<PAGE> 1
FIRST QUARTER - 1999
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, 1999
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
ISPAT INLAND INC.
(a Delaware Corporation)
3210 Watling Street
East Chicago, Indiana 46312
Telephone: (219) 399-1200
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: 100 shares of the
Registrant's Common Stock ($.01 par value per share) were outstanding as
of May 10, 1999, all of which are owned by a wholly owned subsidiary of
Ispat International N.V.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
DOLLARS IN MILLIONS
-------------------
THREE MONTHS
ENDED
MARCH 31, 1999
--------------
<S> <C>
NET SALES $619.9
----------
OPERATING COSTS AND EXPENSES
Cost of goods sold 564.1
Selling, general and administrative expenses 10.2
Depreciation 26.7
----------
Total 601.0
----------
OPERATING PROFIT 18.9
General corporate expense, net of income items 1.3
Interest and other expense on debt 21.8
----------
LOSS BEFORE INCOME TAXES (4.2)
PROVISION FOR INCOME TAXES 1.4 Cr.
----------
NET LOSS ($2.8)
==========
Cr. = Credit
</TABLE>
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
<TABLE>
<CAPTION>
DOLLARS IN MILLIONS
-------------------
THREE MONTHS
ENDED
MARCH 31, 1999
--------------
<S> <C>
Net loss ($2.8)
Other comprehensive gain, net of tax:
Unrealized gain on securities 0.4
-----
COMPREHENSIVE LOSS ($2.4)
=====
</TABLE>
See notes to unaudited condensed consolidated financial statements
-1-
<PAGE> 3
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
===============================================================================
<TABLE>
<CAPTION>
DOLLARS IN
MILLIONS
------------------
THREE MONTHS
ENDED
MARCH 31, 1999
--------------
<S> <C>
OPERATING ACTIVITIES
Net loss ($2.8)
-----
Adjustments to reconcile net loss to
net cash from operating activities:
Depreciation 26.7
Deferred employee benefit cost (29.8)
Amortization of debt premium (0.4)
Deferred income taxes (2.3)
Change in: Receivables (36.8)
Inventories 79.5
Accounts payable 4.0
Bank overdrafts (15.1)
Payables to/receivables from related companies (16.2)
Accrued salaries and wages (3.0)
Other accrued liabilities (2.2)
Other items (22.0)
-----
Net adjustments (17.6)
-----
Net cash from operating activities (20.4)
-----
INVESTING ACTIVITIES
Capital expenditures (4.0)
Investments in and advances to joint ventures, net 15.6
-----
Net cash from investing activities 11.6
-----
FINANCING ACTIVITIES
Payments of long term debt (2.7)
Dividends paid (5.1)
Proceeds from note receivable from related company 0.8
Short-term borrowings 45.0
-----
Net cash from financing activities 38.0
-----
Net increase in cash and cash equivalents 29.2
Cash and cash equivalents - beginning of period 15.7
-----
Cash and cash equivalents - end of period $ 44.9
=====
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
Interest (net of amount capitalized) $ 32.1
Income taxes, net 7.0
Noncash activity:
Deferred tax related to comprehensive gain items ($0.2)
</TABLE>
See notes to unaudited condensed consolidated financial statements
-2-
<PAGE> 4
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
DOLLARS IN MILLIONS
---------------------------------------
ASSETS DECEMBER 31, 1998 MARCH 31, 1999
----------------- --------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 15.7 $ 44.9
Receivables, net 241.4 278.2
Inventories (Note 3) 585.5 506.0
Current deferred income taxes - 0.1
----------- ----------
Total current assets 842.6 829.2
INVESTMENTS IN AND ADVANCES TO JOINT VENTURES 227.7 223.6
PROPERTY, PLANT AND EQUIPMENT, NET 1,968.7 1,945.5
RECEIVABLES FROM RELATED COMPANIES 11.9 11.1
DEFERRED INCOME TAXES 2.9 4.9
OTHER ASSETS 55.7 64.7
----------- ----------
Total Assets $3,109.5 $3,079.0
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 185.0 $189.0
Bank overdrafts 17.8 2.7
Borrowings under Revolving Credit Facilities (Note 4) 100.0 145.0
Payables to related companies 30.7 14.5
Accrued liabilities 171.5 166.2
Long-term debt due within one year
Related companies 7.0 7.0
Other 4.0 9.3
----------- ----------
Total current liabilities 516.0 533.7
LONG-TERM DEBT
Related companies (Note 6) 689.5 687.8
Other 281.9 275.2
DEFERRED EMPLOYEE BENEFITS 1,135.5 1,105.7
OTHER CREDITS 65.1 62.6
COMMITMENTS AND CONTINGENCIES (Note 7)
----------- ----------
Total liabilities 2,688.0 2,665.0
STOCKHOLDERS' EQUITY
Preferred stock (Note 5) 90.0 90.0
Common stock (Note 5) 320.0 320.0
Retained earnings 12.3 4.4
Accumulated other comprehensive loss (0.8) (0.4)
----------- ----------
Total Liabilities and Stockholders' Equity $3,109.5 $3,079.0
=========== ==========
</TABLE>
See notes to unaudited condensed consolidated financial statements
-3-
<PAGE> 5
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in Millions except per share data)
================================================================================
NOTE 1/THE ACQUISITION
On July 16, 1998, Ispat International N.V. ("Ispat") acquired Inland Steel
Company ("Predecessor Company") from Inland Steel Industries, Inc.
("Industries") in accordance with an Agreement and Plan of Merger ("Agreement"),
dated as of May 27, 1998, amended as of July 16, 1998 (the "Acquisition").
Inland Steel Company was renamed Ispat Inland Inc. ("Successor Company" or the
"Company") on September 1, 1998. The Predecessor Company was acquired for
$1,143.1, plus the assumption of certain liabilities or obligations.
NOTE 2/SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The capital structure and accounting basis of the assets and liabilities of
the Company as of July 17, 1998 and thereafter differ from those of the
Predecessor Company in prior periods as a result of the Acquisition. The
Acquisition is being accounted for under the purchase method of accounting in
accordance with Accounting Principles Board Opinion No. 16, "Accounting for
Business Combinations." The total purchase price has been allocated to assets
and liabilities of the Company based on preliminary estimates of their
respective fair values. Accordingly, the allocation of the purchase price
reflected in the accompanying condensed consolidated balance sheet may be
adjusted upon final determination of the purchase price adjustments and upon the
final results of gathering certain necessary information primarily related to
the finalization of liabilities assumed. The final asset and liability values
may differ from those set forth in such balance sheet; however, changes, if any,
are not expected to have a material effect on the results of operations and
financial position of the Company.
