<PAGE> 1
THIRD QUARTER - 1996
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
_________________________
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the period ended September 30, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from __________ to __________
_________________________
Commission file number 1-9117
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: 48,963,808 shares of the
Company's Common Stock ($1.00 par value per share) were outstanding as of
November 7, 1996.
<PAGE> 2
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
---------------------------- ----------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET SALES $1,118.0 $1,128.6 $3,461.9 $3,659.7
-------- -------- -------- --------
OPERATING COSTS AND EXPENSES
Cost of goods sold 976.9 966.5 3,049.1 3,117.1
Selling, general and
administrative expenses 53.1 60.1 159.1 164.4
Depreciation 37.2 35.4 110.5 107.6
-------- -------- -------- --------
Total 1,067.2 1,062.0 3,318.7 3,389.1
-------- -------- -------- --------
OPERATING PROFIT 50.8 66.6 143.2 270.6
General corporate income (expense), net (.8) (14.0) (2.6) (20.2)
Interest and other expense on debt (19.3) (19.7) (59.3) (51.2)
Gain from issuance of subsidiary stock (Note 2) - - 31.4 -
-------- - -------- -
INCOME BEFORE INCOME TAXES 30.7 32.9 112.7 199.2
PROVISION FOR INCOME TAXES 11.9 12.9 42.9 77.3
-------- -------- -------- --------
INCOME BEFORE MINORITY INTEREST 18.8 20.0 69.8 121.9
MINORITY INTEREST IN RYERSON TULL, INC. (Note 2) 1.5 - 1.6 -
-------- --------- -------- --------
INCOME BEFORE EXTRAORDINARY LOSS 17.3 20.0 68.2 121.9
EXTRAORDINARY LOSS ON EARLY
RETIREMENT OF DEBT (Note 2) 8.8 - 23.3 -
-------- -------- -------- --------
NET INCOME $ 8.5 $ 20.0 $ 44.9 $ 121.9
======== ======== ======== ========
EARNINGS PER SHARE OF COMMON STOCK:
Primary:
Before extraordinary loss $ .31 $ .33 $ 1.26 $ 2.24
Extraordinary loss on early retirement of debt (.18) - (.48) -
-------- -------- -------- --------
Net income $ .13 $ .33 $ .78 $ 2.24
======== ======== ======== ========
Fully Diluted:
Before extraordinary loss $ .30 $ .32 $ 1.23 $ 2.11
Extraordinary loss on early retirement of debt (.18) - (.48) -
-------- -------- -------- --------
Net income $ .12 $ .32 $ .75 $ 2.11
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements
-1-
<PAGE> 3
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Dollars in Millions
----------------------------
Nine Months Ended
September 30
---------------------------------
1996 1995
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 44.9 $ 121.9
------- --------
Adjustments to reconcile net income to net
cash provided from operating activities:
Depreciation 110.9 108.1
Deferred employee benefit cost 11.7 (27.4)
Deferred income taxes 21.3 59.0
Gain from issuance of subsidiary stock (31.4)
-
Change in: Receivables (4.6) (10.1)
Inventories (18.5) (74.9)
Advances - (28.2)
Accounts payable (37.1) (35.9)
Accrued salaries and wages (12.1) (9.4)
Other accrued liabilities 14.3 64.1
Other deferred items (9.1) 22.2
------- -------
Net adjustments 45.4 67.5
------- -------
Net cash provided from operating activities 90.3 189.4
------- -------
INVESTING ACTIVITIES
Capital expenditures (124.5) (82.8)
Investments in and advances to joint ventures, net 13.3 11.6
Proceeds from sales of assets 6.3 2.0
------- -------
Net cash used for investing activities (104.9) (69.2)
------- -------
FINANCING ACTIVITIES
Issuance of subsidiary stock 77.1 -
Long-term debt issued 280.0 16.8
Long-term debt retired (305.5) (35.9)
Dividends paid (13.0) (23.5)
Acquisition of treasury stock (2.5) (2.9)
------- -------
Net cash provided by (used for) financing activities 36.1 (45.5)
