<PAGE> 1
1993
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-9117
INLAND STEEL INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
DELAWARE 36-3425828
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
30 WEST MONROE STREET, CHICAGO, ILLINOIS 60603
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
<CAPTION>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (312) 346-0300
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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<S> <C>
COMMON STOCK ($1.00 PAR VALUE), INCLUDING NEW YORK STOCK EXCHANGE, INC.
PREFERRED STOCK PURCHASE RIGHTS
SERIES A $2.40 CUMULATIVE CONVERTIBLE CHICAGO STOCK EXCHANGE, INCORPORATED
PREFERRED STOCK ($1.00 PAR VALUE)
SERIES G. $4.625 CUMULATIVE CONVERTIBLE NEW YORK STOCK EXCHANGE, INC.
EXCHANGEABLE PREFERRED STOCK
($1.00 PAR VALUE)
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X . NO .
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. /X/
AS OF MARCH 15, 1994 THE AGGREGATE MARKET VALUE OF THE VOTING STOCK OF THE
REGISTRANT HELD BY NON-AFFILIATES OF THE REGISTRANT WAS $1,435,453,418.(1)
THE NUMBER OF SHARES OF COMMON STOCK ($1.00 PAR VALUE) OF THE REGISTRANT
OUTSTANDING AS OF MARCH 15, 1994 WAS 41,221,095.
(1)EXCLUDING STOCK HELD BY DIRECTORS AND OFFICERS OF REGISTRANT, WITHOUT
ADMISSION OF AFFILIATE STATUS OF SUCH INDIVIDUALS FOR ANY OTHER PURPOSE; ALSO,
EXCLUDING SERIES E ESOP CONVERTIBLE PREFERRED STOCK AND SERIES F EXCHANGEABLE
PREFERRED STOCK OF THE REGISTRANT, NEITHER OF WHICH SERIES IS PUBLICLY TRADED.
DOCUMENTS INCORPORATED BY REFERENCE
PARTS I AND II OF THIS REPORT ON FORM 10-K INCORPORATE BY REFERENCE CERTAIN
INFORMATION FROM THE ANNUAL REPORT TO STOCKHOLDERS FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1993. PART III OF THIS REPORT ON FORM 10-K INCORPORATES BY
REFERENCE CERTAIN INFORMATION FROM THE COMPANY'S DEFINITIVE PROXY STATEMENT
WHICH WILL BE FURNISHED TO STOCKHOLDERS IN CONNECTION WITH THE ANNUAL MEETING OF
STOCKHOLDERS OF THE COMPANY SCHEDULED TO BE HELD ON MAY 25, 1994.
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<PAGE> 2
PART I
ITEM 1. BUSINESS.
Inland Steel Industries, Inc. (the "Company"), a Delaware corporation, is
the sole stockholder of Inland Steel Company and Inland Materials Distribution
Group, Inc. ("Distribution"). 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.
It is also a participant in certain steel-finishing joint ventures. Distribution
is the sole stockholder of Joseph T. Ryerson & Son, Inc. ("Ryerson") and J. M.
Tull Metals Company, Inc. ("Tull"). Ryerson and Tull are leading steel service,
distribution and materials processing organizations.
BUSINESS SEGMENTS
The business segments of the Company and its subsidiaries are Integrated
Steel (including iron ore operations) and Steel Service Centers. For the three
years ended December 31, 1993, information relating to net sales, operating
profit, identifiable assets, depreciation and capital expenditures for both
business segments of the Company appears in Note 15 of Notes to Consolidated
Financial Statements in the Company's Annual Report to Stockholders for the
fiscal year ended December 31, 1993. Such information is hereby incorporated by
reference herein.
Integrated Steel Operations
General
Inland Steel Company, a wholly owned subsidiary of the Company, is directly
engaged in the production and sale of steel and related products and the
transportation of iron ore, limestone and certain other commodities (primarily
for its own use) on the Great Lakes. Certain subsidiaries and associated
companies of Inland Steel Company are engaged in the mining and pelletizing of
iron ore and in the operation of a cold-rolling mill and two steel galvanizing
lines. All raw steel made by Inland Steel Company is produced at its Indiana
Harbor Works located in East Chicago, Indiana, which also has facilities for
converting the steel produced into semi-finished and finished steel products.
In August 1988, Inland Steel Company realigned its operations into two
divisions -- the Inland Steel Flat Products Company division and the Inland
Steel Bar Company division. The purpose of the realignment was to allow
management to better focus on the distinctive competitive factors and customer
requirements in the markets for the products manufactured by each division. The
Flat Products division manages Inland Steel Company's iron ore operations,
conducts its ironmaking operations, and produces the major portion of its raw
steel. This division also manufactures and sells steel sheet, strip and plate
and certain related semi-finished products for the automotive, appliance, office
furniture, steel service center and electrical motor markets. The Bar division
manufactures and sells special quality bars and certain related semi-finished
products for forgers, steel service centers, heavy equipment manufacturers, cold
finishers and the transportation industry. The Bar division closed its 28-inch
structural mill in early 1991, completing Inland Steel Company's withdrawal from
the structural steel manufacturing business.
Inland Steel Company and Nippon Steel Corporation ("NSC") are participants,
through subsidiaries, in two joint ventures that operate steel-finishing
facilities near New Carlisle, Indiana. The total cost of these two facilities
was approximately $1.1 billion. I/N Tek, owned 60% by a wholly owned subsidiary
of Inland Steel Company and 40% by an indirect wholly owned subsidiary of NSC,
operates a cold-rolling mill that began shipping commercial product in 1990 and
reached its design capability in 1992. I/N Kote, owned equally by wholly owned
subsidiaries of Inland Steel Company and NSC (indirect in the case of NSC),
operates two galvanizing lines which began start-up production in late 1991,
became fully operational in the third quarter of 1992, and were operating near
design capacity by August 1993. Inland Steel Company is also a participant,
through a subsidiary, in another galvanizing joint venture located near
Walbridge, Ohio.
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Raw Steel Production and Mill Shipments
The following table shows, for the five years indicated, Inland Steel
Company's production of raw steel and, based upon American Iron and Steel
Institute data, its share of total domestic raw steel production:
<TABLE>
<CAPTION>
RAW STEEL PRODUCTION INLAND STEEL
---------------------------------
INLAND STEEL
INLAND STEEL COMPANY AS A % OF
COMPANY U.S. STEEL
(000 TONS*) INDUSTRY
------------ -----------------
<S> <C> <C>
1993..................................................... 5,003 5.2%**
1992..................................................... 4,740 5.2
1991..................................................... 4,677 5.3
1990..................................................... 5,339 5.5
1989..................................................... 5,550 5.7
</TABLE>
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* Net tons of 2,000 pounds.
** Based on preliminary data from the American Iron and Steel Institute.
The annual raw steelmaking capacity of Inland Steel Company was reduced to
6.0 million net tons from 6.5 million net tons effective September 1, 1991, as
Inland Steel Company ceased making ingots. The basic oxygen process accounted
for 94% of raw steel production of Inland Steel Company in 1993 and 1992. The
remainder of such production was accounted for by electric furnaces.
The total tonnage of steel mill products shipped by Inland Steel Company
for each of the five years 1989 through 1993 was 4.8 million tons in 1993; 4.3
million tons in 1992; 4.2 million tons in 1991; 4.7 million tons in 1990; and
4.9 million tons in 1989. In 1993, sheet, strip, plate and certain related
semi-finished products accounted for 88% of the total tonnage of steel mill
products shipped from the Indiana Harbor Works, and bar and certain related
semi-finished products accounted for 12%.
In 1993 and 1992, approximately 93% of the shipments of the Flat Products
division and 92% of the shipments of the Bar division were to customers in 20
mid-American states. Approximately 75% of the shipments of the Flat Products
division and 83% of the shipments of the Bar division in 1993 were to customers
in a five-state area comprised of Illinois, Indiana, Ohio, Michigan and
Wisconsin, compared to 72% and 83% in 1992. Both divisions compete in these
geographical areas, principally on the basis of price, service and quality, with
the nation's largest producers of raw steel as well as with foreign producers
and with many smaller domestic mills.
According to data from the American Iron and Steel Institute, steel imports
to the United States in 1993 totaled an estimated 19.5 million tons, compared
with 17.1 million tons imported in 1992. Steel imports constituted approximately
18.8% of apparent domestic supply in 1993, compared with approximately 17.9% of
apparent domestic supply in 1992. During 1984, the peak year for steel imports
into the U.S., such imports accounted for 26.4% of apparent domestic supply. In
addition to the importation of steel mill products, the U.S. steel industry has
faced indirect imports of steel. Data from the American Iron and Steel Institute
show that imports of steel contained in manufactured goods exceeded exports by
an estimated 16 million tons in 1993.
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 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. The Company and
certain domestic producers have filed formal appeals of the adverse ITC
decisions in the U.S. Court of International Trade or similar jurisdiction
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.
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<PAGE> 4
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.
Primarily as a result of the influx of foreign steel imports and the
depressed demand for domestic steel products that began in the early 1980s,
certain facilities at the Indiana Harbor Works were permanently closed during
the second half of the 1980s and the early 1990s and others were shut down for
temporary periods. The 28-inch structural mill was closed in early 1991,
reflecting a decision to withdraw from the structural steel markets. In late
1991 the mold foundry, No. 8 Coke Oven Battery, and selected other facilities
were closed either as part of a program to permanently reduce costs through the
closure of uneconomic facilities or for environmental reasons. Provisions with
respect to the shut-down of the structural mill were taken in 1987. Provisions
for estimated costs incurred in connection with the closure of the mold foundry,
No. 8 Coke Oven Battery, and selected other facilities were made in 1991.