The condensed consolidated financial statements are unaudited, but in the
opinion of management, contain all adjustments (which, except as set forth in
the prior paragraph, are of a normal recurring nature) necessary to present
fairly the financial position and results of operations and cash flows for the
period presented. All significant intercompany accounts and transactions have
been eliminated. 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, 1998.
The results of operations for the interim period shown in this report are
not necessarily indicative of the results to be expected for a full year.
Recent Accounting Pronouncements
In 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which requires
recognition of all derivative instruments in the statement of financial position
as either assets or liabilities, measured at fair value, and is effective for
fiscal years beginning after June 15, 1999. This statement additionally requires
changes in the fair value of derivatives to be recorded each period in current
earnings or comprehensive income depending on the intended use of the
derivatives. The Company is currently assessing the impact of this statement on
its results of operations and financial position.
-4-
<PAGE> 6
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
(Dollars in Millions except per share data)
================================================================================
NOTE 3/INVENTORIES
<TABLE>
<CAPTION>
Inventories consist of the following: December 31, March 31,
1998 1999
--------------- ------------
<S> <C> <C>
In process and finished steel $398.8 $353.7
Raw materials and supplies:
Iron ore 104.5 89.1
Scrap and other raw materials 69.2 50.0
Supplies 13.0 13.2
--------- ------------
186.7 152.3
--------- ------------
Total $585.5 $506.0
========= ============
</TABLE>
NOTE 4/BORROWING ARRANGEMENTS
Ispat Inland Administrative Service Company ("IIASC"), a wholly owned
subsidiary of the Company established to provide a supplemental source of
short-term funds to the Company, has a $125 revolving credit facility with a
group of banks. In July 1998, IIASC entered into an agreement with a bank to
provide another $25 revolving credit facility with terms essentially identical
to those of the existing facility. Both the facilities extend to November 30,
2000. The Company has agreed to sell substantially all of its receivables to
IIASC to secure these facilities. Provisions of the credit agreement limit or
prohibit the Company from merging, consolidating, or selling its assets and
require IIASC to meet minimum net worth and leverage ratio tests. At March 31,
1999, $86 was borrowed under the facilities.
On January 22, 1999, the Company established a five-year $120
revolving credit facility with a group of banks. The Company has agreed to sell
substantially all of its raw material, in-process and finished goods inventory
to Ispat Inland Inventory, LLC ("IIInv"), a wholly owned subsidiary of the
Company, to secure this facility. Provisions of the credit agreement require
IIInv to maintain a minimum net worth. At March 31, 1999, $59 was borrowed under
this facility.
NOTE 5/EQUITY
Common Stock
On March 31, 1999, the Company had 1,000 shares authorized of common
stock, $.01 par value ("Common Stock"), of which 100 shares were issued,
outstanding and owned by a wholly owned subsidiary of Ispat.
Preferred Stock
On March 31, 1999, the Company had 100 shares issued and outstanding
of Series A 8% Preferred Stock, $.01 par value ("Preferred Stock"), which is
owned by a wholly owned subsidiary of Ispat. The Preferred Stock has liquidation
preference over the common stock.
-5-
<PAGE> 7
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
(Dollars in Millions except per share data)
================================================================================
NOTE 6/RELATED PARTY TRANSACTIONS
The Company was charged $1.3 by Ispat for the three months ended March 31,
1999 for management, financial and legal services provided to the Company.
The Company purchased $7.3 of slabs from a subsidiary of Ispat during the
period.
I/N Tek is a joint venture which owns and operates a cold-rolling facility
and is 60% owned by a wholly-owned subsidiary of the Company. Under a tolling
arrangement between the Company and I/N Tek, the Company was charged $36.7 for
such tolling services for the three months ended March 31, 1999.
I/N Kote is a joint venture that owns and operates an electrogalvanizing
line and hot-dip galvanizing line which is 50% owned by the Company. Purchases
of cold-rolled steel by I/N Kote from the Company amounted to $87.8 for the
three month period ended March 31, 1999.
The Company's long-term debt due to a related company of $687.8 as of March
31, 1999 is payable to Ispat Inland Finance LLC, a wholly owned subsidiary of
Ispat. This debt arose in connection with the financing of the Acquisition. The
Company's receivable from related companies of $11.1 at March 31, 1999 consists
of $10.0 from Ispat Inland, L.P., a wholly owned subsidiary of Ispat. This
receivable also arose in connection with the financing of the Acquisition and
payment is due on July 16, 2006 unless Ispat Inland, L.P. chooses to prepay. The
remaining $1.1 is from other related companies for trade and other intercompany
expenses.
NOTE 7/COMMITMENTS AND CONTINGENCIES
At March 31, 1999, the Company guarantees $13 and $155 of long-term debt
attributable to PCI Associates and I/N Kote, two of its equity investments,
respectively. The Company owns a 50% interest in the PCI Associates joint
venture which is a pulverized coal injection facility located at the Indiana
Harbor Works.
The Company has an agreement with the Pension Benefit Guaranty Company (the
"PBGC") to provide certain financial assurances with respect to the Company's
Pension Plan. In accordance with this agreement, the Company provided the PBGC a
letter of credit in the amount of $160 and made a cash contribution of $25 to
the Pension Trust in 1998. The Company also committed to fund normal cost of the
Pension Plan plus an additional $5 per year for five years. Approximately $23
million was contributed to the Trust in the first quarter of 1999 under these
provisions. In addition, the Company granted to the PBGC a first priority lien
on selected assets. The Agreement has a term of at least five years or until
certain financial tests are met, whichever is later; however, the agreement
could terminate within five years if certain other financial tests are met.
The Company has an agreement with a third party to purchase 1.2 million
tons of coke annually for approximately 15 years on a take-or-pay basis at
prices determined by certain cost factors from a heat recovery coke battery
facility located on land leased from the Company. Under a separate tolling
agreement with another third party, the Company has committed to pay tolling
charges over approximately 15 years to desulphurize flue gas from the coke
battery and to convert the heat output from the coke battery to electrical power
and steam. As of March 31, 1999, the estimated minimum tolling charges remaining
over the life of this agreement were approximately $263.6.
As part of the agreement covering the 1990 sale of the Inland Lime & Stone
Company division assets, the Company agreed, subject to certain exceptions, to
purchase, at prices which approximate market, the annual limestone needs of the
Indiana Harbor Works through 2002.
