<PAGE>
THIRD QUARTER - 1994
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, 1994
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 1-9117
I.R.S. Employer Identification Number 36-3425828
INLAND STEEL INDUSTRIES, INC.
(a Delaware Corporation)
30 West Monroe Street
Chicago, Illinois 60603
Telephone: (312) 346-0300
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: 44,472,972 shares of the
Company's Common Stock ($1.00 par value per share) were outstanding as of
November 7, 1994.
<PAGE>
PART I. FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
===============================================================================
<TABLE>
<CAPTION>
Dollars in Millions
(except per share data)
-----------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
------------------ ------------------
1994 1993 1994 1993
-------- ------ -------- --------
<S> <C> <C> <C> <C>
NET SALES $1,129.5 $972.0 $3,340.8 $2,909.9
-------- ------ -------- --------
OPERATING COSTS AND EXPENSES
Cost of goods sold 975.5 855.1 2,909.6 2,630.9
Selling, general and
administrative expenses 49.2 49.5 149.3 146.3
Depreciation 35.6 34.1 105.2 98.2
-------- ------ -------- --------
Total 1,060.3 938.7 3,164.1 2,875.4
-------- ------ -------- --------
OPERATING PROFIT 69.2 33.3 176.7 34.5
-------- ------ -------- --------
General corporate expense,
net of income items 4.1 5.1 10.0 18.1
Interest and other expense on debt 17.6 19.2 54.4 58.7
-------- ------ -------- --------
INCOME (LOSS) BEFORE INCOME TAXES 47.5 9.0 112.3 (42.3)
PROVISION FOR INCOME TAXES 16.8 8.0Cr. 40.9 25.4Cr.
-------- ------ -------- --------
NET INCOME (LOSS) $ 30.7 $ 17.0 $ 71.4 $ (16.9)
======== ====== ======== ========
EARNINGS (LOSS) PER SHARE OF COMMON
STOCK:
PRIMARY $ .54 $ .25 $ 1.15 $ (1.16)
======== ====== ======== ========
FULLY DILUTED $ .50 $ .23 $ 1.07 $ (1.16)
======== ====== ======== ========
</TABLE>
See notes to consolidated financial statements
-1-
<PAGE>
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Dollars in Millions
-------------------
Nine Months Ended
September 30
-------------------
1994 1993
------- ------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 71.4 $(16.9)
------- ------
Adjustments to reconcile net income (loss) to net
cash provided from operating activities:
Depreciation 105.7 98.6
Deferred employee benefit cost 35.6 29.9
Deferred income taxes 36.5 (26.9)
Change in: Receivables (45.8) (51.9)
Inventories (105.5) 9.8
Accounts payable (12.1) (17.6)
Accrued salaries and wages (1.4) (3.7)
Other accrued liabilities 12.9 18.3
Other deferred items 19.8 13.0
------- ------
Net adjustments 45.7 69.5
------- ------
Net cash provided from operating activities 117.1 52.6
------- ------
INVESTING ACTIVITIES
Capital expenditures (135.3) (57.1)
Investments in and advances to joint ventures, net 10.7 (5.0)
Proceeds from sales of assets 5.0 3.1
------- ------
Net cash used for investing activities (119.6) (59.0)
------- ------
FINANCING ACTIVITIES
Long-term debt issued 19.7 46.8
Long-term debt retired (171.7) (70.9)
Dividends paid (22.3) (24.0)
Acquisition of treasury stock (3.7) (3.5)
------- ------
Net cash used for financing activities (178.0) (51.6)
------- ------
Net decrease in cash and cash equivalents (180.5) (58.0)
Cash and cash equivalents - beginning of year 250.5 137.7
------- ------
Cash and cash equivalents - end of period $ 70.0 $ 79.7
======= ======
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
Interest (net of amount capitalized) $ 44.6 $ 48.3
Income taxes, net 5.5 1.5
Non-cash investing and financing activities:
Long-term debt acquired in purchase of assets 63.3 -
</TABLE>
See notes to consolidated financial statements
-2-
<PAGE>
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
===============================================================================
<TABLE>
<CAPTION>
Dollars in Millions
---------------------------------------
September 30, 1994 December 31, 1993
------------------- ------------------
(unaudited)
<S> <C> <C> <C> <C>
ASSETS
- - ------
CURRENT ASSETS
Cash and cash equivalents $ 70.0 $ 250.5
Receivables 473.1 427.3
Inventories - principally at LIFO
In process and finished products $ 425.3 $ 331.9
Raw materials and supplies 57.1 482.4 45.0 376.9
-------- --------
Deferred income taxes 47.4 44.2
-------- --------
Total current assets 1,072.9 1,098.9
INVESTMENTS AND ADVANCES 209.0 221.0
PROPERTY, PLANT AND EQUIPMENT
Valued on basis of cost 4,277.9 4,083.7
Less: Reserve for depreciation,
amortization and depletion 2,570.6 2,467.6
Allowance for terminated facilities 108.4 1,598.9 108.4 1,507.7
-------- --------
DEFERRED INCOME TAXES 390.0 428.4
INTANGIBLE PENSION ASSET 122.1 122.1
OTHER ASSETS 61.1 57.7
-------- --------
Total Assets $3,454.0 $3,435.8
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ------------------------------------
CURRENT LIABILITIES
Accounts payable $ 287.0 $ 300.9
