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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 1994
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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INLAND STEEL INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3425828
(State of incorporation) (I.R.S. Employer Identification Number)
30 West Monroe Street
Chicago, Illinois 60603
(312) 346-0300
(Address, including zip code, and telephone number, including area code, of
principal executive offices)
David B. Anderson
Vice-President -- Corporate Planning, General Counsel and Secretary
30 West Monroe Street
Chicago, Illinois 60603
(312) 899-3917
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
Robert E. Curley Robert H. Craft, Jr.
Mayer, Brown & Platt Sullivan & Cromwell
190 South LaSalle Street 1701 Pennsylvania Avenue, N.W.
Chicago, Illinois 60603 Washington, D.C. 20006
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: /X/
CALCULATION OF REGISTRATION FEE
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PROPOSED
MAXIMUM PROPOSED
OFFERING MAXIMUM
PRICE AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED SHARE(1) PRICE(1) FEE
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<S> <C> <C> <C> <C>
Common Stock ($1.00 par value)
(including Preferred Stock
Purchase Rights).................... 2,703,000 shares $32.6875 $88,354,313 $30,467
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(1) Estimated solely for purposes of determining the registration fee, based on
the average of the high and low sales prices on the New York Stock Exchange
Composite Tape on April 21, 1994.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may
not be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer to buy nor
shall there be any sale of these securities in any State in which such
offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED APRIL 28, 1994
2,703,000 Shares
INLAND STEEL INDUSTRIES, INC.
Common Stock
($1.00 par value per share)
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This Prospectus relates to the issuance of a maximum of 2,703,000 shares of
common stock, $1.00 par value per share (the "Common Stock"), of Inland Steel
Industries, Inc., a Delaware corporation (the "Company"), issuable upon
conversion of the Company's Series G $4.625 Cumulative Convertible
Exchangeable Preferred Stock, $1.00 par value per share (the "Series G
Preferred Stock"), and under the standby arrangements described in this
Prospectus. Common Stock resold under such standby arrangements will
be sold pursuant to this Prospectus.
The Company has called the Series G Preferred Stock for redemption on May 31,
1994 (the "Redemption Date"), unless previously converted into Common Stock, at
a redemption price of $53.2375 plus accrued and unpaid dividends of $.3854,
for an aggregate redemption price of $53.6229 per share of Series G
Preferred Stock (the "Redemption Price"). Prior to the close of
business, New York City time, on May 23, 1994 (the "Last Conversion
Date"), the Series G Preferred Stock may be converted into shares of
Common Stock at a conversion rate equal to 1.802 shares of Common
Stock per share of Series G Preferred Stock. Cash will be paid in
lieu of issuing any fractional shares of Common Stock. After the
Last Conversion Date, no conversion of the Series G Preferred
Stock may be made. Any shares of Series G Preferred Stock not
surrendered for conversion on or prior to the Last
Conversion Date will be redeemed on the Redemption Date.
The Common Stock is listed on the New York Stock
Exchange (the "NYSE") under the trading symbol "IAD."
On April 26, 1994, the reported closing price of the
Common Stock on the NYSE was $34.375 per share. See
"Price Range of Common Stock and Dividend Data."
The Company has arranged for CS First Boston Corporation and Goldman, Sachs &
Co. (the "Purchasers") to purchase all shares of Series G Preferred Stock
properly tendered to the Agent prior to the Last Conversion Date at $53.75
per share, and to purchase, in the event less than all the shares of
Series G Preferred Stock are surrendered for conversion prior to the
Last Conversion Date, directly from the Company up to such whole
number of shares of Common Stock as would have been issuable upon
conversion of any shares of Series G Preferred Stock outstanding
prior to the close of business, New York City time, on the Last
Conversion Date. Prior to such time, the Purchasers may also
purchase Series G Preferred Stock in the open market, and
any Series G Preferred Stock so purchased will be
converted into Common Stock. See "Standby and Other
Arrangements."
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SEE "RISK FACTORS RELATED TO THE STEEL INDUSTRY AND THE COMPANY" FOR A
DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR AD-
EQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Prior to the close of business, New York City time, on the Last Conversion Date,
the Purchasers may offer Common Stock, including shares acquired through the
purchase and conversion of shares of Series G Preferred Stock, at prices set
from time to time by the Purchasers. It is intended that each such price
when set will not exceed the greater of the last sale price or the current
asked price of the Common Stock on the NYSE plus the amount of any
concession to dealers, and it is intended that an offering price set
on any calendar day will not be increased more than once during such
day. After the close of business, New York City time, on the Last
Conversion Date, the Purchasers may offer Common Stock at a price or
prices to be determined, but which it is presently intended will
be determined in conformity with the preceding sentence. The
Purchasers may thus realize profits or losses independent of the
compensation referred to under "Standby and Other Arrangements."
The Purchasers have agreed to remit to the Company 50% of any
profits realized on sales of shares of Common Stock obtained
from the Company pursuant to such arrangements. Any Common
Stock will be offered by the Purchasers when, as and if
accepted by the Purchasers and subject to their right to
reject orders, in whole or in part.
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This Prospectus does not constitute an offer of any securities other than Common
Stock acquired by the Purchasers on conversion of shares of Series G
Preferred Stock or directly from the Company under the standby
arrangements.
CS FIRST BOSTON GOLDMAN, SACHS & CO.
The date of this Prospectus is , 1994
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IN CONNECTION WITH THIS OFFERING, THE PURCHASERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE OUTSTANDING
COMMON STOCK AND SERIES A AND SERIES G PREFERRED STOCK OF THE COMPANY AT LEVELS
ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS
MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, ON THE CHICAGO STOCK EXCHANGE,
IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
Inland Steel Industries, Inc. (the "Company") is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith files reports and other
information with the Securities and Exchange Commission (the "Commission").
Reports, proxy material and other information concerning the Company can be
inspected and copied at the offices of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 or at its regional offices, Citicorp Center, 500 West
Madison Street, Chicago, Illinois 60661 and Seven World Trade Center, New York,
New York 10048. Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. Such reports, proxy material and other information
concerning the Company also may be inspected at the offices of the New York
Stock Exchange, Inc. and the Chicago Stock Exchange, Incorporated.
The Company has filed with the Commission a registration statement on Form
S-3 (together with all amendments and exhibits, the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the shares of Common Stock offered hereby. This prospectus
("Prospectus"), which constitutes a part of the Registration Statement, does not
contain all the information set forth in the Registration Statement, certain
items of which are contained in exhibits to the Registration Statement as
permitted by the rules and regulations of the Commission. Statements made in
this Prospectus as to the content of any contract, agreement or other document
referred to are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference.
INCORPORATION BY REFERENCE
There is incorporated herein by reference the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993 (SEC File No. 1-9117) as
filed by the Company with the Commission pursuant to the Exchange Act. See
"Description of Capital Stock" herein for a current description of the Company's
Common Stock. All documents subsequently filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination
of the offering made hereby shall be deemed to be incorporated by reference into
this Prospectus and to be a part hereof. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein will be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is, or is deemed to be, incorporated by reference herein modifies or
supersedes any such statement. Any such statement so modified or superseded will
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the request of such
person, a copy of any of the foregoing documents incorporated herein by
reference (other than the exhibits to such documents unless such exhibits are
specifically incorporated by reference into such documents). Written or
telephone requests should be directed to Inland Steel Industries, Inc. at its
principal executive offices, 30 West Monroe Street, Chicago, Illinois 60603,
Attention: Secretary (telephone (312) 346-0300).
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THE COMPANY
The Company is the sole stockholder of Inland Steel Company and Inland
Materials Distribution Group, Inc. ("Distribution" or "IMDG"). Inland Steel
Company is a fully integrated domestic steel company that produces and sells a
wide range of steels, of which approximately 99% consists of carbon and
high-strength low-alloy steel grades. The two subsidiaries of Distribution are
Joseph T. Ryerson & Son, Inc. ("Ryerson") and J.M. Tull Metals Company, Inc.
("Tull"), leading domestic steel service, distribution and materials processing
organizations.
Inland Steel Company manufactures basic steel products and is involved in
related raw materials operations. It has the capability to produce six million
tons of raw steel annually at its Indiana Harbor Works complex in East Chicago,
Indiana. The two divisions of Inland Steel Company are Inland Steel Flat
Products Company, which manufactures steel sheet, strip and plate for the
automotive, appliance, office furniture, steel service center and electrical
motor industries, and Inland Steel Bar Company, which manufactures special
quality steel bars and related semi-finished products for forgers, steel service
centers, heavy equipment manufacturers, cold finishers, and the transportation
industry.
Distribution processes and markets carbon, stainless and alloy steels,
aluminum, nickel, brass, copper, and industrial plastics to manufacturers
through 56 service center locations across the United States. Distribution's
Ryerson subsidiary operates through three geographic divisions headquartered in
Philadelphia, Chicago and Seattle. In addition, the Ryerson Coil Processing
Company division, headquartered in Chicago, performs high-quality processing for
customers who traditionally buy large quantities of carbon sheet steel. Based in
Norcross, Georgia, Tull and its AFCO Metals, Inc. subsidiary operate primarily
across the Southeast.
Inland Steel Company and Nippon Steel Corporation ("NSC") operate, through
joint ventures, two steel-finishing facilities near New Carlisle, Indiana. The
total cost of these facilities was approximately $1.1 billion. I/N Tek, owned
60% by a subsidiary of Inland Steel Company and 40% by a subsidiary of NSC,
operates a cold-rolling mill that began shipping commercial product in April
1990 and reached its design capability in March 1992. I/N Kote, owned equally by
subsidiaries of Inland Steel Company and NSC, operates two galvanizing lines,
which began start-up production in late 1991, became fully operational in the
third quarter of 1992, and by the third quarter of 1993 had reached design
capability and galvanized product had been qualified by the venture's major
automotive customers.
The address of the principal executive offices of the Company is 30 West
Monroe Street, Chicago, Illinois 60603, and the telephone number of the Company
is (312) 346-0300.
3
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RISK FACTORS RELATED TO THE STEEL INDUSTRY AND THE COMPANY
The domestic steel industry and the Company's businesses are cyclical and
have experienced only a modest recovery from the 1990-91 recession. These and
other factors, including those described below, should be taken into account by
prospective purchasers of the Common Stock.
DOMESTIC STEEL INDUSTRY
HIGHLY CYCLICAL INDUSTRY
The cyclical nature of the domestic steel industry was demonstrated in the
past decade. The first half of the decade saw significant restructuring and
reductions in industry capacity, continuing significant losses, and bankruptcies
in the industry, as well as the impact of a strong dollar, which generally
disadvantaged domestic steel producers and their exporting customers. This was
followed by record-high industry profits in 1988 and more recently by the
1990-91 downturn in the economy and a dramatic decline in steel industry
financial performance.
EXCESS INDUSTRY CAPACITY AND DEPRESSED PRICES
Steel consumption in the United States has not grown with the overall
economy over the last decade. While domestic steel producers have taken action
to scale back their operations through corporate reorganizations, through the
shut-down of older facilities, or as a result of bankruptcy proceedings, there
has existed over the past several years, taking into account current levels of
imports, significant excess capacity in the United States. Further, while
integrated steel producers, including Inland Steel Company, have reduced their
total production capacity, capacity has been increased by most integrated
producers in certain higher value-added product lines. With further increases
currently underway and anticipated, significant overcapacity could arise in
these product lines, particularly coated steel products. In addition, the
domestic mini-mills have been adding capacity and expanding their product lines
in recent years to include larger-size structural products and certain
flat-rolled products.
The results of operations of the major integrated steel producers are
substantially affected by relatively small variations in the prices of their
products. Current prices on steel products are lower than peak pricing levels
realized in 1989. The outlook for prices continues to be uncertain.
COMPETITION
The domestic steel market is highly competitive. Major integrated
producers, including Inland Steel Company, face competition from a variety of
sources.
IMPORTS. Domestic steel producers face significant competition from foreign
producers and have been adversely affected by imports. Imports of finished steel
products accounted for approximately 19 percent of the domestic market in 1993,
down from the 1984 peak of 26 percent, but up from 18 percent in 1992. Many
foreign steel producers are owned, controlled or subsidized by their
governments. Decisions by these foreign producers with respect to production and
sales may be influenced to a greater degree by political and economic policy
considerations than by prevailing market conditions. Certain foreign producers
of steel and products made of steel have continued to ship into the United
States market despite decreased profit margins or losses experienced by such
producers.
Adverse ITC Rulings. In 1992, unfair trade petitions were filed
against foreign producers of bar, rod and flat-rolled steel products. During
1993, the International Trade Commission ("ITC") upheld final subsidy and
dumping margins on essentially all of the bar and rod products and about half of
the flat-rolled products, in each case based on the tonnage of the products
against which claims were brought. Certain domestic producers have filed formal
appeals of the ITC decisions in the U.S. Court of International Trade or similar
jurisdictional bodies in certain of the trade cases, and foreign producers have
appealed certain of the findings against them. These appeals are pending and
decisions are not expected before September 1994 in the bar and rod product
cases, and mid-1995 in the flat-rolled product cases. It is not certain how the
ITC actions and the appeals will affect imports of steel products into the
United States or the price of such steel products.
4
<PAGE> 6
Potential Adverse GATT Agreements. On December 15, 1993, President
Clinton notified the U.S. Congress of his intent to enter into agreements
resulting from the Uruguay Round of multilateral trade negotiations under the
General Agreement on Tariffs and Trade. The key provisions applicable to
domestic steel producers include an agreement to eliminate steel tariffs in
major industrial markets, including the United States, over a period of 10 years
commencing July 1995, and agreements regarding various subsidy and dumping
practices as well as dispute settlement procedures. Legislation must be enacted
in order to implement the Uruguay Round agreements. Until that process is
completed, it will not be possible to assess the extent to which existing U.S.
laws against unfair trade practices may be weakened. However, the legislation
resulting from the Uruguay Round agreements could potentially have a materially
adverse impact on sales by domestic producers.
MINI-MILLS. Mini-mills provide significant competition in certain product
lines, principally structural shapes, bars and rods. Mini-mills are relatively
efficient, low-cost producers that produce steel principally from scrap in
electric furnaces, and at this time generally have lower capital, overhead,
employment and environmental costs than the integrated steel producers,
including Inland Steel Company. Thin-slab casting technologies have allowed
mini-mills to enter certain sheet markets which have traditionally been supplied
by integrated producers. Two such plants are in operation in the United States
and plans have been announced for additional thin-slab mini-mill plants.
REORGANIZED/RECONSTITUTED MILLS. The intensely competitive conditions
within the domestic steel industry have been aggravated by the bankruptcy
filings of a number of steel producers. These reorganized producers, along with
mills which have been sold by integrated steel producers to new owners, often
operate with lower cost structures, particularly with regard to labor expenses.
Bankruptcy filings and sales of facilities also tend to promote the continued
operation, modernization and upgrading of marginal facilities, perpetuating
overcapacity in certain industry product lines.
STEEL SUBSTITUTES. In the case of many steel products, there is substantial
competition from manufacturers of products other than steel, including plastics,
aluminum, ceramics, glass and concrete.
SIGNIFICANT COST OF ENVIRONMENTAL REGULATION
Domestic steel producers, including the Company, are subject to
environmental laws and regulations concerning emissions into the air, discharges
into ground water and waterways, and the generation, handling, labeling,
storage, transportation, treatment and disposal of waste material. These include
various Federal statutes regulating the discharge or release of pollutants to
the environment, including the Clean Air Act, Clean Water Act, Resource
Conservation and Recovery Act, Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA," also known as "Superfund"),
Safe Drinking Water Act, and Toxic Substances Control Act, as well as state and
local requirements. Violations of these laws and regulations can give rise to a
variety of civil, administrative, and, in some cases, criminal actions and could
also result in substantial liabilities or require substantial capital
expenditures. In addition, under CERCLA the United States Environmental
Protection Agency (the "EPA") has authority to impose liability for site
remediation on waste generators, past and present site owners and operators, and
transporters, regardless of fault or the legality of the original disposal
activity. Liability under CERCLA is strict, joint and several. The costs of
environmental compliance may place domestic steel producers at a competitive
disadvantage with respect to foreign steel producers, which are not subject to
environmental requirements as stringent as those in the United States, and
producers of materials that compete with steel, which may not be required to
assume equivalent costs in their operations.
THE COMPANY
RECENT LOSSES
The Company sustained net losses in six of the past ten years, including a
$37.6 million net loss in 1993. In 1992, the Company had a net loss of $815.6
million, and in 1991 had a net loss of $275.1 million.
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<PAGE> 7
CASH FLOW, LEVERAGE AND LIQUIDITY
Cash Outflows Before Financing Activities. Although the Company's cash flow
before financing activities, such as sale of securities, retirement of debt and
payment of preferred dividends, was positive $11.0 million in 1993, for the
years 1992 and 1991, cash flow before financing activities was negative $64.0
million and negative $126.2 million, respectively.
Highly Leveraged. As a result of financing earlier cash needs, the Company
has become highly leveraged and its debt obligations are rated less than
"investment grade" by the major rating agencies. This has contributed to the
Company's paying higher interest rates, being subject to more burdensome and
restrictive financial covenants, and experiencing greater limitations on credit
availability.
Limited Financial Flexibility. Although the Company may incur modest
amounts of additional debt at this time, the First Mortgage Indenture of Inland
Steel Company, the indenture related to the Company's $150 million principal
amount of 12.75% Notes due December 15, 2002 (the "12.75% Notes"), and documents
governing borrowings by the Company's subsidiaries, limit the Company's ability
to borrow funds and its financial flexibility.
DEPENDENCE ON TRANSPORTATION INDUSTRY
Demand for the Company's products is affected by, among other things, the
relative strength or weakness of the transportation industry, primarily the
automotive industry. In 1993, Inland Steel Company shipments of its product to
the transportation market, including automotive, approximated 37% of total
tonnage of steel shipments. The Steel Service Center segment ships approximately
9% of its product to transportation equipment producers. Sales to General Motors
Corporation accounted for approximately 7% of consolidated net sales in each of
1993, 1992 and 1991.
DEPENDENCE ON THIRD PARTIES FOR COKE REQUIREMENTS
The last of Inland Steel Company's cokemaking facilities was permanently
shut down by year-end 1993. All coke battery closures were necessitated by the
inability of the facilities to meet environmental regulations and their
deteriorating condition and performance. The Company had anticipated the closure
of its remaining cokemaking facilities at year-end 1994. The decision to close
these facilities early necessitated a 1993 pre-tax charge of $22.3 million that
includes the write-off of property, plant and equipment costs which were to be
depreciated in 1994 and additional costs for various expenditures associated
with the shutdown of the facility, including personnel costs.
Inland Steel Company has entered into a long-term contract to satisfy the
majority of its coke needs. The contract contains a provision whereby coke
prices to Inland Steel Company are adjusted annually based on market factors.
PCI Associates (in which a subsidiary of Inland Steel Company holds a 50%
interest) has constructed and is operating a pulverized coal injection facility
that is anticipated to replace approximately 30% of Inland Steel Company's coke
needs.
OBLIGATION TO SELL STEEL TO I/N KOTE WITHOUT REGARD TO PRICE
Inland Steel Company is obligated to sell cold-rolled steel to the
unconsolidated I/N Kote joint venture and to make such sales at a price which is
determined pursuant to the terms of the joint venture agreement. The Company's
return on this venture is largely dependent on the price of cold-rolled steel
sold to I/N Kote. The price received by Inland Steel Company is a function of
I/N Kote's sales revenue, operating costs, debt service, and nominal return on
partners' equity, with certain adjustments based upon I/N Kote's operating rate
and revenue comparisons between Inland Steel Company and I/N Kote. In 1992,
Inland Steel Company was required to sell cold-rolled steel to I/N Kote at less
than its cost of production. Although the price approximated the cost of
production during 1993, it is still significantly less than the market value for
cold-rolled steel. There is no assurance that Inland Steel Company will receive
higher prices for cold-rolled steel sold to I/N Kote in the future. Sales of
cold-rolled steel to I/N Kote totalled 637,000 tons in 1993 and, at capacity,
sales are anticipated to exceed 900,000 tons per year.
6
<PAGE> 8
PENSION AND OTHER POSTRETIREMENT BENEFITS
The Company provides pension, health care and life insurance benefits to
its eligible employees and retirees. The pension benefits are funded through a
pension trust while health care and life insurance benefits are paid as
incurred.
Pension Liabilities. Under Generally Accepted Accounting Principles
("GAAP"), the Company's $1.8 billion pension plan had unfunded liabilities of
$283 million at year-end 1993. Investment performance exceeded actuarial
assumptions in 1993, but pension plan GAAP liabilities increased significantly
because of the decline in the interest rate used to calculate the present value
of the future plan liabilities and because of increased pension benefits
provided in the new labor agreement with the United Steelworkers of America. For
the first time since 1985, the Company will report a pension cost in 1994 rather
than a credit. The year-to-year increase in pension cost will approximate $33
million based on the use of a 7.25% interest assumption to calculate the present
value of pension liabilities. Despite the increased GAAP pension plan
liabilities, the Company will not be required by ERISA to fund the pension plan
in 1994 since ERISA funding calculation guidelines use long-term investment
returns rather than current interest rates to calculate the present value of
future plan liabilities.
Liabilities for Benefits Other Than Pensions Are Unfunded. Liabilities for
health care and life insurance benefits are not funded. The net present value of
the unfunded benefits liability as of December 31, 1993, calculated in
accordance with Financial Accounting Standards Board ("FASB") Statement No. 106,
was approximately $1.0 billion. The expense provision for these benefits for
1993 was $96 million, which was $43 million more than the cash benefit payments
for the year. The unfunded liability will continue to grow, since accrual-basis
costs are expected to exceed cash benefit payments for several more years.
FINANCIAL COMMITMENTS FOR ENVIRONMENTAL COMPLIANCE
The U.S. District Court for the Northern District of Indiana entered a
consent decree in June 1993 confirming the agreement between Inland Steel
Company and the EPA on all matters raised by a lawsuit filed by the EPA in 1990.
The consent decree includes a $3.5 million cash fine (which was charged to
operations in 1992), an obligation to undertake environmentally beneficial
projects at the Indiana Harbor Works through 1997 costing approximately $7
million, and sediment remediation of portions of the Indiana Harbor Ship Canal
and Indiana Harbor Turning Basin estimated to cost approximately $19 million
over the next several years. The consent decree also requires the Company, among
other things, to assess the extent of environmental contamination at Inland
Steel Company's Indiana Harbor Works, to evaluate corrective measures and to
implement such measures. The Company is presently assessing the extent of
environmental contamination. The Company anticipates that this assessment will
cost approximately $1 million to $2 million per year and take another three to
five years to complete. Because the nature and extent of corrective actions
cannot be determined until the assessment of environmental contamination and
evaluation of corrective measures is completed, the Company cannot presently
reasonably estimate the costs of or the time required to complete such
corrective actions. Such corrective actions may, however, require significant
expenditures over the next several years that may be material to the results of
operations or financial position of the Company. Insurance coverage with respect
to such corrective actions is not significant.
Environmental projects authorized and presently under consideration,
including those designed to comply with the 1990 Clean Air Act Amendments, but
excluding any amounts that may be required under the settlement of the 1990 EPA
lawsuit, will require capital expenditures of approximately $20 million in 1994
and $13 million in 1995. It is anticipated that the Company will make annual
expenditures of $5 million to $10 million in each of the three years following.
In addition, the Company will have ongoing annual expenditures of $40 million to
$50 million for the operation of air and water pollution control facilities to
comply with current Federal, state and local laws and regulations. Due to the
inability to predict the costs of corrective action that may be required under
the U.S. Resource Conservation Act and the consent decree settling the 1990 EPA
lawsuit, the Company cannot predict the amount of additional environmental
expenditures that will be required.
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COMMON STOCK BUYBACK COMMITMENT
In connection with the sale of the Series F Preferred Stock to a subsidiary
of NSC in December 1989, the Company agreed to repurchase $185 million of its
Common Stock. In December 1990, the Company suspended further open-market stock
purchases pending its return to acceptable levels of profitability. At December
31, 1993, a total of $144 million had been spent to repurchase 4.6 million
shares of Common Stock. Until the repurchase is completed, the Company has
agreed with NSC to maintain cash, certain securities, a surety bond, a letter of
credit, or some combination thereof, equal to $22 million at December 31, 1993.
The repurchase commitment of $40.8 million as of year-end 1993 is reflected as
"temporary equity" on the Company's balance sheet.
ABSENCE OF COMMON STOCK DIVIDENDS
The Board of Directors discontinued the quarterly Common Stock cash
dividend beginning in the second quarter of 1991. The payment of any future
dividends on the Common Stock and the amount thereof will be determined by the
Board of Directors in light of earnings, the financial condition of the Company,
and other relevant factors. Certain covenants in the indenture related to the
12.75% Notes further limit the Company's ability to pay cash dividends on Common
Stock. See "Description of Capital Stock -- Common Stock -- Dividend
Limitations."
RECENT DEVELOPMENTS AND OUTLOOK
RECENT DEVELOPMENTS
The Company was profitable in the first quarter of 1994. Net income was
$9.2 million, or $.03 per common share. This compares with a net loss of $31.4
million, or $1.12 per common share, in the first quarter of 1993. Sales
increased 14.3%, compared to the first quarter of 1993, to $1.08 billion as
market conditions continued to improve for both of the Company's business
segments. Compared to the same quarter in the prior year, the Company
experienced a $57.6 million increase in operating profit in the first quarter of
1994. Inland Steel Company achieved a $13.6 million operating profit for the
quarter as sales increased 13.5% (over the year-ago quarter) to $590.9 million.
As compared to the year-ago quarter, Inland Steel Company's shipments improved
by 3.7% to 1,253,000 tons and prices rose 9.8%, reflecting market strength and
an improved product mix. Severe weather in January 1994 and underperformance in
plate operations reduced operating results by $16 million. IMDG generated a
first quarter operating profit of $21.4 million, a 42.7% increase from the first
quarter of 1993. IMDG's sales increased 15.4% during the first quarter to $538.6
million. The Company's cash and cash equivalents totaled $103.6 million at March
31, 1994. During the first quarter, $75 million of Inland Steel Company's first
mortgage bonds were redeemed and an equity interest in an off-balance-sheet
leveraged-lease was acquired for $83 million.
8
<PAGE> 10
The following consolidated summary of financial information presents the
results of operations for the quarters ended March 31, 1993 and 1994
(unaudited). The information for interim periods is unaudited, but, in the
opinion of the Company, reflects all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the results of
operations for such periods. Results for interim periods should not be
considered as indicative of results for any other periods or for the year.