-6-
<PAGE> 8
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
(Dollars in Millions except per share data)
================================================================================
NOTE 7/COMMITMENTS AND CONTINGENCIES (CONTINUED)
It is anticipated that the Company will make capital expenditures of $2 to
$5 annually in each of the next five years for the construction, and have
ongoing annual expenditures of $40 to $50 for the operation of air and water
pollution control facilities to comply with current federal, state and local
laws and regulations. The Company is involved in various environmental and other
administrative or judicial actions initiated by governmental agencies. While it
is not possible to predict the results of these matters, the Company does not
expect environmental expenditures, excluding amounts that may be required in
connection with the consent decree in the 1990 EPA lawsuit, to materially affect
the Company's results of operations or financial position. Corrective actions
relating to the EPA consent decree may require significant expenditures over the
next several years that may be material to the results of operations or
financial position of the Company. At March 31, 1999, the Company's reserves for
environmental liabilities totaled $26, $20 of which is related to the sediment
remediation under the 1993 EPA consent decree.
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 $13 at March 31, 1999.
Recently, the United States Attorney for the Middle District of Louisiana
informed the Company that it is a target of a federal criminal grand jury
investigation and one of several defendants in a civil qui tam lawsuit filed by
a private individual on behalf of the government, alleging violations of 31
U.S.C. section 3729, et seq. The U.S. Attorney and the Company have agreed that
no criminal charges will be filed against the Company prior to December 1, 1999
while the Company reviews the matter. If a potential claim by the U.S. Attorney
was successfully proved with respect to such matter, it would be material to the
financial position and results of operation of the Company. However, the Company
has not yet had an opportunity to review the factual basis of such a claim or
the method by which such damages may be calculated. In addition, the Company has
not yet determined the extent to which other potential corporate defendants are
involved. The Company has given notice of this matter to Ryerson Tull, Inc.
pursuant to the indemnification provisions of the Merger Agreement, dated as of
May 27, 1998, among Ispat, the Company, Inland Merger Sub, Inc. and Industries
(the predecessor company to Ryerson Tull, Inc.) as amended.
-7-
<PAGE> 9
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
(Dollars in Millions except per share data)
================================================================================
NOTE 8/PRO FORMA COMBINED STATEMENTS OF OPERATIONS DATA
The following unaudited pro forma condensed combined statements of
operations of the Company for the three months ended March 31, 1998 has been
presented to give effect to the Acquisition, described in Note 1, as if it had
occurred on January 1, 1998. The unaudited pro forma operating results for the
three months ended March 31, 1998 include the historical results of the
Predecessor Company shown herein adjusted for interest cost on borrowings to
finance the Acquisition and purchase accounting adjustments.
The pro forma results presented below are not necessarily indicative of
what actually would have occurred if the acquisition had been completed as of
the beginning of the period presented, nor are they necessarily indicative of
future results.
<TABLE>
<CAPTION>
March 31, 1998
------------------------------------------
Predecessor Pro Forma Pro Forma
Company Adjustments Total
------------ ----------- ------------
<S> <C> <C>
NET SALES $606.1 $606.1
-------- ---------
OPERATING COSTS AND EXPENSES
Cost of goods sold 539.6 (1.0)(a) 538.6
Selling, general and
administrative expenses 10.1 10.1
Depreciation 34.6 (9.0)(b) 25.6
-------- --------- ---------
Total 584.3 (10.0) 574.3
-------- --------- ---------
OPERATING PROFIT 21.8 10.0 31.8
General corporate expense,
net of income items 3.0 3.0
Interest and other expense on debt 10.2 11.0(c) 21.2
-------- --------- ---------
INCOME(LOSS) BEFORE INCOME TAXES 8.6 (1.0) 7.6
PROVISION FOR INCOME TAXES 3.3 0.4 Cr.(d) 2.9
-------- --------- ---------
NET INCOME (LOSS) $5.3 ($0.6) $4.7
======== ========= =========
</TABLE>
Cr. = Credit
-8-
<PAGE> 10
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
(Dollars in Millions except per share data)
================================================================================
NOTE 8/PRO FORMA COMBINED STATEMENTS OF OPERATIONS DATA (CONTINUED)
(a) Reflects the change in pension and retiree health and life insurance
expense as a result of the actuarial valuation.
(b) Reflects change in depreciation based upon the revaluation of the
property, plant and equipment.
(c) Reflects the net adjustments to interest expense as a result of the
transaction as follows:
Three Months
Ended
March 31, 1998
--------------
Revolving Credit Facility and commitment fees $ 0.9
Acquisition related debt 14.3
Other bank charges 1.8
Elimination of historical interest expense (6.0)
-----------
Total interest expense adjustments $11.0
===========
(d) Reflects the tax effects of the pro forma adjustments to income
(loss) before income taxes based on the estimated applicable
statutory tax rates.