------- -------
Net increase in cash and cash equivalents 21.5 74.7
Cash and cash equivalents - beginning of year 267.4 107.1
------- -------
Cash and cash equivalents - end of period $ 288.9 $ 181.8
======= =======
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
Interest (net of amount capitalized) $ 48.1 $ 35.5
Income taxes, net 7.9 8.4
Non-cash investing and financing activities:
Reduction of deferred employee benefits resulting from
contribution of common stock to the Company's Pension Trust - 100.0
Series F Preferred Stock exchanged for Subordinated Voting Note - 185.0
</TABLE>
See notes to consolidated financial statements
-2-
<PAGE> 4
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
================================================================================
<TABLE>
<CAPTION>
Dollars in Millions
----------------------------------------------------------
September 30, 1996 December 31, 1995
------------------------- ------------------------
ASSETS (unaudited)
- ------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 288.9 $ 267.4
Receivables 493.1 488.5
Inventories - principally at LIFO
In process and finished products $ 414.9 $ 386.0
Raw materials and supplies 64.6 479.5 75.0 461.0
--------- ---------
Deferred income taxes 45.7 45.4
--------- ---------
Total current assets 1,307.2 1,262.3
INVESTMENTS AND ADVANCES 238.3 241.0
PROPERTY, PLANT AND EQUIPMENT
Valued on basis of cost 4,486.7 4,364.0
Less: Reserve for depreciation,
amortization and depletion 2,770.3 2,662.9
Allowance for terminated facilities 100.7 1,615.7 100.7 1,600.4
--------- --------
DEFERRED INCOME TAXES 274.4 295.0
INTANGIBLE PENSION ASSET - 102.6
PREPAID PENSION COSTS 61.5 -
OTHER ASSETS 63.8 57.0
-------- ---------
Total Assets $3,560.9 $ 3,558.3
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts payable $ 277.3 $ 314.4
Accrued liabilities 225.5 223.3
Long-term debt due within one year 105.3 106.5
--------- ---------
Total current liabilities 608.1 644.2
LONG-TERM DEBT 768.2 784.5
DEFERRED EMPLOYEE BENEFITS 1,250.9 1,280.3
OTHER CREDITS 62.6 66.2
--------- ---------
Total liabilities 2,689.8 2,775.2
MINORITY INTEREST IN RYERSON TULL, INC. 47.6 -
COMMON STOCK REPURCHASE COMMITMENT 33.1 34.5
STOCKHOLDERS' EQUITY (Schedule A) 790.4 748.6
--------- ---------
Total Liabilities, Minority Interest, Temporary Equity,
and Stockholders' Equity
$ 3,560.9 $ 3,558.3
========= =========
</TABLE>
See notes to consolidated financial statements
-3-
<PAGE> 5
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, 1996 and for the three-month and nine-month periods ended
September 30, 1996 and 1995 are unaudited, but in the opinion of management
include all adjustments necessary for a fair presentation of results for such
periods. These financial statements should be read in conjunction with the
financial statements and related notes contained in the Annual Report to
Stockholders for the year ended December 31, 1995.
NOTE 2/RECAPITALIZATION
In the 1996 second quarter, the Company undertook a recapitalization that
involved the Company and both its Inland Steel Company ("ISC") and Ryerson
Tull, Inc. ("RT") subsidiaries. As part of the restructuring, RT, formerly
Inland Materials Distribution Group, Inc. ("IMDG"), exchanged existing shares
of IMDG common stock, all of which were owned by the Company, for 34.0 million
shares of new-issue RT Series B common stock ($1.00 par value per share). RT
also sold 5.2 million shares of new-issue Series A common stock ($1.00 par
value per share) in a public offering, the net proceeds of which approximated
$77.1 million. The Company recognized a $31.4 million gain on the sale of the
RT Series A common stock.
