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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

     
þ
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
    For the quarterly period ended: September 30, 2004

Commission file number 1-1143

Inco Limited

(Name of Registrant as specified in its charter)
     
Canada
(Jurisdiction of Incorporation)		   98-0000676
(I.R.S. Employer Identification No.)

145 King Street West, Suite 1500, Toronto, Ontario M5H 4B7*

(Address of principal executive offices, including zip code)

(416) 361-7511

(Telephone number)

     The Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Act”) during the preceding twelve 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.

      The Registrant is an accelerated filer (as defined in Rule 12b-2 under the Act).

      Unless otherwise stated, dollar amounts in this Report are expressed in United States currency.

      Common Shares outstanding at September 30, 2004: 187,672,653 shares, no par value.

      * Notices and communications from the Securities and Exchange Commission may be sent to S.F. Feiner, Executive Vice-President, General Counsel and Secretary, 145 King Street West, Suite 1500, Toronto, Ontario M5H 4B7. His telephone number is (416) 361-7680.

 

PART I — FINANCIAL INFORMATION

 
Item 1. Financial Statements

INCO LIMITED AND SUBSIDIARIES

Consolidated Statement of Earnings

(Unaudited)
                                   
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
(Restated) (Restated)
(in millions of United States dollars except per share amounts)
                                
Revenues
                                
Net sales
  $ 1,031     $ 450     $ 3,117     $ 1,642  
Other income, net (Note 3)
    17       20       32       61  
     
     
     
     
 
      1,048       470       3,149       1,703  
     
     
     
     
 
Costs and expenses (income)
                                
Cost of sales and other expenses, excluding depreciation and depletion
    568       358       1,705       1,189  
Depreciation and depletion
    59       53       178       166  
Selling, general and administrative
    57       44       132       104  
Research and development
    6       4       22       18  
Exploration
    7       6       19       18  
Currency translation adjustments
    62       6       29       156  
Interest expense
    6       10       20       36  
Asset impairment charge (Note 4)
    —       —       201       —  
Goro project suspension
    1       (8 )     (2 )     (2 )
     
     
     
     
 
      766       473       2,304       1,685  
     
     
     
     
 
Earnings (loss) before income and mining taxes and minority interest
    282       (3 )     845       18  
Income and mining taxes (Note 5)
    100       5       366       (94 )
     
     
     
     
 
Earnings (loss) before minority interest
    182       (8 )     479       112  
Minority interest
    34       15       90       38  
     
     
     
     
 
Net earnings (loss)
     148       (23 )     389       74  
Accretion of convertible debt, net of tax (Note 10)
    (2 )     (2 )     (6 )     (5 )
Dividends on preferred shares
    —       —       —       (6 )
Premium on redemption of preferred shares
    —       —       —       (15 )
     
     
     
     
 
Net earnings (loss) applicable to common shares
  $ 146     $ (25 )   $ 383     $ 48  
     
     
     
     
 
Net earnings (loss) per common share (Note 9)
                               
 
Basic
  $ 0.78     $ (0.13 )   $ 2.04     $ 0.26  
     
     
     
     
 
 
Diluted
  $ 0.73     $ (0.13 )   $ 1.92     $ 0.26  
     
     
     
     
 

See Notes to Consolidated Financial Statements.

2

 

INCO LIMITED AND SUBSIDIARIES

Consolidated Statement of Retained Earnings (Deficit)

(Unaudited)
                 
Nine Months Ended
September 30,
2004 2003
(Restated)
(in millions of United States dollars)
                
Deficit at beginning of period, as previously reported
  $ (226 )   $ (335 )
Change in accounting policy (Note 2)
    20       4  
     
     
 
Deficit at beginning of year, as restated
    (206 )     (331 )
Net earnings
    389       74  
Accretion of convertible debt, net of tax (Note 10)
    (6 )     (5 )
Dividends on preferred shares
    —       (6 )
Premium on redemption of preferred shares
    —       (15 )
     
     
 
Retained earnings (deficit) at end of period
  $ 177     $ (283 )
     
     
 

See Notes to Consolidated Financial Statements.