Included in such provisions were costs associated with Inland Steel Company's
closure of its No. 11 Coke Oven Battery in June 1992. All remaining coke
batteries were closed by year-end 1993, a year earlier than previously
anticipated. An additional provision was required with respect to those
closures. (See "Environment" below.)
For the five years indicated, shipments by market classification of steel
mill products produced by Inland Steel Company at its Indiana Harbor Works,
including shipments to affiliates of the Company, are set forth below. The table
confirms that a substantial portion of shipments by the Flat Products division
was to steel service centers and transportation-related markets. The Bar
division shipped more than 70% of its products to the steel
converters/processors market over the five-year period shown in the table.
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL TONNAGE
OF STEEL SHIPMENTS
------------------------------------
1993 1992 1991 1990 1989
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<S> <C> <C> <C> <C> <C>
Steel Service Centers:
Affiliates............................................ 9 % 7 % 8 % 8 % 9 %
Non-Affiliates........................................ 21 22 24 20 20
---- ---- ---- ---- ----
30 29 32 28 29
Automotive.............................................. 37 28 25 26 27
Appliance............................................... 9 9 8 7 7
Industrial, Electrical and Farm Machinery............... 4 8 9 9 10
Construction and Contractors' Products.................. 3 3 4 8 10
Steel Converters/Processors............................. 10 18 12 15 11
Other................................................... 7 5 10 7 6
---- ---- ---- ---- ----
100 % 100 % 100 % 100 % 100 %
---- ---- ---- ---- ----
---- ---- ---- ---- ----
</TABLE>
The increase in 1993 of sales to the automotive market and the decline in
sales to the steel converters/processors market are indicative of Inland Steel
Company's efforts to maximize its sales of value-added and higher margin
products.
Some value-added steel processing operations that Inland Steel Company does
not have the capability to perform are performed by outside processors prior to
shipment of certain products to Inland Steel Company's customers. In 1993,
approximately 16% of the products produced by Inland Steel Company were
processed further through value-added services such as electrogalvanizing,
painting and slitting.
Approximately 64% of the total tonnage of shipments by Inland Steel Company
during 1993 from the Indiana Harbor Works was transported by truck, with the
remainder transported primarily by rail. A wholly
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<PAGE> 5
owned truck transport subsidiary of Inland Steel Company was responsible for
shipment of approximately 15% of the total tonnage of products transported by
truck from the Indiana Harbor Works in 1993.
Substantially all of the steel mill products produced by the Flat Products
division are marketed through its own selling organization, with offices located
in Chicago; Southfield, Michigan; St. Louis; and Nashville, Tennessee.
Substantially all of the steel mill products produced by the Bar division are
marketed through its sales office in East Chicago, Indiana.
See "Product Classes" below for information relating to the percentage of
consolidated net sales accounted for by certain classes of similar products of
integrated steel operations.
Raw Materials
Inland Steel Company obtains iron ore pellets primarily from three iron ore
properties, located in the United States and Canada, in which subsidiaries of
Inland Steel Company have varying interests -- the Empire Mine in Michigan, the
Minorca Mine in Minnesota and the Wabush Mine in Labrador and Quebec, Canada. In
recent years Inland Steel Company has closed or terminated certain less
cost-efficient iron ore mining operations. See "Properties Relating to
Integrated Steel Segment -- Raw Materials Properties and Interests" in Item 2
below for further information relating to such iron ore properties.
The following table shows (1) the iron ore pellets available to Inland
Steel Company, as of December 31, 1993, from properties of its subsidiaries and
through interests in raw materials ventures; (2) 1993 and 1992 iron ore pellet
production or purchases from such sources; and (3) the percentage of Inland
Steel Company's iron ore requirements represented by production or purchases
from such sources in 1993 and 1992.
<TABLE>
<CAPTION>
IRON ORE
TONNAGES IN THOUSANDS
(GROSS TONS OF PELLETS)
--------------------------------- % OF
AVAILABLE AS OF PRODUCTION REQUIREMENTS(1)
DECEMBER 31, -------------- -------------
1993(2) 1993 1992 1993 1992
--------------- ----- ----- ---- ----
<S> <C> <C> <C> <C> <C>
INLAND STEEL MINING COMPANY PROPERTY
Minorca -- Virginia, MN.............. 68,000 2,577 2,265 41% 38 %
IRON ORE VENTURES AND LONG-TERM
PURCHASE CONTRACTS
Empire (40% owned) -- Palmer, MI;
Wabush (13.75% owned) -- Wabush,
Labrador and Pointe Noire, Quebec,
Canada............................ 116,000 3,513 3,804 55 63
--------------- ----- ----- ---- ----
Total Iron Ore.................... 184,000 6,090 6,069 96% 101%
--------------- ----- ----- ---- ----
--------------- ----- ----- ---- ----
</TABLE>
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(1) Production in excess of requirements was sold or added to stockpile.
Production below requirements was purchased or taken from stockpile.
(2) Net interest in proven reserves.
All of Inland Steel Company's coal requirements are satisfied from
independent sources, with a portion of such requirements being met under two
significant purchase contracts. The first such contract, extending through
year-end 1994, requires Inland Steel Company to purchase (subject to force
majeure provisions) a total of 1,270,000 tons of metallurgical and/or steam coal
during the term of the contract at prices (intended to approximate market)
determined with respect to certain cost factors. The contract requires the
parties to enter into good-faith negotiations regarding extension of the
arrangement at mutually agreeable terms and conditions prior to the end of the
term. The term of the contract is likely to be extended covering solely steam
coal, due to the shut-down of Inland Steel Company's coke batteries. During
1993, Inland Steel Company purchased 15% of its coal requirements under such
contract, representing 8% of its metallurgical coal requirements and 33% of its
steam coal requirements.
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<PAGE> 6
A second coal purchase contract extends through year-end 1995. Such
contract covers substantially all of the coal needs of the PCI Associates joint
venture, in which a subsidiary of Inland Steel Company holds a 50% interest. The
PCI facility pulverizes coal for injection into Inland Steel Company's blast
furnaces. The contract requires Inland Steel Company to purchase (subject to
force majeure provisions) 95% of the requirements of PCI Associates (100% in
1993) of injection-quality coal through the term of the contract (currently
estimated to be 1,520,000 tons) at prices determined by annual good-faith
negotiations between the parties. The term of the agreement may be extended by
mutual agreement of the parties. During 1993, Inland Steel Company purchased 5%
of its total coal requirements under such contract, representing 100% of its
injection coal requirements. The balance of Inland Steel Company's coal
requirements was purchased from domestic sources under short-term purchase
contracts and from other sources.
In December 1993, the last of Inland Steel Company's coke-making facilities
was permanently shut down. Inland Steel Company entered into a long-term
purchase contract extending through July 1999 which required Inland Steel
Company to purchase approximately 800,000 tons of coke on an annualized basis
through July 1993, and requires Inland Steel Company to purchase 1,400,000 tons
of coke on an annualized basis thereafter through the term of the contract at
prices negotiated annually based on certain market determinants. The purchase
requirement is subject to force majeure provisions. The term of the contract may
be extended by mutual agreement of the parties. During 1993, Inland Steel
Company satisfied 46% of its total coke needs under such arrangement. The
remainder of its purchased coke requirements was obtained through contracts with
independent domestic sources.
Inland Steel Company's Michigan limestone and dolomite properties were sold
in September 1990. As part of such sale, Inland Steel Company entered into a
requirements contract (subject to force majeure provisions) with the buyer of
the properties to purchase in each of the first five years of the contract term,
beginning in 1992, the greater of its annual limestone needs or one million
gross tons, with certain exceptions, and its annual limestone needs, with
certain exceptions, for the remaining six years of the agreement. Prices
(intended to approximate market) are determined with respect to certain cost
factors.
Approximately 75% of the iron ore pellets and virtually all of the
limestone received by Inland Steel Company at its Indiana Harbor Works in 1993
were transported by its Great Lakes carriers. Contracts are in effect for the
transportation on the Great Lakes of the remainder of its iron ore pellet
requirements. Approximately 26% of Inland Steel Company's coal requirements were
transported in its hopper cars by unit train in 1993. The remainder of Inland
Steel Company's coal requirements was transported in independent carrier-owned
equipment.
See "Energy" below for further information relating to the use of coal in
the operations of Inland Steel Company.
Steel Service Center Operations
The Company's steel service center operations are conducted by its wholly
owned steel service center management subsidiary, Inland Materials Distribution
Group, Inc., through its operating subsidiaries -- Joseph T. Ryerson & Son, Inc.
and J. M. Tull Metals Company, Inc. In August 1990, Ryerson, Tull and Ryerson
Coil Processing, a specialized processing unit, were organized into five
business units along regional and product lines. Ryerson, on a nationwide basis,
and Tull, in the southeastern and south-central United States, each compete with
a large number of other steel service centers, some of which are affiliated with
foreign steelmakers. Competition is primarily on the basis of service, quality
and price. The ability to meet just-in-time delivery requirements of customers
depends on maintaining adequate inventories and processing capacity and highly
trained personnel.