Prior to the issuance of the Series A common stock, RT declared and paid
dividends of $445.9 million to the Company, of which $152.1 million was in cash
and $293.8 million was in the form of a note payable. The Company used $63.2
million of the cash dividend to repay intercompany borrowing from RT and its
subsidiaries.
In July, RT sold $150 million of 8-1/2% Notes due July 15, 2001 and $100
million of 9-1/8% Notes due July 15, 2006 in a public offering. The net
proceeds of the offering along with a portion of RT's cash on hand was used to
pay the $293.8 million note balance due the Company.
The Company's recapitalization efforts also included the following:
Effective April 30, 1996, that portion of the Company's Pension plan covering
RT's current and former employees was separated and became a new plan. Due to
this separation, the Company remeasured each subsidiary's benefit obligation
using plan data and actuarial assumptions as of April 30, 1996, including an
increase in the discount rate from 7.75 percent used previously to 8.0 percent.
Primarily as a result of the change in the discount rate, the intangible
pension asset and the offsetting additional minimum liability in deferred
employee benefits were no longer required.
In June 1996, the Company made a tender offer for the entire $150 million
principal amount outstanding of the Company's 12-3/4% Notes. The early
retirement of $144.2 million of Notes that were tendered resulted in the
Company recognizing an extraordinary after-tax loss of $14.5 million, $23.3
million before income taxes, in the 1996 second quarter.
- 4 -
<PAGE> 6
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
In July 1996, Inland Steel Company made a tender offer for all $125 million
principal amount outstanding of its Series T First Mortgage Bonds. In the
third quarter of 1996, Inland Steel Company recognized an extraordinary
after-tax loss on the early retirement of the $98.7 million of bonds tendered
approximating $7.5 million, $11.6 million before income taxes.
On June 28, 1996, Ryerson Tull, Inc. established a new four-year $250 million
credit facility at the parent company. The $200 million Ryerson facility and
the $25 million Tull facility were concurrently terminated. As a result, the
Company's subsidiaries (including Inland Steel Company) increased their
committed credit facilities to $375 million, all of which were unused at
September 30, 1996.
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 $65 million on September 30, 1996 from $61
million on December 31, 1995.
-5-
<PAGE> 7
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - Comparison of Third Quarter 1996 to Third Quarter 1995
The Company reported consolidated net income of $8.5 million, $.13 per
share, in the 1996 third quarter as compared with $20.0 million, $.33 per
share, in the year-earlier period. Included in the 1996 third quarter's net
income was an extraordinary loss of $8.8 million, $.18 per share, on the early
redemption of debt. In the year-earlier quarter, the Company benefited by $.05
per share as a result of adjustments to workforce reduction and other reserves.
Excluding the effects of the extraordinary loss and adjustments, earnings per
share would have been $.31 per share in the 1996 third quarter as compared with
$.28 per share in the year-ago quarter.
Consolidated net sales of $1.12 billion decreased one percent from last
year. Lower selling prices at both of the Company's business segments were
offset by an improved mix of products sold at the Steel Manufacturing segment
and higher volume at the Materials Distribution segment.
The Steel Manufacturing segment's reported net sales of $574.9 million were
virtually unchanged from third quarter 1995 net sales. Average selling price
remained unchanged from the third quarter of last year as an improved mix of
products sold offset lower selling prices. The volume of steel mill products
sold increased minimally. Operating profit decreased to $24.9 million from
$39.2 million. Last year's operating profit included $15.2 million of reserve
adjustments that favorably impacted operating results. Excluding those
adjustments, operating profit improved slightly quarter to quarter.
The Materials Distribution segment net sales of $592.3 million increased
slightly from the 1995 third quarter. A 12 percent increase in tons shipped
was almost entirely offset by a lower average selling price. Operating profit
decreased by $2.3 million to $26.3 million due primarily to an erosion in gross
margin, the difference between selling price and material cost. Mitigating the
gross margin erosion was a reduction in operating cost per ton excluding
material cost from $189 in the year-earlier quarter to $173 in the 1996 third
quarter.