RESULTS OF OPERATIONS (UNAUDITED)
CONSOLIDATED RESULTS
<TABLE>
<CAPTION>
IN THOUSANDS
(EXCEPT PER SHARE DATA)
------------------------------
FIRST QUARTER FIRST QUARTER
1994 1993
------------- -------------
<S> <C> <C>
Net Sales............................................................ $ 1,075,701 $ 941,500
Operating Profit or (Loss)........................................... 36,247 (21,361)
Income or (Loss) Before Income Taxes................................. 14,604 (47,518)
Provision for Income Taxes (cr = credit)............................. 5,418 16,156cr
Net Income or (Loss)................................................. 9,186 (31,362)
Net Income or (Loss) Per Share of Common Stock....................... .03 (1.12)
</TABLE>
SEGMENT INFORMATION
<TABLE>
<CAPTION>
IN MILLIONS
------------------------------
FIRST QUARTER FIRST QUARTER
1994 1993
------------- -------------
<S> <C> <C>
NET SALES
Integrated Steel Operations.......................................... $ 590.9 $ 520.7
Steel Service Center Operations...................................... 538.6 466.9
Eliminations -- Intersegment Sales................................... (53.8) (46.1)
------------- -------------
Total Net Sales................................................. $ 1,075.7 $ 941.5
------------- -------------
------------- -------------
OPERATING PROFIT OR (LOSS)
Integrated Steel Operations.......................................... $ 13.6 $ (36.7)
Steel Service Center Operations...................................... 21.4 15.0
Adjustments and Eliminations......................................... 1.2 .3
------------- -------------
Total Operating Profit or (Loss)................................ $ 36.2 $ (21.4)
------------- -------------
------------- -------------
</TABLE>
OUTLOOK
The Company's return to acceptable levels of profitability is dependent on
the successful implementation of its turnaround strategy, including lowering
costs, increasing revenue and improving asset utilization, as well as a
combination of factors that are outside the Company's control, including the
overall level of domestic steel demand, import penetration, the level of the
U.S. dollar, and the trend of steel selling prices. The Company has experienced
recent improvements in some of these factors, most notably stronger steel demand
and prices. Work force reductions continue at the Company and now total over
2,600 people since year-end 1991. To achieve the 1994 cost target, a further
reduction of 900 employees is planned. Assuming continuing strong steel markets,
steel price increases and further progress in its ongoing cost reduction, the
Company in 1994 has targeted a minimum $200 million improvement in operating
profit over 1993's results, and the Company's first quarter performance is
consistent with achieving this goal. There can be no assurance, however, that
these favorable influences will continue throughout the year or that the
targeted improvements will be obtained.
9
<PAGE> 11
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale to the
Purchasers of Common Stock pursuant to the standby arrangements described herein
will be used to effect the redemption of any shares of Series G Preferred Stock
not tendered for conversion. The remainder, if any, will be used for general
corporate purposes. The proceeds of this offering are dependent upon the number
of shares of Common Stock, if any, to be acquired by the Purchasers from the
Company, which will not be determinable until after the close of business, New
York City time, on May 23, 1994, the Last Conversion Date.
PRICE RANGE OF COMMON STOCK AND DIVIDEND DATA
The Common Stock is traded on the New York Stock Exchange ("NYSE") under
the symbol "IAD." The following table sets forth the high and low sale prices of
the Common Stock on the NYSE Composite Tape, as reported in The Wall Street
Journal (Midwest Edition), for the periods indicated.
<TABLE>
<CAPTION>
PERIOD HIGH LOW
- ------------------------------------------------------------------------------- ---- ---
<S> <C> <C>
1992:
First Quarter................................................................ $26 $21 1/8
Second Quarter............................................................... 27 21 1/4
Third Quarter................................................................ 26 1/4 18 1/8
Fourth Quarter............................................................... 23 3/8 16 1/4
1993:
First Quarter................................................................ 24 3/4 20
Second Quarter............................................................... 29 1/8 21 1/2
Third Quarter................................................................ 30 1/4 24 3/4
Fourth Quarter............................................................... 35 28
1994:
First Quarter................................................................ 37 1/8 29 7/8
Second Quarter (through April 26)............................................ 34 5/8 29 7/8
</TABLE>
For a recent last reported sale price of the Common Stock on the NYSE, see
the cover page of this Prospectus.
The Company paid a cash dividend of $.15 per share in the first quarter of
1991. The Board of Directors discontinued the quarterly Common Stock cash
dividend after the first quarter of 1991. Certain covenants in the indenture
relating to the 12.75% Notes limit the Company's ability to declare and pay cash
dividends and certain covenants in borrowing arrangements of the Company's
subsidiaries limit the ability of these subsidiaries to transfer cash to the
Company. As a result of the former restrictions, approximately $50 million of
cash dividends could have been declared or paid by the Company as of March 31,
1994. See "Description of Capital Stock -- Common Stock -- Dividend
Limitations." The payment of any future dividends on the Common Stock and the
amount thereof will be determined by the Board of Directors in light of
earnings, the financial condition of the Company, and other relevant factors.
10
<PAGE> 12
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company and its subsidiaries as of December 31, 1993, and as adjusted to give
effect to the conversion of Series G Preferred Stock into Common Stock and, to
the extent all of the outstanding shares of Series G Preferred Stock are not
converted by the holders thereof into shares of Common Stock, the redemption of
the such shares of Series G Preferred Stock and the sale of the Common Stock to
the Purchasers. The retirement of all of the Series G Preferred Stock through
conversion or redemption will result in a reduction in the Company's annual
preferred stock dividend requirements of approximately $7 million. In addition
to the amounts set forth below, subsidiaries of the Company had guaranteed
obligations of joint ventures and partnerships totaling $316 million at December
31, 1993.
<TABLE>
<CAPTION>
DECEMBER 31, 1993
----------------------
AS
HISTORICAL ADJUSTED
---------- --------
IN MILLIONS
<S> <C> <C>
Long-term debt (including current maturities of $98.8 million):
First Mortgage Bonds of Inland Steel Company........................... $ 423.8 $ 423.8
Other long-term debt and capitalized lease obligations................. 452.1 452.1
---------- --------
Total long-term debt........................................... 875.9 875.9
---------- --------
Temporary equity(1):
Redeemable preferred stock Series F, $1.00 par value; 185,000 shares
issued and outstanding; redeemable at $1,000 per share with an
aggregate liquidation value of $185.0 million....................... 185.0 185.0
Common stock repurchase commitment..................................... 40.8 40.8
---------- --------
Total temporary equity......................................... 225.8 225.8
---------- --------
Stockholders' equity:
Preferred stock, $1.00 par value, 15,000,000 shares authorized for all
series including Series F:
Series A $2.40 Cumulative Convertible Preferred Stock; 96,589 shares
issued and outstanding with an aggregate liquidation value of $4.3
million............................................................ .1 .1
Series E ESOP $3.523 Cumulative Convertible Preferred Stock;
3,114,568 shares issued and outstanding with an aggregate
liquidation value of $151.0 million................................ 3.1 3.1
Series G $4.625 Cumulative Convertible Exchangeable Preferred Stock;
1,500,000 shares issued and outstanding with an aggregate
liquidation value of $75.0 million................................. 1.5 --
Common stock, $1.00 par value; 100,000,000 shares authorized;
47,854,208 shares issued; 50,557,208 shares as adjusted............. 47.9 50.6
Capital in excess of par value......................................... 1,106.4 1,104.0
Accumulated deficit.................................................... (371.9) (371.9)
Unearned compensation -- ESOP.......................................... (112.2) (112.2)
Common stock repurchase commitment..................................... (40.8) (40.8)
Treasury stock at cost, 6,767,139 shares............................... (236.5) (236.5)
---------- --------
Total stockholders' equity..................................... 397.6 396.4
---------- --------
Total long-term debt, temporary equity and stockholders'
equity..................................................... $ 1,499.3 $1,498.1
---------- --------
---------- --------
</TABLE>
- -------------------------
(1) See Note 4 to the consolidated financial statements.
11
<PAGE> 13
SUMMARY OF FINANCIAL INFORMATION
The following consolidated summary of financial information presents the
results of operations for the five years ended December 31, 1993 and should be
read in conjunction with the Company's Consolidated Financial Statements and the
related notes thereto included herein. The summary for each of the years in the
three-year period ended December 31, 1993 has been derived from the consolidated
financial statements included herein and other information and data contained in
the Company's Consolidated Financial Statements which have been audited by Price
Waterhouse, the Company's independent accountants. The summary for each of the
years in the two-year period ended December 31, 1990, has been derived from
separate audited consolidated financial statements of the Company.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
IN MILLIONS (EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net sales..................................... $3,888.2 $3,494.3 $3,404.5 $3,870.4 $4,146.7
Operating costs............................... 3,839.3 3,690.2 3,500.4 3,842.3 3,905.7
Gain on sale of partial interest in joint
venture(A).................................. -- (22.5) -- -- --
Facility shutdown and restructuring
provisions(B)............................... 22.3 -- 205.0 9.0 --
-------- -------- -------- -------- --------
Operating profit or (loss).................... 26.6 (173.4) (300.9) 19.1 241.0
General corporate expense, net of income
items....................................... (22.2) (30.3) (23.4) (17.1) (10.0)
Interest and other expense on debt............ (78.0) (54.9) (46.8) (38.7) (38.4)
Corporate restructuring provision(B).......... -- -- (10.0) -- --
Effect of claim settlement(C)................. -- -- -- -- (17.0)
-------- -------- -------- -------- --------
Income or (loss) before income taxes.......... (73.6) (258.6) (381.1) (36.7) 175.6
Provision for income taxes(D)................. 36.0Cr 99.2Cr 106.0Cr 16.1Cr 55.9
-------- -------- -------- -------- --------
Income or (loss) before cumulative effect of
change in accounting principle(E)........... (37.6) (159.4) (275.1) (20.6) 119.7
Cumulative effect of change in accounting
principle(F)................................ -- (656.2) -- -- --
-------- -------- -------- -------- --------
Net income or (loss).......................... (37.6) (815.6) (275.1) (20.6) 119.7
Dividend requirements for preferred stock (net
of tax benefits related to leveraged ESOP
shares)..................................... 32.0 32.1 30.5 24.9 7.6
-------- -------- -------- -------- --------
Net income or (loss) applicable to common
stock....................................... $ (69.6) $ (847.7) $ (305.6) $ (45.5) $ 112.1
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Average common shares outstanding............. 35.5 32.8 30.9 32.2 35.6
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Per common share:
Income or (loss) before cumulative effect of
change in accounting principle(E)........... $ (1.96) $ (5.83) $ (9.88) $ (1.41) $ 3.15
Cumulative effect of change in accounting
principle(F)................................ -- (19.99) -- -- --
-------- -------- -------- -------- --------
Net income or (loss) -- Primary................. $ (1.96) $ (25.82) $ (9.88) $ (1.41) $ 3.15
-------- -------- -------- -------- --------
-- Fully diluted........... $ (1.96) $ (25.82) $ (9.88) $ (1.41) $ 3.06
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
BALANCE SHEET (END OF PERIOD):
Working capital............................... $ 496.4 $ 441.0 $ 322.8 $ 395.9 $ 703.0
Total assets.................................. 3,435.8 3,146.5 2,697.8 2,934.8 3,008.5
Long-term debt................................ 777.1 873.7 764.8 691.7 577.7
Redeemable preferred stock.................... 185.0 185.0 185.0 185.0 185.0
Other temporary equity........................ 40.8 49.9 53.0 54.9 181.3
Stockholders' equity.......................... 397.6 271.4 1,009.4 1,234.0 1,313.8
Book value per common share................... 7.79 6.01 31.10 41.27 43.00
</TABLE>
Notes appear on the following page.
12
<PAGE> 14
- -------------------------
(A) In the second quarter of 1992, Inland Steel Company sold half of its 25
percent interest in its Walbridge Coatings joint venture.
(B) In 1993, the Company recorded a facility shutdown provision of $22.3
million which covered costs associated with the earlier than planned
closure of Inland Steel Company's cokemaking facilities. Of the amount
provided, $7.7 million relates to the write-off of assets with the
remainder provided for various expenditures associated with the shutdown of
the facility, including personnel costs.
In 1991, the Company recorded restructuring provisions aggregating $215
million ($165 million after taxes, or $5.53 per share), of which $205
million pertained to the Indiana Harbor Works steelmaking complex of Inland
Steel Company and $10 million was applicable to the Company's corporate
office. The provisions cover writedowns of uneconomic facilities,
principally cokemaking batteries, the ingot mold foundry, and selected
older facilities expected to be shut down, as well as provisions for
environmental matters and workforce reductions (consisting principally of
added pension and other employee benefit costs). In 1990 the Steel Service
Center segment recorded a $9 million restructuring charge.
(C) In 1987, the Indiana Supreme Court refused to review the judgments in favor
of Inland Steel Company entered by the Circuit Court and affirmed by the
Court of Appeals in litigation with Koppers Company, Inc. ("Koppers") for
breach of contract in the construction of a blast furnace and coke plant.
The net judgment and accrued interest totaled approximately $93 million.
Pursuant to a settlement agreement between the parties, Koppers paid Inland
Steel Company approximately $73 million in cash in 1987 and delivered $20
million of coke, a fuel used in ironmaking, in 1988. In the second quarter
of 1989, the Company paid Koppers $17 million to settle a claim made by
Koppers subsequent to the 1987 settlement.
(D) During 1988, the Company exhausted its operating loss carryforwards for
financial statement purposes and began providing for deferred income taxes.
In 1991 and 1990, as a result of the operating losses incurred, an income
tax credit resulted from a reversal of a portion of the reestablished
deferred income taxes. Effective January 1, 1992, the Company adopted FASB
Statement No. 109, "Accounting for Income Taxes." The cumulative effect of
prior years at the date of adoption was not material to the results of
operations or the financial position of the Company.
(E) Excluding the $215 million restructuring provision discussed in Note (B)
above, the Company's 1991 net loss was $110 million, or $4.55 per share.
(F) Effective January 1, 1992, the Company elected to adopt FASB Statement No.
106 and to recognize immediately the related transition obligation (as
defined in FASB Statement No. 106).
13
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1993 1992 1991
-------- -------- --------
IN MILLIONS (EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net sales................................... $3,888.2 $3,494.3 $3,404.5
Operating profit (loss)..................... $ 26.6 $ (173.4) $ (300.9)
Net loss.................................... $ (37.6) $ (815.6) $ (275.1)
Net loss per common share................... $ (1.96) $ (25.82) $ (9.88)
</TABLE>
The Company's 1993 net loss of $37.6 million, or $1.96 per common share,
was significantly less than the 1992 net loss of $815.6 million, or $25.82 per
common share. Included in the 1992 loss is $656.2 million, or $19.99 per common
share, related to a one-time charge to recognize the cumulative effect of
adopting a new accounting standard, FASB Statement No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." Even excluding the
1992 charge, 1993 results were significantly improved from the 1992 loss of
$159.4 million, or $5.83 per common share.
Net sales of $3.89 billion in 1993 were 11 percent higher than 1992 levels,
primarily due to increased volume as average selling prices remained virtually
unchanged at both of the Company's business segments. This compared with a
slight increase in sales in 1992 over 1991 as higher volume was largely offset
by declining prices.
Two primary factors that adversely impacted 1993 results, both at the
Company's Integrated Steel Segment, were a $22.3 million charge for the early
closure of cokemaking operations and a scheduled outage associated with a
mini-reline of its largest blast furnace which unfavorably impacted steel
operations by approximately $30 million. Despite these factors, significant
improvements in volume and continued cost reductions resulted in the Company
posting a $27 million operating profit for the year, a $200 million improvement
compared with 1992.
In 1992, the Company experienced the largest net loss in its history due
primarily to the adoption of FASB Statement No. 106 on retiree health care costs
and the Company's election to recognize immediately, rather than amortize over
20 years, a $656.2 million after-tax transition obligation reflecting the
aggregate amount that would have been accrued had the standard been in effect in
prior years. This charge was reported on a separate line as a change in
accounting principle on the Statement of Operations and did not impact the
year's operating loss. However, operating results for 1993 and 1992, as compared
with 1991, were penalized by approximately $43 million ($28 million after tax)
and $63 million ($41 million after tax), respectively, from the incremental
costs of the accrual method required by FASB Statement No. 106 versus the prior
method of accounting. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Accounting Matters" for further details.
In 1992, the Company also adopted FASB Statement No. 109, "Accounting for
Income Taxes," which, at the time of adoption, had no material impact on results
of operations or the financial position of the Company. However, without the
change, the Company would not have been able to reduce its 1993 and 1992 losses
by credits for deferred tax benefits of $39 million and $463 million,
respectively. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Accounting Matters" for further details.
Excluding the effect of the charge for the early closure of cokemaking
operations in 1993, the effect in 1993 and 1992 of the adoption of FASB
Statement No. 106, and a 1991 restructuring provision of $215 million ($165
million after tax), the Company's adjusted net income would have been $6 million
in 1993 compared with net losses of $119 million and $110 million in 1992 and
1991, respectively. The 1992 loss was lessened by an after-tax gain of $15
million, or $.44 per common share, from the sale of a joint-venture interest.
14
<PAGE> 16
With I/N Tek and I/N Kote having reached the end of their learning curves
and completion of major upgrades at the steelmaking operations, the Company's
modernization program is complete. In addition, a new six-year labor contract at
Inland Steel Company is in place. These factors, coupled with the Company's
turnaround strategy launched in 1991 to improve performance by increasing
revenues, reducing costs and enhancing asset utilization, are anticipated to
provide the basis for continued improvement in 1994 operating results.
To maintain financial flexibility, the Company sold 5.75 million new shares
of Common Stock in 1993 and 4.3 million new shares during 1992. The average
number of shares of Common Stock outstanding were 36 million in 1993, 33 million
in 1992, and 31 million in 1991. Results per common share are reported after
preferred stock dividends.
The Company's Integrated Steel Segment accounted for 64 percent of its
identifiable assets at year-end 1993, and during the year provided 53 percent of
its sales. Sales of sheet, strip and plate in the Integrated Steel Segment
accounted for 45 percent of consolidated net sales in 1993, 1992 and 1991. There
was no other class of similar products of the Company accounting for 10 percent
or more of consolidated net sales in any of such years.
INTEGRATED STEEL SEGMENT
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1993 1992 1991
-------- -------- --------
IN MILLIONS
<S> <C> <C> <C>
Net sales................................... $2,174.9 $1,909.4 $1,895.4
Operating loss.............................. $ (28.2) $ (200.6) $ (313.2)
Net tons shipped............................ 4.8 4.3 4.2
</TABLE>
Inland Steel Company reported an operating loss of $28 million for 1993,
the smallest loss since 1990, following operating losses of $201 million in 1992
and $313 million in 1991. The 1991 operating loss included a $205 million
restructuring provision but was not affected by the incremental expense related
to the adoption of FASB Statement No. 106 that negatively impacted 1993 and 1992
results by $39 million and $53 million, respectively.
The 1993 financial results were further negatively affected by
approximately $30 million due to the unfavorable impact on steel operations of
the scheduled outage of Inland Steel Company's largest blast furnace at the
Indiana Harbor Works for a mini-reline. In addition, there was a $22.3 million
charge taken for the early closure of the Company's remaining cokemaking
facilities due to their inability to meet environmental regulations and
deteriorating operating performance. Partially offsetting these unfavorable
items was a $24 million LIFO profit recognition due to inventory reductions.
Net sales increased 14 percent in 1993 to $2.17 billion due almost entirely
to an increase in shipments to 4.8 million tons. The average selling price for
1993 was virtually unchanged from 1992. In 1992, the slight increase in volume
of 2 percent to 4.3 million tons was largely offset by lower selling prices
resulting from the sale of steel to I/N Kote at a contractual price less than
the cost of production, as discussed below. Inland Steel Company operated at 83
percent of its raw steelmaking capability in 1993, compared with 79 percent in
1992 and 74 percent in 1991.
In 1992, a slower-than-expected shift in galvanized products to I/N Kote,
as well as the initial recognition of interest and depreciation expense
associated with the I/N Kote facility, added approximately $40 million to
operating losses. Also, an outage of the No. 7 Blast Furnace reduced production
by 140,000 tons, which increased the operating loss by nearly $30 million. These
1992 problems, coupled with an addition of $12 million to a reserve for
environmental matters, more than offset the benefits of reduced costs and a $23
million gain on the sale of half of Inland's 25 percent interest in Walbridge
Coatings.
Inland Steel Company embarked in 1991 on a three-year turnaround program to
significantly reduce its underlying cost base by year-end 1994. The 1991
restructuring charge of $205 million provided for the write-off
15
<PAGE> 17
of facilities, an environmental reserve and the cost of an estimated 25 percent
reduction in the workforce. Employment has been reduced by approximately 2,300
people from the end of 1991 through year-end 1993, and an additional 1,200 jobs
are expected to be eliminated by the end of 1994. The 1993 effect of this
program represents a savings of approximately $140 million in employment costs
and $10 million in decreased depreciation expense. However, the savings from
reduced employment was partially offset by increased wages under the Company's
labor agreements and increased medical benefit costs as the Company began to
accrue in 1992 for postretirement medical benefits.
By year-end 1992 and throughout 1993, I/N Tek was operating near capacity
and producing consistently high-quality steels. In August 1993, I/N Kote was
operating near design capacity and, by year-end 1993, had achieved product
qualification at all major customers. Under the I/N Kote partnership agreement,
Inland Steel Company supplies all of the steel for the joint venture and, with
certain limited exceptions, is required to set the price of that steel to assure
that I/N Kote's expenditures do not exceed its revenues. During 1993, Inland
Steel Company's sales price approximated its cost of production, but was still
significantly less than the market value for cold-rolled steel. Beginning in
1993, I/N Kote expenditures included principal payments and provision for return
on equity to the partners. Therefore, Inland Steel Company's ability to realize
a satisfactory price on its sales to I/N Kote depends on the facility achieving
near-capacity operations and obtaining appropriate pricing for its products.
The Company's remaining cokemaking facilities were closed by year-end 1993.
The Company determined that it was uneconomical to repair the coke batteries
sufficiently to continue cost-effective operations that would comply with
current environmental laws. To replace the Company-produced coke, Inland Steel
Company entered into a long-term contract and other arrangements to purchase
coke. In addition, Inland Steel Company and NIPSCO, a local utility, formed a
joint venture which constructed and is operating a pulverized coal injection
facility at the Indiana Harbor Works. This facility injects coal directly into
the blast furnaces and is expected to reduce coke requirements by approximately
30 percent, or 600,000 tons a year, when fully operational. The joint venture
commenced operations in the third quarter of 1993.
SERVICE CENTER SEGMENT
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1993 1992 1991
-------- -------- --------
IN MILLIONS (EXCEPT PLANTS OPERATED)
<S> <C> <C> <C>
Net sales................................... $1,893.3 $1,716.6 $1,655.9
Operating profit............................ $ 56.4 $ 27.1 $ 16.2
Net tons shipped............................ 2.08 1.87 1.74
Plants operated............................. 56 56 56
</TABLE>
IMDG continued to expand market share in 1993. In the past two years,
operating profits rose 248 percent to $56 million. Excluding the incremental
effect of FASB Statement No. 106, which affected 1993 and 1992, IMDG's operating
profits were $60 million in 1993, $37 million in 1992 and $16 million in 1991.
This two year increase has been accomplished, despite some reduction in prices,
through increased volume.
Net sales rose 10 percent in 1993 due almost entirely to an increase in
volume as the average selling price per ton increased minimally. In 1992, the 4
percent increase in net sales resulted from a 7 percent increase in tonnage that
was partially offset by a 3 percent decrease in average selling price per ton.
Both of IMDG's businesses were profitable in 1993. The general line
business, which supplies a wide range of metals as well as industrial plastics,
was profitable in all four regions while expanding market share. The coil
processing business was profitable in 1993 after recording a slight operating
loss in 1992.
LIQUIDITY AND FINANCING
Cash and cash equivalents increased to $251 million at year-end 1993 from
$138 million on December 31, 1992. Cash and cash equivalents on December 31,
1991 totaled $47 million. There was no short-term
16
<PAGE> 18
bank borrowing outstanding at year-end 1993 or at any time during 1993. During
1992, short-term bank borrowing averaged $13 million and peaked at $40 million
in that year.
In the 1993 fourth quarter, the Company sold 5.75 million shares of Common
Stock, and is using the net proceeds of $179 million to reduce fixed charges of
the Company and its subsidiaries. At year-end 1993, Inland Steel Company called
the remaining $75 million principal amount of outstanding Series O, P, and Q
First Mortgage Bonds for redemption on January 28, 1994. In January 1994, the
Company announced that Inland Steel Company would purchase a currently leased
caster facility. Under the terms of the purchase agreement, in March 1994 Inland
Steel Company purchased for $83 million the lessor's equity interest in the No.
2 Basic Oxygen Furnace Shop caster facility that was leased from a subsidiary of
General Electric Capital Corporation. In addition, in connection with such
purchase, Inland Steel Company recorded $63 million of debt.
In the second quarter of 1993, Inland Steel Company refinanced $40 million
of 9.75 percent and 10.0 percent coupon pollution control revenue bonds at an
interest rate of 6.8 percent.
In 1992, approximately $150 million and $100 million, respectively, was
raised through the sale of the Company's 12.75% Notes and Common Stock.
Cash availability as well as various covenants in subsidiary borrowing
arrangements limited the cash that subsidiaries could transfer to the Company in
the form of dividends and advances to approximately $225 million at year-end
1993. This amount is subject to change based on the financial performance of
each subsidiary.
An earnings coverage test in the indenture covering the Inland Steel
Company's First Mortgage Bonds precluded issuance of additional mortgage bonds
in 1993. In addition, the Company's subsidiary borrowing arrangements, as well
as both the Series T First Mortgage Indenture and the indenture under which the
12.75% Notes were issued, contain covenants limiting financial flexibility and
the Company's ability to issue additional debt. Certain covenants in the
indenture relating to the 12.75% Notes also limit the Company's ability to
declare and pay cash dividends.
In 1989, the Company sold $185 million of its Series F Exchangeable
Preferred Stock and agreed to repurchase an identical amount of Company common
stock. By year-end 1993, $144 million had been spent to purchase 4.6 million
shares. In December 1990, the Company suspended further open-market stock
purchases under this agreement.
The Company's subsidiaries continue to maintain committed credit facilities
totaling $225 million. In the second quarter of 1993, one of these agreements, a
$100 million credit facility arranged by a special-purpose subsidiary of Inland
Steel Company, was extended to November 30, 1995. The credit facility is secured
by receivables sold to this subsidiary by Inland Steel Company. The $100 million
Ryerson unsecured revolving credit facility extends to March 31, 1995 and the
$25 million Tull unsecured credit facility extends to December 15, 1994. The
interest rates on borrowings under such credit agreements are, at the Company's
option, based on Eurodollar, Certificate of Deposit, or Base (the greater of
federal funds or prime) rates. At year-end, the highest interest rate option for
borrowings under any of these credit agreements was the applicable prime rate
plus .75 percent. In addition to these credit facilities, a $55 million
revolving credit agreement secured by inventories and receivables was
established in 1993 for I/N Kote to provide for the joint venture's working
capital needs, thus reducing the need for the partners to provide additional
funds to I/N Kote for that purpose.
The Company believes that its present cash position, augmented by its
subsidiaries' credit facilities and the anticipated cash flow from operations
provided by cost reductions and increased revenues, will provide sufficient
liquidity to meet its scheduled debt retirements, pay preferred dividends, fund
its capital program and meet any operating cash requirements that may arise for
at least the next two years. The Company ended 1993 with long-term debt of $777
million. The average interest rate on this debt is approximately 10 percent.
Due to a substantial decrease in stockholders' equity in 1992 primarily
resulting from the adoption of FASB Statement No. 106, the ratio of long-term
debt to total capitalization of 55 percent and 63 percent
17
<PAGE> 19
reported at year-end 1993 and 1992, respectively, was substantially higher than
the 38 percent reported at year-end 1991. Including Series F Preferred Stock,
the ratio of long-term debt and redeemable preferred stock to total
capitalization was 69 percent at December 31, 1993 compared with 77 percent and
47 percent at year-end 1992 and 1991, respectively.