Depending on location, the Company's steel service center operations are
engaged in the sale of carbon, alloy and stainless steel; aluminum and aluminum
alloys; nickel and nickel alloys; copper; brass; specialty metals; and
industrial plastics. The service centers sell products in various forms,
including, again depending on location, plate, sheet, coil, wire, rod, bar,
tubing, pipe, structural, and expanded metal and grating. During 1993, the Steel
Service Center segment shipped approximately 35% of its product (by sales
revenue) to machinery manufacturers, 25% to metal producers and fabricators, 9%
to transportation equipment producers,
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<PAGE> 7
10% to electrical machinery producers, 4% to wholesale distributors, 5% to
construction-related purchasers, 3% to metal mills and foundries, and 9% to
other customers. Approximately 20% of the tons of product purchased in 1993 by
the Steel Service Center segment were from affiliates.
Joseph T. Ryerson & Son, Inc.
Ryerson, with business unit headquarters in Philadelphia, Pennsylvania,
Chicago, Illinois, and Seattle, Washington, is a leading steel service center
organization. With full-line service centers in 30 major cities, Ryerson is
engaged in the nationwide sale of its products through its own sales
organization. Ryerson maintains heavy-duty shears, slitters, precision
cut-to-length lines, high-speed saws, flame-cutting machines and other
processing equipment for use in furnishing custom cutting and miscellaneous
shapes in accordance with customer orders. The Ryerson Coil Processing Company
division, headquartered in Chicago, performs processing through six facilities
for customers who traditionally buy large quantities of sheet steel products.
Ryerson also markets plant equipment products through a wholesale industrial
catalog.
J. M. Tull Metals Company, Inc.
Tull is one of the largest distributors of metals in the southeastern
United States. Tull and its wholly owned subsidiary, AFCO Metals, Inc., acquired
by Tull in June 1988, operate 19 service centers and two processing facilities
located throughout the southeastern and south-central United States. Tull
produces a variety of metal products with value-added processing, including
welded steel tubing and roll-formed shapes. Tull's products are sold principally
through its own sales staff.
PRODUCT CLASSES
The following table sets forth the percentage of consolidated net sales,
for the five years indicated, contributed by each class of similar products in
the Integrated Steel business segment that accounted for 10% or more of
consolidated net sales in such time period. The Steel Service Center business
segment of the Company did not have any class of similar products that accounted
for 10% or more of such sales in any of such years.
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Integrated Steel Operations
Sheet, Strip and Plate...................... 45 % 45 % 45 % 43 % 44 %
Bar and Structural.......................... 7 6 6 10 9
---- ---- ---- ---- ----
Total Integrated Steel Operations............. 52 51 51 53 53
Steel Service Center Products................. 48 49 49 47 47
---- ---- ---- ---- ----
100 % 100 % 100 % 100 % 100 %
---- ---- ---- ---- ----
---- ---- ---- ---- ----
</TABLE>
CAPITAL EXPENDITURES AND INVESTMENTS IN JOINT VENTURES
In recent years, the Company and its subsidiaries have made substantial
capital expenditures, principally at the Indiana Harbor Works, to improve
quality and reduce costs, and for pollution control. Additions by the Company
and its subsidiaries to property, plant and equipment, together with retirements
and adjustments, for the five years ended December 31, 1993, are set forth
below. Net capital additions during such period aggregated $386.9 million.
<TABLE>
<CAPTION>
DOLLARS IN MILLIONS
--------------------------------------------------------------
RETIREMENTS NET CAPITAL
ADDITIONS* OR SALES* ADJUSTMENTS* ADDITIONS
---------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
1993.............................. $105.6 $ 143.4 $ (1.3) $ (39.1)
1992.............................. 64.4 74.9 (7.4) (17.9)
1991.............................. 140.2 95.3 (.6) 44.3
1990.............................. 268.1 49.3 1.4 220.2
1989.............................. 197.2 30.2 12.4 179.4
</TABLE>
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* See detail in Schedule V -- Property, Plant and Equipment, of Financial
Statement Schedules attached hereto and incorporated by reference herein.
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In recent years, the Company's largest capital improvement projects at the
Indiana Harbor Works have emphasized reducing costs and improving quality in the
steel-processing sequence of Inland Steel Company. Approximately $10 million was
spent in 1993 to complete upgrade projects begun in 1990 at the 80-inch Hot
Strip Mill and at the 12-inch Bar Mill. The total cost of the 80-inch Hot Strip
Mill and the 12-inch Bar Mill projects was approximately $214 million. The only
major project undertaken and completed in 1993 was a mini-reline of the No. 7
Blast Furnace at a cost of $27 million. No major projects are planned for 1994.
In July 1987, a wholly owned subsidiary of Inland Steel Company formed a
partnership, I/N Tek, with an indirect wholly owned subsidiary of NSC to
construct, own, finance and operate a cold-rolling facility with an annual
capacity of 1,500,000 tons, of which one-third is cold-rolled substrate for I/N
Kote. The I/N Tek facility, located near New Carlisle, Indiana, became
operational in April 1990 and reached its design capability in March 1992.
Inland Steel Company, which owns, through its subsidiary, a 60% interest in the
I/N Tek partnership, is, with certain limited exceptions, the sole supplier of
hot band to be processed by the I/N Tek facility and generally has exclusive
rights to the production capacity of the facility.
In September 1989, a wholly owned subsidiary of Inland Steel Company formed
a second partnership, I/N Kote, with an indirect wholly owned subsidiary of NSC
to construct, own, finance and operate two sheet steel galvanizing lines
adjacent to the I/N Tek facility. The subsidiary of Inland Steel Company owns a
50% interest in I/N Kote. The I/N Kote facility consists of a hot-dip
galvanizing line and an electrogalvanizing line with a combined annual capacity
of 900,000 tons. The electrogalvanizing line began start-up operations in
September 1991 and the hot-dip galvanizing line began start-up operations in
November 1991. Both lines were operating near design capability by August 1993.
Inland Steel Company has guaranteed 50% of I/N Kote's permanent financing. I/N
Kote has contracted to acquire its cold-rolled steel substrate from Inland Steel
Company, which supplies the substrate from the I/N Tek facility and Inland Steel
Company's Indiana Harbor Works.
Further information regarding the I/N Tek and I/N Kote joint venture
projects will be set forth under the caption "Certain Relationships and Related
Transactions -- Joint Ventures" in the Company's definitive Proxy Statement
which will be furnished to stockholders in connection with the Annual Meeting
scheduled to be held on May 25, 1994, and is incorporated by reference into Item
13 of this Report.
Inland Steel Company sold half of its 25% ownership interest in the
Walbridge, Ohio electrogalvanizing joint venture in the second quarter of 1992.
In 1993, the Company and its subsidiaries made capital expenditures of $106
million. Such expenditures principally focused on new machinery and equipment
related to maintaining or improving Integrated Steel operations. Approximately
$86 million was spent for Integrated Steel capital projects in 1993, including
replacements and renewals. Excluding amounts related to the purchase of the
equity interest in Inland Steel Company's No. 2 BOF Shop Caster facility, the
amount budgeted for 1994 capital expenditures by the Company and its
subsidiaries is approximately $110 million. In March 1994 Inland Steel Company
purchased the equity interest of the lessor of the Caster for $83 million. In
addition, in connection with such purchase, Inland Steel Company recorded $63
million of debt. It is anticipated that capital expenditures will be funded from
cash generated by operations and cash on hand at year-end 1993. (See
"Environment" below for a discussion of capital expenditures for pollution
control purposes.)
EMPLOYEES
The monthly average number of active employees of the Company and its
subsidiaries receiving pay during 1993 was approximately 16,200, of whom
approximately 10,900 were employed at Inland Steel Company. The majority of the
remaining employees were employed at the Company's steel service center
operations. At year-end, approximately 8,900 of the Company's employees,
including 8,400 at Inland Steel Company, were represented by the United
Steelworkers of America, of whom approximately 1,430 including 1,400 at Inland
Steel Company, were on furlough or indefinite layoff. Approximately 1,100
employees were represented by other unions during 1993. The decline at Inland
Steel Company in average employment from 12,100 in 1992 is attributable to
improvements in productivity, the shut-down of older facilities, and workforce
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<PAGE> 9
reductions. Excluding the costs attributable to future workforce reductions,
total employment costs decreased from $941 million in 1992 to $925 million in
1993.
Beginning in 1991, the Company embarked upon a major turnaround strategy,
with the assistance of an outside consulting firm, to significantly reduce
costs, increase revenues and improve asset utilization at both the Company and
Inland Steel Company. As a result, employment was reduced by 2,300 positions by
year-end 1993. Another 1,200 positions are expected to be eliminated by the end
of 1994.
The current labor agreement between Inland Steel Company and the United
Steelworkers of America, effective August 1, 1993, covers 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
(totalling 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's 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 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 term of the contract. The agreement also provides for
election of a Union designee acceptable to the Company to the Company's Board of
Directors, restrictions on the ability of Inland Steel Company to reduce the
Union workforce (generally limited to attrition and major facilities shutdowns)
while allowing greater flexibility to institute work rule changes, 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 on medical benefits.
As of December 31, 1993, the number of active employees at Ryerson was
approximately 4,045 of whom approximately 1,125 were covered by collective
bargaining agreements. Of those employees covered by collective bargaining
agreements, approximately 475 production, maintenance, and transportation
employees were represented by the United Steelworkers of America and
approximately 370 such employees were represented by the International
Brotherhood of Teamsters. The current agreement with the United Steelworkers
will expire on July 31, 1996. During 1993, Ryerson reached agreement at seven
separate plants (San Francisco, Buffalo, Indianapolis, Chattanooga, St. Louis,
Jersey City, and Los Angeles) represented by various unions covering 190
employees. These agreements expire on various dates from April 31, 1995 through
October 31, 1997. The agreements, as well as the current agreement with the
United Steelworkers of America, provide for modest wage increases, lump sum
bonuses, pension improvements, and increased employee sharing of health care
costs. Ryerson maintains agreements with the Teamsters covering 13 facilities.