Accrued liabilities 214.3 202.8
Long-term debt due within one year 70.7 98.8
-------- --------
Total current liabilities 572.0 602.5
LONG-TERM DEBT 716.8 777.1
DEFERRED EMPLOYEE BENEFITS 1,406.7 1,371.1
OTHER CREDITS 59.0 61.7
-------- --------
Total liabilities 2,754.5 2,812.4
REDEEMABLE PREFERRED STOCK 185.0 185.0
COMMON STOCK REPURCHASE COMMITMENT 38.0 40.8
STOCKHOLDERS' EQUITY (Schedule A) 476.5 397.6
-------- --------
Total Liabilities, Temporary Equity,
and Stockholders' Equity $3,454.0 $3,435.8
======== ========
</TABLE>
See notes to consolidated financial statements
-3-
<PAGE>
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
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, 1994 and for the three-month and nine-month periods ended
September 30, 1994 and 1993 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 to
Stockholders for the year ended December 31, 1993.
NOTE 2/CAPITAL STOCK
In the second quarter of 1994, as the result of the Company's call for
redemption, shareholders converted the 1.5 million shares of Series G $4.625
Cumulative Convertible Exchangeable Preferred Stock outstanding into 2.7
million shares of the Company's common stock.
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, increased to $63 million on September 30, 1994 from $15
million on December 31, 1993.
-4-
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - Comparison of Third Quarter 1994 to Third Quarter 1993
- - ------------------------------------------------------------------------------
The Company reported a consolidated net income of $30.7 million in the 1994
third quarter, compared with consolidated net income of $17.0 million in the
year-earlier period. The 1993 third quarter net income included an income tax
credit provision of approximately $11 million, resulting from the cumulative
favorable effect of a change in the federal tax rate from 34 percent to 35
percent. Improved operating profit at both of the Company's business segments
was the principal factor in the year-to-year improvement.
Consolidated net sales increased 16 percent in the 1994 third quarter to
$1.13 billion, the result of higher volume and improved average selling price at
both of the Company's business segments.
The Integrated Steel segment's net sales increased 14 percent in the current
quarter to $614 million, due to a 10 percent increase in the volume of steel
mill products shipped and an improvement in the average selling price of 4
percent. Revenue growth continues to outpace the increase in operating costs,
and was the principal factor in the segment's improved operating profit of $42.2
million, compared with an operating profit of $22.2 million in the 1993 third
quarter.
Steel Service Center segment net sales rose 17 percent in the 1993 third
quarter to $561 million, due to a 13 percent volume improvement and a 4 percent
increase in average selling price per ton. Operating profit increased $15.2
million to $26.9 million due primarily to increased sales.
Comparison of First Nine Months of 1994 to First Nine Months of 1993
- - --------------------------------------------------------------------
A consolidated net income of $71.4 million for the first nine months of 1994
compared favorably with a net loss of $16.9 million in the year-earlier period.
The principal factor contributing to the year-to-year increase was improved
operating results, especially at the Integrated Steel segment.
Consolidated net sales of $3.34 billion were 15 percent higher than the first
nine months of 1993, due to both higher volume and improved average selling
prices at both of the Company's business segments.
Integrated Steel segment net sales increased 14 percent to $1.85 billion in
the first nine months of 1994 as a result of improved average selling price,
which contributed 8 percent of the increase, and higher shipment levels, which
added 6 percent. The improvement in average selling price was the principal
factor operating profit increased to $102.4 million in the first nine months of
1994 from an operating loss of $7.1 million in the year-earlier period.
Steel Service Center segment net sales of $1.65 billion in the first nine
months of 1994 were 15 percent higher than the like 1993 period, due to a 12
percent increase in volume and a 3 percent improvement in average selling price.
Operating profit for the 1994 period of $72.5 million was 73 percent ahead of
the comparable 1993 period. The volume increase was the primary factor
accounting for the improvement.
-5-
<PAGE>
Liquidity and Financing
- - -----------------------
The Company's cash and cash equivalents at September 30, 1994 were $70
million, compared with $251 million at year-end 1993. There was no short-term
borrowing at either date.
Cash flow from operating activities during the first nine months of 1994 was
positive $117 million, compared with $53 million in the year-earlier period.