In addition, Inland Steel Company guarantees its 50 percent share of I/N
Kote borrowings, a PCI joint-venture loan, and a portion of the debt of the
Empire Iron Mining partnership which amount to $258 million, $35 million, and
$23 million, respectively, at year-end 1993. The Empire guarantee has not been
invoked since its inception in 1978. Because of the current strong demand for
steel products, the Company does not believe that these guarantees will be
called upon.
CAPITAL EXPENDITURES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1993 1992 1991
------ ----- ------
IN MILLIONS
<S> <C> <C> <C>
Capital expenditures
Integrated Steel..................................... $ 86.1 $55.1 $124.7
Steel Service Centers................................ 19.3 9.3 9.8
General corporate and other.......................... .2 -- 5.7
------ ----- ------
Total capital expenditures............................. $105.6 $64.4 $140.2
------ ----- ------
------ ----- ------
</TABLE>
Capital expenditures of $106 million in 1993, although higher than the 30
year low experienced in 1992, remained below depreciation for the second
straight year. With the completion of the mini-reline of the No. 7 Blast
Furnace, all major facility upgrades are now complete.
Exclusive of the caster lease buyout discussed earlier, anticipated capital
expenditures in 1994 of $110 million will be slightly higher than 1993 but less
than 1994 depreciation expense. These projects are expected to be funded by cash
generated from operations and cash on hand at year-end 1993.
EMPLOYMENT MATTERS
Inland Steel Company and the United Steelworkers of America entered into a
new labor agreement, effective August 1, 1993, covering wages and benefits
through July 31, 1999. Among other things, the agreement provides a wage
increase of $.50 per hour in 1995, a $500 bonus in each of 1993 and 1994
(totaling in each case approximately $4 million) and a potential bonus of up to
$1,000 per employee (approximately $8 million in total) based on Inland Steel
Company achieving $150 million of pre-tax income in 1995 (adjusted to exclude
the incremental FASB Statement No. 106 costs and such bonus). In addition, all
active employees will receive an additional week of vacation in 1994 and in
1996. The agreement provides for a reopener on wages and certain benefits in
1996 with an arbitration provision to resolve unsettled issues, thereby
precluding a work stoppage over the six-year contract term. The agreement also
provides for election to the Company's Board of Directors of a union designee
acceptable to the Board, restricts Inland Steel Company's ability to reduce the
union workforce (generally limited to attrition and major facilities shutdowns),
allows greater flexibility to institute work rule changes, and requires
quarterly rather than annual payment of profit sharing amounts, significant
improvements in pension benefits for active employees, and the securing of
retiree health care obligations through certain trust and second mortgage
arrangements. "First dollar" health care coverage is eliminated under the
agreement through the institution of co-payments and increased deductibles for
medical benefits. Due to expected reductions in the workforce, this contract is
not anticipated to result in a net increase in employment cost for the next
three years in spite of increased pension benefits, bonuses, and the scheduled
wage increase.
Average employment declined 6 percent during 1993 after declining 8 percent
during each of the prior two years, reflecting continuing efforts by the Company
to implement its cost-reduction program. As announced in 1991, the Company plans
to reduce employment at its corporate headquarters and at Inland Steel Company
by 25 percent from year-end 1991 to year-end 1994. Total employment costs in
1993
18
<PAGE> 20
decreased 2 percent from 1992 while average employment cost per employee
increased 5 percent. In 1992, total employment costs and average employment cost
per employee increased 4 percent and 12 percent, respectively, as the Company
began to accrue for postretirement medical benefits and paid wage increases
under its previous agreement with the Steelworkers' union. Had the Company not
adopted FASB Statement No. 106, total employment costs would have decreased 3
percent in 1992 from 1991.
<TABLE>
<CAPTION>
EMPLOYEES (MONTHLY AVERAGE RECEIVING PAY) 1993 1992 1991
- ------------------------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
Integrated Steel............................................. 10,857 11,847 13,038
Steel Service Centers........................................ 5,157 5,168 5,392
Headquarters and other....................................... 138 166 170
------- ------- -------
Total........................................................ 16,152 17,181 18,600
------- ------- -------
------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED EMPLOYMENT COSTS* 1993 1992 1991
- ------------------------------------------------------------- ------- ------- -------
IN MILLIONS (EXCEPT AVERAGES)
<S> <C> <C> <C>
Direct compensation.......................................... $ 665.0 $ 682.3 $ 697.5
------- ------- -------
Employee benefits
Group insurance costs...................................... 77.1 64.4 85.8
Postretirement benefits other than pensions................ 95.7** 111.0** 44.3
Pension costs (credits).................................... (4.6) (9.2) (18.8)
Social security and unemployment compensation taxes........ 54.6 53.9 55.6
Workers' compensation expense.............................. 10.8 12.0 14.3
Thrift Plan costs.......................................... 9.7 10.5 12.7
Cost of supplemental unemployment benefit plans............ 6.5 8.5 7.6
Industry welfare and retirement funds...................... 3.2 2.5 2.7
All other.................................................. 6.9 4.8 5.7
------- ------- -------
Total cost of employee benefits.............................. 259.9 258.4 209.9
------- ------- -------
Total employment costs....................................... $ 924.9 $ 940.7 $ 907.4
------- ------- -------
------- ------- -------
Average employment cost per employee......................... $57,265 $54,750 $48,785
</TABLE>
- -------------------------
* This table does not include the additional costs due to workforce reductions
included in the 1991 restructuring provision.
** Includes incremental non-cash costs resulting from adoption of FASB Statement
No. 106.
PENSIONS
At year-end 1993, the market value of Inland Steel Industries Pension Plan
assets totaled $1,794 million, a $108 million increase during the year.
Liabilities also rose because of the increased pension benefits provided in the
new labor agreement with the United Steelworkers and the requirement for
financial reporting purposes that the calculation of the pension plan
liabilities be based on the current yield on high grade fixed income
obligations, which are presently at a 20 year low. As a result, pension plan
liabilities of $2,077 million exceeded assets at year-end 1993. However, under
ERISA funding guidelines, which take a longer term view in determining the
interest rate to use in valuing liabilities, the pension plan continues to be
adequately funded. The Company will report a pension cost in 1994 of
approximately $28 million, as compared with a credit of $5 million in 1993. This
is the first reported pension cost since 1985.
The annualized return earned in the pension plan's diversified portfolio
for the past ten years exceeded 14 percent annually and in 1993 the pension plan
earned a 16.2 percent return. Pension benefits of $146 million were paid to
15,748 retirees and their beneficiaries in 1993, compared with $143 million paid
to 15,642 retirees in 1992.
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<PAGE> 21
ACCOUNTING MATTERS
FASB Statement No. 106 requires that the cost of retiree medical and life
insurance benefits be accrued during the working years of each employee.
Previously, retiree medical benefits were expensed as incurred after an
employee's retirement. Adoption of this standard in 1992 did not and will not
affect cash flow as liabilities for health care and life insurance benefits are
not pre-funded and cash payments will continue to be made as claims are
submitted. The net present value of the unfunded benefits liability as of
December 31, 1993, calculated in accordance with FASB Statement No. 106 was
approximately $1.0 billion. The expense provision for these benefits for 1993
was $96 million, which was $43 million more than the cash benefit payments for
the year. The unfunded liability will continue to grow, since accrual-basis
costs are expected to exceed cash benefit payments for several more years. The
reported year-end benefits liability and postretirement benefits cost for the
year reflect changes made during the year incorporating the favorable effects of
the new United Steelworkers of America labor contract and revised actuarial
assumptions incorporating more current information regarding claim costs and
census data, partially offset by a reduction in the discount rate used to
calculate the benefits liability. See Note 10 to the consolidated financial
statements for further details.
FASB Statement No. 109 requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
recognized in the Company's financial statements or tax returns. At December 31,
1993, the Company had a net deferred tax asset of $473 million of which $445
million relates to the temporary difference arising from the adoption of FASB
Statement No. 106. While the Company believes it is more likely than not that
taxable income generated through future profitable operations will be sufficient
to realize all deferred tax assets, a secondary source of future taxable income
could result from tax planning strategies, including the Company's option of
changing from the LIFO method of accounting for inventories to the FIFO method
(such change would have resulted in approximately $350 million of additional
taxable income as of year-end 1993 which would serve to offset approximately
$120 million of deferred tax assets) and selection of different tax depreciation
methods. After assuming such change in accounting for inventories, the Company
would need to recognize approximately $1.0 billion of taxable income over the
15-year net operating loss carryforward period and the period in which the
temporary difference related to the FASB Statement No. 106 obligation will
reverse, in order to fully realize its net deferred tax asset. The Company
believes that it is more likely than not that it will achieve such taxable
income level. See Note 11 to the consolidated financial statements for further
details regarding this net deferred tax asset.
ENVIRONMENTAL ISSUES
Inland Steel Company has significantly reduced discharges of air and water
pollutants at its Indiana Harbor Works complex in East Chicago, Indiana in
recent years and is committed to operating its facilities in an environmentally
acceptable manner. On June 10, 1993, the U.S. District Court for the Northern
District of Indiana entered a consent decree that resolved all matters raised by
a lawsuit filed by the EPA in 1990. The consent decree includes a $3.5 million
cash fine, environmentally beneficial projects at the Indiana Harbor Works
through 1997 costing approximately $7 million, and sediment remediation of
portions of the Indiana Harbor Ship Canal and Indiana Harbor Turning Basin
estimated to cost approximately $19 million over the next several years. The
fine and estimated remediation costs were provided for in 1991 and 1992. After
payment of the fine, the Company's reserve for environmental liabilities,
including those in connection with the consent decree, totaled $19 million. The
consent decree also defines procedures for remediation at Inland Steel Company's
Indiana Harbor Works. These procedures establish essentially a three-step
process, each step of which requires agreement of the EPA before progressing to
the next step in the process, consisting of: assessment of the site, evaluation
of corrective measures for remediating the site, and implementation of the
remediation plan according to the agreed-upon procedures. The Company is
presently assessing the extent of environmental contamination. The Company
anticipates that this assessment will cost approximately $1 million to $2
million per year and take another three to five years to complete. Because
neither the nature and extent of the contamination nor the corrective actions
can be determined until the assessment of environmental contamination and
evaluation of corrective measures is completed, the Company cannot presently
reasonably estimate the costs of or the time required to complete such
corrective actions. Such corrective
20
<PAGE> 22
actions may, however, require significant expenditures over the next several
years that may be material to the results of operations or financial position of
the Company. Insurance coverage with respect to such corrective action is not
significant.
Capital spending for pollution control projects totaled $7 million in 1993,
down from $11 million in 1992. Another $44 million was spent in 1993 to operate
and maintain such equipment, versus $46 million a year earlier. During the five
years ended December 31, 1993, the Company has spent $302 million to construct,
operate and maintain environmental control equipment at its various locations.
Environmental projects previously authorized and presently under
consideration, including those designed to comply with the 1990 Clean Air Act
Amendments, but excluding any amounts that would be required under the consent
decree settling the 1990 EPA lawsuit, will require capital expenditures of
approximately $20 million in 1994 and $13 million in 1995. It is anticipated
that the Company will make annual capital expenditures of $5 million to $10
million in each of the three years following. In addition, the Company will have
ongoing annual expenditures of $40 million to $50 million for the operation of
air and water pollution control facilities to comply with current Federal, state
and local laws and regulations. Due to the inability to predict the costs of
corrective action that may be required under the Resource Conservation and
Recovery Act and the consent decree in the 1990 EPA lawsuit, the Company cannot
predict the amount of additional environmental expenditures that will be
required. Such additional environmental expenditures, excluding amounts that may
be required in connection with the consent decree in the 1990 EPA lawsuit,
however, are not expected to be material to the results of operations or
financial position of Inland Steel Company.
INTERNATIONAL TRADE ISSUES
Domestic steel producers face significant competition from foreign
producers and have been adversely affected by imports. Imports of steel mill
products accounted for approximately 19 percent of the domestic market in 1993,
down from the 1984 peak of 26 percent, but up from 18% in 1992. Many foreign
steel producers are owned, controlled or subsidized by their governments. In
1992, the Company and certain domestic steel producers filed unfair trade
petitions against foreign producers of certain bar, rod and flat-rolled steel
products. During 1993, the International Trade Commission ("ITC") upheld final
subsidy and dumping margins on essentially all of the bar and rod products and
about half of the flat-rolled products, in each case based on the tonnage of the
products against which claims were brought. Appeals of the adverse ITC decisions
have been filed in the U.S. Court of International Trade or similar
jurisdictional bodies, and foreign producers have appealed certain of the
findings against them. These appeals are pending and decisions are not expected
before September 1994 in the bar and rod product cases, and mid-1995 in the
flat-rolled product cases. It is not certain how the ITC actions and the appeals
will impact imports of steel products into the United States or the price of
such steel products.
On December 15, 1993, President Clinton notified the U.S. Congress of his
intent to enter into agreements resulting from the Uruguay Round of multilateral
trade negotiations under the General Agreement on Tariffs and Trade. The key
provisions applicable to domestic steel producers include an agreement to
eliminate steel tariffs in major industrial markets, including the United
States, over a period of 10 years commencing July 1995, and agreements regarding
various subsidy and dumping practices as well as dispute settlement procedures.
Legislation must be enacted in order to implement the Uruguay Round agreements.
Until that process is completed, it will not be possible to assess the extent to
which existing U.S. laws against unfair trade practices may be weakened.
DESCRIPTION OF CAPITAL STOCK
The following statements are summaries of certain provisions of the
Certificate of Incorporation and the By-Laws of the Company and of the Rights
Agreement, dated as of November 25, 1987, as amended and restated as of May 24,
1989 (the "Rights Agreement") between the Company and The First National Bank of
Chicago, as Rights Agent (Harris Trust and Savings Bank, as successor Rights
Agent). Such summaries do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all of the provisions of the
Certificate of Incorporation, the By-Laws and the Rights Agreement, including
the
21
<PAGE> 23
definitions therein of certain terms. Copies of the Certificate of
Incorporation, the By-Laws and the Rights Agreement are incorporated by
reference as exhibits to the Registration Statement of which this Prospectus is
a part.
GENERAL
The Certificate of Incorporation authorizes the issuance of 100,000,000
shares of Common Stock, $1.00 par value per share (the "Common Stock"), and
15,000,000 shares of Preferred Stock, $1.00 par value per share (the "Preferred
Stock"), in one or more series. On December 31, 1993, there were 41,087,069
shares of Common Stock, 96,589 shares of Series A Preferred Stock, 3,114,568
shares of Series E Preferred Stock, 185,000 shares of Series F Preferred Stock
and 1,500,000 shares of Series G Preferred Stock outstanding. The Company
previously redeemed the outstanding shares of Series B and Series C Preferred
Stock and the Company will redeem the Series G Preferred Stock on May 31, 1994.
See Note 6 of Notes to Consolidated Financial Statements. None of the Series D
Preferred Stock, which is issuable under the Rights Agreement, has been issued.
All issued and outstanding shares of Common Stock, Series A Preferred Stock,
Series E Preferred Stock and Series F Preferred Stock are, and the shares of
Common Stock offered hereby will be, fully paid and non-assessable. 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 Company's capital stock
entitled to vote at a meeting of stockholders. Holders of Common Stock and
Preferred Stock have no preemptive rights to subscribe to any additional shares
of capital stock or securities convertible into capital stock.
COMMON STOCK
The rights and privileges of the holders of the Common Stock are subject to
the preferential rights and privileges of the holders of any Preferred Stock,
including the outstanding Series A Preferred Stock, Series E Preferred Stock and
Series F Preferred Stock.
Dividend Rights. Subject to the dividend rights of the holders of Preferred
Stock, including the dividend rights of holders of Series A Preferred Stock,
Series E Preferred Stock and Series F Preferred Stock described below, the
holders of shares of Common Stock are entitled to receive dividends thereon out
of funds legally available therefor if and when declared payable by the
Company's Board of Directors.
Dividend Limitations. Under the terms of the currently outstanding
Preferred Stock, the Company may not pay any dividends or make any other
distribution on its Common Stock (other than dividends or distributions in stock
ranking junior to the Series A Preferred Stock, the Series E Preferred Stock or
the Series F Preferred Stock, as the case may be, as to dividends and on
liquidation) unless all dividends accumulated on the Series A Preferred Stock,
Series E Preferred Stock and Series F Preferred Stock (and, in the case of the
Series F Preferred Stock, interest, if any, thereon) for all then elapsed
quarterly dividend periods have been paid or declared and set apart for payment.
The indenture relating to the 12.75% Notes (the "Indenture") prohibits the
Company from declaring or paying a dividend on the Common Stock if after giving
effect to the payment of such dividend (i) an Event of Default, or an event that
with the giving of notice, lapse of time, or both, would constitute an Event of
Default, shall have occurred and be continuing or (ii) the aggregate of all
Restricted Payments (which term includes, among other things, dividends or
repurchases, redemptions or other acquisitions of any class of capital stock of
the Company, including the Common Stock) exceeds the sum of (a) 50 percent of
cumulative Consolidated Net Income for each fiscal year (or, in case the
Consolidated Net Income shall be negative for any fiscal year, less 100 percent
of such deficit) commencing on or after January 1, 1993 and (b) 100 percent of
the aggregate net proceeds from the issuance of capital stock of the Company and
warrants, rights or options to purchase such capital stock after December 15,
1992, and less the amount of any loan, advance, capital contribution to or
investment in, or payment on a Guarantee of, any obligation of any Affiliate
(with certain exceptions), as such terms are defined in the Indenture. As a
result of the foregoing prohibition, approximately $50 million of cash dividends
could have been declared or paid by the Company as of March 31, 1994.
22
<PAGE> 24
Voting Rights. The Certificate of Incorporation provides that any action to
be taken by stockholders must be taken at a duly called annual or special
meeting and not by written consent, except that the Board of Directors, by
resolution, may permit holders of the Preferred Stock of the Company to act by
written consent. See "Preferred Stock" below. The holders of Common Stock vote
together with the holders of Series A Preferred Stock, Series E Preferred Stock
and Series F Preferred Stock as one class, except as otherwise provided by the
Delaware General Corporation Law or the Certificate of Incorporation. In
general, separate votes will be required on matters that affect one or more but
not all of such classes or series. The holders of Common Stock and Series A
Preferred Stock are entitled to one vote for each share held. The holder of the
Series E Preferred Stock is entitled to 1.25 votes per share and the holder of
the Series F Preferred Stock is entitled to 30.604 votes per share, in each case
subject to adjustment upon the occurrence of certain events. None of the holders
of Common Stock, Series A Preferred Stock, Series E Preferred Stock or Series F
Preferred Stock has the right to cumulate votes in the election of directors.
Liquidation Rights. After the payment of all amounts due upon liquidation
to the holders of Series A Preferred Stock, Series E Preferred Stock and Series
F Preferred Stock, the holders of Common Stock are entitled to receive any
remaining assets of the Company available for distribution to its stockholders.
Transfer Agent. The transfer agent and registrar for the Common Stock is
Harris Trust and Savings Bank, Chicago, Illinois.
PREFERRED STOCK
The Company's Board of Directors is authorized to create and issue one or
more series of Preferred Stock and determine the rights and preferences of each
series, to the extent permitted by the Certificate of Incorporation. Among other
rights, the Board of Directors shall fix (1) the number of shares constituting
the series and the distinctive designation of the series; (2) 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; (3) 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; (4) the
amount payable in respect of the shares of the series, in the event of any
liquidation, dissolution or winding up of the Company, 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; (5) 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 the Company of
the shares of the series; (6) 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; and (7) 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. Except for any difference so provided by
the Board of Directors, the shares of all series of Preferred Stock shall rank
on a parity with respect to the payment of dividends and to the distribution of
assets upon liquidation.
Pursuant to the terms of the Certificate of Incorporation and the Series F
Certificate of Designations, the holders of Series F Preferred Stock, but not
the holders of Series A Preferred Stock, Series E Preferred Stock or Common
Stock, may act by consent. For a description of other voting rights of holders
of the Series A Preferred Stock, Series E Preferred Stock and Series F Preferred
Stock, see "Series A Preferred Stock," "Series E Preferred Stock" and "Series F
Preferred Stock" below.
SERIES A PREFERRED STOCK
The holders of Series A Preferred Stock are entitled to receive dividends
at the rate of $2.40 per share per annum and, upon any liquidation, dissolution
or winding up of the Company, whether voluntary or involuntary, to receive
$44.00 per share plus all dividends accumulated and unpaid thereon. Such shares
are convertible into shares of Common Stock at a rate of one share of Common
Stock for one share of Series A Preferred Stock, subject to adjustments in
certain events, and are redeemable at the option of the Company at any time
23
<PAGE> 25
at $44.00 per share plus all dividends accumulated and unpaid thereon to the
date fixed for such redemption. The Company may partially redeem its Series A
Preferred Stock even if dividends on that series are in arrears, provided that
cumulative dividends are paid in full on the shares which are redeemed. The
Series A Preferred Stock requires that dividends paid on such series of
Preferred Stock and any other series of Preferred Stock ranking on a parity
therewith as to dividends (including the Series F Preferred Stock), if less than
the full amount of dividends accumulated and unpaid on each such series of
Preferred Stock, shall be paid on each such series of Preferred Stock in
proportion to the aggregate amounts of dividends accumulated and unpaid on each
such series.
The holders of Series A Preferred Stock vote together with the holders of
Common Stock (and any other shares of capital stock of the Company entitled to
vote at a meeting of stockholders, including the Series E Preferred Stock and
the Series F Preferred Stock) as one class, except as otherwise provided by the
Delaware General Corporation Law or the Company's Certificate of Incorporation,
and the vote or consent of a majority of the outstanding shares of Series A
Preferred Stock as a class, together with all other series of Preferred Stock
ranking on a parity with the Series A Preferred Stock either as to dividends or
upon liquidation and which are affected in such matter in substantially the same
manner as the Series A Preferred Stock with respect to the right to receive
dividends or the right to receive distributions upon liquidation, is required to
authorize, create or issue any class of stock, or any right to convert into or
purchase any class of stock, ranking prior to the Series A Preferred Stock as to
dividends or liquidation rights, or for any merger or consolidation which would
have a similar effect (with certain exceptions).
SERIES E PREFERRED STOCK
Shares of the Series E Preferred Stock may only be issued to the Company's
Employee Stock Ownership Plan ("ESOP") Trust. In July 1989, the Company sold
3,086,800 newly issued shares of the Series E Preferred Stock to the ESOP Trust.
Shares of the Series E Preferred Stock entitle the holder to cumulative annual
dividends of $3.523 per share, payable semi-annually. Upon any liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary, the
holder of the Series E Preferred Stock is entitled to receive, subject to the
rights of the holders of any stock of the Company ranking senior to the Series E
Preferred Stock, $48.594 per share, plus accrued and unpaid dividends thereon.
Shares of Series E Preferred Stock are convertible into the Company's Common
Stock at a rate of one share of Common Stock for one share of Series E Preferred
Stock, subject to adjustment in certain events. On and after July 7, 1994, the
Series E Preferred Stock may be redeemed, at the option of the Company, as a
whole at any time or from time to time in part, initially at a redemption price
of $50.355 per share, declining to $48.594 per share on and after July 7, 1999,
plus, in each case, accrued and unpaid dividends. In addition, upon the
occurrence of certain events, the Company may elect to redeem some, or, in
certain circumstances, be required to redeem all, of the outstanding shares of
Series E Preferred Stock. In certain instances, the Company may elect to pay the
redemption price in cash or shares of Common Stock, based on the fair market
value thereof (as defined), or a combination of both. The Series E Preferred
Stock is entitled to 1.25 votes per share, subject to adjustment upon the
occurrence of certain events. The Series E Preferred Stock votes together with
the Common Stock (and any other shares of capital stock of the Company entitled
to vote at a meeting of stockholders, including the Series A Preferred Stock and
the Series F Preferred Stock) on all matters submitted to a vote of the
stockholders of the Company, except as otherwise provided by the Delaware
General Corporation Law or the Company's Certificate of Incorporation. From time
to time, the Company elects to provide additional shares of Series E Preferred
Stock to the ESOP Trust to cover employee matching requirements not covered by
the release of shares through scheduled principal and interest payments by the
ESOP Trust on its outstanding notes.
SERIES F PREFERRED STOCK
On December 18, 1989, NS Finance III, Inc. ("NS Finance"), a subsidiary of
Nippon Steel Corporation, purchased 185,000 shares of the Company's Series F
Preferred Stock for an aggregate purchase price of $185 million. The Series F
Preferred Stock entitles the holder to cumulative annual dividends of 9.48%
(based on the purchase price of the Series F Preferred Stock), payable
quarterly. Accrued but unpaid
24
<PAGE> 26
dividends on the Series F Preferred Stock bear interest at the annual rate of
11.48%, compounded quarterly. The Series F Preferred Stock is required to be
redeemed in two stages, consisting of $85 million on December 18, 1996 and the
remaining $100 million on December 17, 1999, plus, in each case, accrued and
unpaid dividends thereon (and interest, if any, thereon). In addition, the
Company may be required to redeem the Series F Preferred Stock upon the
occurrence of certain events, and upon the occurrence of certain other events,
including a change in control of the Company, the Company may be required to
redeem the Series F Preferred Stock at a 10% premium. In certain of such
circumstances, the holder of the Series F Preferred Stock may elect to receive
such redemption price in cash or shares of Common Stock, subject to certain
exceptions. In the event of an early redemption, the Company may be required to
reimburse the holder of the Series F Preferred Stock for certain costs incurred
as a result of such redemption. Upon any liquidation, dissolution or winding up
of the Company, whether voluntary or involuntary, the holder of the Series F
Preferred Stock is entitled to receive $1,000 per share, plus all accrued and
unpaid dividends thereon, and interest, if any, on such dividends, plus a
"breakage amount."
The Series F Preferred Stock provides that no dividend shall be declared or
paid or set apart for payment on any other series of Preferred Stock ranking on
a parity with the Series F Preferred Stock as to dividends (including the Series
A Preferred Stock), unless there shall also be or have been declared and paid or
set apart for payment on the Series F Preferred Stock dividends, including
interest, if any, on such dividends, for all dividend payment periods of the
Series F Preferred Stock ending on or before the dividend payment date of such
parity stock ratably in proportion to the respective amounts of dividends,
including interest, if any, on such dividends, accumulated and unpaid through
such dividend period on the Series F Preferred Stock and accumulated and unpaid
on such parity stock through the dividend payment period on such parity stock
next preceding such dividend payment date.
The Series F Preferred Stock is entitled to 30.604 votes per share, which
number of votes may be adjusted from time to time upon the occurrence of certain
events. The Series F Preferred Stock votes together with shares of the Company's
Common Stock (and any other shares of capital stock of the Company entitled to
vote at a meeting of stockholders, including the Series A Preferred Stock and
the Series E Preferred Stock) as a single class upon all matters upon which
holders of the Company's Common Stock are entitled to vote, except as otherwise
provided by the Delaware General Corporation Law or the Company's Certificate of
Incorporation.
Pursuant to the terms of the Series F Preferred Stock, the Company has the
option to exchange the Series F Preferred Stock for the Company's 10.23%
Subordinated Voting Notes (the "Exchange Notes"), provided that the Company's
stockholders have approved an amendment to the Company's Certificate of
Incorporation which would permit the holder of the Exchange Notes to vote on all
matters submitted for a vote of the stockholders of the Company and that the
holder of the Series F Preferred Stock has consented to the exchange. The
Company's stockholders have approved such an amendment to the Company's
Certificate of Incorporation. The Company has received the interpretation of the
NYSE that the issuance of the Exchange Notes will not violate the voting rights
policy of the NYSE.