Teamster agreements expire on various dates during the period beginning March
31, 1994, and ending October 31, 1997. In addition, Ryerson contracts with
independent third parties to provide approximately 175 drivers on a leased basis
to nine Ryerson facilities. These leased drivers are covered by agreements
between the Teamsters and such independent third parties, which agreements
expire on March 31, 1994.
ENVIRONMENT
The Company is 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 redemination 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.
8
<PAGE> 10
By year-end 1993, the last of Inland Steel Company's coke-making facilities
was permanently shut down. 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 such remaining coke-making facilities at year-end 1994. The October 1993
decision to close these facilities early necessitated a fourth-quarter 1993
pre-tax charge of $22.3 million that included the write-off of property, plant
and equipment costs which were to be depreciated in 1994 and additional costs
related to the earlier-than-anticipated displacement of personnel. Inland Steel
Company has entered into a long-term contract to satisfy the majority of its
coke needs. (See "Raw Materials" above). In addition, Inland Steel Company
participates in a joint venture that has constructed and is operating a
pulverized coal injection facility for blast furnace application, which process
is anticipated to replace up to 30% of Inland Steel Company's coke needs. The
facility is anticipated to substantially achieve operation at its design
capacity by year-end 1994.
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 the 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 totalled $19 million. The
consent decree also defines procedures for corrective action at Inland Steel
Company's Indiana Harbor Works. The procedures defined 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 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.
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 thereafter. In addition, Inland Steel 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.
See Item 3 below for information concerning certain proceedings pertaining
to environmental matters in which Inland Steel Company is involved.
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<PAGE> 11
ENERGY
Coal, all of which is purchased from independent sources, together with
coke, accounted for approximately 67.8% of the energy consumed by Inland Steel
Company at the Indiana Harbor Works in 1993. In recent years Inland Steel
Company has purchased varying portions of its coke requirements from outside
sources, purchasing approximately 59% in 1993 and approximately 46% in 1992. See
"Environment" above for a discussion of coke-making by Inland Steel Company and
alternatives for obtaining coke.
Natural gas and fuel oil supplied approximately 30% of the energy
requirements of the Indiana Harbor Works in 1993 and are used extensively by the
Company at other facilities that it owns or in which it has an interest. The
Company anticipates that utilization of the pulverized coal injection facility
(see "Environment" above) will substantially reduce natural gas and fuel oil
consumption at the Indiana Harbor Works.
The Company both purchases and, through Inland Steel Company, generates
electricity to satisfy electrical energy requirements at the Indiana Harbor
Works. In 1993, Inland Steel Company produced approximately 61% of its
requirements at the Indiana Harbor Works. The purchase of electricity at the
Indiana Harbor Works is subject to curtailment under rules of the local utility
when necessary to maintain appropriate service for various classes of its
customers.
ITEM 2. PROPERTIES.
PROPERTIES RELATING TO INTEGRATED STEEL SEGMENT
Steel Production
All raw steel made by Inland Steel Company is produced at its Indiana
Harbor Works located in East Chicago, Indiana. The property on which this plant
is located, consisting of approximately 1,900 acres, is held by Inland Steel
Company in fee. The basic production facilities of Inland Steel Company at its
Indiana Harbor Works consist of furnaces for making iron; basic oxygen and
electric furnaces for making steel; a continuous billet caster, a continuous
combination slab/bloom caster and two continuous slab casters; and a variety of
rolling mills and processing lines which turn out finished steel mill products.
Certain of these production facilities, including a continuous anneal line and
the No. 2 BOF Shop Caster Facility ("Caster"), are held by Inland Steel Company
under leasing arrangements. Inland Steel Company purchased the equity interest
of the lessor of the Caster in March 1994 and currently intends to terminate the
lease and prepay or formally assume the applicable debt in the first half of
1994. Substantially all of the remaining property, plant and equipment at the
Indiana Harbor Works is subject to the lien of the First Mortgage of Inland
Steel Company dated April 1, 1928, as amended and supplemented. See "Business
Segments -- Integrated Steel Operations -- Raw Steel Production and Mill
Shipments" in Item 1 above for further information relating to capacity and
utilization of Inland Steel Company's properties. Inland Steel Company's
properties are adequate to serve its present and anticipated needs, taking into
account those issues discussed in "Capital Expenditures and Investments in Joint
Ventures" in Item 1 above.
I/N Tek, a partnership in which a subsidiary of Inland Steel Company owns a
60% interest, has constructed a 1,500,000-ton annual capacity cold-rolling mill
on approximately 200 acres of land, which it owns in fee, located near New
Carlisle, Indiana. Substantially all the property, plant and equipment owned by
I/N Tek at this location is subject to a lien securing related indebtedness. The
I/N Tek facility is adequate to serve the present and anticipated needs of
Inland Steel Company planned for such facility.
I/N Kote, a partnership in which a subsidiary of Inland Steel Company owns
a 50% interest, has constructed a 900,000-ton annual capacity steel galvanizing
facility on approximately 25 acres of land, which it owns in fee, located
adjacent to the I/N Tek site. Substantially all the property, plant and
equipment owned by I/N Kote is subject to a lien securing related indebtedness.
The I/N Kote facility is adequate to serve the present and anticipated needs of
Inland Steel Company planned for such facility.
PCI Associates, a partnership in which a subsidiary of Inland Steel Company
owns a 50% interest, has constructed a pulvarized coal injection facility on
land located within the Inland Harbor Works. Inland Steel Company leases PCI
Associates the land upon which the facility is located. Substantially all the
property,
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<PAGE> 12
plant and equipment owned by PCI Associates is subject to a lien securing
related indebtedness. Upon achieving operation at design capacity, the PCI
Associates facility will be adequate to serve the anticipated needs of Inland
Steel Company planned for such facility.
Inland Steel Company owns three vessels for the transportation of iron ore
and limestone on the Great Lakes, and a subsidiary of Inland Steel Company owns
a fleet of 404 coal hopper cars (100-ton capacity each) used in unit trains to
move coal to the Indiana Harbor Works. See "Business Segments -- Integrated
Steel Operations -- Raw Materials" in Item 1 above for further information
relating to utilization of Inland Steel Company's transportation equipment. Such
equipment is adequate, when combined with purchases of transportation services
from independent sources, to meet Inland Steel Company's present and anticipated
transportation needs.
Inland Steel Company also owns and maintains research and development
laboratories in East Chicago, Indiana, which facilities are adequate to serve
its present and anticipated needs.
Raw Materials Properties and Interests
Certain information relating to raw materials properties and interests of
Inland Steel Company and its subsidiaries is set forth below. See "Business
Segments -- Integrated Steel Operations -- Raw Materials" in Item 1 above for
further information relating to capacity and utilization of such properties and
interests.
Iron Ore
The operating iron ore properties of Inland Steel Company's subsidiaries
and of the iron ore ventures in which Inland Steel Company has an interest are
as follows:
<TABLE>
<CAPTION>
ANNUAL
PRODUCTION CAPACITY
(IN THOUSANDS OF
GROSS TONS OF
PROPERTY LOCATION PELLETS)
- ------------------------------------------ ------------------------ -------------------
<S> <C> <C>
Empire Mine............................... Palmer, Michigan 8,100
Minorca Mine.............................. Virginia, Minnesota 2,500
Wabush Mine............................... Wabush, Labrador and 4,500
Pointe Noire, Quebec,
Canada
</TABLE>
The Empire Mine is operated by the Empire Iron Mining Partnership, in which
Inland Steel Company has a 40% interest. Inland Steel Company, through a
subsidiary, is the sole owner and operator of the Minorca Mine. The Wabush Mine
is a taconite project in which Inland Steel Company owns a 13.75% interest.
Inland Steel Company also owns a 38% interest in the Butler Taconite project
(permanently closed in 1985) in Nashwauk, Minnesota.
The reserves at the Empire Mine, the Minorca Mine and the Wabush Mine are
held under leases expiring, or expected at current production rates to expire,
between 2012 and 2040. Substantially all of the reserves at Butler Taconite are
held under leases. Inland Steel Company's share of the production capacity of
its interests in such iron ore properties is sufficient to provide the majority
of its present and anticipated iron ore pellet requirements. Any remaining
requirements have been and are expected to continue to be readily available from
independent sources. During 1992, the Minorca Mine's original ore body was
depleted and production shifted to a new major iron ore body, the Laurentian
Reserve, acquired by lease in 1990.
Limestone and Dolomite
The limestone and dolomite properties of Inland Steel Company located near
the town of Gulliver in the Upper Peninsula of Michigan were permanently closed
on December 29, 1989 and sold in 1990.
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<PAGE> 13
Coal
Inland Steel Company's sole remaining coal property, the Lancashire No. 25
Property, located near Barnesboro, Pennsylvania, is permanently closed. All
Inland Steel Company coal requirements for the past several years have been and
are expected to continue to be met through contract purchases and other
purchases from independent sources.
PROPERTIES OF STEEL SERVICE CENTER SEGMENT
Joseph T. Ryerson & Son, Inc.
Ryerson owns its regional business unit headquarters offices in Chicago and
leases regional headquarters offices in West Chester (PA) and Renton (WA).