-9-
<PAGE> 11
INLAND STEEL COMPANY AND SUBSIDIARY COMPANIES (PREDECESSOR COMPANY)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
DOLLARS IN MILLIONS
-------------------
THREE MONTHS
ENDED
MARCH 31, 1998
--------------
<S> <C>
NET SALES $606.1
---------
OPERATING COSTS AND EXPENSES
Cost of goods sold 539.6
Selling, general and
administrative expenses 10.1
Depreciation 34.6
---------
Total 584.3
---------
OPERATING PROFIT 21.8
General corporate expense,
net of income items 3.0
Interest and other expense on debt 10.2
---------
INCOME BEFORE INCOME TAXES 8.6
PROVISION FOR INCOME TAXES 3.3
---------
NET INCOME $ 5.3
=========
</TABLE>
See notes to unaudited condensed consolidated financial statements
-10-
<PAGE> 12
INLAND STEEL COMPANY AND SUBSIDIARY COMPANIES (PREDECESSOR COMPANY)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
DOLLARS IN MILLIONS
-------------------
THREE MONTHS
ENDED
MARCH 31, 1998
--------------
<S> <C>
OPERATING ACTIVITIES
Net income $ 5.3
---------
Adjustments to reconcile net loss to
net cash from operating activities:
Depreciation 34.6
Deferred employee benefit cost 2.5
Deferred income taxes 4.1
Change in: Receivables 0.8
Inventories 19.7
Accounts payable (58.9)
Receivables from related companies 5.8
Payables to related companies 7.8
Accrued salaries and wages 2.9
Other accrued liabilities 14.4
Other items 8.3
---------
Net adjustments 42.0
---------
Net cash from operating activities 47.3
---------
INVESTING ACTIVITIES
Capital expenditures (14.7)
Investments in and advances to joint ventures 20.0
---------
Net cash from investing activities 5.3
---------
FINANCING ACTIVITIES
Long term debt retired (11.9)
Change in notes payable to related companies (34.3)
Dividends paid (6.4)
---------
Net cash from financing activities (52.6)
---------
Net change in cash and cash equivalents -
Cash and cash equivalents - beginning of period -
---------
Cash and cash equivalents - end of period $ -
=========
SUPPLEMENTAL DISCLOSURES
Cash paid (received) during the period for:
Interest (net of amount capitalized) $ 3.3
Income taxes, net 1.8
</TABLE>
See notes to unaudited condensed consolidated financial statements
-11-
<PAGE> 13
INLAND STEEL COMPANY AND SUBSIDIARY COMPANIES (PREDECESSOR COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
DOLLARS IN MILLIONS
-------------------------
ASSETS MARCH 31, 1998
--------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ -
Receivables 218.4
Inventories - principally at LIFO
In process and finished products $119.8
Raw materials and supplies 61.0 180.8
---------
Deferred income taxes 24.8
---------
Total current assets 424.0
INVESTMENTS IN AND ADVANCES TO JOINT VENTURES 213.7
PROPERTY, PLANT AND EQUIPMENT
Valued on basis of cost 4,088.1
Less: Reserve for depreciation,
amortization and depletion 2,668.8
Allowance for terminated facilities 100.7 1,318.6
---------
PREPAID PENSION COSTS 60.6
DEFERRED INCOME TAXES 190.9
OTHER ASSETS 46.9
---------
Total Assets $2,254.7
=========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable $ 180.0
Payables to related companies
Notes 196.4
Trade & other 7.8
Accrued liabilities 159.6
Long-term debt due within one year 35.3
---------
Total current liabilities 579.1
LONG-TERM DEBT 260.7
DEFERRED EMPLOYEE BENEFITS 1,118.9
OTHER CREDITS 57.4
COMMITMENTS AND CONTINGENCIES (Note 3)
---------
Total liabilities 2,016.1
STOCKHOLDER'S EQUITY 238.6
---------
Total Liabilities and Stockholder's Equity $2,254.7
=========
</TABLE>
See notes to unaudited condensed consolidated financial statements
-12-
<PAGE> 14
INLAND STEEL COMPANY AND SUBSIDIARY COMPANIES (PREDECESSOR COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in Millions except per share data)
================================================================================
NOTE 1/BASIS OF PRESENTATION
On July 16, 1998, Ispat International N.V. ("Ispat") acquired Inland
Steel Company ("Predecessor Company") from Inland Steel Industries, Inc.
("Industries") in accordance with an Agreement and Plan of Merger (the
"Agreement"), dated as of May 27, 1998, amended as of July 16, 1998 (the
"Acquisition"). Inland Steel Company was renamed Ispat Inland Inc. ("Successor
Company" or the "Company") on September 1, 1998. The Predecessor Company was
acquired for $1,143.1, plus the assumption of certain liabilities or
obligations.
The financial statements as of March 31, 1998 and for the three-month
period ended March 31, 1998 are unaudited but in the opinion of management
contain all adjustments, which are of a normal and recurring nature, necessary
to present the Predecessor Company's results of operations and cash flows. The
results of operations for these periods are not necessarily indicative of the
results to be expected for the full year.
NOTE 2/RELATED PARTY TRANSACTIONS
Prior to July 16, 1998, the Predecessor Company was a wholly owned
subsidiary of Inland Steel Industries, Inc. ("Industries"). The Predecessor
Company had agreed to procedures established by Industries for charging
Industries' administrative expenses to the operating companies owned by it.
Pursuant to these procedures, the Company was charged $3.6 by Industries for the
first quarter of 1998 for management, financial and legal services provided to
the Company.
Procedures were established to charge interest on all intercompany loans
within the Industries group of companies. Such loans bore interest at the prime
rate. The Company's net intercompany interest expense for the first three months
of 1998 totaled $5.0.
The Predecessor Company sold to and purchased products from other
companies within the Industries group of companies. Such transactions were made
at prevailing market prices. These transactions are summarized as follows:
Three Months
Ended
March 31, 1998
--------------
Net Product Sales $49.6
Net Product Purchases 4.1
NOTE 3/COMMITMENTS AND CONTINGENCIES
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 $24 at March 31, 1998.
-13-
<PAGE> 15
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
On July 16, 1998, Ispat International N.V. ("Ispat") acquired Inland
Steel Company ("Predecessor Company") from Inland Steel Industries, Inc. in
accordance with an Agreement and Plan of Merger ("Agreement"), dated as of May
27, 1998, amended as of July 16, 1998 (the "Acquisition"). Inland Steel Company
was renamed Ispat Inland Inc. ("Successor Company" or the "Company") on
September 1, 1998. The Predecessor Company was acquired for $1,143.1, plus the
assumption of certain liabilities or obligations.
The capital structure and accounting basis of the assets and liabilities
of the Company as of July 17, 1998 and thereafter differ from those of the
Predecessor Company in prior periods as a result of the Acquisition. Financial
data of the Predecessor Company for periods prior to July 17, 1998 are presented
on a historical cost basis. Financial data of the Company as of July 17, 1998
and thereafter reflect the Acquisition under the purchase method of accounting,
under which the purchase price has been allocated to assets and liabilities
based upon their estimated fair values.
<TABLE>
<CAPTION>
Dollars in Millions
---------------------------
Three Months Ended
March 31,
---------------------------
1999 1998
---- ----
<S> <C> <C>
Net Sales $619.9 $606.1
------------ ----------
Cost of goods sold 564.1 539.6
Selling, general and
administrative expenses 10.2 10.1
Depreciation 26.7 34.6
------------ ----------
Operating Profit 18.9 21.8
General corporate expense,
net of income items 1.3 3.0
Interest and other expense on debt 21.8 10.2
------------ ----------
Income (Loss) before income taxes (4.2) 8.6
Provision for income taxes 1.4 Cr. 3.3
------------ ----------
Net Income (Loss) ($2.8) $ 5.3
============ ==========
</TABLE>
Cr. = Credit
-14-
<PAGE> 16
RESULTS OF OPERATIONS - Comparison of First Quarter 1999 to First Quarter 1998
The Company reported a consolidated net loss of $2.8 for the first
quarter of 1999 compared to net income of $5.3 for the first quarter of 1998.