Comparison of First Nine Months of 1996 to First Nine Months of 1995
The Company reported net income of $44.9 million for the first nine months
of 1996 compared with net income of $121.9 million for the comparable 1995
period. While sharply reduced levels of operating profit at the Steel
Manufacturing segment were the principal reason for the decline, operating
profit at the Materials Distribution segment also decreased.
Consolidated net sales of $3.46 billion for the first nine months of 1996
were 5 percent lower than the $3.66 billion realized in the comparable 1995
period, the result of lower average selling prices.
The Steel Manufacturing segment net sales of $1.80 billion in the first nine
months of 1996 were 6 percent lower than that reported in the 1995 period, due
entirely to a lower average selling price. Steel mill shipments increased by
less than one percent on a comparable period-to-period basis. Lower average
selling price was also the primary factor in the decline in operating profit to
$48.8 million from $160.1 million a year ago.
Net sales of $1.83 billion for the Materials Distribution segment were 3
percent lower than the first nine months of 1995 due to lower average selling
price as volume increased 6 percent on a year-to-year basis. The lower average
selling price was also responsible for the decrease in operating profit to
$95.6 million from $111.6 million a year ago. As in the quarter, operating
cost per ton excluding material cost declined, going from $183 per ton in the
first nine months of 1995 to $173 per ton in the comparable 1996 period.
-6-
<PAGE> 8
Liquidity and Financing
The Company's cash and cash equivalents were $288.9 million at September 30,
1996 compared with $267.4 million at year-end 1995. There was no short-term
borrowing at either date.
In June of 1996, Ryerson Tull issued 5.2 million shares of its Series A
common stock, the net proceeds of which approximated $77.1 million. The
Company recognized a gain on the sale of the Ryerson Tull stock of
approximately $31.4 million.
Ryerson Tull established a new four-year $250 million credit facility prior
to the end of the second quarter. The $200 million Ryerson facility and the
$25 million Tull facility were concurrently terminated. The Company's
subsidiaries (including Inland Steel Company) increased their total committed
credit facilities to $375 million as a result.
In June, the Company tendered for all outstanding 12-3/4% Notes of the
Company. Of the $150 million principal amount outstanding, $144,150,000 was
tendered. The Company recognized an extraordinary after-tax loss of $14.5
million, $23.3 million before income taxes, as a result of this transaction.
In connection with the tender offer, the Company solicited and received
consents from the holders of a majority of the 12-3/4% Notes to amendments to
the indenture governing the Notes. See Item 2 of Part II of the Company's
Form 10-Q for the quarter ended June 30, 1996.
In July, Ryerson Tull issued $250 million principal amount of Notes
consisting of $150 million of 8-1/2% Notes due July 15, 2001 and $100 million
of 9-1/8% Notes due July 15, 2006.
During the 1996 third quarter, Inland Steel Company made a tender offer for
the entire $125 million principal amount of its Series T First Mortgage Bonds
outstanding, of which $98.7 million was tendered. In connection with the
tender offer, Inland Steel Company solicited and received consents from the
holders of a majority of the Series T Bonds to amendments to the indenture
governing the bonds. See Item 2 of Part II of the Inland Steel Company Form
10-Q for the quarter ended September 30, 1996. Inland Steel Company also
refinanced $38 million of 10 percent pollution control bonds with bonds bearing
a rate of 7.25 percent. As a result of these redemptions, Inland Steel Company
recognized an extraordinary after-tax loss of approximately $8.8 million, $13.6
million before income taxes, in the third quarter of 1996.