Subject to the consent of NS Finance, if the Company elects to exchange the
Exchange Notes for the Series F Preferred Stock, the holder of outstanding
shares of Series F Preferred Stock would be entitled to receive an Exchange Note
with a face amount equal to $1,000 per share of Series F Preferred Stock held by
it on the date of exchange. Upon issuance of the Exchange Notes, the holder of
the Exchange Notes would be deemed to be a stockholder of the Company, and the
Exchange Notes would 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. The Exchange Notes would
bear interest at an annual rate of 10.23%, payable quarterly. The holder of the
Exchange Notes would be entitled to the same number of votes that it is then
entitled to as the holder of the Series F Preferred Stock on the date of the
exchange. The principal differences between the Series F Preferred Stock and the
Exchange Notes would be that (i) in the event of any liquidation, insolvency or
bankruptcy of the Company, the Exchange Notes would be entitled to payment
before any distribution with respect to the then outstanding shares of the
Company's Preferred Stock or Common Stock, (ii) the annual interest rate on the
Exchange Notes would be .75% greater than the annual
25
<PAGE> 27
dividend rate on the Series F Preferred Stock and (iii) interest payments would
be deductible in the calculation of income subject to income tax.
The Company's ability to exchange the Series F Preferred Stock for the
Exchange Notes may be limited by the covenants and other provisions contained in
agreements to which the Company is, or may become, a party. The Company has no
present plans to issue Exchange Notes.
STOCKHOLDER RIGHTS PLAN AND SERIES D PREFERRED STOCK
On November 25, 1987, the Company's Board of Directors declared a dividend
distribution of one preferred stock purchase right (a "Right") for each
outstanding share of Common Stock to stockholders of record at the close of
business on December 18, 1987. Each Right entitles the registered holder to
purchase from the Company a unit consisting of one one-hundredth of a share (a
"Unit") of Series D Preferred Stock at a Purchase Price of $90 per Unit, subject
to adjustment. The description and terms of the Rights are set forth in the
Rights Agreement. In the summary below, capitalized terms are defined as set
forth in the Rights Agreement.
The Rights are attached to all Common Stock certificates representing
shares outstanding (including, upon issuance, the shares of Common Stock offered
hereby), and no separate Rights Certificates have been distributed. The Rights
will separate from the Common Stock and a Distribution Date will occur upon the
earlier of (i) 10 days following a public announcement that a person or group of
affiliated or associated persons (an "Acquiring Person") has acquired, or
obtained the right to acquire, beneficial ownership of 20% or more of the
outstanding shares of Common Stock (the date of the announcement being the
"Stock Acquisition Date"), (ii) 10 Business Days following the commencement of a
tender offer or exchange offer that would result in a person or group
beneficially owning 20% or more of such outstanding shares of Common Stock or
(iii) 10 Business Days following a determination by the Board of Directors that
a Person is an Adverse Person (as hereinafter defined). Until the Distribution
Date, (i) the Rights will be evidenced by the Common Stock certificates and will
be transferred with and only with such Common Stock certificates, (ii) new
Common Stock certificates issued after December 18, 1987 will contain a notation
incorporating the Rights Agreement by reference and (iii) the surrender for
transfer of any certificate for Common Stock outstanding will also constitute
the transfer of the Rights associated with the Common Stock represented by such
certificate.
An "Adverse Person" is a Person who beneficially owns at least 10% of the
then outstanding Common Stock of the Company and (i) who the Board of Directors
determines intends to cause the Company to repurchase the shares beneficially
owned by such Person or to cause pressure on the Company to take certain actions
not in the long-term best interests of the Company and its stockholders, or (ii)
whose ownership is determined by the Board of Directors to be reasonably likely
to cause a material adverse impact on the business or prospects of the Company
to the detriment of the Company's stockholders.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on December 17, 1997, unless earlier redeemed by the
Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. All shares of Common Stock issued
prior to the Distribution Date, and prior to the expiration or redemption of the
Rights, will be issued with Rights. Shares of Common Stock issued after the
Distribution Date, and prior to the expiration or redemption of the Rights, will
be issued with Rights Certificates if such shares are issued pursuant to the
exercise of stock options or under an employee benefit plan, or upon the
conversion of securities issued after adoption of the Rights Agreement;
provided, however, that (i) no such Rights Certificate shall be issued if, and
to the extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or the Person to whom such Rights Certificate would be issued, and (ii)
no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof. Except as otherwise determined by the Board of Directors, no other
shares of Common Stock issued after the Distribution Date will be issued with
Rights.
26
<PAGE> 28
In the event that (i) the Company is the surviving corporation in a merger
with an Acquiring Person and its Common Stock is not changed or exchanged, (ii)
a Person becomes the beneficial owner of 20% or more of the then outstanding
shares of Common Stock (except pursuant to an offer for all outstanding shares
of Common Stock at a price and on terms which the independent Continuing
Directors (as hereinafter defined) determine to be fair to and otherwise in the
best interests of the Company and its stockholders), (iii) an Acquiring Person
engages in one or more "self-dealing" transactions as set forth in the Rights
Agreement, (iv) during such time as there is an Acquiring Person, an event
occurs which results in such Acquiring Person's ownership interest being
increased by more than 1% (e.g., a reverse stock split), or (v) the Board of
Directors determines that a Person is an Adverse Person, at any time following
the Distribution Date, each holder of a Right will thereafter have the right to
receive, upon exercise of a Right, Common Stock (or, in certain circumstances,
cash, property or other securities of the Company) having a value equal to two
times the Exercise Price of the Right. The Exercise Price is the Purchase Price
multiplied by the number of Units issuable upon exercise of the Right prior to
the events described in this paragraph (initially, one). Notwithstanding any of
the foregoing, following the occurrence of any of the events set forth in this
paragraph, all Rights that are, or (under certain circumstances specified in the
Rights Agreement) were, beneficially owned by any Acquiring Person or Adverse
Person (or any Associate or Affiliate thereof, as defined in the Rights
Agreement) will be null and void. However, Rights are not exercisable following
the occurrence of any of the events set forth above until such time as the
Rights are no longer redeemable by the Company as set forth below.
In the event that, at any time following the Stock Acquisition Date, (i)
the Company is acquired in a merger or other business combination transaction
(other than a merger described in the preceding paragraph or a merger which
follows an offer described in the preceding paragraph), or (ii) 50% or more of
the Company's assets or earning power is sold or transferred, each holder of a
Right (except Rights which previously have been voided as set forth above) shall
thereafter have the right to receive, upon exercise, common stock of the
acquiring company having a value equal to two times the Exercise Price of the
Right. The events set forth in this paragraph and in the preceding paragraph are
referred to as the "Triggering Events."
The Purchase Price payable, and the number of Units of Series D Preferred
Stock or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Series D Preferred Stock, (ii) if holders of the Series D Preferred Stock are
granted certain rights or warrants to subscribe for Series D Preferred Stock or
convertible securities at less than the current market price of the Series D
Preferred Stock, or (iii) upon the distribution to holders of the Series D
Preferred Stock of evidences of indebtedness or assets (excluding regular
quarterly cash dividends) or of subscription rights or warrants (other than
those referred to above).
At any time until 15 days following the Stock Acquisition Date, the Company
may redeem the Rights in whole, but not in part, at a price of $.05 per Right,
payable, at the option of the Company, in cash, shares of Common Stock or such
other consideration as the Board of Directors may determine. Under certain
circumstances set forth in the Rights Agreement, the decision to redeem shall
require the concurrence of a majority of the Continuing Directors. After the
redemption period has expired, the Company's right of redemption may be
reinstated if each Acquiring Person reduces his beneficial ownership to 10% or
less of the outstanding shares of Common Stock in a transaction or series of
transactions not involving the Company. Immediately upon the action of the Board
of Directors ordering redemption of the Rights, with, where required, the
concurrence of the Continuing Directors, the Rights will terminate and the only
right of the holders of Rights will be to receive the $.05 redemption price.
The term "Continuing Director" means any member of the Board of Directors
of the Company who was a member of the Board prior to the date of the Rights
Agreement and is not an officer or employee of the Company and any person who is
subsequently elected to the Board if such person is recommended or approved by a
majority of the Continuing Directors and is not an officer or employee of the
Company, but shall not include an Acquiring Person, or an affiliate or associate
of an Acquiring Person, or any representative of the foregoing entities.
27
<PAGE> 29
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board of Directors (in certain circumstances, with the concurrence of the
Continuing Directors) in order to cure any ambiguity, defect or inconsistency,
to make changes which do not adversely affect the interests of holders of Rights
(excluding the interests of any Acquiring Person), or to shorten or lengthen any
time period under the Rights Agreement; provided, however, that no amendment to
adjust the time period governing redemption shall be made at such time as the
Rights are not redeemable. All actions of the Board of Directors, other than
those actions which require the concurrence of the Continuing Directors, will
require the concurrence of Directors who are not officers or employees of the
Company.
The Series D Preferred Stock purchasable upon exercise of the Rights would
be subordinate to any other series of the Company's Preferred Stock currently
outstanding or issued in the future. One one-hundredth of a share of Series D
Preferred Stock would be purchasable upon exercise of one Right. Each whole
share of Series D Preferred Stock would have a minimum preferential quarterly
dividend rate equal to the greater of $10 per share or 100 times the dividend
declared on the Common Stock. In the event of liquidation, the holders of the
Series D Preferred Stock would, subject to the rights of the holders of other
series of the Preferred Stock, receive a preferred liquidation payment equal to
the greater of $9,000 per share or the equivalent of 100 times the payment made
per share of the Common Stock. Each share of Series D Preferred Stock would have
100 votes, voting together with the Common Stock, except as Delaware law may
otherwise provide. In the event of any merger, consolidation or other
transaction in which shares of Common Stock are exchanged, each share of Series
D Preferred Stock would be entitled to receive 100 times the amount received per
share of Common Stock. The rights of the Series D Preferred Stock as to
dividends and voting, upon liquidation, and in the event of mergers and
consolidations, are protected by customary antidilution provisions.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
in a manner that causes the Rights to become exercisable. The Company believes,
however, that the Rights would neither affect any prospective offeror willing to
negotiate with the Board of Directors of the Company nor interfere with any
merger of other business combination approved by the Board of Directors of the
Company.
28
<PAGE> 30
STANDBY AND OTHER ARRANGEMENTS
The Purchasers named below have severally agreed to purchase, subject to
certain conditions, at a price of $53.750 per share of Series G Preferred Stock
and in the respective percentages set forth below, such of the shares of Series
G Preferred Stock as are properly tendered to Harris Trust and Savings Bank (the
"Agent") prior to the close of business, New York City time, on the Last
Conversion Date and have further agreed to convert such shares of Series G
Preferred Stock into shares of Common Stock.
<TABLE>
<CAPTION>
PURCHASER PERCENTAGE
------------------------------------------------------------------- ----------
<S> <C>
CS First Boston Corporation........................................ 50.00%
Goldman, Sachs & Co................................................ 50.00%
----------
Total............................................................ 100.00%
----------
----------
</TABLE>
The agreement governing the standby arrangements (the "Standby Agreement")
provides that the Purchasers are obligated to purchase all shares of Series G
Preferred Stock properly tendered to the Agent prior to the close of business,
New York City time, on the Last Conversion Date. The Purchasers may also
purchase shares of Series G Preferred Stock in the open market prior to the
close of business, New York City time, on the Last Conversion Date, and the
Purchasers have agreed with the Company to convert any shares of Series G
Preferred Stock so purchased into Common Stock. In the event that less than all
of the shares of Series G Preferred Stock are surrendered for conversion prior
to the close of business, New York City time, on the Last Conversion Date, the
Purchasers have severally agreed to purchase directly from the Company up to
such whole number of shares of Common Stock as would have been issuable upon
conversion of any Series G Preferred Stock outstanding at the close of business,
New York City time, on the Last Conversion Date. The price to the Purchasers of
Common Stock so purchased will be $29.7574 per share. The Standby Agreement
provides that the obligations of the Purchasers are subject to certain
conditions precedent.
Pursuant to the terms of the Standby Agreement and in consideration of
their obligations thereunder, the Company has agreed to pay the Purchasers the
sum of $750,000 (the "Standby Fee") plus an additional amount equal to $1.1903
per share for each share of Common Stock, in excess of 135,150 shares, purchased
from the Company pursuant to the Standby Agreement or acquired by the Purchasers
through conversion of shares of Series G Preferred Stock tendered to the Agent
for purchase by the Purchasers.
The Company has been advised by the Purchasers that they propose to in part
offer the shares of Common Stock offered hereby directly to other purchasers as
set forth on the cover page of this Prospectus and in part to certain securities
dealers at prices which may represent concessions from the prices at which such
shares are then being offered to the public. The Purchasers may allow, and such
dealers may reallow, a concession to certain brokers and dealers. The amount of
such concessions and reallowances will be determined from time to time by the
Purchasers. In effecting such transactions, the Purchasers may realize profits
and losses independent of the compensation referred to above. The Purchasers
have agreed to remit to the Company 50% of the profit (determined in accordance
with the terms of the Standby Agreement) made by the Purchasers from the sale of
Common Stock purchased by the Purchasers from the Company pursuant to the
Standby Agreement or acquired through conversion of shares of Series G Preferred
Stock acquired by the Purchasers through the Agent.
The Company has agreed to indemnify the Purchasers against certain civil
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Purchasers may be required to make in respect thereof.
The Company has agreed that, from the date of this Prospectus through the
date 60 days after the Redemption Date, if will not (i) offer, sell, contract to
sell or otherwise dispose of any securities of the Company which are
substantially similar to the Common Stock, (ii) issue shares of capital stock or
debt instruments convertible into Common Stock to any person other than the
Purchasers under any plan of distribution requiring the registration of such
shares of Common Stock or such convertible shares or debt instruments under the
Securities Act and (iii) register any shares of Common Stock under the
Securities Act in connection with any secondary distribution of such shares of
Common Stock or such convertible shares or
29
<PAGE> 31
debt instruments (in the cases of (i), (ii) or (iii), other than in the ordinary
course of the Company's dividend reinvestment and stock option, stock incentive,
employee stock ownership, stock investment, thrift, stock purchase, benefit or
stockholders' rights plans, as a result of the conversion of the Company's
outstanding Series G Preferred Stock, or as otherwise contemplated in this
Prospectus), except, in each case, with the written consent of the Purchasers.
CS First Boston Corporation and Goldman, Sachs & Co. have from time to time
provided investment banking services to the Company and may do so in the future.
EXPERTS
The consolidated financial statements as of December 31, 1993 and 1992 and
for each of the three years in the period ended December 31, 1993 included in
this Prospectus have been so included in reliance on the report of Price
Waterhouse, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
VALIDITY OF SHARES
The validity of the Common Stock offered hereby will be passed upon for the
Company by Mayer, Brown & Platt, Chicago, Illinois, and for the Underwriters by
Sullivan & Cromwell, New York, New York.
30
<PAGE> 32
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants..................................................... F-2
Consolidated Statements of Operations and Reinvested Earnings for the three years
ended December 31, 1993............................................................. F-3
Consolidated Statement of Cash Flows for the three years ended December 31, 1993...... F-4
Consolidated Balance Sheet at December 31, 1993 and 1992.............................. F-5
Schedules to Consolidated Financial Statements at December 31, 1993 and 1992 relating
to: Investments and Advances; Property, Plant and Equipment; and Long-Term Debt..... F-6
Statement of Accounting and Financial Policies........................................ F-7
Notes to Consolidated Financial Statements............................................ F-9
</TABLE>
F-1
<PAGE> 33
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Inland Steel Industries, Inc.
In our opinion, the consolidated financial statements on pages F-3 through
F-26 present fairly, in all material respects, the financial position of Inland
Steel Industries, Inc. and Subsidiary Companies at December 31, 1993 and 1992,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1993, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Notes 10 and 11 to the consolidated financial statements,
in 1992 the Company changed its method of accounting for postretirement benefits
other than pensions and for income taxes.
/s/ PRICE WATERHOUSE
Chicago, Illinois
February 23, 1994
F-2
<PAGE> 34
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND REINVESTED EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1993 1992 1991
-------- -------- --------
IN MILLIONS (EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
NET SALES................................................ $3,888.2 $3,494.3 $3,404.5
-------- -------- --------
OPERATING COSTS AND EXPENSES:
Cost of goods sold (excluding depreciation)........... 3,457.8 3,305.8 3,124.4
Selling, general and administrative expenses.......... 190.0 193.9 200.0
Depreciation.......................................... 131.2 128.9 117.6
State, local and miscellaneous taxes.................. 60.3 61.6 58.4
Facility shutdown and restructuring provisions (Note
9).................................................. 22.3 -- 205.0
Gain on sale of partial interest in joint venture
(Note 13)........................................... -- (22.5) --
-------- -------- --------
Total................................................. 3,861.6 3,667.7 3,705.4
-------- -------- --------
OPERATING PROFIT (LOSS).................................. 26.6 (173.4) (300.9)
-------- -------- --------
OTHER EXPENSE:
General corporate expense, net of income items........ 22.2 30.3 23.4
Interest and other expense on debt.................... 78.0 54.9 46.8
Corporate restructuring provision (Note 9)............ -- -- 10.0
-------- -------- --------
LOSS BEFORE INCOME TAXES................................. (73.6) (258.6) (381.1)
-------- -------- --------
PROVISIONS FOR INCOME TAXES (Note 11):
Current taxes......................................... 2.8 .9 12.3Cr.
Deferred taxes........................................ 38.8Cr. 100.1Cr. 93.7Cr.
-------- -------- --------
Total............................................... 36.0Cr. 99.2Cr. 106.0Cr.
-------- -------- --------
LOSS BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE............................................. (37.6) (159.4) (275.1)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (Note
10)................................................... -- (656.2) --
-------- -------- --------
NET LOSS................................................. (37.6) (815.6) (275.1)
Dividend requirements for preferred stock (net of tax
benefits related to leveraged ESOP shares)............ 32.0 32.1 30.5
-------- -------- --------
Net loss applicable to common stock...................... $ (69.6) $ (847.7) $ (305.6)
-------- -------- --------
-------- -------- --------
PER SHARE OF COMMON STOCK:
Before cumulative effect of change in accounting
principle........................................... $ (1.96) $ (5.83) $ (9.88)
Cumulative effect of change in accounting principle... -- (19.99) --
-------- -------- --------
NET LOSS.............................................. $ (1.96) $ (25.82) (9.88)
-------- -------- --------
-------- -------- --------
CONSOLIDATED STATEMENT OF REINVESTED EARNINGS
Earnings reinvested in the business (accumulated deficit)
at beginning of year.................................. $ (302.3) $ 545.4 $ 856.2
Net loss for the year.................................... (37.6) (815.6) (275.1)
Dividends declared:
Common ($.15 per share in 1991)....................... -- -- (4.6)
Preferred (Notes 4 and 6)............................. (32.0) (32.1) (31.1)
-------- -------- --------
Earnings reinvested in the business (accumulated
deficit) at end of year............................. $ (371.9) $ (302.3) $ 545.4
-------- -------- --------
-------- -------- --------
</TABLE>
- -------------------------
cr. = credit
See Notes to Consolidated Financial Statements.
F-3
<PAGE> 35
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1993 1992 1991
------- ------- -------
INCREASE (DECREASE) IN CASH
--
IN MILLIONS
<S> <C> <C> <C>
OPERATING ACTIVITIES:
NET LOSS......................................................... $ (37.6) $(815.6) $(275.1)
------- ------- -------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH PROVIDED FROM
(USED FOR) OPERATING ACTIVITIES:
Depreciation................................................... 131.8 129.6 118.2
Facility shutdown and restructuring provisions................. 18.9 -- 212.4
Deferred income taxes.......................................... (36.8) (455.7) (93.7)
Deferred employee benefit cost, including cumulative effect of
change in accounting principle.............................. 38.1 1,066.7 (14.3)
Stock issued for coverage of employee benefit plan expense..... 19.1 13.4 14.0
Gain on sale of partial interest in joint venture.............. -- (22.5) --
Change in: Receivables......................................... (46.4) (27.1) 53.8
Inventories....................................... (4.2) 5.6 72.1
Accounts payable.................................. 34.0 22.8 (74.0)
Accrued salaries and wages........................ 1.6 (1.8) (6.7)
Other accrued liabilities......................... 4.9 30.0 4.0
Other deferred items.............................. (11.4) 33.2 14.3
------- ------- -------
NET ADJUSTMENTS................................................ 149.6 794.2 300.1
------- ------- -------
NET CASH PROVIDED FROM (USED FOR) OPERATING ACTIVITIES......... 112.0 (21.4) 25.0
------- ------- -------
INVESTING ACTIVITIES:
Capital expenditures............................................. (105.6) (64.4) (140.2)
Investments in and advances to joint ventures, net............... (1.9) (6.3) (24.9)
Proceeds from sales of assets.................................... 6.5 28.1 13.9
------- ------- -------
NET CASH USED FOR INVESTING ACTIVITIES......................... (101.0) (42.6) (151.2)
------- ------- -------
FINANCING ACTIVITIES:
Sale of common stock............................................. 178.7 97.9 --
Sale of preferred stock.......................................... -- -- 72.8
Long-term debt issued............................................ 46.8 145.4 121.4
Long-term debt retired........................................... (78.5) (49.4) (39.3)
Dividends paid................................................... (35.7) (35.8) (37.6)
Acquisition of treasury stock.................................... (9.5) (3.5) (2.3)
------- ------- -------
NET CASH PROVIDED FROM FINANCING ACTIVITIES.................... 101.8 154.6 115.0
------- ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............. 112.8 90.6 (11.2)
Cash and equivalents -- beginning of year........................ 137.7 47.1 58.3
------- ------- -------
Cash and equivalents -- end of year.............................. $ 250.5 $ 137.7 $ 47.1
------- ------- -------
------- ------- -------
SUPPLEMENTAL DISCLOSURES:
Cash paid (received) during the year for:
Interest (net of amount capitalized)........................... $ 76.0 $ 53.1 $ 40.4
Income taxes, net.............................................. 1.9 (12.3) (12.5)
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE> 36
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------
1993 1992
-------- --------
IN MILLIONS
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................. $ 250.5 $ 137.7
Receivables less provision for allowances, claims and doubtful
accounts of $28.2 and $23.2, respectively.......................... 427.3 380.9
Inventories (Note 1).................................................. 376.9 372.7
Deferred income taxes (Note 11)....................................... 44.2 35.2
-------- --------
Total current assets.......................................... 1,098.9 926.5
Investments and advances (see details on next page)..................... 221.0 212.6
Property, plant and equipment, at cost, less accumulated depreciation
(see details on next page)............................................ 1,507.7 1,548.8
Deferred income taxes (Note 11)......................................... 428.4 396.9
Intangible pension asset (Note 10)...................................... 122.1 --
Excess of cost over net assets acquired................................. 26.4 27.7
Deferred charges and other assets....................................... 31.3 34.0
-------- --------
Total assets.................................................. $3,435.8 $3,146.5
-------- --------
-------- --------
LIABILITIES
Current liabilities:
Accounts payable...................................................... $ 300.9 $ 266.9
Accrued liabilities:
Salaries, wages and commissions.................................... 75.7 74.1
Federal income taxes............................................... 2.7 5.0
Taxes, other than Federal income taxes............................. 75.6 68.7
Interest on debt................................................... 13.0 14.3
Terminated facilities costs and other (Note 9)..................... 35.8 23.0
Long-term debt due within one year (Note 3)........................ 98.8 33.5
-------- --------
Total current liabilities..................................... 602.5 485.5
Long-term debt (see details on next page and Note 3).................... 777.1 873.7
Allowance for terminated facilities costs and other (Note 9)............ 36.1 43.2
Deferred employee benefits (Note 10).................................... 1,371.1 1,211.0
Deferred income......................................................... 25.6 26.8
-------- --------
Total liabilities............................................. 2,812.4 2,640.2
TEMPORARY EQUITY
Redeemable preferred stock, Series F, $1.00 par value, 185,000 shares
issued and outstanding, redeemable at $1,000 per share (Note 4)....... 185.0 185.0
Common stock repurchase commitment (Note 4)............................. 40.8 49.9
-------- --------
STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value, 15,000,000 shares authorized for all
series including Series F, aggregate liquidation value of $230.6 in
1993 and $231.6 in 1992 (Notes 5 and 6)............................... 4.7 4.7
Common stock, $1.00 par value; authorized--100,000,000 shares; issued --
47,854,208 shares for 1993 and 42,104,208 shares for 1992 (Notes 6
through 8)............................................................ 47.9 42.1
Capital in excess of par value (Note 6)................................. 1,106.4 945.0
Accumulated deficit..................................................... (371.9) (302.3)
Unearned compensation -- ESOP (Note 5).................................. (112.2) (122.2)
Common stock repurchase commitment (Note 4)............................. (40.8) (49.9)
Treasury stock at cost -- Common stock of 6,767,139 shares in 1993 and
6,857,020 shares in 1992.............................................. (236.5) (246.0)
-------- --------
Total stockholders' equity.................................... 397.6 271.4
-------- --------
Total liabilities, temporary equity, and stockholders'
equity.................................................... $3,435.8 $3,146.5
-------- --------
-------- --------
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE> 37
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
SCHEDULES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------
1993 1992
-------- --------
IN MILLIONS
<S> <C> <C>
INVESTMENTS AND ADVANCES
Steel processing joint ventures....................................................... $ 168.2 $ 142.5
Raw material joint ventures........................................................... 37.5 34.2
Common stock of Nippon Steel Corporation held for investment, net of valuation
allowances of $5.1 and $5.8, respectively........................................... 9.5 8.8
Other investments and advances........................................................ 5.8 27.1
-------- --------
Total............................................................................. $ 221.0 $ 212.6
-------- --------
-------- --------
PROPERTY, PLANT AND EQUIPMENT
Land, land improvements and mineral properties........................................ $ 156.5 $ 155.9
Buildings, machinery and equipment.................................................... 3,749.0 3,786.0
Transportation equipment.............................................................. 135.1 136.7
Property under capital leases--primarily machinery and equipment...................... 43.1 44.2
-------- --------
Total............................................................................. 4,083.7 4,122.8
Less --
Accumulated depreciation.............................................................. 2,432.1 2,433.3
Accumulated depreciation -- capital leases............................................ 35.5 34.5
Allowance for retirements and terminated facilities (Note 9).......................... 108.4 106.2
-------- --------
Net............................................................................... $1,507.7 $1,548.8
-------- --------
-------- --------
LONG-TERM DEBT
Inland Steel Industries, Inc.
