<PAGE>
Third Quarter - 1997
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 September 30, 1997
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 November 6,
1997.
<PAGE>
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 Nine Months Ended
September 30 September 30
------------------- -------------------
1997 1996 1997 1996
------- ------ -------- --------
<S> <C> <C> <C> <C>
NET SALES $615.7 $574.9 $1,866.1 $1,795.5
------ ------ -------- --------
OPERATING COSTS AND EXPENSES
Cost of goods sold 532.8 506.0 1,616.0 1,619.0
Selling, general and
administrative expenses 9.3 12.4 31.4 33.8
Depreciation 33.6 31.6 100.4 93.9
Gain from sale of assets (Note 3) - - (9.0) -
------ ------ -------- --------
Total 575.7 550.0 1,738.8 1,746.7
------ ------ -------- --------
OPERATING PROFIT 40.0 24.9 127.3 48.8
General corporate expense,
net of income items 3.2 3.5 10.8 10.3
Interest and other expense on debt 9.0 11.9 30.6 36.7
------ ------ -------- --------
INCOME BEFORE INCOME TAXES 27.8 9.5 85.9 1.8
PROVISION FOR INCOME TAXES 9.6 3.7 33.0 .9
------ ------ -------- --------
INCOME BEFORE EXTRAORDINARY LOSS 18.2 5.8 52.9 .9
EXTRAORDINARY LOSS ON EARLY RETIREMENT
OF DEBT - 8.8 - 8.8
------ ------ -------- --------
NET INCOME (LOSS) $ 18.2 $ (3.0) $ 52.9 $ (7.9)
====== ====== ======== ========
</TABLE>
See notes to consolidated financial statements
-1-
<PAGE>
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
-------------------
Nine Months Ended
September 30
-------------------
1997 1996
------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 52.9 $ (7.9)
------- -------
Adjustments to reconcile net income (loss) to
net cash provided from operating activities:
Depreciation 100.4 93.9
Deferred income taxes 38.9 2.2
Deferred employee benefit cost (21.4) 10.2
Gain from sale of assets (9.0) -
Change in: Receivables (8.7) 15.4
Inventories 4.2 28.9
Accounts payable (3.3) (48.3)
Payables to related companies 4.7 11.9
Accrued salaries and wages 12.2 (5.8)
Other accrued liabilities 12.4 8.7
Other deferred items (14.4) (19.4)
------- -------
Net adjustments 116.0 97.7
------- -------
Net cash provided from operating activities 168.9 89.8
------- -------
INVESTING ACTIVITIES
Capital expenditures (56.1) (111.4)
Investments in and advances to joint ventures, net 17.1 18.9
Proceeds from sales of assets 15.0 4.8
------- -------
Net cash used for investing activities (24.0) (87.7)
------- -------
FINANCING ACTIVITIES
Long-term debt issued - 37.2
Long-term debt retired (7.7) (144.0)
Change in notes payable to related companies (117.8) 124.0
Dividends paid (19.4) (19.3)
------- -------
Net cash used for financing activities (144.9) (2.1)
------- -------
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) $ 25.2 $ 29.6
Income taxes, net (5.8) (15.6)
</TABLE>
See notes to consolidated financial statements
-2-
<PAGE>
INLAND STEEL COMPANY AND SUBSIDIARY COMPANIES
(A wholly owned subsidiary of Inland Steel Industries, Inc.)