SUBSEQUENT EVENT
Inland Steel Company has reached an agreement with Sun Coal and Coke Company
and a unit of NIPSCO Industries for a heat recovery coke battery and an
associated energy recovery and flue-gas desulphurization facility, to be
located at Inland's Indiana Harbor Works. Sun will design, build, finance and
operate the cokemaking portion of the project. A unit of NIPSCO Industries
will design, build, finance and operate the portion of the project which will
clean the coke plant's flue gas and convert the heat into steam and
electricity. Sun, the NIPSCO unit and other third parties will invest
approximately $350 million in the project. Inland Steel Company has committed
to purchase, for approximately 15 years, 1.2 million tons of coke annually from
the facility on a take-or-pay basis, as well as energy produced by the facility
through a tolling arrangement. Inland Steel Company will also advance
approximately $30 million during construction of the project which will be
credited against the energy tolling arrangement.
-7-
<PAGE> 9
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In October 1996, Inland Steel Company received a notification from
the Indiana Department of Environmental Management, as lead
administrative trustee, that the natural resource trustees (which
also include the Indiana Department of Natural Resources, the U. S.
Department of the Interior, Fish and Wildlife Service and the
National Park Service) intend to perform a natural resource damage
assessment on the Grand Calumet River and Indiana Harbor Canal
system. The notification further states that Inland Steel Company
has been identified as a potentially responsible party in connection
with the release of hazardous substances and oil and the subsequent
damages resulting from natural resource injury. Because of the
preliminary nature of this matter, it is not possible at this time to
predict the amount of Inland Steel Company's potential liability or
whether such potential liability could materially affect the
Company's financial position.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
3.(i) Copy of Certificate of Incorporation, as amended, of the
Company. (Filed as Exhibit 3.(i) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995, and
incorporated by reference herein.)
3.(ii) Copy of By-laws, as amended, of the Company. (Filed as
Exhibit 3.(ii) to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1995, 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 Subordinated Voting Note Due 1999 in the amount of
$185,000,000 from the Company to NS Finance III, Inc. (Filed
as Exhibit 4.8 to Form S-3 Registration Statement No. 33-62897
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 Supplemental Indenture dated as of June 19, 1996
between the Company and Harris Trust & Savings Bank, as
Trustee, respecting the Company's $150,000,000 12-3/4% Notes.
(Filed as Exhibit 4.G to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996 and incorporated
by reference herein.)
-8-
<PAGE> 10
4.H 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 of
supplemental indentures thereto, to and including the
Thirty-Fifth Supplemental Indenture, incorporated by reference
from the following Exhibits: (i) Exhibits B-1(a), B-1(b),
B-1(c), B-1(d) and B-1(e), filed with 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);
(xxvii) Exhibit 4 filed with Steel Company's Current Report on
Form 8-K dated June 23, 1993; and (xxviii) Exhibit 4.C filed
with the Steel Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995; (xxix) Exhibit 4.C filed with the
Steel Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995; and (xxx) Exhibit 4.C filed with
Steel Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996.
4.I 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.)
-9-
<PAGE> 11
10.A* Assumption and Amendment Agreement dated July 24, 1996 by and
among Inland Steel Industries, Inc., Ryerson Tull, Inc. and
Neil S. Novich.
11 Statement of Earnings per Share of Common Stock.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
The Company did not any file Current Reports on Form 8-K during the
quarter ended September 30, 1996.
______________________
* Management contract or compensatory plan or arrangement required to
be filed as an exhibit to the Company's Quarterly Report on Form
10-Q.