Ryerson/East division maintains steel service centers at Allston (MA), Buffalo,
Carnegie (PA), Charlotte, Chattanooga, Cleveland, Jersey City, Philadelphia, and
Wallingford (CT). Ryerson/Central's service centers are in Chicago, Cincinnati,
Dallas, Detroit, Houston, Indianapolis, Kansas City, Milwaukee, Plymouth (MN),
St. Louis, and Tulsa. Ryerson/West's service centers are in Commerce City (CO),
Emeryville (CA), Los Angeles, Phoenix, Portland (OR), Renton (WA), Spokane, and
Salt Lake City. Ryerson Coil Processing division's processing facilities are
located in Chicago, Marshalltown (IA), Plymouth (MN) and New Hope (MN).
All of Ryerson's operating facilities are held in fee with the exception of
a portion of the property at St. Louis (held under long-term lease), a portion
of the property in Portland (held under short-term lease), a satellite facility
at Omaha (held under short-term lease), two facilities in Chicago (held under
short-term lease), two facilities in New Hope (MN) (one partly held in fee and
partly under short-term lease, the other held under short-term lease), one
facility in Marshalltown (IA) (held under an installment purchase contract) and
one facility in Salt Lake City (held under short-term lease). In addition,
Ryerson holds in fee approximately 44 acres of unimproved property in Powder
Springs (GA) and approximately eight acres of property in Elk Grove Village
(IL), formerly the site of an operating facility. Ryerson's properties are
adequate to serve its present and anticipated needs.
J. M. Tull Metals Company, Inc.
Tull maintains service centers in Birmingham, Columbia (SC), Jacksonville,
Miami, Tampa, Baton Rouge, New Orleans, Charlotte, Greensboro (NC), Greenville
(SC), Richmond, and Norcross (GA), where its headquarters is located. All of
these facilities are owned by Tull in fee, except for the Columbia facility,
which is held under short-term lease. Tull's AFCO Metals, Inc. subsidiary
operates service centers in Fort Smith (AR), Oklahoma City, Shreveport, West
Memphis (AR), Wichita, Jackson (MS) and Little Rock. AFCO's headquarters are
located in Norcross (GA), where it leases space owned in fee by Tull. Each of
AFCO's facilities is held in fee except the Wichita facility, which is held
under a short-term lease. Tull holds in fee land improved with a parking garage
in Atlanta. Tull's properties are adequate to serve its present and anticipated
needs.
OTHER PROPERTIES
The Company and certain of its subsidiaries lease, under a long-term
arrangement, approximately 63% of the space in the Inland Steel Building located
at 30 West Monroe Street, Chicago, Illinois (where the Company's principal
executive offices are located), which property interest is adequate to serve the
Company's present and anticipated needs. Approximately 12% of such space is
under sublease to other parties.
Magnetics International, Inc., a subsidiary of the Company, owns
approximately 63 acres in northern Indiana, on which site it has constructed an
iron oxide plant that began operation in April 1991. Such facility is adequate
to serve the present and anticipated needs of Magnetics International, Inc.
Certain subsidiaries of the Company hold in fee at various locations an
aggregate of approximately 355 acres of land, all of which is for sale. Inland
Steel Company also holds in fee approximately 300 acres of land adjacent to the
I/N Tek and I/N Kote sites, which land is available for future development.
Approximately 1,060 acres of rural land, which are held in fee at various
locations in the north-central United States by various raw materials ventures,
are
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<PAGE> 14
also for sale. I R Construction Products Company, Inc. (formerly Inryco, Inc.),
a subsidiary of Inland Steel Company and the Company's former Construction
Products business segment, owns, in fee, a combination office building and
warehouse in Hoffman Estates (IL), which is for sale.
ITEM 3. LEGAL PROCEEDINGS.
On August 12, 1992, Inland Steel Administrative Service Company ("ISAS"), a
wholly owned subsidiary of Inland Steel Company, filed a lawsuit in the Court of
Common Pleas in Lorain County, Ohio against Western Steel Group, Inc.
("Western") to collect the unpaid balance of its account for steel products sold
to Western by Inland Steel Company in the amount of $5.7 million. On October 15,
1992, Western filed a counterclaim against ISAS and a third-party complaint
against Inland Steel Company for $40 million actual damages and $100 million
punitive damages, alleging, among other things, breach of contract and wrongful
interference with contractual relations in connection with a refusal by Inland
Steel Company to continue selling steel products to Western and defamation of
Western and a patent held by Western in connection with discussions with third
parties. All claims were settled between the parties in February 1994 and the
settlement was approved by the court. Under the terms of the settlement, ISAS
has received $3.4 million and all counterclaims against Inland Steel Company and
ISAS have been released.
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 the 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 totalled $19 million. The
consent decree also defines procedures for corrective action at Inland Steel
Company's Indiana Harbor Works. The procedures defined 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 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.
On March 22, 1985, the EPA issued an administrative order to Inland Steel
Company's former Inland Steel Container Company Division ("Division") naming the
former Division and various other unrelated companies as responsible parties
under the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") in connection with the cleanup of a waste disposal facility operated
by Duane Marine Salvage Corporation at Perth Amboy, New Jersey. The
administrative order alleged that certain of the former Division's wastes were
transported to, and disposed of at, that facility and required Inland Steel
Company to join with other named parties in taking certain actions relating to
the facility. Inland Steel Company and the other administrative order recipients
have completed the work required by the order. In unrelated matters, the EPA
also advised the former Division and various other unrelated parties of other
sites located in New Jersey at which the EPA expects to spend public funds on
any investigative and corrective measures that may be necessary to control any
releases or threatened releases of hazardous substances, pollutants and
contaminants pursuant to the applicable provisions of CERCLA. The notice also
indicated that the EPA believes Inland Steel Company may be a responsible party
under CERCLA. The extent of Inland Steel Company's involvement and participation
in these matters has not yet been determined. While it is not possible at this
time to predict the amount of Inland Steel Company's potential liability, none
of these matters is expected to materially affect Inland Steel Company's
financial position.
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<PAGE> 15
The EPA has adopted a national policy of seeking substantial civil
penalties against owners and operators of sources for noncompliance with air and
water pollution control statutes and regulations under certain circumstances. It
is not possible to predict whether further proceedings will be instituted
against the Company or any of its subsidiaries pursuant to such policy, nor is
it possible to predict the amount of any such penalties that might be assessed
in any such proceeding.
The Indiana Department of Environmental Management ("IDEM") from time to
time advises various parties of alleged violations of air pollution regulations
by issuing Notices of Violation so as to initiate discussions concerning
corrective measures. Inland Steel Company has three currently outstanding
unresolved Notices of Violation at its Indiana Harbor Works. Inland Steel
Company is presently in discussions with the staff of IDEM with respect to these
matters and cannot currently estimate the time period within which these matters
will be resolved. While it is not possible at this time to predict the amount of
Inland Steel Company's potential liability, none of these matters is expected to
materially affect Inland Steel Company's financial position.
Inland Steel Company received a Notice of Violation from IDEM dated March
3, 1989 alleging violations of Inland Steel Company's National Pollution
Discharge Elimination System permit regarding water discharges. Inland Steel
Company is presently in discussions with the staff of IDEM with respect to these
matters and cannot currently estimate the time period within which these matters
will be resolved. While it is not possible at this time to predict the amount of
Inland Steel Company's potential liability, this matter is not expected to
materially affect Inland Steel Company's financial position.
Inland Steel Company received a Special Notice of Potential Liability
("Special Notice") from IDEM on February 18, 1992 relating to the Four County
Landfill Site, Fulton County, Indiana (the "Facility"). The Special Notice
stated that IDEM has documented the release of hazardous substances, pollutants
and contaminants at the Facility and was planning to spend public funds to
undertake an investigation and control the release or threatened release at the
Facility unless IDEM determined that a potentially responsible party ("PRP")
will properly and promptly perform such action. The Special Notice further
stated that Inland Steel Company may be a PRP and that Inland Steel Company, as
a PRP, may have potential liability with respect to the Facility. In August
1993, Inland Steel Company, along with other PRPs, entered into an Agreed Order
with IDEM, pursuant to which the PRPs agreed to perform a Remedial
Investigation/Feasibility Study ("RI/FS") for the Facility and pay certain past
and future IDEM costs. In addition, the PRPs agreed to provide funds for
operation and maintenance necessary for stabilization of the Facility. Those
costs which Inland Steel Company has agreed to assume under the Agreed Order are
not currently anticipated to exceed $154,000. The cost of the final remedies
which will be determined to be required with respect to the Facility cannot be
reasonably estimated until, at a minimum, the RI/FS is completed. Inland Steel
Company is therefore unable to determine the extent of its potential liability,
if any, relating to the Facility or whether this matter could materially affect
Inland Steel Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
Not applicable.
EXECUTIVE OFFICERS OF REGISTRANT.
Officers are elected by the Board of Directors of the Company to serve for
a period ending with the next succeeding annual meeting of the Board of
Directors held immediately after the annual meeting of stockholders. All
executive officers of the Company, with the exception of Earl L. Mason, H.
William Howard, Olivia M. Thompson, and Maurice S. Nelson, Jr., have been
employed by the Company or a subsidiary of the Company throughout the past five
years.
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<PAGE> 16
Set forth below are the executive officers of the Company as of March 1,
1994 and the age of each as of such date. Their principal occupations held
presently and during the past five years, including positions and offices held
with the Company or a significant subsidiary of the Company are shown below.