Net income of $71 million, combined with non-cash expenses of $178 million
related to depreciation, deferred employee benefit cost and deferred income
taxes more than offset working capital required for increased inventories and
receivables.
During the first half of 1994, Inland Steel Company redeemed all $75 million
of its outstanding Series O, P and Q First Mortgage Bonds and acquired the
equity interest in the operating lease of the No. 2 Basic Oxygen Furnace Shop
continuous casters for $83 million. In connection with this purchase, Inland
Steel Company recorded $63 million of debt. Inland Steel Company also called
and subsequently prepaid approximately $48 million of caster-related debt. In
addition, in early May, Inland Steel Company called all remaining debt related
to this continuous caster facility (approximately $48 million) for prepayment in
November 1994.
During the second quarter, Inland Steel Company redeemed $20 million
principal amount of 8.125 percent Pollution Control Revenue bonds. The
redemption was funded largely by the proceeds from the issuance of a like amount
of Pollution Control Revenue bonds with a 7.125 percent coupon.
The Company called for redemption all outstanding shares of Series G $4.625
Cumulative Convertible Exchangeable Preferred Stock during the second quarter.
The call resulted in conversion of 1.5 million shares of Series G Preferred
Stock outstanding, increasing the number of shares of common stock outstanding
by 2.7 million shares. This will reduce ongoing preferred dividends by
approximately $7 million on an annual basis.
-6-
<PAGE>
PART II. OTHER INFORMATION
---------------------------
ITEM 5. OTHER INFORMATION
Consolidated financial statements for Inland Materials Distribution Group,
Inc. are set forth in Appendix A to this Quarterly Report on Form 10-Q.
Separate consolidated financial statements for Inland Steel Company are set
forth in Inland Steel Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1994.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
3(i) Copy of Certificate of Incorporation, as amended, of the Company.
3(ii) Copy of By-laws, as amended, of the Company. (Filed as Exhibit 3-B
to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992, and incorporated by reference herein.)
4.A Copy of Certificate of Designations, Preferences and Rights of
Series A $2.40 Cumulative Convertible Preferred Stock of the
Company. (Filed as part of Exhibit B to the definitive Proxy
Statement of Inland Steel Company dated March 21, 1986 that was
furnished to stockholders in connection with the annual meeting held
April 23, 1986, and incorporated by reference herein.)
4.B Copy of Certificate of Designation, Preferences and Rights of Series
D Junior Participating Preferred Stock of the Company. (Filed as
Exhibit 4-D to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1987, and incorporated by reference
herein.)
4.C Copy of Rights Agreement, dated as of November 25, 1987, as amended
and restated as of May 24, 1989, between the Company and The First
National Bank of Chicago, as Rights Agent (Harris Trust and Savings
Bank, as successor Rights Agent). (Filed as Exhibit 1 to the
Company's Current Report on Form 8-K filed on May 24, 1989, and
incorporated by reference herein.)
4.D Copy of Certificate of Designations, Preferences and Rights of
Series E ESOP Convertible Preferred Stock of the Company. (Filed as
Exhibit 4-F to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1989, and incorporated by reference herein.)
4.E Copy of Certificate of Designations, Preferences and Rights of
Series F Exchangeable Preferred Stock of the Company. (Filed as
Exhibit 4(b) to the Company's Current Report on Form 8-K filed on
December 18, 1989, and incorporated by reference herein.)
4.F Copy of Indenture dated as of December 15, 1992, between the Company
and Harris Trust and Savings Bank, as Trustee, respecting the
Company's $150,000,000 12-3/4% Notes due December 15, 2002. (Filed
as Exhibit 4-G to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992, and incorporated by reference
herein.)
4.G Copy of First Mortgage Indenture, dated April 1, 1928, between
Inland Steel Company (the "Steel Company") and First Trust and
Savings Bank and Melvin A. Traylor, as Trustees, and
-7-
<PAGE>
of supplemental indentures thereto, to and including the Thirty-Second
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 Steel Company's Registration Statement on Form A-2 (No.