Increased interest expense as well as a decrease in operating profit were the
major factors for the decline.
Net sales of $619.9 for the first quarter of 1999 were 2.3 percent more
than the year ago quarter as volume increased by 13.1 percent but was offset by
a 9.6 percent decrease in the average selling price per ton.
Cost of goods sold of $564.1 increased 4.5 percent (from the year-ago
Quarter) due to the increase in volume shipped during the current quarter.
Depreciation expense of $26.7 for the current quarter decreased by $7.9,
or 22.8 percent from the prior year, due to the change in depreciable value and
remaining useful lives resulting from the valuation of property, plant, and
equipment as of the July 16, 1998 acquisition date.
Operating profit decreased to $18.9 for the current quarter compared to
$21.8 a year ago as a result of the items noted above.
Interest expense increased $11.6 in the 1999 first quarter from the
comparable quarter of last year due to the additional debt incurred as a result
of the acquisition.
Liquidity and Financing
At March 31, 1999, total liquidity, compromising cash, cash equivalents
and funds available under our bank credit arrangements, totaled $126.9 compared
with $65.7 December 31, 1998.
In connection with the acquisition of the Company by Ispat on July 16,
1998, the Company received $320 from the sale of common stock, $90 from the sale
of preferred stock and $700 from the issuance of First Mortgage Bonds. The
Company immediately paid this $1,110 along with $33.1 of other cash on hand, to
Inland Steel Industries, Inc. ("Industries"), its parent prior to July 17, 1998,
as payment for the Company's capital stock owned by Industries and to repay
intercompany loans and other obligations to Industries.
In connection with the financing of the Acquisition, an affiliate of the
Company, Ispat Inland, L.P. (the "Borrower"), entered into a Credit Agreement
dated July 16, 1998 (the "Credit Agreement") for a senior secured term credit
facility and letter of credit with a syndicate of financial institutions for
whom Credit Suisse First Boston is the agent (the "Agent"). The Credit Agreement
consists of a $350 Tranche B Term Loan due July 16, 2005 (the "Tranche B Loan"),
a $350 Tranche C Term Loan due July 16, 2006 (the "Tranche C Loan" and together
with the Tranche B Loan, the "Term Loans") (together the "Term Loan Facility")
and a $160 letter of credit extending to July 16, 2003 (the "LC", and together
with the Term Loan Facility, the Facilities").
On July 16, 1998, the Company issued $875 of First Mortgage Bonds as
security both under the Facilities and for an interest rate hedge required under
the Credit Agreement (the "Hedge"). Series U, in a principal amount of $700, was
issued to an indirect subsidiary of the Borrower which, in turn, pledged the
Bonds to the Agent for the benefit of the Term Loan lenders. Series V, in a
principal amount of $160, was issued to the Agent for the benefit of the LC
lenders. Series W, in a principal amount of $15, was issued to the Agent for the
benefit of the counterparty to the Hedge.
As a further credit enhancement under the Credit Agreement, the
Facilities and the Hedge are fully and unconditionally guaranteed by the
Company, certain subsidiaries of the Company and Ispat.
-15-
<PAGE> 17
The Credit Agreement contains covenants that, among other things, limit
or prohibit the ability of the Company or the Borrower to incur indebtedness,
create liens, pay dividends, make investments, engage in transactions with
affiliates, sell assets and engage in mergers and consolidations. Additionally,
the Company must maintain a minimum Consolidated EBITDA (as defined in the
Credit Agreement).
At March 31, 1999, the Company had $270 of committed revolving credit
facilities, of which $145 was borrowed, $82 was available and $43 was
unavailable under the terms of the facilities. Ispat Inland Administrative
Service Company ("IIASC"), a wholly owned subsidiary of the Company established
to provide a supplemental source of short-term funds to the Company, has a $125
revolving credit facility with a group of banks. In July 1998, IIASC entered
into an agreement with a bank to provide another $25 revolving credit facility
with terms essentially identical to those of the existing facility. Both the
facilities extend to November 30, 2000. The Company has agreed to sell
substantially all of its receivables to IIASC to secure these facilities. On
January 22, 1999, the Company established a five-year $120 revolving credit
facility with a group of banks. The Company has agreed to sell substantially all
of its raw material, in-process and finished goods inventory to Ispat Inland
Inventory, LLC, a wholly owned subsidiary of the Company, to secure this
facility.
The Company guarantees a pulverized coal injection joint venture loan
and its 50 percent share of I/N Kote borrowing amounting to $13 and $155,
respectively, at March 31, 1999. As neither of these guarantees has been invoked
since inception, the Company does not believe these guarantees will be called
upon.
In March 1999, the Company paid a $5.1 dividend on its Series A
Preferred Stock.
The Company believes that cash flows from operating activities and its
ability to borrow under the revolving credit facilities will be adequate to meet
the Company's debt service obligations, working capital needs and planned
capital expenditures for the foreseeable future.
Year 2000
In mid-1995 the Company initiated a formal program to analyze potential
Year 2000 problems in business and process systems, to remediate and test all
non-compliant systems needed in the new millennium, and to evaluate the Year
2000 status of critical suppliers and service providers.
In order to coordinate the Year 2000 efforts throughout the Company, a
Year 2000 Steering Committee was created to review progress to plan and to
address any major issues that may be encountered. The committee meets on a
regular basis and representatives from sixteen key areas of the Company report
on status of their respective areas.
Information Technology has identified all business systems, and all
components of the hardware infrastructure. At this time, the three most critical
major business systems (Order Fulfillment System, Manufacturing Automation
System, and the Manix System) and the major mainframe IBM operating systems and
ancillary support systems have been remediated and validated as Year 2000
compliant. All other critical business systems have completed final testing or
validation phases. Non-critical business systems are in the remediation or final
testing phases with planned completion dates by the end of June 1999. The PC/LAN
and Client Server environments are in the validation phase with planned
completion dates by the end of June 1999. The Information Technology teams are
also working with end users in departments across the Company to ensure critical
management reporting, spreadsheets, personal computers, and equipment with
imbedded microprocessors are Year 2000 compliant. Planned completion of this
activity is June 1999.
Process Automation has identified over 16,000 pieces of equipment
throughout the Company's manufacturing complex with imbedded computer technology
and is on schedule with its remediation and testing plan. Remediation and
testing of all Process Automation equipment is complete with the exception of
the I/N Tek and I/N Kote Automated Guided Vehicle System (AGV), three critical
systems and one non-critical system, which will be completed by the end of June
1999.