<TABLE>
<CAPTION>
NAME, AGE AND POSITIONS AND OFFICES HELD
PRESENT POSITION WITH REGISTRANT DURING THE PAST FIVE YEARS
- ----------------------------------- --------------------------------------------------------
<S> <C>
Robert J. Darnall, 56.............. Mr. Darnall has been Chairman, President and Chief
Chairman, President, Chief Executive Officer of the Company since September 1,
Executive Officer and Director 1992. A Director of the Company and a member of the
Executive and Finance and Retirement Committees of the
Board of Directors since April 23, 1986, he became
Chairman of the Finance and Retirement Committee on
April 24, 1991 and Chairman of the Executive Committee
on January 1, 1993. He was President and Chief Operating
Officer of the Company from April 16, 1986 to September
1, 1992. He has been Chairman and Chief Executive
Officer of Inland Steel Company since September 1, 1992
and was also its President from November 1987 to
September 1, 1992. Mr. Darnall has also been a Director
of Inland Steel Company since April 1983. He also has
been Chairman of the Board of Directors of Inland
Materials Distribution Group, Inc. (and its predecessor
company) since November 1990. Prior to November 1990, he
had been Chairman of the Board of its subsidiaries
Joseph T. Ryerson & Son, Inc. since May 1986 and J. M.
Tull Metals Company, Inc. since July 1986.
W. Gordon Kay, 57.................. Mr. Kay has been Senior Vice President of the Company
Senior Vice President since July 1990 and President and Chief Operating
Officer of Inland Materials Distribution Group, Inc.
(and its predecessor company) and Chairman of its
subsidiaries, Joseph T. Ryerson & Son, Inc. and J. M.
Tull Metals Company, Inc., since November 1990. He also
has been President of Joseph T. Ryerson & Son, Inc.
since January 1990 and was President and Chief Executive
Officer of J. M. Tull Metals Company, Inc. (acquired by
the Company in July 1986) from July 1984 until November
1990.
Maurice S. Nelson, Jr., 56......... Mr. Nelson has been Senior Vice President of the Company
Senior Vice President and President and Chief Operating Officer of Inland
Steel Company since September 1, 1992. He also holds the
position of President of the Inland Steel Flat Products
Company division of Inland Steel Company, which he
assumed on joining the Company on November 1, 1991.
Prior to joining Inland Steel Company, he was President,
Sheet and Plate Division, Aluminum Company of America
("ALCOA"), from August 1991 to October 1991 and Vice
President, Sheet and Plate Division, ALCOA, from October
1986 to July 1991.
</TABLE>
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<PAGE> 17
<TABLE>
<CAPTION>
NAME, AGE AND POSITIONS AND OFFICES HELD
PRESENT POSITION WITH REGISTRANT DURING THE PAST FIVE YEARS
- ----------------------------------- --------------------------------------------------------
<S> <C>
Earl L. Mason, 46.................. Mr. Mason has been Vice President and Chief Financial
Vice President and Officer of the Company since January 24, 1994. Prior to
Chief Financial Officer such appointment, he was Vice President -- Finance and
Principal Financial Officer of the Company from June 17,
1991. Prior to joining the Company, he was Group
Executive -- Logistics and Asset Management of Digital
Equipment Corporation (a manufacturer of data processing
equipment) ("Digital") from July 1990 until joining the
Company in June 1991, and Chief Financial Officer for
the European operations of Digital from September 1987
to June 1990.
David B. Anderson, 51.............. Mr. Anderson has been Secretary of the Company and of
Vice President -- Corporate Inland Steel Company since January 1, 1994. He also has
Planning, General Counsel and been Vice President -- Corporate Planning and General
Secretary Counsel of the Company since April 23, 1986.
Jay E. Dittus, 61.................. Mr. Dittus has been Vice President -- Finance since
Vice President -- Finance January 24, 1994. Prior to such appointment, he was
Treasurer of the Company from April 23, 1986, Treasurer
of Inland Steel Company from May 1981, Treasurer of
Joseph T. Ryerson & Son, Inc. from October 1990,
Assistant Treasurer of Joseph T. Ryerson & Son, Inc.
from April 1986 to October 1990, and Treasurer of J. M.
Tull Metals Company, Inc. from September 1988. He also
has been Vice President of Inland Steel Company since
November 1988.
Judd R. Cool, 58................... Mr. Cool has been Vice President -- Human Resources of
Vice-President -- Human Resources the Company since September 21, 1987 and Vice President
-- Human Resources of Inland Steel Flat Products Company
division since January 11, 1993.
H. William Howard, 59.............. Mr. Howard has been Vice President -- Information
Vice President -- Information Technology of the Company since September 1, 1990 and
Technology Vice President -- Automation and Information Technology
of Inland Steel Flat Products Company division since
January 11, 1993. Prior to joining the Company, he was
the Vice President of Information Technology of the
Bechtel Group, Inc. (involved in engineering and
construction) from May 1987 to September 1990.
Vicki L. Avril, 39................. Ms. Avril has been Treasurer of the Company and of
Treasurer and Director of Pension Inland Steel Company since January 24, 1994, and
Investments and Administration Treasurer of Joseph T. Ryerson & Son, Inc. and J. M.
Tull Metals Company, Inc. since February 10, 1994. In
addition, she has been Director of Pension Investments
and Administration since June 1991. She was Assistant
Treasurer of the Company from May 1993 until January
1994, Manager -- Planning -- Distribution Business from
February 1990 until June 1991, and Manager -- Pension
Investments from March 1988 until February 1990.
</TABLE>
16
<PAGE> 18
<TABLE>
<CAPTION>
NAME, AGE AND POSITIONS AND OFFICES HELD
PRESENT POSITION WITH REGISTRANT DURING THE PAST FIVE YEARS
- ----------------------------------- --------------------------------------------------------
<S> <C>
Olivia M. Thompson, 44............. Ms. Thompson has been Controller of the Company since
Controller and Principal August 17, 1992 and Controller of Inland Steel Company
Accounting Officer since February 1, 1993. Prior to joining the Company,
she was employed by Allied-Signal, Inc. (involved in
aerospace, automotive and engineered materials) as
Director of Business Planning and Development for the
Automotive Sector from September 1991 to July 1992,
Assistant Corporate Controller -- Operations Analysis
and Accounting from June 1990 to August 1991, and Group
Controller -- Bendix Safety Restraints Group from
January 1987 to June 1990.
</TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
The common stock of the Company is listed and traded on the New York Stock
Exchange. As of March 15, 1994, the number of holders of record of common stock
of the Company was 15,388.
The remaining information called for by this Item 5 is set forth under the
caption "Summary by Quarter" in the Company's Annual Report to Stockholders for
the fiscal year ended December 31, 1993, and is hereby incorporated by reference
herein.
ITEM 6. SELECTED FINANCIAL DATA.
The information called for by this Item 6 with respect to each of the last
five years of the Company and its predecessor is set forth under the caption
"Eleven-Year Summary of Selected Financial Data and Operating Results" in the
Company's Annual Report to Stockholders for the fiscal year ended December 31,
1993, and is hereby incorporated by reference herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information called for by this Item 7 is set forth in the Financial
Review section of the Company's Annual Report to Stockholders for the fiscal
year ended December 31, 1993, and, excluding the tables entitled "Inland Steel
Company -- Steel Shipments by Market" and "Inland Materials Distribution Group
- -- Shipments by Market" and the bar charts entitled "Inland Steel Industries --
Debt to Total Capitalization," "Inland Steel Industries -- Capital Expenditures
versus Depreciation," "Inland Steel Industries -- Total Employment Costs" and
"Inland Steel Industries -- Average Employment Cost Per Employee" contained
therein, is hereby incorporated by reference herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of the Company called for by this
Item 8, together with the report thereon of the independent accountants dated
February 23, 1994, are set forth under the captions "Report of Independent
Accountants" and "Statement of Accounting and Financial Policies" as well as in
all consolidated financial statements and schedules of the Company and the
"Notes to Consolidated Financial Statements" in the Company's Annual Report to
Stockholders for the fiscal year ended December 31, 1993, and are hereby
incorporated by reference herein. The financial statement schedules listed under
Item 14(a)2 of this Report on Form 10-K, together with the report thereon of the
independent accountants dated February 23, 1994, should be read in conjunction
with the consolidated financial statements. Financial statement schedules not
included in this Report on Form 10-K have been omitted because they are not
applicable or because the information called for is shown in the consolidated
financial statements or notes
17
<PAGE> 19
thereto. Separate consolidated financial statements for Inland Steel Company are
set forth in Inland Steel Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993. Separate consolidated financial statements for
Inland Materials Distribution Group, Inc. are set forth in Appendix A to this
Report.
Consolidated quarterly sales, earnings and per share common stock
information for 1992 and 1993 are set under the caption "Summary by Quarter" in
the Company's Annual Report to Stockholders for the fiscal year ended December
31, 1993, and are hereby incorporated by reference herein.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information called for by this Item 10 with respect to directors of the
Company will be set forth under the caption "Election of Directors" in the
Company's definitive Proxy Statement which will be furnished to stockholders in
connection with the Annual Meeting of Stockholders to be held on May 25, 1994,
and is hereby incorporated by reference herein. The information called for with
respect to executive officers of the Company is included in Part I of this
Report on Form 10-K under the caption "Executive Officers of Registrant."
ITEM 11. EXECUTIVE COMPENSATION.
The information called for by this Item 11 will be set forth under the
caption "Executive Compensation" in the Company's definitive Proxy Statement
which will be furnished to stockholders in connection with the Annual Meeting of
Stockholders to be held on May 25, 1994, and is hereby incorporated by reference
herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) The information called for by this Item 12 with respect to security
ownership of more than five percent of the Company's common stock, Series E ESOP
Convertible Preferred Stock and Series F Exchangeable Preferred Stock will be
set forth under the caption "Additional Information Relating to Voting
Securities" in the Company's definitive Proxy Statement which will be furnished
to stockholders in connection with the Annual Meeting of Stockholders scheduled
to be held on May 25, 1994, and is hereby incorporated by reference herein.