2-1855); (ii) Exhibits D-1(f) and D-1(g), filed with Steel Company's
Registration Statement on Form E-1 (No. 2-2182); (iii) Exhibit B-1(h),
filed with Steel Company's Current Report on Form 8-K dated January
18, 1937; (iv) Exhibit B-1(i), filed with Steel Company's Current
Report on Form 8-K, dated February 8, 1937; (v) Exhibits B-1(j) and
B-1(k), filed with Steel Company's Current Report on Form 8-K for the
month of April, 1940; (vi) Exhibit B-2, filed with Steel Company's
Registration Statement on Form A-2 (No. 2-4357); (vii) Exhibit B-1(l),
filed with Steel Company's Current Report on Form 8-K for the month of
January, 1945; (viii) Exhibit 1, filed with Steel Company's Current
Report on Form 8-K for the month of November, 1946; (ix) Exhibit 1,
filed with Steel Company's Current Report on Form 8-K for the months
of July and August, 1948; (x) Exhibits B and C, filed with Steel
Company's Current Report on Form 8-K for the month of March, 1952;
(xi) Exhibit A, filed with Steel Company's Current Report on Form 8-K
for the month of July, 1956; (xii) Exhibit A, filed with Steel
Company's Current Report on Form 8-K for the month of July, 1957;
(xiii) Exhibit B, filed with Steel Company's Current Report on Form
8-K for the month of January, 1959; (xiv) the Exhibit filed with Steel
Company's Current Report on Form 8-K for the month of December, 1967;
(xv) the Exhibit filed with Steel Company's Current Report on Form 8-K
for the month of April, 1969; (xvi) the Exhibit filed with Steel
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 Steel
Company's Current Report on Form 8-K for the month of April, 1974;
(xviii) Exhibit B, filed with Steel Company's Current Report on Form
8-K for the month of September, 1975; (xix) Exhibit B, filed with
Steel Company's Current Report on Form 8-K for the month of January,
1977; (xx) Exhibit C, filed with Steel Company's Current Report on
Form 8-K for the month of February, 1977; (xxi) Exhibit B, filed with
Steel Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1978; (xxii) Exhibit B, filed with Steel Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1980; (xxiii)
Exhibit 4-D, filed with Steel Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1980; (xxiv) Exhibit 4-D, filed
with Steel Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1982; (xxv) Exhibit 4-E, filed with Steel 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); and (xxvii) Exhibit 4 filed with
Steel Company's Current Report on Form 8-K dated June 23, 1993.
4.H Copy of consolidated reprint of First Mortgage Indenture, dated April
1, 1928, between Inland Steel 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.)
11 Statement of Earnings per Share of Common Stock.
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, 1994.
-8-
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INLAND STEEL INDUSTRIES, INC.
By James M. Hemphill
--------------------------------------
James M. Hemphill
Controller
(Chief Accounting Officer)
Date: November 10, 1994
-9-
<PAGE>
Part I -- Schedule A
--------------------
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
SUMMARY OF STOCKHOLDERS' EQUITY
================================================================================
<TABLE>
<CAPTION>
Dollars in Millions
---------------------------------------------
September 30, 1994 December 31, 1993
-------------------- --------------------
(unaudited)
<S> <C> <C> <C> <C>
STOCKHOLDERS' EQUITY
- - --------------------
Series A preferred stock ($1 par value)
- 96,354 shares and 96,589 shares issued and
outstanding as of September 30, 1994 and
December 31, 1993, respectively $ .1 $ .1
Series E preferred stock ($1 par value)
- 3,095,848 shares and 3,114,568 shares
issued and outstanding as of September 30,
1994 and December 31, 1993, respectively 3.1 3.1
Series G preferred stock ($1 par value)
- 1,500,000 shares issued and outstanding as of
December 31, 1993 - 1.5
Common stock ($1 par value)
- 50,556,350 shares and 47,854,208 shares issued
as of September 30, 1994 and December 31, 1993,
respectively 50.6 47.9
Capital in excess of par value 1,097.0 1,113.7
Accumulated deficit
Balance beginning of year $(371.9) $(302.3)
Net income (loss) 71.4 (37.6)
Dividends
Series A preferred stock -
$1.80 per share in 1994 and
$2.40 per share in 1993 (.2) (.2)
Series E preferred stock -
$1.7615 per share in 1994 and
$3.523 per share in 1993 (5.5) (11.0)
Income tax benefit - Series E dividend 1.4 3.6
Series F preferred stock -
$71.10 per share in 1994 and
$94.80 per share in 1993 (13.2) (17.5)
Series G preferred stock -
$1.54165 per share in 1994 and
$4.625 per share in 1993 (1.7) (319.7) (6.9) (371.9)
------- -------
Unearned compensation related to ESOP (103.4) (112.2)
Common stock repurchase commitment (38.0) (40.8)
Investment valuation allowance (3.3) (5.2)
Unearned restricted stock award compensation (2.9) (2.1)
Treasury stock, at cost
- 6,137,667 shares and 6,767,139
shares as of September 30, 1994 and
December 31, 1993, respectively (207.0) (236.5)
------- --------
Total Stockholders' Equity $ 476.5 $ 397.6
======= ========
</TABLE>
-10-
<PAGE>
Part I -- Schedule B
--------------------
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
SUMMARY FINANCIAL INFORMATION FOR BUSINESS SEGMENTS (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Dollars in Millions
---------------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
------------------- ---------------------
1994 1993 1994 1993
-------- ------ -------- --------
<S> <C> <C> <C> <C>
NET SALES
- - ---------
Integrated Steel Operations $ 613.5 $539.9 $1,847.6 $1,626.8
Steel Service Center Operations 560.7 478.2 1,647.3 1,426.4
Eliminations and adjustments (44.7) (46.1) (154.1) (143.3)
-------- ------ -------- --------
Total Net Sales $1,129.5 $972.0 $3,340.8 $2,909.9
======== ====== ======== ========
OPERATING PROFIT (LOSS)
- - -----------------------
Integrated Steel Operations $ 42.2 $ 22.2 $ 102.4 $ (7.1)
Steel Service Center Operations 26.9 11.7 72.5 41.8
Eliminations and adjustments .1 (.6) 1.8 (.2)
-------- ------ -------- --------
Total Operating Profit $ 69.2 $ 33.3 $ 176.7 $ 34.5
======== ====== ======== ========
</TABLE>
-11-
<PAGE>
Exhibit 3(i)
CERTIFICATE OF INCORPORATION
of
INLAND STEEL INDUSTRIES, INC.