-10-
<PAGE> 12
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 /s/ James M. Hemphill
--------------------------------
James M. Hemphill
Controller and
Principal Accounting Officer
Date: November 11, 1996
-11-
<PAGE> 13
Part I -- Schedule A
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
SUMMARY OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Dollars in Millions
---------------------------------------------------------------
September 30, 1996 December 31, 1995
-------------------------- -------------------------
(unaudited)
<S> <C> <C> <C> <C>
STOCKHOLDERS' EQUITY
Series A preferred stock ($1 par value)
- 94,201 shares issued and outstanding as of
September 30, 1996 and December 31, 1995 $ .1 $ .1
Series E preferred stock ($1 par value)
- 3,066,615 shares and 3,118,601 shares
issued and outstanding as of September 30,
1996 and December 31, 1995, respectively 3.1 3.1
Common stock ($1 par value)
- 50,556,350 shares issued as of September 30, 1996
and December 31, 1995 50.6 50.6
Capital in excess of par value 1,046.5 1,052.1
Accumulated deficit
Balance beginning of year $(172.8) $(292.4)
Net income 44.9 146.8
Dividends
Series A preferred stock -
$1.80 per share in 1996 and
$2.40 per share in 1995 (.2) (.2)
Series E preferred stock -
$1.7615 per share in 1996 and
$3.523 per share in 1995 (5.4) (11.0)
Income tax benefit - Series E dividend 1.1 2.4
Series F preferred stock -
$47.40 per share in 1995 - (8.8)
Common stock -
$.15 per share in 1996 and
$.20 per share in 1995 (7.4) (139.8) (9.6) (172.8)
------- --------
Unearned compensation related to ESOP (83.1) (89.9)
Common stock repurchase commitment (33.1) (34.5)
Investment valuation allowance (4.6) (4.0)
Unearned restricted stock award compensation (1.0) (2.4)
Treasury stock, at cost
- 1,675,753 shares and 1,814,516
shares as of September 30, 1996 and
December 31, 1995, respectively (45.8) (51.1)
Cumulative translation adjustment (2.5) (2.6)
--------- --------
Total Stockholders' Equity $ 790.4 $ 748.6
========= ========
</TABLE>
-12-
<PAGE> 14
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
----------------------- ---------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES
- ---------
Steel Manufacturing Operations $ 574.9 $ 574.3 $1,795.5 $1,911.4
Materials Distribution Operations 592.3 590.7 1,825.1 1,874.7
Eliminations and adjustments (49.2) (36.4) (158.7) (126.4)
------- -------- -------- --------
Total Net Sales $1,118.0 $1,128.6 $3,461.9 $3,659.7
======== ======== ======= ========
OPERATING PROFIT
- ----------------
Steel Manufacturing Operations $ 24.9 $ 39.2 $ 48.8 $ 160.1
Materials Distribution Operations 26.3 28.6 95.6 111.6
Eliminations and adjustments (.4) (1.2) (1.2) (1.1)
-------- -------- -------- --------
Total Operating Profit $ 50.8 $ 66.6 $ 143.2 $ 270.6
======== ======== ======== ========
</TABLE>
-13-
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page No.
------- ----------- --------
<S> <C> <C>
3.(i) Copy of Certificate of Incorporation, as amended, of the Company. (Filed as Exhibit
3.(i) to the Company's Annual Report on Form 10-K for the year ended December 31, 1995,
and incorporated by reference herein.) --
3.(ii) Copy of By-laws, as amended, of the Company. (Filed as Exhibit 3.(ii) to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1995, 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 Subordinated Voting Note Due 1999 in the amount of $185,000,000 from the
Company to NS Finance III, Inc. (Filed as Exhibit 4.8 to Form S-3 Registration
Statement No. 33-62897 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 Supplemental Indenture dated as of June 19, 1996 between the Company and Harris
Trust & Savings Bank, as Trustee, respecting the Company's $150,000,000 12-3/4% Notes.
(Filed as Exhibit 4.G to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996 and incorporated by reference herein.)
--
</TABLE>
- i -
<PAGE> 16
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page No.
------- ----------- --------
<S> <C> <C>
4.H 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 of supplemental indentures thereto, to and including the Thirty-Fifth
Supplemental Indenture, incorporated by reference from the following Exhibits: (i)
Exhibits B-1(a), B-1(b), B-1(c), B-1(d) and B-1(e), filed with 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); (xxvii) Exhibit 4 filed with Steel Company's Current Report on Form 8-
K dated June 23, 1993; and (xxviii) Exhibit 4.C filed with the Steel Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995; (xxix) Exhibit 4.C
filed with the Steel Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995; and (xxx) Exhibit 4.C filed with the Steel Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996. --
</TABLE>
- ii -
<PAGE> 17
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page No.