18
<PAGE> 20
The following beneficial owners of Series A $2.40 Cumulative Convertible
Preferred Stock are the only persons known to the Company to be the beneficial
owners (as defined by the Securities and Exchange Commission), as of March 15,
1994, of more than five percent of that class of the Company's voting
securities:
<TABLE>
<CAPTION>
NUMBER PERCENT
NAME AND ADDRESS OF SHARES OF CLASS
------------------------------------------------------------------- --------- --------
<S> <C> <C>
Joseph H. Campbell................................................. 7,500 7.78
2003 Country Club Drive
Midland, TX 79701
Harry Kifferstein.................................................. 10,025 10.40
c/o Warren Kifferstein
6735 Telegraph Road, Suite 330
Bloomfield Hills, MI 48301
Janice F. McCollough............................................... 7,200 7.47
5778 Lake Breeze Court
Sarasota, FL 34233
Donald F. Reinhardt................................................ 5,181 5.38
24638 Elmhurst Drive
Elkhart, IN 46517
</TABLE>
(b) The information called for by this Item 12 with respect to the security
ownership of directors and of management will be set forth under the caption
"Security Ownership of Directors and Management" in the Company's definitive
Proxy Statement which will be furnished to stockholders in connection with the
Annual Meeting of Stockholders to be held on May 25, 1994, and is hereby
incorporated by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information called for by this Item 13 will be set forth under the caption
"Additional Information Relating to Voting Securities -- Certain Relationships
and Related Transactions" in the Company's definitive Proxy Statement which will
be furnished to stockholders in connection with the Annual Meeting of
Stockholders to be held on May 25, 1994, and is hereby incorporated by reference
herein.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) DOCUMENTS FILED AS A PART OF THIS REPORT.
1. CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY. The consolidated
financial statements listed below are set forth in the Company's Annual
Report to Stockholders for the fiscal year ended December 31, 1993, and
are incorporated by reference in Item 8 of this Annual Report on Form
10-K.
Report of Independent Accountants dated February 23, 1994.
Statement of Accounting and Financial Policies.
Consolidated Statements of Operations and Reinvested Earnings for the
three years ended December 31, 1993.
Consolidated Statement of Cash Flows for the three years ended
December 31, 1993.
Consolidated Balance Sheet at December 31, 1993 and 1992.
Schedules to Consolidated Financial Statements at December 31, 1993
and 1992, relating to:
Investments and Advances.
19
<PAGE> 21
Property, Plant and Equipment.
Long-Term Debt.
Notes to Consolidated Financial Statements.
2. FINANCIAL STATEMENT SCHEDULES OF THE COMPANY.
Report of Independent Accountants on Financial Statement Schedules
dated February 23, 1994. (Included on page 27 of this Report)
Consent of Independent Accountants. (Included on page 27 of this
Report)
For the years ended December 31, 1993, 1992 and 1991:
Schedule III -- Condensed Financial Information (Parent Company
Only). (Included on pages 28 to 30, inclusive, of this Report)
Schedule V -- Property, Plant and Equipment. (Included on page 31
of this Report)
Schedule VI -- Reserve for Depreciation, Amortization and
Depletion of Property, Plant and Equipment. (Included on page 32
of this Report)
Schedule VIII -- Reserves. (Included on page 33 of this Report)
Schedule IX -- Short-Term Borrowings. (Included on page 34 of
this Report)
Schedule X -- Supplementary Profit and Loss Information.
(Included on page 35 of this Report)
3. CONSOLIDATED FINANCIAL STATEMENTS OF INLAND MATERIALS DISTRIBUTION
GROUP, INC.
The consolidated financial statements listed below are set forth in
Appendix A on pages A-1 to A-13 inclusive, of this Report.
Report of Independent Accountants dated February 23, 1994. (Page A-2)
Consolidated Statements of Operations and Reinvested Earnings for the
three years ended December 31, 1993. (Page A-3)
Consolidated Statement of Cash Flows for the three years ended
December 31, 1993. (Page A-4)
Consolidated Balance Sheet at December 31, 1993 and 1992. (Page A-5)
Statement of Accounting and Financial Policies. (Page A-6)
Notes to Consolidated Financial Statements. (Pages A-7 to A-13,
inclusive)
4. EXHIBITS. The exhibits required to be filed by Item 601 of Regulation
S-K are listed under the caption "Exhibits" below.
(B) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed by the Company during the quarter
ended December 31, 1993.
(C) EXHIBITS.
<TABLE>
<S> <C>
3.(i) Copy of 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.)
</TABLE>
20
<PAGE> 22
<TABLE>
<S> <C>
3.(ii) Copy of By-laws, as amended, of the Company. (Filed as Exhibit 3-B to the
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1992, and incorporated by reference herein.)
4.A Copy of Certificate of Designations, Preferences and Rights of Series A
$2.40 Cumulative Convertible Preferred Stock of the Company. (Filed as
part of Exhibit B to the definitive Proxy Statement of Inland Steel
Company dated March 21, 1986 that was furnished to stockholders in
connection with the annual meeting held April 23, 1986, and incorporated
by reference herein.)
4.B Copy of Certificate of Designation, Preferences and Rights of Series D
Junior Participating Preferred Stock of the Company. (Filed as Exhibit
4-D to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1987, and incorporated by reference herein.)
4.C Copy of Rights Agreement, dated as of November 25, 1987, as amended and
restated as of May 24, 1989, between the Company and The First National
Bank of Chicago, as Rights Agent (Harris Trust and Savings Bank, as
successor Rights Agent). (Filed as Exhibit 1 to the Company's Current
Report on Form 8-K filed on May 24, 1989, and incorporated by reference
herein.)
4.D Copy of Certificate of Designations, Preferences and Rights of Series E
ESOP Convertible Preferred Stock of the Company. (Filed as Exhibit 4-F to
the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1989, and incorporated by reference herein.)
4.E Copy of Certificate of Designations, Preferences and Rights of Series F
Exchangeable Preferred Stock of the Company. (Filed as Exhibit 4(b) to
the Company's Current Report on Form 8-K filed on December 18, 1989, and
incorporated by reference herein.)
4.F Copy of 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.G Copy of Indenture dated as of December 15, 1992, between the Company and
Harris Trust and Savings Bank, as Trustee, respecting the Company's
$150,000,000 12-3/4% Notes due December 15, 2002. (Filed as Exhibit 4-G
to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992, and incorporated by reference herein.)
4.H Copy of First Mortgage Indenture, dated April 1, 1928, between Inland
Steel Company (the "Steel Company") and First Trust and Savings Bank and
Melvin A. Traylor, as Trustees, and of supplemental indentures thereto,
to and including the Thirty-Second Supplemental Indenture, incorporated
by reference from the following Exhibits: (i) Exhibits B-1(a), B-1(b),
B-1(c), B-1(d) and B-1(e), filed with Steel Company's Registration
Statement on Form A-2 (No. 2-1855); (ii) Exhibits D-1(f) and D-1(g),
filed with Steel Company's Registration Statement on Form E-1 (No.
2-2182); (iii) Exhibit B-1(h), filed with Steel Company's Current Report
on Form 8-K dated January 18, 1937; (iv) Exhibit B-1(i), filed with Steel
Company's Current Report on Form 8-K, dated February 8, 1937; (v)
Exhibits B-1(j) and B-1(k), filed with Steel Company's Current Report on
Form 8-K for the month of April, 1940; (vi) Exhibit B-2, filed with Steel
Company's Registration Statement on Form A-2 (No. 2-4357); (vii) Exhibit
B-1(l), filed with Steel Company's Current Report on Form 8-K for the
month of January, 1945; (viii) Exhibit 1, filed with Steel Company's
Current Report on Form 8-K for the month of November, 1946; (ix) Exhibit
1, filed with Steel Company's Current Report on Form 8-K for the months
of July and August, 1948; (x) Exhibits B and C, filed with Steel
Company's Current Report on Form 8-K for the month of March, 1952; (xi)
Exhibit A, filed with Steel Company's Current Report on Form 8-K for the
month of July, 1956; (xii) Exhibit A, filed with Steel Company's Current
Report on Form 8-K for the month of July, 1957;
</TABLE>
21
<PAGE> 23
<TABLE>
<S> <C>
(xiii) Exhibit B, filed with Steel Company's Current Report on Form 8-K
for the month of January, 1959; (xiv) the Exhibit filed with Steel
Company's Current Report on Form 8-K for the month of December, 1967;
(xv) the Exhibit filed with Steel Company's Current Report on Form 8-K
for the month of April, 1969; (xvi) the Exhibit filed with Steel
Company's Current Report on Form 8-K for the month of July, 1970; (xvii)
the Exhibit filed with the amendment on Form 8 to Steel Company's Current
Report on Form 8-K for the month of April, 1974; (xviii) Exhibit B, filed
with Steel Company's Current Report on Form 8-K for the month of
September, 1975; (xix) Exhibit B, filed with Steel Company's Current
Report on Form 8-K for the month of January, 1977; (xx) Exhibit C, filed
with Steel Company's Current Report on Form 8-K for the month of
February, 1977; (xxi) Exhibit B, filed with Steel Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1978; (xxii) Exhibit
B, filed with Steel Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1980; (xxiii) Exhibit 4-D, filed with Steel
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1980; (xxiv) Exhibit 4-D, filed with Steel Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1982; (xxv) Exhibit 4-E,
filed with Steel Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1983; (xxvi) Exhibit 4(i) filed with the Steel
Company's Registration Statement on Form S-2 (No. 33-43393); and (xxvii)
Exhibit 4 filed with Steel Company's Current Report on form 8-K dated
June 23, 1993.
