,194.5
Accumulated deficit
Balance beginning of year $(949.5) $(992.7)
Net income(loss) (2.1) 69.1
Dividends (6.4) (958.0) (25.9) (949.5)
------- ------- ------- ------
Total Stockholder's Equity $ 236.5 $ 245.0
======== =======
</TABLE>
-9-
<PAGE> 11
INDEX TO EXHIBITS
Exhibit Sequential
Number Description Page No.
- ------ ----------- ----------
3.(i) Copy of Restated Certificate of Incorporation of the Company.
(Filed as Exhibit 3-A to the Company's Annual Report on Form
10-K for the year ended December 31, 1992, and incorporated
by reference herein.) --
3.(ii) Copy of By-laws, as amended, of the Company. (Filed as
Exhibit 3.(ii) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1994, and incorporated by
reference herein.) --
4.A Copy of First Mortgage Indenture, dated April 1, 1928, between
the Company and First Trust and Savings Bank and Melvin A.
Traylor, as Trustees, and of supplemental indentures thereto,
to and including the Thirty-Fourth Supplemental Indenture,
incorporated by reference from the following Exhibits: (i)
Exhibits B-1(a), B-1(b), B-1(c), B-1(d) and B-1(e), filed with
the Company's Registration Statement on Form A-2 (No. 2-1855);
(ii) Exhibits D-1(f) and D-1(g), filed with the Company's
Registration Statement on Form E-1 (No. 2-2182); (iii)
Exhibit B-1(h), filed with the Company's Current Report on
Form 8-K dated January 18, 1937; (iv) Exhibit B-1(i), filed
with the Company's Current Report on Form 8-K, dated February 8,
1937; (v) Exhibits B-1(j) and B-1(k), filed with the Company's
Current Report on Form 8-K for the month of April, 1940; (vi)
Exhibit B-2, filed with the Company's Registration Statement on
Form A-2 (No. 2-4357); (vii) Exhibit B-1(l), filed with the
Company's Current Report on Form 8-K for the month of January,
1945; (viii) Exhibit 1, filed with the Company's Current
Report on Form 8-K for the month of November, 1946; (ix) Exhibit
1, filed with the Company's Current Report on Form 8-K for the
months of July and August, 1948; (x) Exhibits B and C, filed
with the Company's Current Report on Form 8-K for the month
of March, 1952; (xi) Exhibit A, filed with the Company's
Current Report on Form 8-K for the month of July, 1956; (xii)
Exhibit A, filed with the Company's Current Report on Form
8-K for the month of July, 1957; (xiii) Exhibit B, filed with
the Company's Current Report on Form 8-K for the month of
January, 1959; (xiv) the Exhibit filed with the Company's
Current Report on Form 8-K for the month of December, 1967;
(xv) the Exhibit filed with the Company's Current Report on
Form 8-K for the month of April, 1969; (xvi) the Exhibit filed
with the Company's Current Report on Form 8-K for the month of
July, 1970; (xvii) the Exhibit filed with the amendment on
Form 8 to the Company's Current Report on Form 8-K for the
month of April 1974; (xviii) Exhibit B, filed with the
Company's Current Report on Form 8-K for the month of September,
1975; (xix) Exhibit B, filed with the Company's Current Report
on Form 8-K for the month of January, 1977; (xx) Exhibit C,
filed with the Company's Current Report on Form 8-K for the
month of February, 1977; (xxi) Exhibit B, filed with the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1978; (xxii) Exhibit
-i-
<PAGE> 12
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page No.
- ------- ----------- ----------
<S> <C> <C>
B, filed with the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1980; (xxiii) Exhibit 4-D,
filed with the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1980; (xxiv) Exhibit 4-D,
filed with the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1982; (xxv) Exhibit 4-E, filed
with the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1983; (xxvi) Exhibit 4(i) filed with
the Steel Company's Registration Statement on Form S-2
(No. 33-43393); (xxvii) Exhibit 4 filed with the Company's
Current Report on Form 8-K dated June 23, 1993; and (xxviii)
Exhibit 4.C filed with the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995; and (xxix) --
Exhibit 4.H filed with the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1995.
4.B Copy of consolidated reprint of First Mortgage Indenture,
dated April 1, 1928, between the Company and First Trust and
Savings Bank and Melvin A. Traylor, as Trustees, as amended
and supplemented by all supplemental indentures thereto, to
and including the Thirteenth Supplemental Indenture. (Filed
as Exhibit 4-E to Form S-1 Registration Statement No. 2-9443,
and incorporated by 4.B reference herein.) --
4.C Copy of the Thirty-Fourth Supplemental Indenture dated as of
August 1, 1995 from Inland Steel Company to First National
Bank and John G. Finley as Trustees, to the First Mortgage
Indenture dated April 1, 1928 between Inland Steel Company
and First Trust and Savings Bank and Melvin A. Traylor, as
Trustees. (Filed as Exhibit 4.C to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995,
and incorporated by 4.C reference herein.) --
27 Financial Data Schedule .....................................
</TABLE>
-ii-
<TABLE> <S> <C>
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 246,200
<ALLOWANCES> 17,300
<INVENTORY> 195,300
<CURRENT-ASSETS> 454,800
<PP&E> 3,888,000
<DEPRECIATION> 2,556,900
<TOTAL-ASSETS> 2,315,700
<CURRENT-LIABILITIES> 525,600
<BONDS> 408,400
0
0
<COMMON> 0
<OTHER-SE> 236,500
<TOTAL-LIABILITY-AND-EQUITY> 2,315,700
<SALES> 615,000
<TOTAL-REVENUES> 615,700
<CGS> 592,600
<TOTAL-COSTS> 593,200
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,700
<INCOME-PRETAX> (3,300)
<INCOME-TAX> (1,200)
<INCOME-CONTINUING> (2,100)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,100)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