as Amended to and Including September 8, 1994
-------------------
First: The name of this Corporation is
INLAND STEEL INDUSTRIES, INC.
Second: The address of its registered office in the State of Delaware
is 1209 Orange Street, in the City of Wilmington, County of New Castle. The
name of its registered agent at such address is The Corporation Trust Company.
Third: The nature of the business or purpose to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
Fourth: The total number of shares of stock which this Corporation
shall have authority to issue is 115,000,000, of which 15,000,000 shares shall
be Preferred Stock, $1.00 par value per share (hereinafter sometimes referred to
as "Preferred Stock"), and 100,000,000 shares shall be Common Stock, $1.00 par
value per share (hereinafter sometimes referred to as "Common Stock"). The
shares of stock of this Corporation may be issued from time to time for such
consideration as may be fixed from time to time by the Board of Directors.
PART I
PREFERRED STOCK
The Board of Directors is expressly authorized to adopt, from time to
time, a resolution or resolutions providing for the issue of Preferred Stock in
one or more series, to fix the number of shares in each such series and to fix
the designations and the powers, preferences and relative, participating,
optional and other special rights and the qualifications, limitations and
restrictions thereof, of each such series. The authority of the Board of
Directors with respect to each such series shall include a determination of the
following, which may vary as between the different series of Preferred Stock:
<PAGE>
-2-
(a) The number of shares constituting the series and the distinctive
designation of the series;
(b) The dividend rate on the shares of the series, the conditions and
dates upon which dividends thereon shall be payable, the extent, if any, to
which dividends thereon shall be cumulative, and the relative rights of
preference, if any, of payment of dividends thereon;
(c) Whether or not the shares of the series are redeemable and, if
redeemable, the time or times during which they shall be redeemable and the
amount per share payable on redemption thereof, which amount may, but need not,
vary according to the time and circumstances of such redemption;
(d) The amount payable in respect of the shares of the series, in the
event of any liquidation, dissolution or winding up of this Corporation, which
amount may, but need not, vary according to the time or circumstances of such
action, and the relative rights of preference, if any, of payment of such
amount;
(e) Any requirement as to a sinking fund for the shares of the series,
or any requirement as to the redemption, purchase or other retirement by this
Corporation of the shares of the series;
(f) The right, if any, to exchange or convert shares of the series
into other securities or property, and the rate or basis, time, manner and
condition of exchange or conversion;
(g) The voting rights, if any, to which the holders of shares of the
series shall be entitled in addition to the voting rights provided by law; and
(h) Any other terms, conditions or provisions with respect to the
series not inconsistent with the provisions of this Article Fourth or any
resolution adopted by the Board of Directors pursuant hereto.
The number of authorized shares of Preferred Stock may be increased or decreased
by the affirmative vote of the holders of a majority of the stock of this
Corporation entitled to vote at a meeting of stockholders. No holder of shares
of Preferred Stock of this Corporation shall, by reason of such holding, have
any preemptive right to subscribe to any additional issue of stock of any class
or series nor to any security convertible into such stock.
<PAGE>
-3-
PART II
COMMON STOCK
(a) Dividends. Subject to any prior rights to receive dividends to
which the holders of shares of any series of the Preferred Stock may be
entitled, the holders of shares of Common Stock shall be entitled to receive
dividends, if and when declared payable from time to time by the Board of
Directors, from funds legally available therefor.