Guaranteed ESOP notes, 7.96%, 8.43% and 8.80%, due through July 2, 2004............... $ 123.6 $ 131.2
Notes, 12 3/4% due December 15, 2002.................................................. 150.0 150.0
-------- --------
Total Inland Steel Industries, Inc................................................ 273.6 281.2
-------- --------
Inland Steel Company
First Mortgage Bonds:
Series O, 8 3/4% due July 15, 1995.................................................. -- 10.0
Series P, 8 7/8% due April 15, 1999................................................. -- 22.5
Series Q, 9 1/2% due September 1, 2000.............................................. -- 42.8
Series R, 7.9% due January 15, 2007................................................. 87.9 93.1
Series T, 12% due December 1, 1998.................................................. 125.0 125.0
Pollution Control Series 1977, 5 3/4% due February 1, 2007.......................... 26.5 26.5
Pollution Control Series 1978, 6 1/2% due May 15, 2008.............................. 52.0 52.0
Pollution Control Series 1980B, 9 3/4% due October 1, 2000.......................... -- 25.0
Pollution Control Series 1980C, 10% due October 1, 2010............................. -- 5.0
Pollution Control Series 1982A, 10% due December 1, 2012............................ -- 10.0
Pollution Control Series 1982B, 10 3/4% due December 1, 2012........................ 17.0 17.0
Pollution Control Series 1993, 6.8% due June 1, 2013................................ 40.0 --
-------- --------
Total First Mortgage Bonds............................................................ 348.4 428.9
Obligations for Industrial Development Revenue Bonds:
Pollution Control Projects No. 3 and No. 4 at rates ranging from 6 1/4% to 8 1/8%
due through June 1, 2005........................................................... 32.0 34.0
Pollution Control Project No. 9, 10% due November 1, 2011........................... 38.0 38.0
Obligations under capital leases including Pollution Control
Projects No. 1 and No. 2 -- primarily at rates ranging from 5.9% to 12.6%, due
through August 1, 1998............................................................. 20.7 26.0
No. 2 BOF Shop Caster Project Debt, 9.4% and 11 1/4%, due through May 7, 2001......... 36.2 39.8
-------- --------
Total Inland Steel Company............................................................ 475.3 566.7
Joseph T. Ryerson & Son, Inc.
Obligation for Industrial Revenue Bond with floating rate, set weekly based on 13-week
Treasury bills, due November 1, 2007................................................ 7.0 7.0
Other long-term debt 10 1/4% due through November 30, 1997............................ 1.7 1.9
J.M. Tull Metals Company, Inc.
Obligations for Industrial Revenue Bonds and other long-term debt with variable rates
and fixed rates to 9 7/8%, due through August 17, 1998.............................. 8.8 2.6
Senior Notes, 9.43% due through July 29, 1997......................................... 10.7 14.3
-------- --------
Total long-term debt.................................................................. $ 777.1 $ 873.7
-------- --------
-------- --------
</TABLE>
See Notes to Consolidated Financial Statements
F-6
<PAGE> 38
STATEMENT OF ACCOUNTING AND FINANCIAL POLICIES
The following briefly describes the Company's principal accounting and
financial policies.
ACCOUNTING FOR EQUITY INVESTMENTS
The Company's investments in 20 percent or more but less than
majority-owned companies, joint ventures and partnerships, and the Company's
majority interest in the I/N Tek partnership, are accounted for under the equity
method.
PER SHARE RESULTS
Primary per share results are based on the weighted average number of
common shares outstanding and take into account the dividend requirements of
preferred stock, net of tax benefits related to leveraged Employee Stock
Ownership Plan ("ESOP") shares, and the dilutive effect of outstanding stock
options.
The outstanding preferred shares have the potential of necessitating
presentation of fully diluted earnings per share, in addition to the primary per
share results, reflecting the further dilutive effect of the assumed conversion
into common stock of the outstanding shares of convertible preferred stock, and
the elimination of the related preferred stock dividends. Fully diluted earnings
per common share would also reflect an adjustment for the additional ESOP
contribution, net of tax benefits, that would be necessary to meet debt service
requirements that would arise upon conversion of the leveraged Series E ESOP
Convertible Preferred Stock ("Series E Preferred Stock"), due to the current
excess of the preferred dividend over the common dividend.
INVENTORY VALUATION
Inventories are valued at cost which is not in excess of market. Cost is
determined by the last-in, first-out method except for supply inventories, which
are determined by the average cost or first-in, first-out methods.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is depreciated for financial reporting
purposes over the estimated useful lives of the assets. Steelmaking machinery
and equipment, a significant class of assets, is depreciated on a
production-variable method, which adjusts straight-line depreciation to reflect
production levels at the steel plant. The adjustment is limited to not more than
a 25 percent increase or decrease from straight-line depreciation. Blast furnace
relining expenditures are capitalized and amortized on a unit-of-production
method over the life of the lining. All other assets are depreciated on a
straight-line method.
Expenditures for normal repairs and maintenance are charged to income as
incurred.
Gains or losses from significant abnormal disposals or retirements of
properties are credited or charged to income. The cost of other retired assets
less any sales proceeds is charged to accumulated depreciation.
EXCESS OF COST OVER NET ASSETS ACQUIRED
The excess of cost over fair value of net assets of businesses acquired is
being amortized over 25-year periods.
BENEFITS FOR RETIRED EMPLOYEES
Pension benefits are provided by the Company to substantially all employees
under a trusteed non-contributory plan. Life insurance and certain medical
benefits are provided for substantially all retired employees.
The estimated costs of pension, medical, and life insurance benefits are
determined annually by consulting actuaries. With the adoption of Financial
Accounting Standards Board ("FASB") Statement No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions," effective January 1,
F-7
<PAGE> 39
1992, the cost of healthcare benefits for retirees, previously recognized as
incurred, is being accrued during their term of employment (see Note 10).
Pensions are funded in accordance with ERISA requirements in a trust established
under the plan. Costs for retired employee medical benefits and life insurance
are funded when claims are submitted.
CASH EQUIVALENTS
Cash equivalents reflected in the Statement of Cash Flows are highly
liquid, short-term investments with maturities of three months or less that are
an integral part of the Company's cash management portfolio. The carrying amount
of cash equivalents approximates fair value because of the short maturity of
those instruments.
INCOME TAXES
Effective January 1, 1992, the Company adopted FASB Statement No. 109,
"Accounting for Income Taxes." Previously, the Company accounted for income
taxes under Accounting Principles Board ("APB") Opinion No. 11.
F-8
<PAGE> 40
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: INVENTORIES
Inventories were classified on December 31 as follows:
<TABLE>
<CAPTION>
1993 1992
------ ------
IN MILLIONS
<S> <C> <C>
In process and finished products:
Integrated Steel Operations............................................... $ 55.6 $ 67.0
Steel Service Center Operations........................................... 276.3 259.5
------ ------
331.9 326.5
------ ------
Raw materials and supplies:
Iron ore.................................................................. 25.3 23.4
Scrap and other raw materials............................................. 7.8 9.3
Supplies.................................................................. 11.9 13.5
------ ------
45.0 46.2
------ ------
Total.................................................................. $376.9 $372.7
------ ------
------ ------
</TABLE>
During 1993, various inventory quantities were reduced, resulting in
liquidations of LIFO inventory quantities carried at lower costs prevailing in
prior years as compared with the current year costs. The effect of these
liquidations on continuing operations was to decrease cost of goods sold by
$24.1 million in 1993. The effect on cost of goods sold of LIFO liquidations in
1992 and 1991 was not material.
Replacement costs for the LIFO inventories exceeded LIFO values by
approximately $348 million and $380 million on December 31, 1993 and 1992,
respectively.
NOTE 2: BORROWING ARRANGEMENTS
On December 31, 1993, the Company's subsidiaries had available unused
credit facilities totaling $225 million. Each facility requires compliance with
various financial covenants including minimum net worth and leverage ratios.
A $100 million unsecured credit agreement between Joseph T. Ryerson & Son,
Inc. and a group of banks provides a revolving credit facility to March 31,
1995.
A special-purpose subsidiary of Inland Steel Company has a $100 million
revolving credit facility, which extends to November 30, 1995, with the same
banks as the Ryerson agreement. Inland Steel Company has agreed to sell
substantially all of its receivables to this special-purpose subsidiary and
these receivables are used to secure this facility.
J.M. Tull Metals Company, Inc. has a $25 million unsecured revolving credit
agreement with other banks, which extends to December 15, 1994.
Cash availability as well as various covenants in subsidiary borrowing
arrangements limited the cash that subsidiaries could transfer to the Company in
the form of dividends and advances to $225 million at year-end 1993. This amount
is subject to change during 1994 based on the financial performance of each
subsidiary.
NOTE 3: LONG-TERM DEBT
Each series of First Mortgage Bonds issued by Inland Steel Company is
limited to the principal amount outstanding and, with the exception of the
Pollution Control Series 1982 Bonds, the Pollution Control Series 1993 Bonds,
and the Series T First Mortgage Bonds, is subject to a sinking fund.
Substantially all the
F-9
<PAGE> 41
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
property, plant and equipment owned by Inland Steel Company at its Indiana
Harbor Works is subject to the lien of the First Mortgage. This property had a
net book value of approximately $1.0 billion on December 31, 1993.
In June 1993, the Company, through its Inland Steel Company subsidiary,
refinanced $40 million of pollution control revenue bonds at an interest rate of
6.8 percent. The weighted average percentage rate of the refunded bonds was 9.9
percent. At year-end 1993 all remaining outstanding Series O, P, and Q First
Mortgage Bonds were called to be redeemed on January 28, 1994. Accordingly, the
outstanding principal amount of $75.1 million at December 31, 1993 has been
classified as a current liability. Prior to the redemption of the Series O, P
and Q First Mortgage Bonds, under terms of the First Mortgage, Inland Steel
Company was prohibited, when its reinvested earnings were less than $187.1
million, from paying dividends on its common stock (other than stock dividends)
to the Company. At year-end 1993, the accumulated deficit of Inland Steel
Company was $1.0 billion.
In December 1992, Inland Steel Industries issued $150 million principal
amount of unsecured 12 3/4% Notes due December 15, 2002. The Notes are
obligations solely of the Company and not of any of its subsidiaries. Net
proceeds of the offering were added to the general funds of the Company for
general corporate purposes. The Notes, which are not entitled to the benefit of
any sinking fund, are not subject to redemption prior to December 15, 1997.
In December 1991, Inland Steel Company issued $125 million principal amount
of First Mortgage 12% Bonds, Series T, due December 1, 1998. Net proceeds of the
offering were added to the general funds of Inland Steel Company for general
corporate purposes, allowing its special-purpose subsidiary to repay its
short-term bank borrowing. The Bonds are not subject to redemption prior to
their maturity.
Both the First Mortgage Indenture under which the Series T Bonds were
issued and the Indenture under which the Notes were issued contain covenants
limiting, among other things, the creation of additional indebtedness; the
declaration and payment of dividends and distributions on the Company's capital
stock; as well as mergers, consolidations, retirement of certain debt, and the
sales or purchases of certain assets.
The outstanding borrowing of the Company's ESOP is recorded as a liability
of the Company because the Company has committed to make payments (dividends and
supplemental contributions) to the ESOP Trust sufficient to service the ESOP
debt. See Note 5 for additional information on the ESOP debt.
Maturities of long-term debt and capitalized lease obligations due within
five years are: $98.8 million in 1994, $28.9 million in 1995, $31.8 million in
1996, $33.6 million in 1997, and $162.2 million in 1998. See Note 14 regarding
commitments and contingencies for other scheduled payments.
Interest cost incurred by the Company totaled $80.9 million in 1993, $65.1
million in 1992, and $60.3 million in 1991. Included in these totals is
capitalized interest of $2.9 million in 1993, $10.2 million in 1992, and $13.5
million in 1991.
The estimated fair value of the Company's long-term debt (including current
portions thereof) using quoted market prices of Company debt securities recently
traded and market-based prices of similar securities for those securities not
recently traded was $929 million, as compared with the carrying value of $876
million included in the balance sheet, at year-end 1993.
NOTE 4: REDEEMABLE PREFERRED STOCK
In December 1989, the Company sold 185,000 shares of the Company's Series F
Exchangeable Preferred Stock, $1.00 par value per share ("Series F Preferred
Stock"), for $185 million to NS Finance III, Inc., an indirect wholly owned
subsidiary of Nippon Steel Corporation ("NSC"). The Series F Preferred Stock
entitles the holder to cumulative annual dividends of 9.48 percent (based on the
purchase price of the stock) payable quarterly; to certain preferences including
preference in the payment of dividends and in liquidation
F-10
<PAGE> 42
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
over holders of the Company's Series E Preferred Stock and common stock; and to
30.604 votes per share, which number may be adjusted from time to time upon the
occurrence of certain events. The voting power is based on the equivalent number
of common shares represented by a market value of $185 million at the time the
Series F Preferred Stock was issued. In the event of a change in control or
certain other events, the holder may require the Company to redeem the Series F
Preferred Stock at a 10 percent premium. In the event of an early redemption,
the Company may be required to reimburse the holder for certain costs incurred
as a result of such redemption. Any accrued but unpaid dividends bear interest
at the annual rate of 11.48 percent, compounded quarterly. The Series F
Preferred Stock is exchangeable at the option of the Company and with the
consent of NSC for the Company's 10.23% Subordinated Voting Note.
The Series F Preferred Stock or the Subordinated Voting Note is required to
be redeemed in two stages, consisting of $85 million on December 18, 1996, and
the remaining $100 million on December 17, 1999, plus, in each instance, accrued
and unpaid dividends thereon.
In connection with the sale of the Series F Preferred Stock, the Company
agreed to repurchase $185 million of the Company's common stock, of which $144
million (amounting to 4.6 million shares) has been repurchased. As of December
31, 1993, the amount representing the remaining repurchase commitment of $41
million has been classified as temporary equity with a corresponding reduction
of stockholders' equity. In December 1990, the Company suspended open-market
stock purchases and agreed to maintain cash, certain securities, a surety bond
or letter of credit, or some combination thereof, currently equal to $22
million, to meet its obligation under the Series F Preferred Stock sale
agreement.
The terms of a letter agreement between the Company and NSC which provided
for the purchase of the Series F Preferred Stock generally restrict the
acquisition by NSC of additional securities of the Company and the disposition
of the Series F Preferred Stock. Under certain circumstances related to a
potential change in control of the Company, NSC may seek to acquire voting
securities of the Company on terms and conditions no less favorable to the
Company's stockholders than the terms and conditions offered in connection with
the potential change in control.
The Company has agreed not to create issues of stock senior to the Series F
Preferred Stock. So long as the purchaser and permitted transferees beneficially
own at least $100 million of Series F Preferred Stock or $100 million aggregate
principal amount of the Subordinated Voting Note, the Company has agreed with
NSC to nominate a mutually acceptable individual for election to the Company's
Board of Directors. No such individual has been nominated.
The Company believes that it is not practical to estimate a fair market
value different from the carrying value of this security as the security was
sold to a joint venture partner and has numerous features unique to this
security including, but not limited to, the right to appoint a director, the
ability to convert to voting debt, the right of first refusal in change in
control situations, a limitation on the acquisition of additional Company stock,
and the agreement by the Company to buy back $185 million of the Company's
common stock.
See Note 12 regarding other related party transactions.
NOTE 5: EMPLOYEE STOCK OWNERSHIP PLAN
In July 1989, the Board of Directors amended the Inland Steel Industries
Thrift Plan for salaried employees to include an ESOP. The ESOP Trust purchased
3,086,800 newly issued shares of Series E Preferred Stock from the Company with
the proceeds of loans totaling $150 million. The ESOP notes are payable in
semi-annual installments through July 2004 and are guaranteed by Joseph T.
Ryerson & Son, Inc., a wholly owned subsidiary of the Company.
Interest expense is recognized by the Company as it is incurred by the ESOP
Trust. Compensation expense recognition is equal to the original stated value of
the shares of Series E Preferred Stock allocated to
F-11
<PAGE> 43
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the participants during the period. Dividends on the Series E Preferred Stock
are recorded as declared and dividends on unallocated leveraged shares (shares
purchased by the ESOP Trust in July 1989) serve to reduce expense recognized by
the Company.
Interest expense incurred by the ESOP Trust totaled $11.3 million, $11.9
million and $12.4 million in 1993, 1992 and 1991, respectively. In 1993, the
ESOP Trust received $10.6 million in dividends and $8.1 million in contributions
from the Company to make required principal and interest payments. For 1992, the
ESOP Trust received $10.7 million in dividends and $8.0 million in contributions
from the Company to make such required payments. In 1991, the Company paid $10.8
million in dividends and provided $2.3 million in contributions.
NOTE 6: CAPITAL STOCK
On December 31, 1993, 11,317,153 shares of common stock remained reserved
for issuance under the Company's various employee stock plans and upon
conversion of shares of preferred stock.
In the fourth quarter of 1993, the Company sold 5.75 million shares of
new-issue common stock, $1 par value per share, in a public offering. The net
proceeds of the offering totaled approximately $179 million.
In the third quarter of 1992, the Company sold 4.3 million shares of
new-issue common stock, $1 par value per share, in a public offering. The net
proceeds of the offering totaled approximately $98 million.
The indenture relating to the Company's 12 3/4% Notes prohibits the Company
from declaring or paying cash dividends on the Company's common stock under
certain conditions. At year-end 1993, up to $67 million of common dividends
could have been paid under the terms of the indenture.
The Series A $2.40 Cumulative Convertible Preferred Stock, $1.00 par value
per share ("Series A Preferred Stock"), is convertible into common stock at the
rate of one share of common stock for each share of Series A Preferred Stock and
is redeemable, at the Company's option, at $44 per share plus any accrued and
unpaid dividends. Each such share is entitled to one vote and generally votes
together with holders of common stock as one class.
Shares of Series E Preferred Stock, $1.00 par value per share, entitle the
holder to cumulative annual dividends of $3.523 per share, payable
semi-annually, and to 1.25 votes per share. Shares of Series E Preferred Stock
are convertible into the Company's common stock on a one-for-one basis. From
time to time, the Company elects to provide additional shares of Series E
Preferred Stock to the ESOP Trust to cover employee matching requirements not
covered by the release of shares through scheduled principal and interest
payments by the ESOP Trust on its outstanding notes (see Note 5).
In March 1991, the Company sold 1.5 million shares of Series G $4.625
Cumulative Convertible Exchangeable Preferred Stock, $1.00 par value per share
("Series G Preferred Stock"), in a public offering. Each share of Series G
Preferred Stock is convertible, at the option of the holder, into 1.802 shares
of Company common stock. The Series G Preferred Stock may be exchanged, at the
Company's option, on any dividend payment date for the Company's 9 1/4%
Convertible Subordinated Debentures due May 1, 2016, at a rate of $50.00
principal amount of the Debentures for each share of Series G Preferred Stock.
The shares are redeemable at the Company's option beginning May 1, 1994, at a
price (plus accrued and unpaid dividends) which declines in annual increments
from $53.2375 for the one-year period commencing May 1, 1994, to $50.00
beginning May 1, 2001. Net proceeds from the sale approximated $73 million.
F-12
<PAGE> 44
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table details changes in capital accounts:
<TABLE>
<CAPTION>
PREFERRED STOCK
------------------------------------------------------
CAPITAL IN
COMMON STOCK TREASURY STOCK SERIES A SERIES E SERIES G EXCESS OF
----------------- ---------------- ---------------- ---------------- ---------------- PAR VALUE
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS DOLLARS
------ ------- ------ ------- ------ ------- ------ ------- ------ ------- ----------
SHARES IN THOUSANDS AND DOLLARS IN MILLIONS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1991............... 37,804 $37.8 (6,918) $(253.9) 97 $.1 3,083 $ 3.1 -- $ -- $ 785.4
Acquisition of
treasury stock... -- -- (99 ) (2.3) -- -- -- -- -- -- --
Issued under
employee benefit
plans............ -- -- 185 7.8 -- -- 86 -- -- -- .5
Redemption of
Series E
Preferred
Stock............ -- -- -- -- -- -- (22 ) -- -- -- (1.1)
Issuance of Series
G Preferred
Stock............ -- -- -- -- -- -- -- -- 1,500 1.5 70.9
Other changes...... -- -- (15 ) (.3) -- -- -- -- -- -- .2
------ ------- ------ ------- -- -- ------ ------- ------ ------- ----------
Balance at December
31, 1991........... 37,804 37.8 (6,847) (248.7) 97 .1 3,147 3.1 1,500 1.5 855.9
Acquisition of
treasury stock... -- -- (150 ) (3.5) -- -- -- -- -- -- --
Issued under
employee benefit
plans............ -- -- 144 6.1 -- -- 19 -- -- -- (2.1)
Redemption of
Series E
Preferred
Stock............ -- -- -- -- -- -- (31 ) -- -- -- (1.5)
Issuance of Common
Stock............ 4,300 4.3 -- -- -- -- -- -- -- -- 93.4
Other changes...... -- -- (4 ) .1 -- -- -- -- -- -- (.7)
------ ------- ------ ------- -- -- ------ ------- ------ ------- ----------
Balance at December
31, 1992........... 42,104 42.1 (6,857) (246.0) 97 .1 3,135 3.1 1,500 1.5 945.0
Acquisition of
treasury stock... -- -- (341 ) (9.5) -- -- -- -- -- -- --
Issued under
employee benefit
plans............ -- -- 440 19.3 -- -- 39 -- -- -- (7.5)
Redemption of
Series E
Preferred
Stock............ -- -- -- -- -- -- (59 ) -- -- -- (2.8)
Issuance of Common
Stock............ 5,750 5.8 -- -- -- -- -- -- -- -- 172.9
Other changes...... -- -- (9 ) (.3) -- -- -- -- -- -- (1.2)
------ ------- ------ ------- -- -- ------ ------- ------ ------- ----------
Balance at December
31, 1993........... 47,854 $47.9 (6,767) $(236.5) 97 $.1 3,115 $ 3.1 1,500 $ 1.5 $1,106.4
------ ------- ------ ------- -- -- ------ ------- ------ ------- ----------
------ ------- ------ ------- -- -- ------ ------- ------ ------- ----------
</TABLE>
NOTE 7: STOCK OPTION PLANS
The Inland 1992 Incentive Stock Plan, approved by stockholders on April 22,
1992, provides for the issuance, pursuant to options and other awards, of 2.2
million shares of common stock to officers and other key employees. Options
remain outstanding and exercisable under the Inland 1988 and 1984 Incentive
Stock Plans; however, no further options may be granted under these plans. Under
the various plans, the per share option exercise price may not be less than 100
percent of the fair market value per share on the date of grant. During 1993,
options were granted to 235 executives under the 1992 Plan and a total of
891,224 shares was
F-13
<PAGE> 45
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
available for future grants under that Plan as of December 31, 1993. The
following summarizes the status of options under the plans for the periods
indicated:
<TABLE>
<CAPTION>
OPTION EXERCISE
NUMBER OF PRICE OR RANGE
SHARES PER SHARE
--------- ---------------
<S> <C> <C>
Options (granted and unexercised) at December 31, 1990............. 1,196,145 $15.31-$39.75
Granted.......................................................... 619,200 19.75- 21.38
Exercised........................................................ --
Cancelled or expired............................................. (68,000) 21.38- 39.75
Surrendered (SAR Exercise)....................................... (250) 15.31
---------
Options (granted and unexercised) at December 31, 1991
(985,295 exercisable)............................................ 1,747,095 15.31- 39.75
Granted.......................................................... 655,450 22.31- 25.50
Exercised........................................................ (600) 18.75
Cancelled or expired............................................. (48,450) 18.75- 39.75
Surrendered (SAR Exercise)....................................... (8,000) 15.31- 25.38
---------
Options (granted and unexercised) at December 31, 1992
(1,316,530 exercisable).......................................... 2,345,495 15.31- 39.75
Granted.......................................................... 575,200 26.13
Exercised........................................................ (231,953) 21.38- 33.75
Cancelled or expired............................................. (198,911) 21.38- 39.75
Surrendered (SAR Exercise)....................................... (20,675) 15.31- 25.38
---------
Options (granted and unexercised) at December 31, 1993
(1,425,909 exercisable).......................................... 2,469,156 15.31- 39.75
---------
---------
</TABLE>
Options outstanding on December 31, 1993, under the 1984 Plan have
expiration dates ranging from June 26, 1994 to September 22, 1997, with a
weighted average exercise price per share of $29.78. Options outstanding under
the 1988 Plan have expiration dates ranging from July 26, 1998 to November 26,
2001, with a weighted average exercise price per share of $31.94. Options
outstanding under the 1992 Plan have expiration dates ranging from June 23, 2002
to May 25, 2003, with a weighted average exercise price per share of $25.78. On
December 31, 1993, there were 72 holders of options granted under the 1984 Plan,
217 holders of options granted under the 1988 Plan, and 273 holders of options
granted under the 1992 Plan.
Stock appreciation rights have also been granted with respect to 176,800
shares subject to outstanding options under the plans at the rate of one stock
appreciation right ("SAR") for each share subject to option. Upon exercise of an
SAR, the holder is entitled to receive the excess of the fair market value of
the shares for which the SAR is exercised over the related option exercise
price. The holder may elect to receive payment in stock, or in a combination of
stock and cash. An SAR is exercisable only upon surrender of the related option
and only to the extent that the related option is exercisable. No SAR has been
granted since 1990. Following is a summary of SAR activity:
<TABLE>
<CAPTION>
NUMBER SHARES AVERAGE
OF RIGHTS OF STOCK EXERCISE
EXERCISED ISSUED PRICE CASH PAID
--------- -------- -------- ---------
<S> <C> <C> <C> <C>
1991..................................................... 250 40 $22.63 $ 1,000
1992..................................................... 8,000 1,070 $23.66 $ 4,000
1993..................................................... 20,675 2,794 $29.47 $84,000
</TABLE>
SAR compensation expense recorded by the Company was not material for any
of the three years.
F-14
<PAGE> 46
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The 1992 Plan also provides, as did the 1988 and 1984 Plans, for the
granting of restricted stock and performance awards to officers and other key
employees. During 1993, restricted stock awards totaling 122,000 shares were
granted to 33 executives, and no performance awards were granted. Also during
1993, 7,052 shares of previously granted restricted stock awards vested, while
4,000 shares were forfeited. During 1992, restricted stock awards totaling 3,810
shares were granted to one executive, and no performance awards were granted.
The final performance period for awards granted prior to 1992 ended December 31,
1992. As the performance criteria for such performance period were not met, the
remaining 95,436 shares subject to performance awards were cancelled. Also
during 1992, 75,657 shares of previously granted restricted awards vested, while
1,143 shares were forfeited. During 1991, restricted stock awards totaling
13,216 shares were granted to four executives and three performance awards
totaling 39,000 shares were granted under the 1988 Plan. One existing
performance award was amended to increase by 3,000 the total number of shares
subject to such award. Also during 1991, 23,327 shares of previously granted
restricted stock awards vested, while 37,045 shares (including
dividend-equivalent shares) subject to performance awards and 8,586 shares of
restricted stock were forfeited.
NOTE 8: STOCKHOLDER RIGHTS PLAN
Pursuant to a stockholder rights plan, on November 25, 1987, the Board of
Directors declared a dividend distribution, payable to stockholders of record on
December 18, 1987, of one preferred stock purchase right (a "Right") for each
outstanding share of the Company's common stock. The rights plan was amended by
the Board on May 24, 1989. The Rights will expire 10 years after issuance, and
will become exercisable only if a person or group becomes the beneficial owner
of 20 percent or more of the common stock (a "20 percent holder"), commences a
tender or exchange offer which would result in the offeror beneficially owning
20 percent or more of the common stock, or is determined by the Board to
beneficially own at least 10 percent of the common stock and either intends to
cause the Company to take certain actions not in the best long-term interests of
the Company and its stockholders or is reasonably likely, through such
beneficial ownership, to cause a material adverse impact on the business or
prospects of the Company and its stockholders (an "Adverse Person"). Each Right
will entitle stockholders to buy one newly issued unit of one one-hundredth of a
share of Series D Junior Participating Preferred Stock at an exercise price of
$90, subject to certain antidilution adjustments. The Company will generally be
entitled to redeem the Rights at $.05 per Right at any time prior to 15 days
after a public announcement of the existence of a 20 percent holder.