-16-
<PAGE> 18
The Company's personnel are also working with key customers, critical
suppliers and service providers to assure that potential Year 2000 issues are
remediated and tested in systems interfaces with these business partners. In
addition, all Company suppliers have been notified of the Year 2000 issue and
the Company's Year 2000 position. Critical suppliers have been identified and
the Purchasing Department is in the process of further assessing of these
selected vendors as to their Year 2000 readiness and the risk they may impose on
the Company.
A Company team is working with all outside processors to assure all
communications and business procedures are Year 2000 tested and compliant. The
customer communications Information Technology team is working to assure all
customer-required communication protocols, formats, and business procedures are
Year 2000 tested and compliant. The work of these two teams is to reduce the
risk of any type of business disruption to our customers or outside processors.
The Sales Department is communicating with our customers to assure them
that the Company is being proactive in addressing the Year 2000 problem. The
Sales Department is also performing a risk assessment of the Company's key
customers to understand the ramifications of customer problems due to Year 2000
issues. Planned completion of this activity is June 1999.
All critical business systems will again be tested in September and
throughout November 1999 for assurance that nothing has changed since the 1998
remediation and testing phases.
The costs of becoming Year 2000 compliant include providing awareness of
Year 2000 issues, inventory of systems and equipment, impact analysis of systems
and equipment, remediation of software and hardware, testing and validation of
all systems and hardware, risk assessment of suppliers and customers, and
contingency planning. The Company has spent $6.1 through March 31, 1999 and
anticipates that the remaining costs will be $2.3. Impact analysis and cost
estimates are updated monthly. At this time, there are no other projects being
delayed that will affect operations or estimated costs due to Year 2000
projects.
The Company is doing everything reasonably possible to reduce the risk
of disruptions to the Company due to the Year 2000 problem. Although the Company
considers it unlikely, the failure by major customers or suppliers, or any delay
or oversight in the Company's effort to address Year 2000 compliance issues
could result in an adverse impact on the Company, which could be material to its
result of operations or financial position.
Contingency plans are in the development phase with scheduled completion
in the third quarter of 1999. The plans will be constantly reviewed through the
actual millennium rollover. A Year 2000 command center will be assembled to
address any Year 2000 issues as they may occur. The command center will have
plans for emergencies such as power outages, communication failures, police,
fire, and emergency medical services requests; have on hand certain types of
spare equipment for rapid deployment to departments; have access to programmers
and process automation engineers; and have available other service equipment
that appears to be appropriate in case of failures.
-17-
<PAGE> 19
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Recently, the United States Attorney for the Middle District of
Louisiana informed the Company that it is a target of a federal criminal grand
jury investigation and one of several defendants in a civil qui tam lawsuit
filed by a private individual on behalf of the government, alleging violations
of 31 U.S.C. section 3729, et seq. The U.S. Attorney and the Company have agreed
that no criminal charges will be filed against the Company prior to December 1,
1999 while the Company reviews the matter. If a potential claim by the U.S.
attorney was successfully proved with respect to such matter, it would be
material to the financial position and results of operation of the Company.
However, the Company has not yet had an opportunity to review the factual basis
of such a claim or the method by which such damages may be calculated. In
addition, the Company has not yet determined the extent to which other potential
corporate defendants are involved. The Company has given notice of this matter
to Ryerson Tull, Inc. pursuant to the indemnification provisions of the Merger
Agreement, dated as of May 27, 1998, among Ispat, the Company, Inland Merger
Sub, Inc. and Industries (the predecessor company to Ryerson Tull, Inc.) as
amended.
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.
The Company did not file any reports on Form 8-K during the quarter
ended March 31, 1999.
- 18 -
<PAGE> 20
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.
ISPAT INLAND INC.
By: /s/ Michael G. Rippey
----------------------------
Michael G. Rippey
Vice President -
Finance and CFO
Principal Financial Officer
Date: May 14, 1999
-19-
<PAGE> 21
INDEX TO EXHIBITS
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- ------- ----------- ----------
4.A Amended Certificate of Designations, Powers, Preferences
and Relative, Participating or Other Rights, and the
Qualifications, Limitations or Restrictions Thereof,
of Series 8% Preferred Stock of Inland Steel
Company ..................................................
4.B Amended Certificate of Designations of Series 8% Preferred
Stock of Ispat Inland Inc. ...............................
27 Financial Data Schedule ..................................
<PAGE> 1
EX 4A
CERTIFICATE OF THE DESIGNATIONS, POWERS, PREFERENCES
AND RELATIVE, PARTICIPATING OR OTHER RIGHTS, AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF, OF
SERIES A 8% PREFERRED STOCK
($0.01 Par Value)
OF
INLAND STEEL COMPANY
-----------------
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
-----------------
INLAND STEEL COMPANY, a Delaware corporation (the "Corporation"),
does hereby certify that the following resolutions were duly adopted by the
Board of Directors of the Corporation pursuant to authority conferred upon the
Board of Directors by Article IV of the Amended and Restated Certificate of
Incorporation of the Corporation, which approved the Certificate of Designation
of the preferred stock and authorized the issuance of up to 100 shares of
preferred stock, by unanimous written consent of the Board of Directors dated
August , 1998;
RESOLVED, that the Certificate of Designation of the Series A
Preferred Stock be, hereby is, approved and adopted setting forth the
relative rights, preference and powers of the Series A Preferred Stock, par
value $.01 per share, of the Corporation.
Section (1) Number of Shares and Designation. 100 shares of the
preferred stock, $0.01 par value, of the Corporation are hereby
constituted as a series of the preferred stock designated as Series A
Preferred Stock (the "Series A Preferred Stock"). Without the consent
of the then current holders of shares of Series A Preferred Stock as
provided for herein, the number of shares of Series A Preferred Stock
may not be increased and may not be decreased below the number of
then currently outstanding shares of Series A Preferred Stock.
Section (2) Definitions. For purposes of the Series A Preferred
Stock, the following terms shall have the meanings indicated:
<PAGE> 2
"Board of Directors" shall mean the board of directors of
the Corporation or any committee authorized by such Board of
Directors to perform any of its responsibilities with respect to the
Series A Preferred Stock.
"Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the State of New
York are authorized or obligated by law or executive order to close.
"Common Stock" shall mean the Common Stock of the
Corporation, par value $0.01 per share.
"Issue Date" shall mean the first date on which shares of
Series A Preferred Stock are issued.
