Ispat Inland Inc. reported record net income of $119.9 million on net sales of $909.1 million for the third quarter of 2004.

Third Quarter Results—Record net income of $119.9 million represents an increase of $146.2 million over the loss of $26.3 million reported in the third quarter of 2003. Net sales of $909.1 million represent a 68% increase over $541.5 million in the third quarter of 2003.

Average selling price per ton increased 50% to $618 per ton compared to $413 per ton in the third quarter of 2003; average price per ton was also 14% higher than the $541 per ton realized in the second quarter of 2004. The increase was due to higher base prices; implementation of pricing surcharges designed to offset escalating prices for key input commodities such as coke, scrap, and iron ore; and continued strong demand for the company’s products. Offsetting these factors was a higher percentage of hot rolled products sold, which adversely impacted the average selling price per ton.

Shipments of 1,470,200 tons represent an increased of 159,300 tons (12%) compared to third quarter 2003 shipments of 1,310,900 tons. The increase in shipments was due to a combination of higher production levels resulting from the reline of the No. 7 Blast Furnace, which was completed early in the fourth quarter of 2003, and stronger demand across most markets.

Record operating profit of $213.1 million compares to an operating loss of $34.9 million in the third quarter of 2003. In the second quarter of 2004, the company generated an operating profit of $110.2 million. The company set a quarterly production record at its hot strip mill in the third quarter, and had higher slab production in the third quarter compared to the second quarter.

"Our record results for the third quarter were driven by steady increases during the quarter in our sales prices and our focus on maintaining high levels of production to meet the strong demand for our products," said Lou Schorsch, President and CEO.

Cash Balance and Financial—The company's cash balance at September 30, 2004 was $43.4 million and there was an additional $243.3 million of availability under the two revolving credit facilities, for total liquidity of approximately $287 million. For the nine months ended September 30, 2004, the company utilized net cash of $40.8 million from financing activities. On March 25, 2004, the company received $775.5 million of net proceeds from the issuance and sale of $800 million of Senior Secured Notes. These net proceeds were used to retire the entire balance outstanding of $661.5 million of Tranche B and Tranche C Loans under its credit agreement, and repay the entire balance outstanding of $105 million under its inventory revolving credit facility, with the remainder of the proceeds used to reduce the amount outstanding under its receivables revolving credit facility.

For the nine months ended September 30, 2004, net cash inflows from operations totaled $60.4 million, which is net of pension contributions of $97.8 million. Cash inflows from operations for the nine months ended September 30, 2003 were $22.6 million, which included $125.5 million of pension contributions.

Changes in working capital, components of receivables, inventories and accounts payable, utilized cash of $281.2 million for the current period, including $163.1 million for increased receivables and $146.1 million for increased inventories. For the first nine months of 2003, changes in working capital generated $99.1 million of cash, including $41.2 million for decreased receivables, $35.5 million for decreased inventories, and $22.4 million for increased payables.

On November 5, 2004, the company furnished the SEC a Form 8-K for the purpose of disclosing a restatement of its consolidated financial statements included in its 2003 Form 10-K and for the quarterly periods ended March 31, 2004 and June 30, 2004. The company had determined that borrowings under its revolving credit facilities previously reported as long-term obligations should have been classified as current liabilities. In addition, accrued interest on advances from the company's parent, Ispat, previously reported as other long-term obligations should have been classified as long-term debt — related companies and accrued interest. The company has also determined that management fees charged to the company by related companies previously reported as other expense should have been classified as selling, general and administrative expense. The restated financial statements will have no impact on the company's previously reported net income, the debt covenants under the credit agreements or its ability to draw on existing facilities.

Outlook—With a softening in the demand for steel in the fourth quarter of 2004, the company expects to generate strong, but lower profits compared to the record level of the third quarter of 2004.

Ispat Inland Inc., a subsidiary of Ispat International NV, manufactures a broad range of semifinished and finished flat and bar steel products and is one of North America's lowest-cost integrated steel producers.

A member of the LNM Group, Ispat International NV is a leading international steel company with steelmaking facilities in six countries and shipments of 15.2 million tons in 2003. In addition to Ispat Inland in East Chicago, Ind., Ispat International has major steelmaking facilities in Canada, Mexico, Trinidad, France and Germany.

The LNM Group is the world's second-largest and most global steel group, which also operates in Algeria, Czech Republic, Indonesia, Kazakhstan, Poland, Romania, and South Africa.