Consolidated Balance Sheet
================================================================================
<TABLE>
<CAPTION>
Dollars in Millions
--------------------------------------
ASSETS September 30, 1997 December 31, 1996
- ------ ------------------ ------------------
(unaudited)
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ - $ -
Receivables 234.3 225.6
Inventories - principally at LIFO
In process and finished products $ 110.1 $ 106.5
Raw materials and supplies 67.7 177.8 75.5 182.0
-------- --------
Deferred income taxes 19.2 18.6
-------- --------
Total current assets 431.3 426.2
INVESTMENTS IN AND ADVANCES
TO JOINT VENTURES 219.8 221.4
PROPERTY, PLANT AND EQUIPMENT
Valued on basis of cost 4,069.8 4,011.4
Less: Reserve for depreciation,
amortization and depletion 2,642.4 2,542.0
Allowance for terminated
facilities 100.7 1,326.7 100.7 1,368.7
-------- --------
PREPAID PENSION COSTS 81.6 58.5
DEFERRED INCOME TAXES 208.9 248.4
OTHER ASSETS 12.8 19.6
-------- --------
Total Assets $2,281.1 $2,342.8
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts payable $ 217.8 $ 217.7
Payables to related companies
Notes 154.7 272.5
Trade & other 8.6 3.9
Accrued liabilities 167.1 142.5
Long-term debt due within one year 14.3 7.7
-------- --------
Total current liabilities 562.5 644.3
LONG-TERM DEBT 293.6 307.9
DEFERRED EMPLOYEE BENEFITS 1,131.8 1,130.1
OTHER CREDITS 48.9 49.7
-------- --------
Total liabilities 2,036.8 2,132.0
STOCKHOLDER'S EQUITY (Schedule A) 244.3 210.8
-------- --------
Total Liabilities and
Stockholder's Equity $2,281.1 $2,342.8
======== ========
</TABLE>
See notes to consolidated financial statements
-3-
<PAGE>
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
September 30, 1997 and for the three-month and nine-month periods ended
September 30, 1997 and 1996 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, 1996.
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 $12.3 million and $13.4 million by Industries for the first nine months
of 1997 and 1996, 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 nine months of 1997 totaled $13.9 million as compared with $12.0
million for the first nine months of 1996.
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 Nine Months
Ended September 30 Ended September 30
------------------- -------------------
1997 1996 1997 1996
------- ------- ------- ------
<S> <C> <C> <C> <C>
Net Product Sales $46.3 $48.6 $157.7 $154.4
Net Product Purchases 3.8 4.0 12.1 14.7
</TABLE>
NOTE 3/SALE OF ASSETS
During the second quarter of 1997, the Company sold its interest in the Wabush
iron ore mine to the managing partner, Cleveland Cliffs, resulting in a pretax
gain of $9.0 million.
NOTE 4/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 $27 million at September 30, 1997 compared with $34
million at December 31, 1996.
-4-
<PAGE>
Item 2.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF OPERATIONS - Comparison of First Nine Months of 1997 to First Nine
Months of 1996
The Company reported net income of $52.9 million in the first nine months
of 1997 compared with a net loss of $7.9 million in the comparable 1996 period.
Increased operating profit was the principal reason for the improvement.
The Company's net sales improved four percent from the year-earlier period
to $1.87 billion due largely to a three percent increase in steel mill
shipments. The increase in shipments combined with improved operating cost
performance were the primary factors contributing to the $78.5 million year-to-
year increase in operating profit. The 1997 nine month period included a $9.0
million gain from the sale of the Company's interest in the Wabush iron ore
property.
-5-
<PAGE>
PART II. OTHER INFORMATION
---------------------------
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-Fifth 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, 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
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; (xxviii) Exhibit 4.C filed with the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995;
(xxix) Exhibit
-6-
<PAGE>
4.C filed with the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995, and (xxx) Exhibit 4.C filed with
the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996.
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.)
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 September 30, 1997.
-7-
<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.
INLAND STEEL COMPANY
By Cynthia C. Heath
---------------------------------
Cynthia C. Heath
Vice President -
Finance and Purchasing,
Principal Financial Officer
and Controller
Date: November 11, 1997
-8-
<PAGE>
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
---------------------------------------
September 30, 1997 December 31, 1996
------------------ -------------------
(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 $(983.7) $(949.5)
Net income(loss) 52.9 (17.9)
Impact of pension plan split - 9.5
Dividends (19.4) (950.2) (25.8) (983.7)
------- ------- ------- -------
Total Stockholder's Equity $ 244.3 $ 210.8
======= =======
</TABLE>
-9-
<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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 251,500
<ALLOWANCES> 17,200
<INVENTORY> 177,800
<CURRENT-ASSETS> 431,300
<PP&E> 4,069,800
<DEPRECIATION> 2,743,100
<TOTAL-ASSETS> 2,281,100
<CURRENT-LIABILITIES> 562,500
<BONDS> 293,600
0
0
<COMMON> 0
<OTHER-SE> 244,300
<TOTAL-LIABILITY-AND-EQUITY> 2,281,100
<SALES> 1,864,100
<TOTAL-REVENUES> 1,866,100
<CGS> 1,714,700
<TOTAL-COSTS> 1,716,400
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,600
<INCOME-PRETAX> 85,900
<INCOME-TAX> 33,000
<INCOME-CONTINUING> 52,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,900
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