If a person or group accumulates 20 percent or more of the common stock
(except pursuant to an offer for all outstanding shares of common stock which
the independent Continuing Directors determine to be fair to and otherwise in
the best interests of the Company and its stockholders), or a merger takes place
with a 20 percent holder where the Company is the surviving corporation and its
common stock is unchanged, or a 20 percent holder engages in certain
self-dealing transactions, or the Board determines that a person or group is an
Adverse Person, each Right (other than Rights held by such 20 percent holder and
certain related parties which become void) will represent the right to purchase,
at the exercise price, common stock (or, in certain circumstances, a combination
of securities and/or assets) having a value of twice the exercise price. In
addition, if, following the public announcement of the existence of a 20 percent
holder, the Company is acquired in a merger or other business combination
transaction, except a merger or other business combination transaction that
takes place after the consummation of an offer for all outstanding shares of
common stock that the independent Continuing Directors have determined to be
fair, or a sale of 50 percent or more of the Company's assets or earning power
is made to a third party, each Right (unless previously voided) will represent
the right to purchase, at the exercise price, common stock of the acquiring
entity having a value of twice the exercise price at the time.
F-15
<PAGE> 47
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9: PROVISIONS FOR RESTRUCTURING
In 1993, the Company recorded a facility shutdown provision of $22.3
million which covered costs associated with the earlier than planned closure of
Inland Steel Company's cokemaking facilities. Of the amount provided, $7.7
million relates to the write-off of assets with the remainder provided for
various expenditures associated with the shutdown of the facility, including
personnel costs.
In 1991, the Company recorded restructuring provisions aggregating $215
million, of which $205 million pertained to the Indiana Harbor steelmaking
complex of Inland Steel Company and $10 million was applicable to the Company's
corporate office. The provisions cover writedowns of uneconomic facilities,
principally cokemaking batteries, the ingot mold foundry, and selected older
facilities expected to be shut down, as well as provisions for environmental
matters and workforce reductions (consisting principally of added pension and
other employee benefit costs).
In 1992, as the specific identification of the continuing status of pension
liabilities associated with the shutdown provisions is not feasible, these
liabilities were transferred from the restructuring reserve to the general
pension liabilities of the Company. At December 31, 1993, the Company had
restructuring reserves, excluding pension-related liabilities, totaling $149.7
million. Comparable reserves at December 31, 1992 and 1991 were $141.3 million
and $137.5 million, respectively.
NOTE 10: RETIREMENT BENEFITS
PENSIONS
The Company has a non-contributory defined benefit pension plan which
covers substantially all Company employees, retirees and their beneficiaries.
Benefits provided participants of the plan are based on final pay and years of
service for all salaried employees and certain wage employees, and years of
service and a fixed rate for all other wage employees, including members of the
United Steelworkers union.
The Company's funding policy is to contribute annually the amount necessary
to satisfy the ERISA funding standards. No funding has been required since 1984.
The assumptions used to determine the plan's funded status are as follows:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Discount (settlement) rate........................................ 7.25% 8.6%
Rate of compensation increase..................................... 5.0% 5.0%
Rate of return on plan assets..................................... 9.5% 9.5%
</TABLE>
F-16
<PAGE> 48
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The funded status of the plan as of December 31, 1993 and 1992 was as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1993 1992
------ ------
IN MILLIONS
<S> <C> <C>
Fair value of plan assets
Equities.................................................. $1,011 $ 943
Bonds..................................................... 354 458
Real estate............................................... 136 137
Cash equivalents and accrued interest..................... 293 148
------ ------
1,794 1,686
------ ------
Actuarial present value of benefits for service rendered to
date:
Accumulated Benefit Obligation based on compensation to
date, including vested benefits of $1,808 and $1,433
for 1993 and 1992, respectively........................ 1,960 1,534
Additional benefits based on estimated future compensation
levels................................................. 117 82
------ ------
Projected Benefit Obligation.............................. 2,077 1,616
------ ------
Plan Assets in excess (shortfall) of Projected Benefit
Obligation................................................ $ (283) $ 70
------ ------
------ ------
</TABLE>
The Projected Benefit Obligation is the full measure of the Company's
"going concern" liability for pensions accrued to date based on current interest
rates. It includes the effect of future compensation increases for benefits
based on final pay. It does not, however, take into consideration contingent
benefits that are not expected to be paid but that would require funding in any
plan termination.
The pension cost reflected in the Company's balance sheet on December 31,
1993 and 1992, can be reconciled to the excess or shortfall of plan assets as
shown below:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1993 1992
----- ----
IN MILLIONS
<S> <C> <C>
Accrued pension cost......................................... $(166) $ (50)
Unrecognized transition asset................................ 139 162
Unrecognized net gain (loss)................................. (237) 9
Unrecognized prior service cost.............................. (141) (51)
Adjustment required to recognize minimum liability........... 122 --
----- ----
Plan assets in excess (shortfall) of Projected Benefit
Obligation................................................. $(283) $ 70
----- ----
----- ----
</TABLE>
The additional minimum pension liability represents the excess of the
unfunded Accumulated Benefit Obligation over previously accrued pension costs. A
corresponding intangible asset was recorded as an offset to this additional
liability as prescribed.
The unrecognized transition asset is being recognized in income by reducing
pension expense in equal annual installments of $23.1 million through 1999. Any
subsequent unrecognized net gain or loss in excess of 10 percent of the greater
of the Projected Benefit Obligation or the fair value of plan assets will be
amortized over the remaining service period of active employees.
F-17
<PAGE> 49
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pension credit for 1993 and 1992 is composed of the components set forth in
the table below:
<TABLE>
<CAPTION>
1993 1992
----- -----
IN MILLIONS
<S> <C> <C>
Service cost -- present value of benefits earned during
year...................................................... $ 27 $ 27
Interest on service cost and Projected Benefit Obligation... 139 134
Actual return on plan assets................................ (256) (151)
Net amortization and deferral............................... 85 (19)
----- -----
Total pension credit........................................ $ (5) $ (9)
----- -----
----- -----
</TABLE>
BENEFITS OTHER THAN PENSIONS
Substantially all of the Company's employees are covered under
postretirement life insurance and medical benefit plans that involve deductible
and co-insurance requirements. The postretirement life insurance benefit formula
used in the determination of postretirement benefit cost is primarily based on
applicable annual earnings at retirement for salaried employees and specific
amounts for hourly employees. The Company did not prefund any of these
postretirement benefits in 1993. Effective January 1, 1994, a Voluntary Employee
Benefit Association Trust was established for payment of health care benefits
made to Inland Steel Company United Steelworkers of America ("USWA") retirees.
Funding of the Trust will be made as claims are submitted for payment.
The Company adopted FASB Statement No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," effective January 1, 1992. FASB
Statement No. 106 requires accrual accounting for all postretirement benefits
other than pensions. The Company must be fully accrued for these postretirement
benefits by the date each employee attains full eligibility for such benefits.
In conjunction with the adoption of FASB Statement No. 106, the Company elected
to immediately recognize the accumulated postretirement benefit obligation for
current and future retirees (the "transition obligation").
Prior to the adoption of FASB Statement No. 106, the cost of medical
benefits for retired employees was expensed as incurred. For 1993, the accrued
expense for benefits other than pensions recorded in accordance with FASB
Statement No. 106 exceeded the expense that would have been recorded under the
prior accounting methods by $43 million, $28 million after tax or $.80 per
share. For 1992, the incremental expense was $63 million, $41 million after tax
or $1.24 per share.
The amount of net periodic postretirement benefit cost for 1993 and 1992 is
composed of the following:
<TABLE>
<CAPTION>
1993 1992
---- ----
IN MILLIONS
<S> <C> <C>
Service cost................................................... $15 $ 15
Interest cost.................................................. 85 96
Net amortization and deferral.................................. (4 ) --
---- ----
Total net periodic postretirement cost......................... $96 $111
---- ----
---- ----
</TABLE>
F-18
<PAGE> 50
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth components of the accumulated postretirement
benefit obligation:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1993 1992
------ ------
IN MILLIONS
<S> <C> <C>
Accumulated postretirement benefit obligation attributable
to:
Retirees.................................................. $ 552 $ 580
Fully eligible plan participants.......................... 212 234
Other active plan participants............................ 280 313
------ ------
Accumulated postretirement benefit obligation............... 1,044 1,127
Unrecognized net gain..................................... 73 --
Unrecognized prior service credit......................... 76 24
------ ------
Accrued postretirement benefit obligation................... $1,193 $1,151
------ ------
------ ------
</TABLE>
Any net gain or loss in excess of 10 percent of the accumulated
postretirement benefit obligation will be amortized over the remaining service
period of active plan participants.
In 1993, in connection with Inland Steel Company's new labor agreement with
the USWA, the postretirement medical benefit plan covering union employees was
amended, effective August 1, 1993, to provide for employee co-payments and
increased deductibles. As a result of these plan amendments, the Company
remeasured its postretirement benefit obligation under FASB Statement No. 106,
as of August 1, 1993. This remeasurement incorporated the effect of the union
contract changes as well as the effects of changes in actuarial assumptions to
reflect more current information regarding claim costs, census data and interest
rate factors. The net effect of these changes was to reduce net periodic
postretirement benefit cost for 1993 by $12 million and to reduce the
accumulated postretirement benefit obligation as of August 1, 1993 by $146
million.
The assumptions used to determine the plan's accumulated postretirement
benefit obligation are as follows:
<TABLE>
<CAPTION>
1992 1993
----------- -----------------------
DECEMBER 31 AUGUST 1 DECEMBER 31
----------- -------- -----------
<S> <C> <C> <C>
Discount rate................................. 9.0% 7.35% 7.25%
Rate of compensation increase................. 5.0% 5.0% 5.0%
Medical cost trend rate....................... 9%-5% 7%-5% 7%-5%
Year ultimate rate reached.................... 1997 1996 1996
</TABLE>
A one percentage point increase in the assumed health care cost trend rates
for each future year increases annual net periodic postretirement benefit cost
and the accumulated postretirement benefit obligation as of December 31, 1993 by
$14 million and $131 million, respectively.
POSTEMPLOYMENT BENEFITS
In November 1992, the FASB issued Statement No. 112, "Employers' Accounting
for Postemployment Benefits." Adoption of the new Standard, which is required by
the first quarter of 1994, is not anticipated to have a material impact on
results of operations or the financial position of the Company.
NOTE 11: INCOME TAXES
The Company adopted FASB Statement No. 109, "Accounting for Income Taxes,"
effective January 1, 1992. The cumulative effect of prior years at the date of
adoption was not material to the results of operations
F-19
<PAGE> 51
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
or the financial position of the Company. Through December 31, 1991, income
taxes were accounted for under APB Opinion No. 11.
The elements of the provisions for income taxes for each of the three years
indicated below were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1993 1992 1991
----- ------ ------
IN MILLIONS
<S> <C> <C> <C>
Current income taxes:
Federal....................................................... $ -- $ -- $ 10.5Cr.
State and foreign............................................. 2.8 .9 1.8Cr.
----- ------ ------
2.8 .9 12.3Cr.
Deferred income taxes........................................... 38.8Cr. 100.1Cr. 93.7Cr.
----- ------ ------
Total tax benefit............................................. $36.0Cr. $ 99.2Cr. $106.0Cr.
----- ------ ------
----- ------ ------
- -------------------------
</TABLE>
Cr. = Credit
In accordance with FASB Statement No. 109, the Company adjusted its
deferred tax assets and liabilities for the effect of the change in the
corporate Federal income tax rate from 34 to 35 percent, effective January 1,
1993. A credit to income of $11 million, which includes the effect of the rate
change on deferred tax asset and liability balances as of January 1, 1993 as
well as the effect on 1993 tax benefits recorded by the Company prior to the
enactment date of August 10, 1993, was recorded in the third quarter of 1993.
The components of the deferred income tax assets and liabilities arising
under FASB Statement No. 109 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1993 1992
---- ----
IN MILLIONS
<S> <C> <C>
Deferred tax assets (excluding postretirement benefits other than pensions):
Net operating loss and tax credit carryforwards................................ $354 $306
Restructuring and termination reserves......................................... 95 84
Other deductible temporary differences......................................... 104 101
Less valuation allowances...................................................... (9) (13)
---- ----
544 478
---- ----
Deferred tax liabilities:
Fixed asset basis difference................................................. 430 386
Other taxable temporary differences.......................................... 86 75
---- ----
516 461
---- ----
Net deferred asset (excluding postretirement benefits other than pensions)..... 28 17
FASB Statement No. 106 impact (postretirement benefits other than pensions).... 445 415
---- ----
Net deferred asset............................................................. $473 $432
---- ----
---- ----
</TABLE>
For tax purposes, the Company had available, at December 31, 1993, net
operating loss ("NOL") carryforwards for regular Federal income tax purposes of
approximately $923 million which will expire as follows: $72 million in year
2000, $130 million in year 2005, $313 million in year 2006, $280 million in year
F-20
<PAGE> 52
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2007, and $128 million in year 2008. The Company also had investment tax credit
and other general business credit carryforwards for tax purposes of
approximately $18 million, which expire during the years 1994 through 2006. A
valuation allowance has been established for those tax credits which are not
expected to be realized. Additionally, in conjunction with the Alternative
Minimum Tax ("AMT") rules, the Company had available minimum tax credit
carryforwards for tax purposes of approximately $13 million, which may be used
indefinitely to reduce regular Federal income taxes.
The Company believes that it is more likely than not that the $923 million
of NOL carryforwards will be utilized prior to their expiration. This belief is
based upon the factors discussed below.
The NOL carryforwards and existing deductible temporary differences
(excluding those relating to FASB Statement No. 106) are substantially offset by
existing taxable temporary differences reversing within the carryforward period.
Furthermore, any such recorded tax benefits which would not be so offset are
expected to be realized by achieving future profitable operations based on the
following:
First, the Company launched a turnaround strategy to improve performance by
implementing a cost reduction program and enhancing asset utilization. This
resulted in a $215 million restructuring provision in 1991 to write off
uneconomic facilities and provide for future workforce reductions at the Inland
Steel Company and the Company.
Second, in 1992 Inland Steel Company completed a major plant and equipment
investment program that amounted to approximately $1.3 billion since 1988. This
included the joint ventures of I/N Tek and I/N Kote and major upgrades to
facilities in the flat products and bar business. As expected, these facility
upgrades resulted in significant start-up costs and disruptions to operations
that negatively impacted financial results. By year-end 1993, all facilities
except the 12-inch Bar Mill reached their design capabilities. This major
investment program also shifts the product mix to higher value-added products
which historically have not experienced significant price volatility.
Consequently, the Company is now positioned with modern facilities that will
enhance its ability to generate taxable profits.
Finally, the Company operates in a highly cyclical industry and
consequently has had a history of generating and then fully utilizing
significant amounts of NOL carryforwards (during the years 1986-1989 the Company
utilized approximately $600 million of NOL carryforwards).
Subsequent to the adoption of FASB Statement No. 109, the Company adopted
FASB Statement No. 106 and recognized the entire transition obligation at
January 1, 1992, as a cumulative effect charge in 1992 (Note 10). This adoption
resulted in a $415 million deferred tax asset at December 31, 1992, and future
annual charges under FASB Statement No. 106 are expected to continue to exceed
deductible amounts for many years. Thereafter, even if the Company should have a
tax loss in any year in which the deductible amount would exceed the financial
statement expense, the tax law provides for a 15-year carryforward period of
that loss. Because of the extremely long period that is available to realize
these future tax benefits, a valuation allowance for this deferred tax asset is
not necessary.
While not affecting the determination of deferred income taxes for
financial reporting purposes, at December 31, 1993, the Company had available
for AMT purposes approximately $290 million of NOL carryforwards which will
expire as follows: $122 million in year 2006 and $168 million in year 2007.
The deferred income tax benefit of $93.7 million for 1991 arose from the
release of deferred tax liabilities as a result of the operating loss in that
year. Timing differences between tax and financial reporting purposes for that
year were composed primarily of the excess of tax over book depreciation and
provisions for restructuring.
F-21
<PAGE> 53
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Total income taxes reflected in the Consolidated Statement of Operations
differ from the amounts computed by applying the Federal corporate rate as
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1993 1992 1991
----- ----- ------
IN MILLIONS
<S> <C> <C> <C>
Federal income tax benefit computed at statutory
tax rate of 35% in 1993, and 34% in 1992 and
1991............................................. $25.8Cr. $87.9Cr. $129.6Cr.
Additional taxes or credits from:
State and local income taxes, net of Federal
income tax effect............................. 3.6 1.7Cr. 1.2Cr.
Percentage depletion............................. 2.2Cr. 4.1Cr. 2.9Cr.
Adjustment of taxes of prior years............... -- 7.2Cr. --
Change in Federal statutory rate................. 10.6Cr. -- --
Loss for which no tax benefit was recognized..... -- -- 26.6
All other, net................................... 1.0Cr. 1.7 1.1
----- ----- ------
Total income tax benefit......................... $36.0Cr. $99.2Cr. $106.0Cr.
----- ----- ------
----- ----- ------
-------------------------
</TABLE>
Cr. = Credit
NOTE 12: RELATED PARTY TRANSACTIONS -- NIPPON STEEL CORPORATION
Following is a summary of the Company's relationships with NSC, whose
indirect wholly owned subsidiary became the holder of all of the Company's
outstanding Series F Preferred Stock on December 18, 1989 (see Note 4).
I/N Tek, a general partnership formed for a joint venture between the
Company and NSC, owns and operates a cold-rolling facility that commenced
operations in early 1990. I/N Tek is 60 percent owned by a wholly owned
subsidiary of Inland Steel Company and 40 percent owned by an indirect wholly
owned subsidiary of NSC. The cost of the facility was $525 million, of which
$111.6 million was contributed by the subsidiary of Inland Steel Company and
$74.4 million by the subsidiary of NSC, with the balance borrowed by I/N Tek
from three Japanese trading companies. Inland Steel Company has exclusive rights
to the productive capacity of the facility, except in certain limited
circumstances, and, under a tolling arrangement with I/N Tek, has an obligation
to use the facility for the production of cold-rolled steel. Under the tolling
arrangement, Inland Steel Company was charged $141.2 million, $122.6 million and
$95.0 million in 1993, 1992 and 1991, respectively, for such tolling services.
NSC has the right to purchase up to 400,000 tons of cold-rolled steel from
Inland Steel Company in each year at market-based negotiated prices, up to half
of which may be steel processed by I/N Tek. Purchases of Inland Steel Company
products by a subsidiary of NSC aggregated $157.8 million, $123.0 million and
$100.6 million during 1993, 1992 and 1991, respectively. At year-end 1993 and
1992, a subsidiary of NSC owed the Company $8.2 million and $7.1 million,
respectively, related to these purchases.
The Company and NSC also own and operate another joint venture which
consists of a 400,000 ton electrogalvanizing line and a 500,000 ton hot-dip
galvanizing line adjacent to the I/N Tek facility. I/N Kote, the general
partnership formed for this joint venture, is owned 50 percent by a wholly owned
subsidiary of Inland Steel Company and 50 percent by an indirect wholly owned
subsidiary of NSC. The facility commenced operations in the fourth quarter of
1991 and became fully operational in the third quarter of 1992, with the total
cost of the project being $554 million. Permanent financing for the project, as
well as for capitalized interest and a portion of the working capital, was
provided by third-party long-term financing, by capital contributions of the two
partners of $60 million each and by subordinated partner loans of $30 million
F-22
<PAGE> 54
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
each. Inland Steel Company and NSC each have guaranteed the share of long-term
financing attributable to their respective subsidiary's interest in the
partnership. I/N Kote had $516 million outstanding under its long-term financing
agreement at December 31, 1993. Additional working capital requirements were met
by partner loans and by third-party credit arrangements. I/N Kote is required to
buy all of its cold-rolled steel from Inland Steel Company, which is required to
furnish such cold-rolled steel at a price that results in an annual return on
equity to the partners of I/N Kote, depending upon operating levels, of up to 10
percent after operating and financing costs; this price is subject to an upward
adjustment if Inland Steel Company's return on sales is less than I/N Kote's
return on sales. Purchases of Inland Steel Company cold-rolled steel by I/N Kote
aggregated $191.7 million in 1993 and $99.3 million in 1992. At year-end 1993,
I/N Kote owed the Company $35.5 million related to these purchases. Prices of
cold-rolled steel sold by Inland Steel Company to I/N Kote are determined
pursuant to the terms of the joint venture agreement and are based, in part, on
operating costs of the partnership. During 1993, Inland Steel Company sold
cold-rolled steel to I/N Kote at a price that approximated its cost of
production compared with 1992 when such sales were at less than its cost of
production. I/N Kote also provides tolling services to Inland Steel Company for
which it was charged $29.1 million in 1993. Inland Steel Company sells all I/N
Kote products that are distributed in North America.
The Company and NSC have entered into various agreements pursuant to which
NSC has provided technical services and licenses of proprietary steel technology
with respect to specific Company research and engineering projects. Pursuant to
such agreements, Inland Steel Company incurred costs of $3.7 million, $4.1
million and $7.0 million for technical services and related administrative costs
for services provided during 1993, 1992 and 1991, respectively.
At midyear 1989, the Company and NSC, through a subsidiary, each purchased
in the open market approximately $15 million of the other company's common
stock. The estimated fair value of the NSC common stock at year-end 1993, based
on the year-end quoted market price and exchange rate, was $6.7 million.
NOTE 13: INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
The Company's investments in unconsolidated joint ventures accounted for by
the equity method consist primarily of its 60 percent interest in I/N Tek, 50
percent interest in I/N Kote, 50 percent interest in PCI Associates, 40 percent
interest in the Empire Iron Mining Partnership, 12 1/2 percent interest (25
percent interest in 1991) in Walbridge Electrogalvanizing Company, and 13 3/4
percent interest in Wabush Mines. I/N Tek and I/N Kote are joint ventures with
NSC (see Note 12). The Company does not exercise control over I/N Tek, as all
significant management decisions of the joint venture require agreement by both
of the partners. Due to this lack of control by the Company, the Company
accounts for its investment in I/N Tek under the equity method. PCI Associates
is a joint venture which operates a pulverized coal injection facility at the
Indiana Harbor Works. Empire and Wabush are iron ore mining and pelletizing
ventures owned in various percentages primarily by U.S. and Canadian steel
companies. On June 30, 1992, the Company, through subsidiaries, sold one-half of
its interest in Walbridge, resulting in a $22.5 million pre-tax gain. Walbridge
is a venture that coats cold-rolled steel in which Inland has the right to 25
percent of the productive
F-23
<PAGE> 55
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
capacity (50 percent at year-end 1991). Following is a summary of combined
financial information of the Company's unconsolidated joint ventures:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
IN MILLIONS
<S> <C> <C> <C>
Results of Operations for the years ended December 31:
Gross revenue................................................ $ 956.7 $ 740.8 $ 595.4
Costs and expenses........................................... 945.1 748.3 586.8
-------- -------- --------
Net income (loss)......................................... $ 11.6 $ (7.5) $ 8.6
-------- -------- --------
-------- -------- --------
Financial Position at December 31:
Current assets............................................... $ 279.7 $ 203.2 $ 137.3
Total assets................................................. 1,925.9 1,949.9 1,875.8
Current liabilities.......................................... 241.6 174.0 145.0
Total liabilities............................................ 1,545.5 1,511.7 1,428.4
Net assets................................................... 380.4 438.2 447.4
</TABLE>
NOTE 14: COMMITMENTS AND CONTINGENCIES
Inland Steel Company guarantees payment of principal and interest on its 40
percent share of the long-term debt of Empire Iron Mining Partnership requiring
principal payments of approximately $7.6 million annually through 1996. At
year-end 1993, Inland Steel Company also guaranteed $34.5 million of long-term
debt attributable to a subsidiary's interest in PCI Associates.
As part of the agreement covering the 1990 sale of the Inland Lime & Stone
Company division assets, Inland Steel Company agreed, subject to certain
exceptions, to purchase, at prices which approximate market, the full amount of
its annual limestone needs or one million gross tons, whichever is greater,
through 2002.
The Company and its subsidiaries have various operating leases for which
future minimum lease payments are estimated to total $370.6 million through
2018, including approximately $60.7 million in 1994, $53.6 million in 1995,
$48.2 million in 1996, $46.0 million in 1997, and $41.9 million in 1998.
Included in the above amounts is a total of $154 million, approximately $20
million per year, related to the lease of a caster facility that the Company
plans to buy-out in 1994. Upon completion of the transaction, the total and five
year estimates provided should be reduced accordingly. The Company will also
record additional long-term debt of approximately $63 million as part of the
transaction, the interest and principal of which will be paid on through 2001.
In addition, at year-end 1993, the Company guaranteed the lease and loans
related to this caster facility, which are partially secured by a surety bond,
currently in the amount of $62 million.
It is anticipated that the Company will make expenditures of $20 million in
1994, $13 million in 1995, and $5 million to $10 million annually in each of the
three years thereafter for the construction, and have ongoing annual
expenditures of $40 million to $50 million for the operation, of air and water
pollution control facilities to comply with current Federal, state and local
laws and regulations. The Company is involved in various environmental and other
administrative or judicial actions initiated by governmental agencies. While it
is not possible to predict the results of these matters, the Company does not
expect environmental expenditures, excluding amounts that may be required in
connection with the consent decree in the 1990 EPA lawsuit, to materially affect
the Company's results of operations or financial position. Corrective actions
relating to the EPA consent decree may require significant expenditures over the
next several years that may be material to the results of operations or
financial position of the Company. At December 31, 1993, the Company's reserves
for environmental liabilities totaled $19 million related to the sediment
remediation under the 1993 EPA consent decree.
F-24
<PAGE> 56
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, approximated $15 million at year-end 1993.
NOTE 15: BUSINESS SEGMENTS AND CONCENTRATION OF CREDIT RISK
The Company operates in two business segments, Integrated Steel and Steel
Service Centers.
Integrated Steel operations include the manufacture of steel mill products
and the mining and processing of iron ore. Integrated Steel produces and sells a
wide range of steels, of which approximately 99 percent consists of carbon and
high-strength low-alloy steel grades. Approximately 76 percent of this segment's
sales were to customers in five mid-American states, and 93 percent were to
customers in 20 mid-American states. Over half the sales are to the steel
service center and transportation (including automotive) markets.
The Steel Service Center business segment processes and distributes a broad
line of steel products, non-ferrous metals and industrial plastics to a wide
range of industrial users on a nationwide basis. This segment includes Joseph T.
Ryerson & Son, Inc. and J.M. Tull Metals Company, Inc.
Substantially all sales between segments are recorded at current market
prices. Operating profit consists of total sales less operating expenses.
Operating expenses of segments do not include any allocation of general
corporate income and expense, other non-operating income or expense, interest
income or expense, or income taxes.
Identifiable assets are those that are associated with each business
segment. Corporate assets are principally investments in cash equivalents, the
intangible pension asset, and the assets of discontinued segments.
Substantially all of the Company's operations are located in the United
States, and foreign sales are not material.