3

 

INCO LIMITED AND SUBSIDIARIES

Consolidated Balance Sheet

(Unaudited)
                   
September 30, December 31,
2004 2003
(Restated)
(in millions of United States dollars)
                
ASSETS
Current assets
                
Cash and cash equivalents (Note 14)
  $ 869     $ 418  
Accounts receivable
    565       435  
Inventories (Note 14)
    812       746  
Other
    136       112  
     
     
 
Total current assets
    2,382       1,711  
Property, plant and equipment (Note 14)
    7,251       7,033  
Deferred charges and other assets
    371       319  
     
     
 
Total assets
  $ 10,004     $ 9,063  
     
     
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
                
Long-term debt due within one year
  $ 101     $ 103  
Accounts payable
    267       253  
Accrued payrolls and benefits
    184       165  
Other accrued liabilities
    412       332  
Income and mining taxes payable
    339       27  
     
     
 
Total current liabilities
    1,303       880  
Deferred credits and other liabilities
                
Long-term debt (Note 6)
    1,331       1,409  
Deferred income and mining taxes
    1,785       1,706  
Post-retirement benefits
    643       603  
Asset retirement obligation (Note 8)
    145       141  
Minority interest
    496       442  
     
     
 
Total liabilities
    5,703       5,181  
     
     
 
Commitments and contingencies (Note 12)
               
Shareholders’ equity
                
Convertible debt (Note 10)
    615       606  
     
     
 
Common shareholders’ equity
               
 
Common shares issued and outstanding 187,672,653
(2003 — 186,915,865 shares) (Note 9)
    2,877       2,858  
 
Warrants (Note 11)
    62       62  
 
Contributed surplus (Note 15)
    570       562  
 
Retained earnings (deficit)
    177       (206 )
     
     
 
      3,686       3,276  
     
     
 
Total shareholders’ equity
    4,301       3,882  
     
     
 
Total liabilities and shareholders’ equity
  $ 10,004     $ 9,063  
     
     
 

See Notes to Consolidated Financial Statements.

4

 

INCO LIMITED AND SUBSIDIARIES

Consolidated Statement of Cash Flows

(Unaudited)
                                     
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
(Restated) (Restated)
(in millions of United States dollars)
                                
Operating activities
                                
 
Earnings (loss) before minority interest
  $ 182     $ (8 )   $ 479     $ 112  
 
Charges not affecting cash
                               
   
Depreciation and depletion
    59       53       178       166  
   
Deferred income and mining taxes
    3       3       45       (49 )
   
Asset impairment charge
    —       —       201       —  
   
Other
    53       1       61       73  
 
Decrease (increase) in non-cash working capital related to operations
                               
   
Accounts receivable
    (61 )     10       (115 )     (17 )
   
Inventories
    27       (39 )     (66 )     (89 )
   
Accounts payable and accrued liabilities
    29       3       47       (50 )
   
Income and mining taxes payable
    79       24       313       (138 )
   
Other
    23       (15 )     (20 )     (18 )
 
Other
    (14 )     (13 )     (24 )     12  
     
     
     
     
 
 
Net cash provided by operating activities
    380       19       1,099       2  
     
     
     
     
 
Investing activities
                                
 
Capital expenditures
    (248 )     (126 )     (543 )     (417 )
 
Other
    1       3       (19 )     17  
     
     
     
     
 
 
Net cash used for investing activities
    (247 )     (123 )     (562 )     (400 )
     
     
     
     
 
Financing activities
                                
 
Repayments of long-term debt
    (42 )     (53 )     (90 )     (269 )
 
Long-term borrowings
    —       308       —       308  
 
Convertible debt issued
    —       —       —       470  
 
Common shares issued
    4       23       18       27  
 
Preferred shares redeemed
    —       —       —       (487 )
 
Preferred dividends paid
    —       —       —       (6 )
 
Dividends paid to minority interest
    —       —       (15 )     (2 )
 
Other
    —       (2 )     1       (5 )
     
     
     
     
 
 
Net cash provided by (used for) financing activities
    (38 )     276       (86 )     36  
     
     
     
     
 
Net increase (decrease) in cash and cash equivalents
     95       172       451       (362 )
Cash and cash equivalents at beginning of period
    774       553       418       1,087  
     
     
     
     
 
Cash and cash equivalents at end of period
   $ 869     $ 725     $ 869     $ 725  
     
     
     
     
 

See Notes to Consolidated Financial Statements.