"Person" shall mean any individual, firm, partnership,
corporation or other entity, and shall include any successor (by
merger or otherwise) of such entity.
"Subsidiaries" shall mean any and all corporations,
partnerships, limited liability companies, joint ventures,
associations and other entities controlled by the Corporation
directly or indirectly through one or more intermediaries.
Section (3) Dividends. (a) The holders of shares of the Series A
Preferred Stock, in preference to the holders of Common Stock, shall be
entitled to receive, when and if declared by the Board of Directors out of
funds legally available therefor, dividends at a rate of 8.0% per share per
annum on the Liquidation Preference (as defined below). Each such dividend
shall be payable in arrears to the holders of record of shares of the
Series A Preferred Stock, as they appear on the stock records of the
Corporation at the close of business on such record dates, not more than 60
days preceding the payment dates thereof, as shall be fixed by the Board of
Directors.
(b) Except as provided in Section 5(a), holders of shares of Series A
Preferred Stock called for redemption on a redemption date between a
dividend payment record date and the dividend payment date shall not be
entitled to receive the dividend payable on such dividend payment date.
(c) So long as any shares of the Series A Preferred Stock are
outstanding, no dividends shall be declared or paid or set apart for
payment on any class or series of stock of the Corporation ranking, as to
dividends, on a parity with or junior to the Series A Preferred Stock, for
any period, nor shall any shares ranking on a parity with or junior to the
Series A Preferred Stock be redeemed or purchased by the Corporation or any
Subsidiary, unless dividends declared and paid on the Series A Preferred
Stock have been or contemporaneously are declared and paid or declared and
a sum sufficient for the payment thereof set apart for such payment on the
Series A Preferred Stock in accordance with paragraph (a) of this Section
(3).
<PAGE> 3
Section (4) Liquidation Preference. (a) In the event of any
liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, before any payment or distribution of the assets
of the Corporation (whether capital or surplus) shall be made to or set
apart for the holders of Common Stock or any other series or class or
classes of stock of the Corporation ranking junior to the Series A
Preferred Stock, upon liquidation, dissolution or winding up, the holders
of the shares of Series A Preferred Stock shall be entitled to receive
$900,000 per share plus an amount equal to all dividends declared and
unpaid thereon to the date of final distribution to such holders;
thereafter, such holders shall be entitled to share ratably with the
holders of the shares of Common Stock as provided in paragraph (b) of this
Section (4). If, upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation, or proceeds thereof,
distributable among the holders of the shares of Series A Preferred Stock,
and any other shares of stock ranking, as to liquidation, dissolution or
winding up, on a parity with the Series A Preferred Stock, shall be
insufficient to pay in full the preferential amount aforesaid and
liquidating payments in respect thereof, then such assets, or the proceeds
thereof, shall be distributed among the holders of shares of Series A
Preferred Stock and any such other stock ratably in accordance with the
respective amounts which would be payable on such shares of Series A
Preferred Stock and any such other stock if all amounts payable thereon
were paid in full. For the purposes of this Section (4), (i) a
consolidation or merger of the Corporation with one or more corporations,
(ii) a sale or transfer of all or substantially all of the Corporation's
assets or (iii) a statutory share exchange shall not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary.
(b) Subject to the rights of the holders of shares of any series or
class or classes of stock ranking on a parity with or prior to Series A
Preferred Stock, upon any liquidation, dissolution or winding up of the
Corporation, after payment shall have been made in full to the holders of
Series A Preferred Stock, as provided in paragraph (a) of this Section (4),
holders of shares of Series A Preferred Stock shall be entitled to share
ratably with holders of shares of Common Stock and any other class or
series entitled to participate with the Common Stock in the event of
liquidation, dissolution or winding up, in any and all assets remaining to
be paid or distributed.
Section (5) Redemption at the Option of the Corporation. (a) Series
A Preferred Stock may not be redeemed by the Corporation prior to the fifth
anniversary of the Issue Date. After the fifth anniversary of the Issue
Date, the Corporation, at its option, may redeem the shares of Series A
Preferred Stock, in whole or in part, for an aggregate redemption price of
$900,000 per share plus an amount per share equal to declared and unpaid
dividends, if any, to the date fixed for redemption, out of funds legally
available therefor, at any time or from time to time, subject to the notice
provisions and provisions for partial redemption described below.
(b) In the event the Corporation shall redeem shares of Series A
Preferred Stock, notice of such redemption shall be given by first class
mail, postage prepaid, mailed not less than 20 nor more than 60 days prior
to the redemption date, to each holder of record of the shares to be
redeemed, at such holder's address as the same appears on
<PAGE> 4
the stock records of the Corporation, which notice shall be unconditional
and irrevocable. Each such notice shall state: (1) the redemption date; (2)
the number of shares of Series A Preferred Stock to be redeemed and, if
less than all the shares held by such holder are to be redeemed, the number
of such shares to be redeemed from such holder; (3) the redemption price;
and (4) the place or places where certificates for such shares are to be
surrendered for payment of the redemption price. Notice having been mailed
as aforesaid, from and after the redemption date (unless default shall be
made by the Corporation in providing money for the prompt payment of the
redemption price), (i) the shares of the Series A Preferred Stock so called
for redemption shall no longer be deemed to be outstanding, and (ii) all
rights of the holders thereof as stockholders of the Corporation (except
the right to receive from the Corporation the redemption price without
interest thereon after the redemption date) shall cease. If the Corporation
fails to provide money for the payment of the redemption price within 30
days after the redemption date, the redemption price shall accrue interest
at the rate of 15% per annum.
Upon surrender in accordance with said notice of the certificates for
any such shares so redeemed (properly endorsed or assigned for transfer, if
the Corporation shall so require and the notice shall so state), such
shares shall be redeemed by the Corporation at the applicable redemption
price aforesaid. If fewer than all the outstanding shares of Series A
Preferred Stock are to be redeemed, shares to be redeemed shall be selected
pro rata (as nearly as may be) by the Corporation from outstanding shares
of Series A Preferred Stock not previously called for redemption. If fewer
than all the shares represented by any certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares without cost
to the holder thereof.
Section (6) Shares to be Retired. All shares of Series A Preferred
Stock purchased or redeemed by the Corporation shall be retired and
cancelled and shall be restored to the status of authorized but unissued
shares of preferred stock, without designation as to series.