F-25
<PAGE> 57
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INFORMATION ABOUT BUSINESS SEGMENTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1993 1992 1991
-------- -------- --------
IN MILLIONS
<S> <C> <C> <C>
NET SALES
Integrated Steel Operations:
Sales to unaffiliated customers.............................. $2,001.3 $1,787.3 $1,757.9
Intersegment sales........................................... 173.6 122.1 137.5
-------- -------- --------
2,174.9 1,909.4 1,895.4
-------- -------- --------
Steel Service Center Operations:
Sales to unaffiliated customers.............................. 1,882.5 1,707.0 1,645.6
Intersegment sales........................................... 10.8 9.6 10.3
-------- -------- --------
1,893.3 1,716.6 1,655.9
Eliminations and adjustments................................... (180.0) (131.7) (146.8)
-------- -------- --------
Total net sales...................................... $3,888.2 $3,494.3 $3,404.5
-------- -------- --------
-------- -------- --------
OPERATING PROFIT (LOSS)
Integrated Steel Operations.................................... $ (28.2) $ (200.6) $ (313.2)
Steel Service Center Operations................................ 56.4 27.1 16.2
Eliminations and adjustments................................... (1.6) .1 (3.9)
-------- -------- --------
Total operating profit (loss)........................ $ 26.6 $ (173.4) $ (300.9)
-------- -------- --------
-------- -------- --------
IDENTIFIABLE ASSETS
Integrated Steel Operations.................................... $2,201.2 $2,212.3 $1,868.7
Steel Service Center Operations................................ 788.3 742.9 750.3
-------- -------- --------
2,989.5 2,955.2 2,619.0
General corporate and other.................................... 446.3 191.3 78.8
-------- -------- --------
Total assets on December 31.......................... $3,435.8 $3,146.5 $2,697.8
-------- -------- --------
-------- -------- --------
DEPRECIATION
Integrated Steel Operations.................................... $ 111.1 $ 110.2 $ 98.7
Steel Service Center Operations................................ 19.2 18.7 18.4
-------- -------- --------
130.3 128.9 117.1
General corporate and other.................................... 1.5 .7 1.1
-------- -------- --------
Total depreciation................................... $ 131.8 $ 129.6 $ 118.2
-------- -------- --------
-------- -------- --------
CAPITAL EXPENDITURES
Integrated Steel Operations.................................... $ 86.1 $ 55.1 $ 124.7
Steel Service Center Operations................................ 19.3 9.3 9.8
-------- -------- --------
105.4 64.4 134.5
General corporate and other.................................... .2 -- 5.7
-------- -------- --------
Total capital expenditures........................... $ 105.6 $ 64.4 $ 140.2
-------- -------- --------
-------- -------- --------
</TABLE>
F-26
<PAGE> 58
------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY PURCHASER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Incorporation by Reference............ 2
The Company........................... 3
Risk Factors Related to the Steel
Industry and the Company............ 4
Recent Developments and Outlook....... 8
Use of Proceeds....................... 10
Price Range of Common Stock and
Dividend Data....................... 10
Capitalization........................ 11
Summary of Financial Information...... 12
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 14
Description of Capital Stock.......... 21
Standby and Other Arrangements........ 29
Experts............................... 30
Validity of Shares.................... 30
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
------------------------------------------------------
------------------------------------------------------
2,703,000 Shares
INLAND STEEL INDUSTRIES, INC.
Common Stock
($1.00 par value per share)
PROSPECTUS
CS FIRST BOSTON
GOLDMAN, SACHS & CO.
------------------------------------------------------
<PAGE> 59
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses in connection with
the issuance and distribution of the securities registered hereby:
<TABLE>
<S> <C>
SEC registration fee............................................... $ 30,467
Blue sky fees and expenses......................................... 14,000
Legal fees......................................................... 150,000
Accounting fees and expenses....................................... 60,000
Printing expenses.................................................. 120,000
Miscellaneous...................................................... 10,533
--------
Total......................................................... $385,000
--------
--------
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
(a) The General Corporation Law of Delaware (Section 145) gives Delaware
corporations broad powers to indemnify their present and former directors and
officers and those of affiliated corporations against expenses incurred in the
defense of any lawsuit to which they are made parties by reason of being or
having been such directors or officers, subject to specified conditions and
exclusions; gives a director or officer who successfully defends an action the
right to be so indemnified; and authorizes the Company to buy directors' and
officers' liability insurance. Such indemnification is not exclusive of any
other rights to which those indemnified may be entitled under any by-laws,
agreement, vote of stockholders or otherwise.
(b) Article Thirteen of the Certificate of Incorporation of the Company
permits, and Article VI of the By-Laws of the Company provides for,
indemnification of directors, officers, employees and agents to the full extent
permitted by law.
(c) The Company maintains directors' and officers' liability insurance
coverage for its directors and officers and those of its subsidiaries and for
certain other executive employees. This coverage insures such persons against
certain losses that may be incurred by them in their respective capacities as
directors, officers or employees, with respect to which they may or may not be
indemnified under the provisions of the Certificate of Incorporation or By-Laws
of the Company or otherwise.
(d) Reference is made to Section 7 of the Standby Underwriting Agreement
(the form of which is included as Exhibit 1.1 to this Registration Statement)
regarding the indemnification under certain circumstances of the Company, its
directors and certain of its officers by the Purchasers.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
See Index to Exhibits included herewith.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in this registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-1
<PAGE> 60
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions set forth or described in Item 15 (except
as set forth in paragraphs (c) and (d) therein) of this Registration Statement,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement;
Provided, however, that paragraphs (a)(i) and (a)(ii) do not apply
if the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the
registrant pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference
in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-2
<PAGE> 61
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE COMPANY CERTIFIES
THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE REQUIREMENTS FOR
FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
CHICAGO AND STATE OF ILLINOIS ON THE 28TH DAY OF APRIL, 1994.
INLAND STEEL INDUSTRIES, INC.
By: /s/ ROBERT J. DARNALL
Robert J. Darnall
Chairman, President and Chief
Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES
INDICATED ON APRIL 28, 1994.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------- ----------------------------------------------
<S> <C>
/s/ ROBERT J. DARNALL Chairman, President and Chief
- ---------------------------------------- Executive Officer and Director
Robert J. Darnall
/s/ EARL L. MASON Vice President and Chief Financial Officer
- ---------------------------------------- (Principal Financial Officer)
Earl L. Mason
/s/ OLIVIA M. THOMPSON Controller and Principal Accounting Officer
- ----------------------------------------
Olivia M. Thompson
James W. Cozad Director
James A. Henderson Director
Constituting a majority of the
Robert B. McKersie Director Directors of the Company
Donald S. Perkins Director
By: /s/ DAVID B. ANDERSON
Joshua I. Smith Director David B. Anderson
Attorney-in-Fact
Nancy H. Teeters Director
Raymond C. Tower Director
Arnold R. Weber Director
</TABLE>
II-3
<PAGE> 62
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NUMBER
------ ---------------------------------------------------------------------- -----------
<S> <C> <C>
1.1 Form of Standby Underwriting Agreement................................
4.1 Certificate of Incorporation, as amended, of the Company. (Filed as
Exhibit 4-A to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1991, and incorporated by reference herein.)
4.2 By-laws, as amended, of the Company. (Filed as Exhibit 3-B to the
Company's Annual Report on Form 10-K for the year ended December 31,
1992, and incorporated by reference herein.)
4.3 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.)
4.4 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.)
4.5 Copy of Rights Agreements, 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 of Form 8-K filed on May 24, 1989, and incorporated by
reference herein.)
4.6 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.)
4.7 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.)
4.8 Copy of Certificate of Designations of Series G $4.625 Cumulative
Convertible Exchangeable Preferred Stock of the Company. (Filed as
Exhibit 2.8 to the Company's Registration Statement on Form 8-A filed
on March 25, 1991, and incorporated by reference herein.)
4.9 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.)
5.1 Opinion of Mayer, Brown & Platt.......................................
23.1 Consent of Price Waterhouse...........................................
23.2 The consent of Mayer, Brown & Platt is contained in their opinion
filed as Exhibit 5.1 to this Registration Statement.
24.1 Powers of Attorney....................................................
</TABLE>
<PAGE> 1
EXHIBIT 1.1
2,703,000
INLAND STEEL INDUSTRIES, INC.
COMMON STOCK ($1.00 PAR VALUE PER SHARE)
STANDBY AGREEMENT
April 28, 1994
CS FIRST BOSTON CORPORATION,
GOLDMAN, SACHS & CO.
c/o CS First Boston Corporation,
Park Avenue Plaza,
New York, N.Y. 10055
Dear Sirs:
1. Introductory. Inland Steel Industries, Inc., a Delaware
corporation (the "Company"), proposes to redeem all of its outstanding Series G
$4.625 Cumulative Convertible Exchangeable Preferred Stock, par value $1.00 per
share (the "Convertible Securities") and, in that connection, agrees with you
(the "Purchasers") as follows:
2. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, each of the several Purchasers
that:
(a) A registration statement (No. 33- ), including a
form of prospectus, relating to the Common Stock, par value $1.00 per
share, of the Company ("Common Stock") issuable upon conversion
("Shares") of the Convertible Securities or otherwise in accordance
with the provisions of paragraph 3 hereof has been filed with the
Securities and Exchange Commission ("Commission") and either (i) has
been declared effective under the Securities Act of 1933 ("Act") and
is not proposed to be amended or (ii) is proposed to be amended by
amendment or post-effective amendment. If the Company does not propose
to amend such registration statement and if any post-effective
amendment to such registration statement has been filed with the
Commission prior to the execution and delivery of this Agreement, the
most recent such amendment has been declared effective by the
Commission. For purposes of this Agreement, "Effective Time" means (i)
if the Company has advised you that it does not propose to amend such
registration statement, the date and time as of which such
registration statement, or the most recent post-effective amendment
thereto (if any) filed prior to the execution and delivery of this
Agreement, was declared effective by the Commission, or (ii) if the
Company has advised you that it proposes to file an amendment or
post-effective amendment to such registration statement, the date and
time as of which such registration statement, as amended by such
amendment or post-effective amendment, as the case may be, is declared
effective by the Commission. "Effective Date" means the date of the
Effective Time. Such registration statement, as amended at the
Effective Time, including all material incorporated by reference
therein and including all information (if any) deemed to be a part of
such registration statement as of the Effective Time pursuant to Rule
430A(b) under the Act, is hereinafter referred to as the "Registration
Statement", and the form of prospectus relating to the Shares, as
first filed with the Commission pursuant to and in accordance with
Rule 424(b) ("Rule 424(b)") under the Act or (if no such filing is
required) as included in the
<PAGE> 2
Registration Statement, including all material incorporated by
reference in such prospectus, is hereinafter referred to as the
"Prospectus".
(b) If the Effective Time is prior to the execution and
delivery of this Agreement: (i) on the Effective Date, the
Registration Statement conformed in all material respects to the
requirements of the Act and the rules and regulations of the
Commission ("Rules and Regulations") and did not include any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, and (ii) on the date of this Agreement, the
Registration Statement conforms, and at the time of filing of the
Prospectus pursuant to Rule 424(b), the Registration Statement and the
Prospectus will conform, in all material respects to the requirements
of the Act and the Rules and Regulations, and neither of such
documents includes, or will include, any untrue statement of a
material fact or omits, or will omit, to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading. If the Effective Time is subsequent to the
execution and delivery of this Agreement: on the Effective Date, the
Registration Statement and the Prospectus will conform in all material
respects to the requirements of the Act and the Rules and Regulations,
and neither of such documents will include any untrue statement of a
material fact or will omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading. The two preceding sentences do not apply to statements in
or omissions from the Registration Statement or Prospectus based upon
written information furnished to the Company by any Purchaser through
you specifically for use therein.
(c) As of the close of business on April 21, 1994, 1,500,000
shares of Convertible Securities were outstanding, and the Company has
duly authorized or will promptly duly authorize the redemption of all
the outstanding Convertible Securities on May 31, 1994 (the
"Redemption Date"), at the redemption price of $53.2375 per share plus
an amount equal to accrued and unpaid dividends thereon to the
Redemption Date, or a total of $53.6229 per share.
(d) The Convertible Securities are convertible into the
Shares at the rate of 1.802 Shares per share of the Convertible
Securities, by surrender of Convertible Securities to Harris Trust and
Savings Bank ("Agent"), Chicago, Illinois prior to the close of
business on May 23, 1994 (the "Expiration Date"); the Shares and the
Purchased Shares (as defined below) have been duly authorized; the
Shares have been reserved for issuance upon conversion; and the
Shares, when issued upon conversion, and the Purchased Shares when
issued as contemplated hereby, will be validly issued, fully paid and
nonassessable.
(e) There are no contracts, agreements or understandings
(other than the letter agreement, dated December 18, 1989, between
Nippon Steel Corporation, NS Finance III, Inc. and the Company)
between the Company and any person granting such person the right to
require the Company to file a registration statement under the Act
with respect to any securities of the Company owned or to be owned by
such person or to require the Company to include such securities in
the securities registered pursuant to the Registration Statement or in
any securities being registered pursuant to any other registration
statement filed by the Company under the Act.
3. Purchase and Conversion of Convertible Securities. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Purchasers agree, severally and
not jointly:
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(a) To purchase, in the respective percentages specified
after the names of the Purchasers in Schedule A hereto, at a flat
price of $53.75 per share, all Convertible Securities tendered to and
accepted by the Agent for redemption prior to the close of business on
the Expiration Date.
(b) That it may (but will not be obligated to) purchase
Convertible Securities in the open market in such amounts and at such
prices as such Purchaser deems advisable.
(c) To surrender, from time to time, for conversion into
Shares, at or prior to the close of business on the Expiration Date,
all Convertible Securities purchased by them.
(d) If less than all the outstanding Convertible Securities
are surrendered for conversion at or prior to the close of business on
the Expiration Date, the Purchasers, on the basis of the
representations, warranties and agreements contained in this Agreement
(but subject to the terms and conditions set forth in this Agreement),
agree, severally and not jointly, to purchase from the Company, in the
respective percentages specified opposite their names in Schedule A
hereto, at a purchase price of $29.7574 per share, such whole number
of shares of Common Stock ("Purchased Shares") as shall be specified
in an irrevocable notice from the Company to you, given as promptly as
practicable after the close of business on the Expiration Date (and in
no event later than 11:00 a.m., New York City time, on the next
business day) but not in excess of the number of shares of Common
Stock that would have been issuable upon conversion of such of the
Convertible Securities which shall not have been surrendered and
converted prior to or on the Expiration Date.
(e) The Purchasers shall remit to the Company one-half of the
Profit received on the sale of the Purchased Shares and the Shares.
As used in the immediately preceding sentence, "Profit" means the
excess of the aggregate gross proceeds received on the sale of such
shares over the aggregate purchase price paid by the Purchasers for
the Shares (after giving affect to the conversion of the Convertible
Securities) or the Purchased Shares, as the case may be, after
deduction from such proceeds of sale any selling concessions, transfer
taxes and other related expenses not reimbursed by the Company or any
unaffiliated party. For purposes of the foregoing determination, any
shares not sold by the Purchasers prior to the close of business on
the tenth day (or, if such tenth day is not a business day, the next
business day thereafter) after the Redemption Date shall be deemed to
have been sold on such day for an amount equal to the average of the
high and low sale price of the Common Stock on such day as reported on
the New York Stock Exchange Composite Tape. Upon completion of the
sale of such shares, you shall furnish to the Company a statement
setting forth the aggregate proceeds received on the sale thereof and
the applicable selling concessions, transfer taxes and other related
expenses. Nothing contained herein shall limit the rights of the
Purchasers, or the time or times when, any shares of Common Stock
shall be sold, whether or not prior to the Expiration Date and whether
or not for long or short account.
(f) The Company understands that the Purchasers propose to
resell the Purchased Shares, as set forth in the Prospectus, as soon
as practicable after the Expiration Date. The Company confirms that
the Purchasers and dealers have been authorized to distribute the
Prospectus (as amended or supplemented if the Company furnishes
amendments or supplements to the Purchasers).
Purchases referred to in subsections (a) and (b) may, at the election of the
Purchasers, be made at any time, or from time to time, at or prior to the
Expiration Date. The Company agrees to deliver to the Purchasers for settlement
within five trading days of conversion the Common Stock issuable upon
conversion by the Purchasers of any purchased Convertible Securities. Payment
by the Purchasers for
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<PAGE> 4
purchases referred to in subsection (a) shall be made by check or checks in
Chicago Clearing House (next day) funds.
4. Compensation of Purchasers and Delivery. As compensation for the
Purchasers' commitments, the Company will pay to you for your proportionate
accounts the sum of (a) $750,000, and (b) an amount equal to [$1.1903]
[$1.4879] per share for each Share acquired by you, in excess of 135,150
shares, for the accounts of the Purchasers through purchase (including
purchases other than those referred in Section 3(a)) and conversion of
Convertible Securities. Such payment will be made promptly after the Expiration
Date, whether or not any Convertible Securities are purchased hereunder.
The Company will deliver to you through the Depository Trust Company
for the accounts of the Purchasers, certificates representing the number
of Purchased Shares purchased by such Purchaser against payment of the purchase
price by certified or official bank check in Chicago Clearing House (next day)
funds drawn to the order of the Company for all Purchased Shares purchased by
the Purchasers at the offices of Mayer, Brown & Platt, 190 South LaSalle Street,
Chicago, Illinois 60603 at 10:00 a.m., Chicago time, on the fifth business day
after the Expiration Date, or at such other time not later than five full
business days thereafter as you and the Company determine, such time being
herein referred to as the "Closing Date".
5. Certain Agreements of the Company. The Company agrees with the
several Purchasers that:
(a) If the Effective Time is prior to the execution and
delivery of this Agreement, the Company will file the Prospectus with
the Commission pursuant to and in accordance with subparagraph (1)
(or, if applicable and if consented to by you, subparagraph (4)) of
Rule 424 (b) not later than the earlier of (A) the second business day
following the execution and delivery of this Agreement or (B) the
fifth business day after the Effective Date. The Company will advise
you promptly of any such filing pursuant to Rule 424(b).
(b) The Company will advise you promptly of any proposal to
amend or supplement the registration statement as filed, or the
related prospectus or the Registration Statement or the Prospectus and
will not effect such amendment or supplementation without your
consent; and the Company will also advise you promptly of the
effectiveness of the Registration Statement (if the Effective Time is
subsequent to the execution and delivery of this Agreement) and of any
amendment or supplementation of the Registration Statement or the
Prospectus and of the institution by the Commission of any stop order
proceedings in respect of the Registration Statement and will use its
best efforts to prevent the issuance of any such stop order and to
obtain as soon as possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the Shares
and Purchased Shares is required to be delivered under the Act, any
event occurs as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, or if it is necessary at any time to amend the
Prospectus to comply with the Act, the Company promptly will prepare
and file with the Commission an amendment or supplement which will
correct such statement or omission or an amendment which will effect
such compliance. Neither your consent to, nor the Purchasers'
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<PAGE> 5
delivery of, any such amendment or supplement shall constitute a
waiver of any of the conditions set forth in Section 6.
(d) As soon as practicable, but not later than the
Availability Date (as defined below), the Company will make generally
available to its securityholders an earnings statement covering a
period of at least 12 months beginning after the Effective Date which
will satisfy the provisions of Section 11(a) of the Act. For the
purpose of the preceding sentence, "Availability Date" means the 45th
day after the end of the fourth fiscal quarter following the fiscal
quarter that includes the Effective Date, except that, if such fourth
fiscal quarter is the last quarter of the Company's fiscal year,
"Availability Date" means the 90th day after the end of such fourth
fiscal quarter.
(e) The Company will furnish to you copies of the
Registration Statement (three of which will be signed and will include
all exhibits filed therewith), each related preliminary prospectus,
the Prospectus, and all amendments and supplements to such documents,
in each case as soon as available and in such quantities as you
request.
(f) The Company will arrange for the qualification of the
Shares and the Purchased Shares for sale under the laws of such
jurisdictions as you designate and will continue such qualifications
in effect so long as required for the distribution of the Shares and
the Purchased Shares; provided, that in connection therewith the
Company shall not be required to qualify as a foreign corporation or
to file a general consent to service of process in any jurisdiction;
and provided further, that the cost of maintaining such qualification
on or after a date nine months from the date hereof shall be borne by
the Purchasers requesting the same.
(g) During the period of three years hereafter, the Company
will furnish to you and, upon request, to each of the other
Purchasers, as soon as practicable after the end of each fiscal year,
a copy of its annual report to stockholders for such year; and the
Company will furnish to you (i) as soon as available, a copy of each
report or definitive proxy statement of the Company filed with the
Commission under the Securities Exchange Act of 1934 or mailed to
stockholders, and (ii) from time to time, such other information
concerning the Company as you may reasonably request.
(h) The Company will commence on April 29, 1994 and
thereafter continue to mail the required notice of the redemption of
the Convertible Securities on the Redemption Date (together with
notice of the other rights of the holders of Convertible Securities)
in the form submitted to you and furnish copies thereof as you may
request.
(i) The Company will direct the Agent to advise you daily of
the number of shares of Convertible Securities surrendered for
conversion into Shares on the preceding day and the number of shares
of Convertible Securities tendered to and accepted by the Agent for
redemption or for purchase by the Purchasers on the preceding day.
(j) The Company will pay all expenses incident to the
performance of its obligations under this Agreement, will pay the
charges of the Agent and will reimburse the Purchasers for any
expenses (including fees and disbursements of counsel) incurred by
them in connection with qualification of the Shares and the Purchased
Shares for sale under the laws of such jurisdictions as you designate
and the printing of memoranda relating thereto, for telephone and
mailing expenses incurred by you in soliciting conversions of the
Convertible Securities, for any handling or processing charges of
nominee holders of Convertible Securities, for expenses
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<PAGE> 6
incurred in distributing preliminary prospectuses and the Prospectus
(including any amendments and supplements thereto) to the Purchasers
and any expenses (including fees and disbursements of counsel) to the
Purchasers in connection with this Agreement and your offering of the
Shares or the Purchased Shares.
(k) From the date hereof through the date 60 days after the
Redemption Date, the Company will not, (i) offer, sell, contract to
sell or otherwise dispose of any securities of the Company which are
substantially similar to the Shares or the Purchased Shares, (ii)
issue shares of capital stock or debt instruments convertible into
Common Stock to any person other than the Purchasers under any plan of
distribution requiring the registration of such shares of Common Stock
or such convertible shares or debt instruments under the Act and (iii)
register any shares of Common Stock under the Act in connection with
any secondary distribution of such shares of Common Stock or such
convertible shares or debt instruments (in the cases of (i), (ii) or
(iii)), other than in the ordinary course of the Company's dividend
reinvestment and stock option, stock incentive, employee stock
ownership, stock investment, thrift, stock purchase, benefit or
stockholders' rights plans, as a result of the conversion of the
Company's outstanding Preferred Stock, or as otherwise contemplated by
the Prospectus), except, in each case, with the written consent of the
Purchasers.
6. Conditions of the Obligations of the Purchasers. The obligations
of the several Purchasers hereunder will be subject to the accuracy of the
representations and warranties on the part of the Company herein, to the
accuracy of the statements of Company officers made pursuant to the provisions
hereof, to the performance by the Company of its obligations hereunder and to
the following additional conditions precedent:
(a) You shall have received a letter, dated the date of
delivery thereof (which, if the Effective Time is prior to the
execution and delivery of this Agreement, shall be on or prior to the
date of this Agreement or, if the Effective Time is subsequent to the
execution and delivery of this Agreement, shall be prior to the filing
of the amendment or post-effective amendment to the registration
statement to be filed shortly prior to the Effective Time), of Price
Waterhouse confirming that they are independent public accountants
within the meaning of the Act and the applicable published Rules and
Regulations thereunder and stating in effect that:
(i) in their opinion the financial statements and
schedules examined by them and included or incorporated by
reference in the Registration Statement comply in form in all
material respects with the applicable accounting requirements of
the Act and the related published Rules and Regulations;
(ii) they have made a review of the unaudited financial
statements included in the Registration Statement in accordance
with standards established by the American Institute of Certified
Public Accountants, as indicated in their report attached to such
letter;
(iii) on the basis of the review referred to in clause
(ii) above, a reading of the latest available interim financial
statements of the Company, inquiries of officials of the Company
who have responsibility for financial and accounting matters and
other specified procedures, nothing came to their attention that
caused them to believe that:
(A) the unaudited consolidated net sales, operating
profit, net income and net income per share amounts for the
three- month periods ended March 31, 1994 and 1993 included in
the Prospectus do not agree with the amounts set forth in the
unaudited
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<PAGE> 7
consolidated financial statements for those same
periods or were not determined on a basis substantially
consistent with that of the corresponding amounts in the
audited statements of income;
(B) at the date of the latest available balance sheet
read by such accountants, or at a subsequent specified date
not more than five days prior to the date of this Agreement,
there was any change in the consolidated capital stock (other
than issuances of capital stock upon exercise of options,
stock appreciation rights and stock purchase rights, upon
earn-outs of performance shares, as contributions to the
Company's thrift plan and upon conversions of convertible
securities, in each case which were outstanding on the date of
the latest balance sheet included or incorporated by reference
in the Prospectus) or any increase in consolidated short-term
indebtedness or consolidated long-term debt of the Company and
its subsidiaries or, at the date of the latest available
balance sheet read by such accountants, there was any decrease
in consolidated net current assets or net assets or any
increases or decreases in items specified by the Purchasers,
in each case as compared with amounts shown on the latest
balance sheet included in the Prospectus; or
(C) for the period from the closing date of the latest
income statement included in the Prospectus to the closing
date of the latest available income statement read by such
accountants there were any decreases, as compared with the
corresponding period of the previous year and with the period
of corresponding length ended the date of the latest income
statement included in the Prospectus, in consolidated net
revenues or operating profit, or in the total or per share
amounts of consolidated income before extraordinary items or
net income; or any increases or decreases in other items as
specified by the Purchasers;
except in all cases set forth in clauses (B) and (C) above for
changes, increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter; and
(iv) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other financial
information contained in the Registration Statement (in each case
to the extent that such dollar amounts, percentages and other
financial information are derived from the general accounting
records of the Company and its subsidiaries subject to the
internal controls of the Company's accounting system or are
derived directly from such records by analysis or computation)
with the results obtained from inquiries, a reading of such
general accounting records and other procedures specified in such
letter and have found such dollar amounts, percentages and other
financial information to be in agreement with such results, except
as otherwise specified in such letter.
For purposes of this subsection, if the Effective Time is subsequent
to the execution and delivery of this Agreement, "Registration
Statement" shall mean the registration statement as proposed to be
amended by the amendment or post-effective amendment to be filed
shortly prior to the Effective Time, and "Prospectus" shall mean the
prospectus included in the Registration Statement. All financial
statements and schedules included in material incorporated by
reference into the Prospectus shall be deemed included in the
Registration Statement for purposes of this subsection.
(b) If the Effective Time is not prior to the execution and
delivery of this Agreement, the Effective Time shall have occurred not
later than 10:00 P.M., New York time, on the date of this Agreement or
such later date as shall have been consented to by you. If the
Effective Time is prior to the execution and delivery of this
Agreement, the Prospectus shall have been filed with
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<PAGE> 8
the Commission in accordance with the Rules and Regulations and
Section 5(a) of this Agreement. Prior to the close of business on the
Expiration Date, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for
that purpose shall have been instituted or, to the knowledge of the
Company or you, shall be contemplated by the Commission.
(c) Subsequent to December 31, 1993, there shall not have been
any change in the funded debt or capital stock of the Company except
as disclosed in the letter referred to in Section 6(a) of this
Agreement or as the result of the transactions contemplated hereby nor
any change in the charter or by-laws of the Company materially
affecting the rights of the holders of Common Stock.