------- ----------- --------
<S> <C> <C>
4.I 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.)
--
10.A* Assumption and Amendment Agreement dated July 24, 1996 by and among Inland Steel
Industries, Inc., Ryerson Tull, Inc. and Neil S. Novich . . . . . . . . . . . . . . . .
11 Statement of Earnings per Share of Common Stock . . . . . . . . . . . . . . . . . . . .
27 Financial Data Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
______________________
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit to the Company's Quarterly Report on Form 10-Q.
- iii -
<PAGE> 1
Exhibit 10.A
ASSUMPTION AND AMENDMENT AGREEMENT
This assumption and amendment agreement made and entered into as of
July 24, 1996 by and among Inland Steel Industries, Inc., a Delaware
corporation (Inland), Ryerson Tull, Inc., a Delaware corporation (Ryerson
Tull), and Neil S. Novich (Novich), presently residing at 431 Washington
Avenue, Wilmette, Illinois.
WHEREAS, Novich and Inland entered into two agreements on April 8,
1994, one relating to the terms of Novich's employment with Inland and its
subsidiaries (the Employment Agreement) and the other relating to
severance in the event that Novich's employment was terminated by Inland
prior to the third anniversary of his employment (the "Severance Agreement")
(collectively referred to as the "Agreements");
WHEREAS, Novich thereafter was elected to the positions, among others,
of Senior Vice President of Inland and President and Chief Operating
Officer of Ryerson Tull;
WHEREAS, Inland subsequently sold a portion of the stock of Ryerson Tull to
the public;
WHEREAS, Novich thereafter was elected President and Chief Executive Officer
of Ryerson Tull and, to devote his entire efforts to Ryerson Tull, chose not
to be re-elected as an officer of Inland; and
WHEREAS, Inland, Ryerson Tull and Novich desire to assure that each of
them receives the full benefit of the Agreements through June 15, 1997.
THE PARTIES hereto agree, in consideration of the premises, the mutual
agreements herein set forth and other good and valuable consideration, the
receipt of which is hereby acknowledged, as follows:
1. Ryerson Tull hereby assumes primary responsibility for
performing each and every remaining obligation of Inland pursuant to the
Agreements.
2. The parties hereby agree that the term "Company" as used in the
Severance Agreement and paragraphs 2 and 5 of the Employment Agreement shall
mean Ryerson Tull.
-14-
<PAGE> 2
3. Inland will continue to be responsible for every obligation agreed
to by it pursuant to the Agreements only to the extent any such obligation is
not fully performed by Ryerson Tull.
4. Paragraph 1 of the Employment Agreement is hereby amended to
provide that Novich's titles will be President and Chief Executive Officer of
Ryerson Tull. Novich will rely on Ryerson Tull as the primary obligor
under the Agreements, and will hold Inland responsible for obligations
imposed by the Agreements only if and when Ryerson Tull has refused or failed
to perform such obligations.
IN WITNESS WHEREOF, the parties have signed this Assumption and
Amendment Agreement as of the date first above written.
-------------------------------------------------
Neil S. Novich
RYERSON TULL, INC.
By:
--------------------------------------------
Robert J. Darnall,
Chairman
INLAND STEEL INDUSTRIES, INC.