(b) Liquidation. In the event of any dissolution, liquidation or
winding up of this Corporation, whether voluntary or involuntary, after there
shall have been paid to the holders of shares of Preferred Stock the full
amounts to which they shall be entitled, the holders of the then outstanding
shares of Common Stock shall be entitled to receive, pro rata, any remaining
assets of this Corporation available for distribution to its stockholders. The
Board of Directors may distribute in kind to the holders of the shares of Common
Stock such remaining assets of this Corporation or may sell, transfer or
otherwise dispose of all or any part of such remaining assets to any other
corporation, trust or entity and receive payment therefor in cash, stock or
obligations of such other corporation, trust or entity or any combination
thereof, and may sell all or any part of the consideration so received, and may
distribute the consideration received or any balance or proceeds thereof to
holders of the shares of Common Stock. The voluntary sale, conveyance, lease,
exchange or transfer of all or substantially all the property or assets of this
Corporation (unless in connection therewith the dissolution, liquidation or
winding up of this Corporation is specifically approved), or the merger or
consolidation of this Corporation into or with any other corporation, or the
merger of any other corporation into it, or any purchase or redemption of shares
of stock of this Corporation of any class, shall not be deemed to be a
dissolution, liquidation or winding up of this Corporation for the purpose of
this paragraph (b).
(c) Voting. Except as provided by law or this Certificate of
Incorporation with respect to voting by class or series, each outstanding share
of Common Stock of this Corporation shall entitle the holder thereof to one vote
on each matter submitted to a vote at a meeting of stockholders.
(d) Reservation of Common Stock. Such numbers of shares of Common
Stock as may from time to time be required for such purpose shall be reserved
for issuance (i) upon conversion of any shares of Preferred Stock or any
obligation of this Corporation convertible into shares of Common Stock and (ii)
upon exercise of any options or warrants to purchase shares of Common Stock.
<PAGE>
-4-
(e) Preemptive Rights. No holder of shares of Common Stock of this
Corporation shall, by reason of such holding, have any preemptive right to
subscribe to any additional issue of stock of any class or series nor to any
security convertible into such stock.
PART III
VOTING NOTES
The holders of the Corporation's 10.23% Subordinated Voting Notes (the
"Exchange Notes"), which may be issued from time to time in exchange for the
Corporation's Series F Exchangeable Preferred Stock, shall be entitled to vote
on all matters submitted to a vote of the stockholders of the Corporation,
voting together with the holders of Common Stock (and of any other shares of
capital stock of the Corporation entitled to vote at a meeting of stockholders)
as one class. Each $1,000 aggregate principal amount of Exchange Notes shall be
entitled to a number of votes equal to the number of votes to which each share
of Series F Exchangeable Preferred Stock was entitled on the effective date of
the exchange of such share of Series F Exchangeable Preferred Stock for an
Exchange Note, subject to adjustment as provided in paragraph 3 of the Exchange
Notes. Holders of the Exchange Notes shall be deemed to be stockholders of the
Corporation, and the Exchange Notes shall be deemed to be shares of stock for
the purpose of any provision of the Delaware General Corporation Law that
requires the vote of stockholders as a prerequisite to any corporate action.
Fifth: Any action required or permitted to be taken by the
stockholders of the Corporation, whether voting as a class or otherwise, must be
taken at a duly called annual or special meeting of the stockholders of the
Corporation and may not be taken by consent in writing of such stockholders,
except that the Board of Directors at any time may by resolution provide that
the holders of Preferred Stock, or any series thereof, may take any action
required or permitted to be taken by such holders by consent in writing without
a meeting.
Sixth. The name and mailing address of the incorporator is as
follows:
Mr. Clark L. Wagner
c/o Inland Steel Industries, Inc.
30 West Monroe Street
Chicago, Illinois 60603
Seventh: The Corporation is to have perpetual existence.
<PAGE>
-5-
Eighth: The Corporation may indemnify, in accordance with and to the
full extent now or hereafter permitted by law, any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (including, without limitation, an action by or in the right of
the Corporation), by reason of his acting as a director, officer, employee or
agent of, or his acting in any other capacity for, on behalf of, or at the
request of, the Corporation, against any liability or expense actually and
reasonably incurred by such person in respect thereof.
Ninth: No director of this Corporation shall be personally liable to
this Corporation or its stockholders for monetary damages for any breach of
fiduciary duty by such director as a director, except for liability (i) for any
breach of the director's duty of loyalty to this Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit. No amendment to or repeal of any
of the provisions of this Article Ninth shall apply to or have any effect on the
liability or alleged liability of any director of this Corporation for or with
respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
Tenth: In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized to make, alter or
repeal the by-laws of the Corporation.
Eleventh: Meetings of stockholders may be held within or without the
State of Delaware, as the by-laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the statutes) outside the State
of Delaware at such place or places as may be designated from time to time by
the Board of Directors or in the by-laws of the Corporation. Elections of
directors need not be by written ballot unless the by-laws of the Corporation
shall so provide.
Twelfth: The corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
Thirteenth: The Board of Directors is authorized to sell, assign,
transfer, convey and otherwise dispose of a part of the property, assets and
effects of this Corporation, less than the whole or substantially the whole
thereof, on such terms and conditions as they shall
<PAGE>
-6-
deem advisable, without the assent of the stockholders in writing or otherwise;
and also to sell, assign, transfer, convey and otherwise dispose of the whole,
or substantially the whole, of the property, assets, effects, franchises and
good will of the Corporation on such terms and conditions as they shall deem
advisable but only with the assent in writing, or pursuant to the vote, of the
holders of not less than two-thirds in interest of all the stock of this
Corporation, but in any event not less than the amount required by law.