Section (7) Ranking. Any class or classes of stock of the
Corporation shall be deemed to rank:
(i) prior to the Series A Preferred Stock, as to dividends
or as to distribution of assets upon liquidation, dissolution or
winding up, if the holders of such class shall be entitled to the
receipt of dividends or of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in preference or
priority to the holders of Series A Preferred Stock;
(ii) on a parity with the Series A Preferred Stock, (A) as to
dividends, if the holders of such class of stock and the Series A
Preferred Stock shall be entitled to the receipt of dividends in
proportion to their respective amounts of declared and unpaid
dividends per share, without preference or priority one over the
other, or (B) as to distribution of assets upon liquidation,
dissolution or winding up, whether or not the redemption or
liquidation prices per share thereof be different from those of the
Series A Preferred Stock, if the holders of such
<PAGE> 5
class of stock and the Series A Preferred Stock shall be entitled to
the receipt of amounts distributable upon liquidation, dissolution or
winding up in proportion to their respective amounts of liquidation
prices, without preference or priority one over the other; and
(iii) junior to the Series A Preferred Stock, (A) as to
dividends, if the holders of Series A Preferred Stock shall be
entitled to the receipt of dividends in preference or priority to the
holders of shares of such stock, or (B) as to distribution of assets
upon liquidation, dissolution or winding up, if such stock shall be
Common Stock or if the holders of Series A Preferred Stock shall be
entitled to receipt of amounts distributable upon liquidation,
dissolution or winding up in preference or priority to the holders of
shares of such stock.
Section (8) Voting. (a) Except as herein provided or as
otherwise from time to time required by law, holders of Series A Preferred
Stock shall have no voting rights.
(b) So long as any shares of the Series A Preferred Stock remain
outstanding, the consent of the holders of at least a majority of the
shares of Series A Preferred Stock outstanding at the time given in person
or by proxy, either in writing or at any special or annual meeting, shall
be necessary to permit, effect or validate any one or more of the
following:
(i) The authorization, creation or issuance, or any increase
in the authorized or issued amount, of any class or series of stock
ranking prior to Series A Preferred Stock as to dividends or the
distribution of assets upon liquidation, dissolution or winding up;
(ii) The increase in the authorized or issued amount of Series
A Preferred Stock; or
(iii) The amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of the
Certificate of Incorporation of the Corporation (including any of the
provisions hereof) which would affect any right, preference or voting
power of Series A Preferred Stock or of the holders thereof;
provided, however, that any increase in the amount of authorized
preferred stock or the creation and issuance of other series of
preferred stock, or any increase in the amount of authorized shares
of such series or of any other series of preferred stock, in each
case ranking on a parity with or junior to the Series A Preferred
Stock with respect to the payment of dividends and the distribution
of assets upon liquidation, dissolution or winding up, shall not be
deemed to affect such rights, preferences or voting powers.
(c) So long as any shares of the Series A Preferred Stock remain
outstanding, each share of Series A Preferred Stock shall entitle the
holder thereof to vote on any merger or consolidation of the Corporation,
sale of all or substantially all of the Corporation's assets, statutory
share exchange, or other extraordinary transaction, with
<PAGE> 6
the shares of Series A Preferred Stock voting together as a single class
with the shares of Common Stock.
The foregoing voting provisions shall not apply if, at or prior to
the time when the act with respect to which such vote would otherwise be
required shall be effected, all outstanding shares of Series A Preferred
Stock shall have been redeemed or sufficient funds shall have been
deposited in trust to effect such redemption, scheduled to be consummated
within 30 days after such time.
Section (9) Record Holders. The Corporation may deem and treat the
record holder of any shares of Series A Preferred Stock as the true and
lawful owner thereof for all purposes, and the Corporation shall not be
affected by any notice to the contrary.
<PAGE> 7
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by Edward McCarthy, its Assistant Secretary, this 24th day of August,
1998.
INLAND STEEL COMPANY
By: /s/ Edward C McCarthy
-------------------------
Edward McCarthy
Assistant Secretary
<PAGE> 1
EX 4B
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF THE DESIGNATIONS, POWERS, PREFERENCES
AND RELATIVE, PARTICIPATING OR OTHER RIGHTS, AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF, OF
SERIES A 8% PREFERRED STOCK
($0.01 Par Value)
OF
ISPAT INLAND INC.
(formerly known as Inland Steel Company)
ISPAT INLAND INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That the Board of Directors of said corporation, by unanimous
written consent of its members, adopted a resolution proposing and declaring
advisable the following amendment to the Certificate of Designations of the
Series A 8% Preferred Stock, $0.01 par value, of the Corporation which was filed
with the Secretary of State of the State of Delaware on August 25, 1998:
RESOLVED, that Section (3)(a) of the Certificate of
Designations of the Series A Preferred Stock of the Corporation is
hereby amended in its entirety to read as follows:
Section (3) Dividends. (a) The holders of shares of
the Series A Preferred Stock, in preference to the holders of
Common Stock, shall be entitled to receive, when and if
declared by the Board of Directors out of funds legally
available therefor, dividends to accrue from July 16, 1998 at
a rate of 8.0% per share per annum on the Liquidation
Preference (as defined below). Each such dividend shall be
payable in arrears to the holders of record of shares of the
Series A Preferred Stock, as they appear in the stock records
of the Corporation at the close of business on such record
dates, not more
<PAGE> 2
than 60 days preceding the payment dates thereof, as shall be fixed by the Board
of Directors.
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders have given unanimous written consent to said amendment in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance
with the applicable provisions of Sections 242 and 228 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Edward C. McCarthy, its Assistant Secretary, this 26th day of March,
1999.
ISPAT INLAND INC.
By: /s/ Edward C. McCarthy
-----------------------
Edward C. McCarthy
Assistant Secretary
<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 STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 44,900
<SECURITIES> 0
<RECEIVABLES> 296,100
<ALLOWANCES> 17,800
<INVENTORY> 506,000
<CURRENT-ASSETS> 829,200
<PP&E> 2,019,000
<DEPRECIATION> 73,500
<TOTAL-ASSETS> 3,079,000
<CURRENT-LIABILITIES> 533,700
<BONDS> 963,000
0
90,000
<COMMON> 320,000
<OTHER-SE> (400)
<TOTAL-LIABILITY-AND-EQUITY> 3,079,000
<SALES> 619,212
<TOTAL-REVENUES> 619,900
<CGS> 590,200
<TOTAL-COSTS> 590,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,800
<INCOME-PRETAX> (4,200)
<INCOME-TAX> (1,400)
<INCOME-CONTINUING> (2,800)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,800)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