By:
--------------------------------------------
Robert J. Darnall,
Chairman, President and
Chief Executive Officer
-15-
<PAGE> 1
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
----------------------- ----------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE OF COMMON STOCK
Shares of common stock
Average shares outstanding 48.8 48.7 48.8 46.9
Dilutive effect of stock options - .1 - .1
------- ------- ------- -------
48.8 48.8 48.8 47.0
======= ======= ======= =======
Income before extraordinary loss $ 17.3 $ 20.0 $ 68.2 $ 121.9
Extraordinary loss 8.8 - 23.3 -
------- ------- ------- -------
Net income 8.5 20.0 44.9 121.9
Dividends on preferred stock, net of tax benefit on dividends
applicable to leveraged Series E Preferred Stock held by
the ESOP 2.2 3.7 6.7 16.8
------- ------- ------- -------
Net income applicable $ 6.3 $ 16.3 $ 38.2 $ 105.1
======= ======= ======= =======
Primary earnings per share of common stock
Before extraordinary loss $ .31 $ .33 $ 1.26 $ 2.24
Extraordinary loss on early retirement of debt (.18) - (.48) -
------- ------- ------- -------
Net income $ .13 $ .33 $ .78 $ 2.24
======= ======= ======= =======
FULLY DILUTED EARNINGS PER SHARE OF COMMON STOCK
Shares of common stock
Average shares outstanding 48.8 48.7 48.8 46.9
Assumed conversion of Series A and leveraged
Series E Preferred Stock 3.0 3.0 3.0 3.1
Dilutive effect of stock options - .1 - .1
------- ------- ------- -------
51.8 51.8 51.8 50.1
======= ======= ======= =======
Income before extraordinary loss $ 17.3 $ 20.0 $ 68.2 $ 121.9
Extraordinary loss 8.8 - 23.3 -
------- ------- ------- -------
Net income 8.5 20.0 44.9 121.9
Dividends on antidilutive preferred stock .1 1.6 .3 10.6
Additional ESOP funding required on conversion of leveraged
Series E Preferred Stock, net of tax benefit 2.0 1.9 5.9 5.6
------- ------- ------- -------
Net income applicable $ 6.4 $ 16.5 $ 38.7 $ 105.7
======= ======= ======= =======
Fully diluted earnings per share of common stock
Before extraordinary loss $ .30 $ .32 $ 1.23 $ 2.11
Extraordinary loss on early retirement of debt (.18) - (.48) -
------- ------- ------- -------
Net income $ .12 $ .32 $ .75 $ 2.11
======= ======= ======= =======
</TABLE>
NOTE: In the three-month and nine-month periods ended September 30,
1996, the assumed conversions of Series A Preferred Stock and
non-leveraged Series E Preferred Stock were antidilutive. In the
three-month and nine-month periods ended September 30, 1995,
the assumed conversion of non-leveraged Series E Preferred Stock
was antidilutive.
-16-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF OPERATIONS, THE CONSOLIDATED BALANCE SHEET, AND THE
SUMMARY OF STOCKHOLDERS' EQUITY CONTAINED IN THE QUARTERLY REPORT ON FORM 10-Q
TO WHICH THIS EXHIBIT IS ATTACHED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL SCHEDULES.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 288,900
<SECURITIES> 0
<RECEIVABLES> 516,400
<ALLOWANCES> 23,300
<INVENTORY> 479,500
<CURRENT-ASSETS> 1,307,200
<PP&E> 4,486,700
<DEPRECIATION> 2,871,000
<TOTAL-ASSETS> 3,560,900
<CURRENT-LIABILITIES> 608,100
<BONDS> 768,200
<COMMON> 50,600
0
3,200
<OTHER-SE> 736,600
<TOTAL-LIABILITY-AND-EQUITY> 3,560,900
<SALES> 3,460,500
<TOTAL-REVENUES> 3,461,900
<CGS> 3,158,400
<TOTAL-COSTS> 3,159,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 59,300
<INCOME-PRETAX> 112,700
<INCOME-TAX> 42,900
<INCOME-CONTINUING> 69,800
<DISCONTINUED> 0
<EXTRAORDINARY> (23,000)
<CHANGES> 0
<NET-INCOME> 44,900
<EPS-PRIMARY> .78
<EPS-DILUTED> .75
</TABLE>