(d) Subsequent to the execution and delivery of this Agreement,
there shall not have occurred (i) any change, or any development
involving a prospective change, in or affecting particularly the
business or properties of the Company or its subsidiaries which, in
the judgment of a majority in interest of the Purchasers including
you, materially impairs the investment quality of the Shares; (ii) any
downgrading in the rating of any debt securities or preferred stock of
the Company by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the Act),
or any public announcement that any such organization has under
surveillance or review its rating of any debt securities or preferred
stock of the Company (other than an announcement with positive
implications of a possible upgrading, and no implication of a possible
downgrading, of such rating); (iii) any suspension or limitation of
trading in securities generally on the New York Stock Exchange, or any
setting of minimum prices for trading on such exchange, or any
suspension of trading of any securities of the Company on any exchange
or in the over-the-counter market; (iv) any banking moratorium
declared by Federal or New York authorities; or (v) any outbreak or
escalation of major hostilities in which the United States is
involved, any declaration of war by Congress or any other substantial
national or international calamity or emergency if, in the judgment of
a majority in interest of the Purchasers including you, the effect of
any such outbreak, escalation, declaration, calamity or emergency
makes it impractical or inadvisable to proceed with completion of the
purchase of and payment for the Purchased Shares or the Convertible
Securities, the conversion of the Convertible Securities into the
Shares and the resale of the Shares or the Purchased Shares by the
Purchasers.
(e) Prior to the commencement (the "Mailing Date") of the mailing
and publication of the notice of redemption of the Convertible
Securities, you shall have received an opinion, dated the date of
delivery thereof, of David B. Anderson, Esq., Vice President,
Corporate Planning and General Counsel for the Company, to the effect
that:
(i) The redemption of all the outstanding Convertible
Securities on the Redemption Date has been duly authorized;
(ii) The Company has an authorized capitalization as
set forth in the Prospectus, as of the date set forth therein, and
all of the issued shares of capital stock of the Company have been
duly and validly authorized and issued and are fully paid and
non-assessable; the Convertible Securities are convertible as set
forth in Section 2(d); and the Shares and the Purchased Shares
have been duly authorized; the Shares have been reserved for
issuance upon such conversion; the Shares, when issued upon such
conversion, and the Purchased Shares, when issued as contemplated
hereby, will be validly issued, fully paid and nonassessable; the
outstanding shares of Common Stock conform, and the Shares and
Purchased Shares will upon issuance conform, to the description
thereof contained in the Prospectus; and the holders of
outstanding shares of capital stock of the Company are not
entitled to any preemptive or other rights to subscribe for the
Shares or Purchased Shares;
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<PAGE> 9
(iii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it
owns or leases properties, or conducts any business, so as to
require such qualification, or is subject to no liability or
disability by reason of failure to be so qualified in any such
jurisdiction, which liability or disability is material to the
Company and its subsidiaries taken as a whole;
(iv) Each significant subsidiary of the Company has
been duly incorporated and is an existing corporation in good
standing under the laws of its jurisdiction of incorporation; and
all of the issued shares of capital stock of each such subsidiary
have been duly and validly authorized and issued, are fully paid
and non-assessable, and (except for directors' qualifying shares)
are owned directly or indirectly by the Company, free and clear of
all liens, encumbrances, equities or claims;
(v) No consent, approval, authorization or order of
any court or governmental agency or body is required for the issue
and sale of the Purchased Shares or issue upon conversion and the
sale of the Shares, the compliance by the Company with all of the
provisions of this Agreement and the consummation by the Company
of the transactions contemplated by this Agreement, except such as
have been obtained under the Act and the Exchange Act and such as
may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Shares and
the Purchased Shares by the Purchasers;
(vi) The execution, delivery and performance of this
Agreement, the purchase and conversion of the Convertible
Securities by the Purchasers, the issuance of the Shares upon the
conversion contemplated herein, the resale of the Shares by the
Purchasers and the issue and sale of the Purchased Shares will not
result in a breach or violation of any of the terms or provisions
of, or constitute a default under, any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument known to
such counsel to which the Company or any of its significant
subsidiaries is a party or by which the Company or any of its
significant subsidiaries is bound or to which any of the property
or assets of the Company or any of its significant subsidiaries is
subject, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or By-laws of the
Company or any statute or any order, rule or regulation known to
such counsel of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of
their properties;
(vii) To the best of such counsel's knowledge and other
than as set forth or contemplated in the Prospectus, there are no
legal or governmental proceedings pending to which the Company or
any of its subsidiaries is a party or of which any property of the
Company or any of its subsidiaries is the subject which will
individually or in the aggregate have a material adverse effect on
the consolidated financial position, stockholders' equity or
results of operations of the Company and its subsidiaries; and, to
the best of such counsel's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or
threatened by others; and
(viii) There are no contracts, agreements or
understandings known to such counsel (other than the letter
agreement, dated December 18, 1989, between Nippon Steel
Corporation, NS Finance III, Inc. and the Company) between the
Company and any person granting such person the right to require
the Company to file a registration statement under the Act with
respect to any securities of the Company owned or to be owned by
such person or to require the Company to include such securities
in the securities registered pursuant to
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<PAGE> 10
the Registration Statement or in any securities being registered
pursuant to any other registration statement filed by the Company
under the Act.
(f) Prior to the Mailing Date, you shall have received an
opinion, dated the date of delivery thereof, of Mayer, Brown & Platt,
counsel for the Company, to the effect that:
(i) The Company has been duly incorporated and is an
existing corporation in good standing under the laws of the State
of Delaware, with corporate power and authority to own its
properties and conduct its business as described in the
Prospectus;
(ii) This Agreement has been duly authorized, executed
and delivered by the Company;
(iii) The documents incorporated by reference in the
Prospectus (other than the financial statements related schedules
and other financial or statistical data contained or incorporated
by reference in such documents, as to which such counsel need
express no opinion), when they were filed with the Commission,
complied as to form in all material respects with the requirements
of the Securities Exchange Act of 1934, as amended and the rules
and regulations of the Commission thereunder; and no facts have
come to the attention of such counsel which lead them to believe
that any of such documents, when they were so filed, contained an
untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such
documents were so filed, not misleading, it being understood that
in each such case, such counsel need express no opinion as to the
financial statements and related schedules or other financial or
statistical data contained or incorporated by reference in any
such documents;
(iv) The Registration Statement and the Prospectus and
any further amendments and supplements thereto made by the Company
prior to such Closing Date (other than the financial statements
and related schedules and other financial or statistical data
contained or incorporated by reference in such documents, as to
which such counsel need express no opinion) comply as to form in
all material respects with the requirements of the Act and the
rules and regulations thereunder; no facts have come to the
attention of such counsel which lead them to believe that, as of
the effective date of the Registration Statement, either the
Registration Statement or the Prospectus (or, as of its date, any
further amendment or supplement thereto made by the Company prior
to such Closing Date) contained an untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading
or that, as of such Closing Date, either the Registration
Statement or the Prospectus (or any such further amendment or
supplement thereto) contains an untrue statement of a material
fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, it being understood that in each such case, such
counsel need express no opinion as to the financial statements and
related schedules or other financial or statistical data contained
or incorporated by reference in any such documents; and
(v) Such counsel does not know of any contracts or
other documents of a character required to be filed as an exhibit
to the Registration Statement or required to be incorporated by
reference in the Prospectus or required to be described in the
Registration Statement or the Prospectus which are not filed or
incorporated by reference or described as required.
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(g) Prior to the Mailing Date, you shall have received from
Sullivan & Cromwell, counsel for the Purchasers, such opinion or
opinions, dated the date of delivery thereof, with respect to the
incorporation of the Company, the validity of the Shares and the
Purchased Shares, the Registration Statement, the Prospectus and other
related matters as you may require, and the Company shall have
furnished to such counsel such documents as they request for the
purpose of enabling them to pass upon such matters.
(h) Prior to the Mailing Date, you shall have received a
certificate, dated the date of delivery thereof, of the President or
any Vice-President and a principal financial or accounting officer of
the Company in which such officers, to the best of their knowledge
after reasonable investigation, shall state that the representations
and warranties of the Company in this Agreement are true and correct,
that the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or
prior to the date of delivery thereof, that no stop order suspending
the effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are contemplated
by the Commission and that, subsequent to the date of the most recent
financial statements in the Prospectus, there has been no material
adverse change in the financial position or results of operation of
the Company and its subsidiaries except as set forth in or
contemplated by the Prospectus or as described in such certificate.
(i) On the Closing Date, if requested by you, you shall have
received a letter, opinions and a certificate, each dated the Closing
Date, of the independent accountants, counsel and officers referred to
in subsections (a), (e), (f), (g) and (h), respectively, of this
Section and otherwise meeting the requirements of such subsections,
except that the specified date referred to in subsection (a) will be a
date not more than five days prior to the Closing Date for the
purposes of this subsection.
The Company will furnish you with such conformed copies of such
opinions, certificates, letters and documents as you reasonably
request.
7. Indemnification and Contribution. (a) The Company will indemnify
and hold harmless each Purchaser against any losses, claims, damages or
liabilities, joint or several, to which such Purchaser may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement, the Prospectus, or any amendment or supplement
thereto, or any related preliminary prospectus, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and will reimburse each Purchaser for any legal or other expenses
reasonably incurred by such Purchaser in connection with investigating or
defending any such loss, claim, damage, liability or action as such expenses
are incurred; provided, however, that the Company will not be liable in any
such case to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement in or
omission or alleged omission from any of such documents in reliance upon and in
conformity with written information furnished to the Company by any Purchaser
through you specifically for use therein; and provided, further, that the
Company shall not be liable to any Underwriter under the indemnity agreement in
this subsection (a) with respect to any preliminary prospectus, or with respect
to any Prospectus which has been amended or supplemented to reflect an event
subsequent to the effective date of the Registration Statement, to the extent
that any such loss, claim, damage or liability of such Underwriter results from
the fact that such Underwriter sold Shares or Purchased Shares to a person to
whom there was not sent or given, at or prior to the written confirmation of
such sale, a copy of the Prospectus (excluding documents incorporated by
reference) as
-11-
<PAGE> 12
then amended or supplemented (excluding documents incorporated by reference) if
the Company has previously furnished copies thereof to such Underwriter.
(b) Each Purchaser will severally indemnify and hold harmless the
Company against any losses, claims, damages or liabilities to which the Company
may become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, the Prospectus, or any amendment
or supplement thereto, or any related preliminary prospectus, or arise out of
or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by such Purchaser through you specifically for use
therein, and will reimburse any legal or other expenses reasonably incurred by
the Company in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In case any such action is brought against
any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any
claims that are the subject matter of such action.
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Purchasers on the other from the
transactions contemplated by this Agreement or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand and the
Purchasers on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities as well as any other
relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Purchasers on the other shall be deemed to be
in the same proportion as (x) the aggregate conversion price of all Shares
issued by the Company after the date of this Agreement upon conversion of
Convertible Securities (including Shares issued upon such conversion by persons
other than the Purchasers) together with the aggregate purchase price of the
Purchased Shares, before deducting expenses, less the compensation received by
the Purchasers pursuant to Section 4 bears to (y) the compensation received by
the Purchasers pursuant to Section 4. The relative fault shall be
-12-
<PAGE> 13
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or the
Purchasers and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities referred to in the first sentence of this subsection (d) shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim which is the subject of this subsection (d). Notwithstanding the
provisions of this subsection (d), no Purchaser shall be required to contribute
any amount in excess of the amount by which the total price at which the Shares
or Purchased Shares acquired by it or for its account through purchase
(including purchases other than through the Agent) and conversion of
Convertible Securities were offered to the public exceeds the amount of any
damages which such Purchaser has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Purchasers' obligations in
this subsection (d) to contribute are several in proportion to their respective
obligations hereunder and not joint.
(e) The obligations of the Company under this Section shall be in
addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who
controls any Purchaser within the meaning of the Act; and the obligations of
the Purchasers under this Section shall be in addition to any liability which
the respective Purchasers may otherwise have and shall extend, upon the same
terms and conditions, to each director of the Company, to each officer of the
Company who has signed the Registration Statement and to each person, if any,
who controls the Company within the meaning of the Act.
8. Default of Purchasers. If either Purchaser should default in its
obligation to purchase Convertible Securities and Purchased Shares hereunder
and the aggregate number of shares of the Convertible Securities (after giving
effect to the conversion) and Purchased Shares that such defaulting Purchaser
agreed but failed to purchase does not exceed 10% of the total number of shares
of the Convertible Securities (after giving effect to the conversion) and
Purchased Shares required to be purchased hereunder, the non-defaulting
Purchaser may make arrangements satisfactory to the Company for the purchase of
such Convertible Securities or Purchased Shares by other persons, including the
non-defaulting Purchaser, but if no such arrangements are made by the close of
business on the Expiration Date, the non-defaulting Purchaser shall be
obligated to purchase the Convertible Securities or Purchased Shares that such
defaulting Purchaser agreed but failed to purchase. If any Purchaser or
Purchasers so default and the aggregate number of shares of the Convertible
Securities (after giving effect to the conversion) and Purchased Shares with
respect to which such default or defaults occur exceeds 10% of the total number
of shares of the Convertible Securities and Purchased Shares required to be
purchased hereunder and arrangements satisfactory to you and the Company for
the purchase of such Convertible Securities or Purchased Shares by other
persons are not made prior to the close of business on the Expiration Date,
this Agreement will terminate without liability on the part of any
non-defaulting Purchaser or the Company, except as provided in Section 9. As
used in this Agreement, the term "Purchaser" includes any person substituted
for a Purchaser under this Section. Nothing herein will relieve a defaulting
Purchaser from liability for its default.
9. Survival of Certain Representations and Obligations. The
respective indemnities, agreements, representations, warranties and other
statements of the Company or its officers and of the several Purchasers set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation, or statement as to the results
thereof, made by or on behalf of any Purchaser, the Company or any of their
respective representatives, officers or directors or any controlling person,
and will
-13-
<PAGE> 14
survive delivery of the Purchased Shares and the Shares upon conversion of the
Convertible Securities. If this Agreement is terminated pursuant to Section 8
or if for any reason the purchase of the Convertible Securities or the
Purchased Shares by the Purchasers is not consummated, the Company shall remain
responsible for the expenses to be paid or reimbursed by it pursuant to Section
5 and the respective obligations of the Company and the Purchasers pursuant to
Section 7 shall remain in effect. If the purchase of the Convertible Securities
or the Purchased Shares by the Purchasers is not consummated for any reason
other than solely because of the termination of this Agreement pursuant to
Section 8 or the occurrence of any event specified in clause (iii), (iv), or
(v) of Section 6(d), the Company will reimburse the Purchasers for all out-of-
pocket expenses (including fees and disbursements of counsel) reasonably
incurred by them in connection with the offering of the Shares and the
Purchased Shares and not otherwise subject to reimbursement pursuant to Section
5(j).
10. Notices. All communications hereunder will be in writing and, if
sent to the Purchasers, will be mailed, delivered or telegraphed and confirmed
to you c/o CS First Boston Corporation, Park Avenue Plaza, New York, N.Y.
10055, Attention: Investment Banking Department--New Issue Processing Group,
or, if sent to the Company, will be mailed, delivered or telegraphed and
confirmed to it at 30 West Monroe Street, Chicago, Illinois 60603, Attention:
Treasurer; provided, however, that any notice to a Purchaser pursuant to
Section 7 will be mailed, delivered or telegraphed and confirmed to such
Purchaser.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns and
the officers and directors and controlling persons referred to in Section 7,
and no other person will have any right or obligation hereunder.
12. Representation of Purchasers. Any action under this Agreement
taken by you jointly will be binding upon all the Purchasers.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
-14-
<PAGE> 15
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us one of the counterparts hereof,
whereupon it will become a binding agreement between the Company and the
several Purchasers in accordance with its terms.
Very truly yours,
INLAND STEEL INDUSTRIES, INC.
By................................
Name:
Title:
The foregoing Agreement is hereby confirmed and
accepted as of the date first above written.
CS FIRST BOSTON CORPORATION
GOLDMAN, SACHS & CO.
By CS FIRST BOSTON CORPORATION
By ..............................
Name:
Title:
-15-
<PAGE> 16
SCHEDULE A
<TABLE>
<CAPTION>
Purchaser Percentage
- --------- ----------
<S> <C>
CS First Boston Corporation . . . . . . . . . . . . . . . . . . . . . . . . . 50%
Goldman, Sachs & Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
-----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
-----------
-----------
</TABLE>
-16-
<PAGE> 1
Exhibit 5.1
April 28, 1994
Inland Steel Industries, Inc.
30 West Monroe Street
Chicago, Illinois 60603
Re: Common Stock, $1.00 par value per share
Ladies and Gentlemen:
We have acted as counsel to Inland Steel Industries, Inc., a Delaware
corporation (the "Company"), in connection with the corporate proceedings (the
"Corporate Proceedings") taken and to be taken relating to the public offering
of up to an aggregate of 2,703,000 shares of the Company's Common Stock, $1.00
par value per share (the "Common Stock"), pursuant to a standby agreement (the
"Standby Agreement"). We have also participated in the preparation and filing
with the Securities and Exchange Commission under the Securities Act of 1933 of
a registration statement on Form S-3 (the "Registration Statement") relating to
such shares of Common Stock. In this connection, we have examined such
corporate and other records, instruments, certificates and documents as we
considered necessary to enable us to express this opinion.
Based on the foregoing, it is our opinion that, upon completion of the
Corporate Proceedings, the Common Stock will have been duly authorized for
issuance and, when the Common Stock is delivered in accordance with the Standby
Agreement in substantially the form filed as Exhibit 1.1 to the Registration
Statement and the Corporate Proceedings, it will be validly issued, fully paid
and non-assessable by the Company.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Validity
of Shares."
Very truly yours,
/s/ MAYER, BROWN & PLATT
MAYER, BROWN & PLATT
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement on Form S-3 of our report dated February 23, 1994
relating to the Consolidated Financial Statements of Inland Steel Industries,
Inc. and Subsidiary Companies, which appears in such Prospectus. We also consent
to the application of such report to the Financial Statement Schedules for the
three years ended December 31, 1993 listed under Item 14(a)(2) of Inland Steel
Industries, Inc.'s Annual Report on Form 10-K for the year ended December 31,
1993 when such schedules are read in conjunction with the financial statements
referred to in our report. The audits referred to in such report also included
these Financial Statement Schedules. We also consent to the references to us
under the headings "Experts" and "Summary of Financial Information" in such
Prospectus. However, it should be noted that Price Waterhouse has not prepared
or certified such "Summary of Financial Information."
/s/ PRICE WATERHOUSE
Chicago, Illinois
April 28, 1994
<PAGE> 1
EXHIBIT 24.1
INLAND STEEL INDUSTRIES, INC.
POWER OF ATTORNEY
------------------------
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do
hereby nominate, constitute and appoint Robert J. Darnall, David B. Anderson,
Earl L. Mason and Jay E. Dittus, or any one or more of them, my true and lawful
attorneys-in-fact and agents to do any and all acts and things and execute any
and all instruments which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable said Inland Steel Industries, Inc. to
comply with the Securities Act of 1933, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
registration under said Act of not to exceed 2,703,000 shares of Common Stock,
$1.00 par value per share, of said Inland Steel Industries, Inc. that may be
issued on conversion of or sold to certain standby purchasers in connection with
the redemption of the Series G $4.625 Cumulative Convertible Exchangeable
Preferred Stock of said Inland Steel Industries, Inc., including specifically,
but without limitation thereof, full power and authority to sign my name as a
director and(or) officer of said Inland Steel Industries, Inc. to a registration
statement on Form S-3 (or such other form as may be appropriate) covering such
shares of Common Stock and to any amendment to said registration statement,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of April,
1994.
/s/ JAMES W. COZAD
--------------------------------------
James W. Cozad
<PAGE> 2
INLAND STEEL INDUSTRIES, INC.
POWER OF ATTORNEY
------------------------
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do
hereby nominate, constitute and appoint Robert J. Darnall, David B. Anderson,
Earl L. Mason and Jay E. Dittus, or any one or more of them, my true and lawful
attorneys-in-fact and agents to do any and all acts and things and execute any
and all instruments which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable said Inland Steel Industries, Inc. to
comply with the Securities Act of 1933, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
registration under said Act of not to exceed 2,703,000 shares of Common Stock,
$1.00 par value per share, of said Inland Steel Industries, Inc. that may be
issued on conversion of or sold to certain standby purchasers in connection with
the redemption of the Series G $4.625 Cumulative Convertible Exchangeable
Preferred Stock of said Inland Steel Industries, Inc., including specifically,
but without limitation thereof, full power and authority to sign my name as a
director and(or) officer of said Inland Steel Industries, Inc. to a registration
statement on Form S-3 (or such other form as may be appropriate) covering such
shares of Common Stock and to any amendment to said registration statement,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of April,
1994.
/s/ JAMES A. HENDERSON
--------------------------------------
James A. Henderson
<PAGE> 3
INLAND STEEL INDUSTRIES, INC.
POWER OF ATTORNEY
------------------------
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do
hereby nominate, constitute and appoint Robert J. Darnall, David B. Anderson,
Earl L. Mason and Jay E. Dittus, or any one or more of them, my true and lawful
attorneys-in-fact and agents to do any and all acts and things and execute any
and all instruments which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable said Inland Steel Industries, Inc. to
comply with the Securities Act of 1933, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
registration under said Act of not to exceed 2,703,000 shares of Common Stock,
$1.00 par value per share, of said Inland Steel Industries, Inc. that may be
issued on conversion of or sold to certain standby purchasers in connection with
the redemption of the Series G $4.625 Cumulative Convertible Exchangeable
Preferred Stock of said Inland Steel Industries, Inc., including specifically,
but without limitation thereof, full power and authority to sign my name as a
director and(or) officer of said Inland Steel Industries, Inc. to a registration
statement on Form S-3 (or such other form as may be appropriate) covering such
shares of Common Stock and to any amendment to said registration statement,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of April,
1994.
/s/ ROBERT B. MCKERSIE
--------------------------------------
Robert B. McKersie
<PAGE> 4
INLAND STEEL INDUSTRIES, INC.
POWER OF ATTORNEY
------------------------
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do
hereby nominate, constitute and appoint Robert J. Darnall, David B. Anderson,
Earl L. Mason and Jay E. Dittus, or any one or more of them, my true and lawful
attorneys-in-fact and agents to do any and all acts and things and execute any
and all instruments which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable said Inland Steel Industries, Inc. to
comply with the Securities Act of 1933, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
registration under said Act of not to exceed 2,703,000 shares of Common Stock,
$1.00 par value per share, of said Inland Steel Industries, Inc. that may be
issued on conversion of or sold to certain standby purchasers in connection with
the redemption of the Series G $4.625 Cumulative Convertible Exchangeable
Preferred Stock of said Inland Steel Industries, Inc., including specifically,
but without limitation thereof, full power and authority to sign my name as a
director and(or) officer of said Inland Steel Industries, Inc. to a registration
statement on Form S-3 (or such other form as may be appropriate) covering such
shares of Common Stock and to any amendment to said registration statement,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of April,
1994.
/s/ DONALD S. PERKINS
--------------------------------------
Donald S. Perkins
<PAGE> 5
INLAND STEEL INDUSTRIES, INC.
POWER OF ATTORNEY
------------------------
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do
hereby nominate, constitute and appoint Robert J. Darnall, David B. Anderson,
Earl L. Mason and Jay E. Dittus, or any one or more of them, my true and lawful
attorneys-in-fact and agents to do any and all acts and things and execute any
and all instruments which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable said Inland Steel Industries, Inc. to
comply with the Securities Act of 1933, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
registration under said Act of not to exceed 2,703,000 shares of Common Stock,
$1.00 par value per share, of said Inland Steel Industries, Inc. that may be
issued on conversion of or sold to certain standby purchasers in connection with
the redemption of the Series G $4.625 Cumulative Convertible Exchangeable
Preferred Stock of said Inland Steel Industries, Inc., including specifically,
but without limitation thereof, full power and authority to sign my name as a
director and(or) officer of said Inland Steel Industries, Inc. to a registration
statement on Form S-3 (or such other form as may be appropriate) covering such
shares of Common Stock and to any amendment to said registration statement,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of April,
1994.
/s/ JOSHUA I. SMITH
--------------------------------------
Joshua I. Smith
<PAGE> 6
INLAND STEEL INDUSTRIES, INC.
POWER OF ATTORNEY
------------------------
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do
hereby nominate, constitute and appoint Robert J. Darnall, David B. Anderson,
Earl L. Mason and Jay E. Dittus, or any one or more of them, my true and lawful
attorneys-in-fact and agents to do any and all acts and things and execute any
and all instruments which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable said Inland Steel Industries, Inc. to
comply with the Securities Act of 1933, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
registration under said Act of not to exceed 2,703,000 shares of Common Stock,
$1.00 par value per share, of said Inland Steel Industries, Inc. that may be
issued on conversion of or sold to certain standby purchasers in connection with
the redemption of the Series G $4.625 Cumulative Convertible Exchangeable
Preferred Stock of said Inland Steel Industries, Inc., including specifically,
but without limitation thereof, full power and authority to sign my name as a
director and(or) officer of said Inland Steel Industries, Inc. to a registration
statement on Form S-3 (or such other form as may be appropriate) covering such
shares of Common Stock and to any amendment to said registration statement,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of April,
1994.
/s/ NANCY H. TEETERS
--------------------------------------
Nancy H. Teeters
<PAGE> 7
INLAND STEEL INDUSTRIES, INC.
POWER OF ATTORNEY
------------------------
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do
hereby nominate, constitute and appoint Robert J. Darnall, David B. Anderson,
Earl L. Mason and Jay E. Dittus, or any one or more of them, my true and lawful
attorneys-in-fact and agents to do any and all acts and things and execute any
and all instruments which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable said Inland Steel Industries, Inc. to
comply with the Securities Act of 1933, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
registration under said Act of not to exceed 2,703,000 shares of Common Stock,
$1.00 par value per share, of said Inland Steel Industries, Inc. that may be
issued on conversion of or sold to certain standby purchasers in connection with
the redemption of the Series G $4.625 Cumulative Convertible Exchangeable
Preferred Stock of said Inland Steel Industries, Inc., including specifically,
but without limitation thereof, full power and authority to sign my name as a
director and(or) officer of said Inland Steel Industries, Inc. to a registration
statement on Form S-3 (or such other form as may be appropriate) covering such
shares of Common Stock and to any amendment to said registration statement,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of April,
1994.
/s/ RAYMOND C. TOWER
--------------------------------------
Raymond C. Tower
<PAGE> 8
INLAND STEEL INDUSTRIES, INC.
POWER OF ATTORNEY
------------------------
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do
hereby nominate, constitute and appoint Robert J. Darnall, David B. Anderson,
Earl L. Mason and Jay E. Dittus, or any one or more of them, my true and lawful
attorneys-in-fact and agents to do any and all acts and things and execute any
and all instruments which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable said Inland Steel Industries, Inc. to
comply with the Securities Act of 1933, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
registration under said Act of not to exceed 2,703,000 shares of Common Stock,
$1.00 par value per share, of said Inland Steel Industries, Inc. that may be
issued on conversion of or sold to certain standby purchasers in connection with
the redemption of the Series G $4.625 Cumulative Convertible Exchangeable
Preferred Stock of said Inland Steel Industries, Inc., including specifically,
but without limitation thereof, full power and authority to sign my name as a
director and(or) officer of said Inland Steel Industries, Inc. to a registration
statement on Form S-3 (or such other form as may be appropriate) covering such
shares of Common Stock and to any amendment to said registration statement,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of April,
1994.
/s/ ARNOLD R. WEBER
--------------------------------------
Arnold R. Weber