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 26th day of February, 1986.
/s/ Clark L. Wagner
-------------------------------------
Clark L. Wagner
<PAGE>
Exhibit 11
----------
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Dollars and Shares in Millions
(except per share data)
--------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
------------------ ------------------
1994 1993 1994 1993
-------- -------- ------- ---------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE OF COMMON STOCK
Shares of common stock
Average shares outstanding 44.3 35.3 42.6 35.3
Dilutive effect of stock options .6 .2 .5 -
----- ----- ----- ------
44.9 35.5 43.1 35.3
===== ===== ===== ======
Net income (loss) $30.7 $17.0 $71.4 $(16.9)
Dividends on preferred stock, net of tax
benefit on dividends applicable to leveraged
Series E Preferred Stock held by the ESOP 6.6 8.0 21.8 24.0
----- ----- ----- ------
Net income (loss) applicable $24.1 $ 9.0 $49.6 $(40.9)
===== ===== ===== ======
Primary earnings (loss) per share of
common stock $ .54 $ .25 $1.15 $(1.16)
===== ===== ===== ======
FULLY DILUTED EARNINGS PER SHARE OF COMMON STOCK
Shares of common stock
Average shares outstanding 44.3 35.3 42.6 35.3
Assumed conversion of leveraged Series E
Preferred Stock 3.0 3.0 3.0 -
Dilutive effect of stock options .6 .2 .7 -
----- ----- ----- ------
47.9 38.5 46.3 35.3
===== ===== ===== ======
Net income (loss) $30.7 $17.0 $71.4 $(16.9)
Dividends on antidilutive preferred stock, net
of tax benefit on dividends applicable to
leveraged Series E Preferred Stock held by
the ESOP 4.5 6.3 15.9 24.0
Additional ESOP funding required on conversion
of leveraged Series E Preferred Stock, net of
tax benefit 2.1 1.7 5.9 -
----- ----- ----- ------
Net income (loss) applicable $24.1 $ 9.0 $49.6 $(40.9)
===== ===== ===== ======
Fully diluted earnings (loss) per share of
common stock $ .50 $ .23 $1.07 $(1.16)
===== ===== ===== ======
</TABLE>
NOTE: Series G Preferred Stock was converted to common stock as the result of a
redemption call in May 1994.
In the three-month period ended September 30, 1994 and 1993, and in the
nine-month period ended September 30, 1994, only the assumed conversion
of leveraged Series E Preferred Stock was dilutive. In the nine-month
period ended September 30, 1993, the assumed conversions of Series A,
Series E, and Series G Preferred Stock were antidilutive.
-12-
<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-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 70,000
<SECURITIES> 0
<RECEIVABLES> 500,000
<ALLOWANCES> 26,900
<INVENTORY> 482,400
<CURRENT-ASSETS> 1,072,900
<PP&E> 4,277,900
<DEPRECIATION> 2,570,600
<TOTAL-ASSETS> 3,454,000
<CURRENT-LIABILITIES> 572,000
<BONDS> 716,800
<COMMON> 50,600
185,000
3,200
<OTHER-SE> 422,700
<TOTAL-LIABILITY-AND-EQUITY> 3,454,000
<SALES> 3,337,600
<TOTAL-REVENUES> 3,340,800
<CGS> 3,011,900
<TOTAL-COSTS> 3,014,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,400
<INCOME-PRETAX> 112,300
<INCOME-TAX> 40,900
<INCOME-CONTINUING> 71,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 71,400
<EPS-PRIMARY> 1.15
<EPS-DILUTED> 1.07
</TABLE>
<PAGE>
APPENDIX A
INLAND MATERIALS DISTRIBUTION GROUP, INC.
AND SUBSIDIARY COMPANIES
(A wholly owned subsidiary of Inland Steel Industries, Inc.)
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
===============================================================================
<TABLE>
<CAPTION>
Dollars in Millions
-------------------------------------
Three Nine
Months Ended Months Ended
September 30 September 30
--------------- -------------------
1994 1993 1994 1993
------ ------ -------- --------
<S> <C> <C> <C> <C>
NET SALES $560.7 $478.2 $1,647.3 $1,426.4
------ ------ -------- --------
OPERATING COSTS AND EXPENSES
Cost of goods sold 490.8 423.6 1,444.9 1,257.4
Selling, general and
administrative expenses 37.6 37.7 113.8 111.6
Depreciation and amortization 5.4 5.2 16.1 15.6
------ ------ -------- --------
Total 533.8 466.5 1,574.8 1,384.6
------ ------ -------- --------
OPERATING PROFIT 26.9 11.7 72.5 41.8
General corporate expense 1.8 1.8 5.3 5.5
Interest expense, net of
interest income .9 3.1 2.7 8.5
------ ------ -------- --------
INCOME BEFORE INCOME TAXES 24.2 6.8 64.5 27.8
PROVISION FOR INCOME TAXES 8.5 2.5 25.0 8.3
------ ------ -------- --------
NET INCOME $ 15.7 $ 4.3 $ 39.5 $ 19.5
====== ====== ======== ========
</TABLE>
See notes to consolidated financial statements
A-1
<PAGE>
INLAND MATERIALS DISTRIBUTION GROUP, INC.
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
--------------------
1994 1993
------ ------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 39.5 $ 19.5
------ ------
Adjustments to reconcile net income
to net cash used for operating
activities:
Depreciation and amortization 16.1 15.6
Deferred employee benefit cost (.1) 2.6
Deferred income taxes 1.2 (5.7)
Change in: Receivables (52.9) (42.3)
Inventories (35.4) (13.8)
Accounts payable 12.5 (18.9)
Payables to related companies 10.2 5.3
Accrued liabilities (3.4) (.9)
------ ------
Net adjustments (51.8) (58.1)
------ ------
Net cash used for operating activities (12.3) (38.6)
------ ------
INVESTING ACTIVITIES
Capital expenditures (11.5) (12.9)
Proceeds from sales of assets 2.8 .8
------ ------
Net cash used for investing activities (8.7) (12.1)
------ ------
FINANCING ACTIVITIES
Long-term debt issued - 7.5
Long-term debt retired (4.7) (5.1)
Change in notes receivable from/payable
to related companies (1.8) 48.3
------ ------
Net cash provided from (used for)
financing activities (6.5) 50.7
------ ------
Net decrease in cash and cash equivalents (27.5) -
Cash and cash equivalents - beginning of year 29.5 -
------ ------
Cash and cash equivalents - end of period $ 2.0 $ -
====== ======
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
Interest (net of amount capitalized) $ 3.5 $ 6.6
Income taxes, net 17.3 15.6
</TABLE>
See notes to consolidated financial statements
A-2
<PAGE>
INLAND MATERIALS DISTRIBUTION GROUP, INC.
AND SUBSIDIARY COMPANIES
(A wholly owned subsidiary of Inland Steel Industries, Inc.)
CONSOLIDATED BALANCE SHEET
==============================================================================
<TABLE>
<CAPTION>
Dollars in Millions
----------------------------------------------
ASSETS September 30, 1994 December 31, 1993
- - ------ -------------------- --------------------
(unaudited)
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2.0 $ 29.5
Receivables 248.9 196.0
Inventories - principally at LIFO 314.3 278.9
Deferred income taxes 12.2 11.8
------ -------
Total current assets 577.4 516.2
PROPERTY, PLANT AND EQUIPMENT
Valued on basis of cost $461.2 $455.2
Less accumulated depreciation 210.4 250.8 198.0 257.2
------ -------
DEFERRED INCOME TAXES 26.9 28.5
EXCESS OF COST OVER NET ASSETS ACQUIRED 25.4 26.4
------ ------
Total Assets $880.5 $828.3
====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY
- - ------------------------------------
CURRENT LIABILITIES
Accounts payable $ 89.7 $ 77.2
Payables to related companies
Notes 27.8 29.6
Other 19.2 9.0
Accrued liabilities 25.2 28.6
Long-term debt due within one year 4.7 5.0
------ -------
Total current liabilities 166.6 149.4
LONG-TERM DEBT 23.8 28.2
DEFERRED EMPLOYEE BENEFITS AND OTHER 123.9 124.0
------ ------
Total liabilities 314.3 301.6
STOCKHOLDER'S EQUITY 566.2 526.7
------ ------
Total Liabilities and Stockholder's Equity $880.5 $828.3
====== ======
</TABLE>
See notes to consolidated financial statements
A-3
<PAGE>
INLAND MATERIALS DISTRIBUTION GROUP, INC.
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, 1994 and for the three-month and nine-month periods ended
September 30, 1994 and 1993 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 Appendix A of Inland Steel
Industries, Inc. Annual Report on Form 10-K for the year ended December 31,
1993.
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 $5.4 million and $5.5 million by Industries for the first nine months of
1994 and 1993, 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 1994 totaled $.5 million as compared to $6.2 million
for the first nine months of 1993.
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:
Dollars in Millions
--------------------------
Three Months Nine Months
Ended September 30 Ended September 30
------------------ ------------------
1994 1993 1994 1993
-------- -------- -------- --------
Net Product Sales $ 2.7 $ 2.9 $ 8.2 $ 8.5
Net Product Purchases 43.7 44.5 151.0 138.4
A-4