4.I Copy of consolidated reprint of First Mortgage Indenture, dated April 1,
1928, between Inland Steel Company and First Trust and Savings Bank and
Melvin A. Traylor, as Trustees, as amended and supplemented by all
supplemental indentures thereto, to and including the Thirteenth
Supplemental Indenture. (Filed as Exhibit 4-E to Form S-1 Registration
Statement No. 2-9443, and incorporated by reference herein.)
[The registrant hereby agrees to provide a copy of any other agreement
relating to long-term debt at the request of the Commission.]
10.A* Copy of Inland Steel Industries, Inc. Annual Incentive Plan, as amended.
10.B* Copy of Inland Steel Industries, Inc. Special Achievement Award Plan.
(Filed as Exhibit 10-I to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1987, and incorporated by reference
herein.)
10.C* Copy of Inland 1975 Executive Stock Option Plan, as amended. (Filed as
Exhibit 10-A to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1987, and incorporated by reference herein.)
10.D* Copy of Inland 1984 Incentive Stock Plan, as amended.
10.E* Copy of Inland 1988 Incentive Stock Plan, as amended.
10.F* Copy of Inland 1992 Incentive Stock Plan, as amended.
10.G* Copy of Inland Steel Industries Non-Qualified Thrift Plan, as amended.
(Filed as Exhibit 10-H to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1989, and incorporated by reference
herein.)
10.H* Copy of Inland 1992 Stock Plan for Non-Employee Directors. (Filed as
Exhibit B to the Company's definitive Proxy Statement dated March 16,
1992 that was furnished to stockholders in connection with the annual
meeting held April 22, 1992, and incorporated by reference herein.)
10.I* Copy of Inland Steel Industries Supplemental Retirement Benefit Plan for
Covered Employees, as amended.
</TABLE>
- ---------------
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit to the Company's Annual Report on Form 10-K.
22
<PAGE> 24
<TABLE>
<S> <C>
10.J* Copy of Inland Steel Industries Special Retirement Benefit Plan for
Covered Employees, as amended.
10.K* Copy of the Inland Steel Industries Deferred Compensation Plan for
Certain Employees. (Filed as Exhibit 10-K to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1989, and
incorporated by reference herein.)
10.L* Copy of Inland Steel Industries Deferred Compensation Plan for Directors,
as amended. (Filed as Exhibit 10-L to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1992, and incorporated by
reference herein.)
10.M* Copy of Inland Steel Industries Director Retirement Plan.
10.N* Copy of Outside Directors Accident Insurance Policy. (Filed as Exhibit
10-F to Inland Steel Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1983, and incorporated by reference herein.)
10.O.(1)* Copy of form of Severance Agreement dated June 28, 1989 between the
Company and each of the seven executive officers of the Company
identified on the exhibit relating to terms and conditions of termination
of employment following a change in control of the Company. (Filed as
Exhibit 10-O-(1) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989, and incorporated by reference
herein.)
10.O.(2)* Amended listing of executive officers of the Company who are parties to
the form of Severance Agreement dated June 28, 1989 in Exhibit 10.O.(1)
hereof.
10.O.(3)* Copy of Severance Agreement dated June 28, 1989 between the Company and
Judd R. Cool. (Filed as Exhibit 10-O-(2) to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1989, and
incorporated by reference herein.)
10.O.(4)* Copy of Severance Agreement dated September 4, 1990 between the Company
and H. William Howard. (Filed as Exhibit 10-M-(5) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1990, and
incorporated by reference herein.)
10.O.(5)* Copy of Severance Agreement dated June 26, 1991 between the Company and
Earl L. Mason. (Filed as Exhibit 10-X to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1991, and incorporated by
reference herein.)
10.O.(6)* Copy of Severance Agreement dated November 27, 1991 between the Company
and Maurice S. Nelson, Jr. (Filed as Exhibit 10-O-(6) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1992,
and incorporated by reference herein.)
10.O.(7)* Copy of Severance Agreement dated August 17, 1992 between the Company and
Olivia M. Thompson. (Filed as Exhibit 10-O-(7) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1992, and
incorporated by reference herein.)
10.O.(8)* Copy of Severance Agreement dated March 23, 1994 between the Company and
Vicki L. Avril.
10.P.(1)* Copy of letter to Judd R. Cool dated September 2, 1987 relating to terms
and conditions of employment. (Filed as Exhibit 10-K to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1987,
and incorporated by reference herein.)
10.P.(2)* Copy of letter agreement dated November 23, 1987 between the Company and
Judd R. Cool. (Filed as Exhibit 10-L to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1987, and incorporated
by reference herein.)
</TABLE>
- ---------------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to the Company's Annual Report on Form 10-K.
23
<PAGE> 25
<TABLE>
<S> <C>
10.P.(3)* Copy of letter agreement dated December 10, 1993 between the Company and
Judd R. Cool restating certain provisions of the September 2, 1987 and
November 23, 1987 letters in Exhibits 10.P.(1) and (2).
10.Q* Copy of letter to H. William Howard dated July 17, 1990 relating to terms
and conditions of employment. (Filed as Exhibit 10-P to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1990,
and incorporated by reference herein.)
10.R* Copy of letter to Earl L. Mason dated May 17, 1991 relating to terms and
conditions of employment. (Filed as Exhibit 10-W to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1991, and
incorporated by reference
herein.)
10.S* Copy of letter to Maurice S. Nelson, Jr. dated March 26, 1993 relating to
supplemental pension arrangement. (Filed as Exhibit 10-S to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1992,
and incorporated by reference herein.)
10.T* Copy of Letter of Credit with respect to the Supplemental and Special
Retirement Benefit Plan obligations of the Company to W. Gordon Kay.
10.U* Copy of letter to Olivia M. Thompson dated June 24, 1992 relating to
terms and conditions of employment. (Filed as Exhibit 10-T to the
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1992, and incorporated by reference herein.)
10.V Copy of Stock Purchase Agreement, dated as of July 7, 1989, between the
Company and Harris Trust and Savings Bank, as ESOP Trustee. (Filed as
Exhibit 4-G to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1989, and incorporated by reference herein.)
10.W.(1) Copy of Letter Agreement dated December 18, 1989 among the Company,
Nippon Steel Corporation and NS Finance III, Inc. (an indirectly wholly
owned subsidiary of Nippon Steel Corporation) relating to sale to NS
Finance III, Inc. of 185,000 shares 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.)
10.W.(2) Copy of Steel Technology Agreement dated as of July 14, 1989 between
Inland Steel Company and Nippon Steel Corporation relating to technology
sharing between the signatories. (Filed as Exhibit 10-S-(2) to the
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1989, and incorporated by reference herein.)
10.W.(3) Copy of Basic Agreement dated as of July 21, 1987 between the Company and
Nippon Steel Corporation relating to the I/N Tek joint venture. (Filed as
Exhibit 10-S-(3) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989, and incorporated by reference
herein.)
10.W.(4) Copy of Partnership Agreement dated as of July 21, 1987 between ISC Tek,
Inc. (an indirectly wholly owned subsidiary of the Company) and NS Tek,
Inc. (an indirectly wholly owned subsidiary of Nippon Steel Corporation)
relating to the I/N Tek joint venture. (Filed as Exhibit 10-S-(4) to the
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1989, and incorporated by reference herein.)
10.W.(5) Copy of Basic Agreement dated as of September 12, 1989 between the
Company and Nippon Steel Corporation relating to the I/N Kote joint
venture. (Filed as Exhibit 10-S-(5) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1989, and incorporated
by reference herein.)
</TABLE>
- ---------------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to the Company's Annual Report on Form 10-K.
24
<PAGE> 26
<TABLE>
<S> <C>
10.W.(6) Copy of Partnership Agreement dated as of September 12, 1989 between ISC
Kote, Inc. (an indirectly wholly owned subsidiary of the Company) and NS
Tek, Inc. (an indirectly wholly owned subsidiary of Nippon Steel
Corporation) relating to the I/N Kote joint venture. (Filed as Exhibit
10-S-(6) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1989, and incorporated by reference herein.)
10.W.(7) Copy of Substrate Supply Agreement dated as of September 12, 1989 between
Inland Steel Company and I/N Kote, an Indiana general partnership. (Filed
as Exhibit 10-S-(7) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989, and incorporated by reference
herein.)
10.W.(8) First Amendment to Substrate Supply Agreement dated as of May 1, 1990
between Inland Steel Company and I/N Kote relating to the I/N Kote joint
venture. (Filed as Exhibit 10-R-(8) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1990, and incorporated
by reference herein.)
10.W.(9) Letter Agreement dated as of May 1, 1990 among I/N Kote, the Company and
Nippon Steel Corporation relating to partner loans. (Filed as Exhibit
10-R-(9) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, and incorporated by reference herein.)
10.W.(10) First Amendment to I/N Kote Basic Agreement dated as of May 1, 1990
between the Company and Nippon Steel Corporation relating to the I/N Kote
joint venture. (Filed as Exhibit 10-R-(10) to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1990, and
incorporated by reference herein.)
10.W.(11) Letter Agreement dated as of April 19, 1990 between the Company and
Nippon Steel Corporation relating to capital contributions to I/N Tek.
(Filed as Exhibit 10-R-(11) to Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990, and incorporated by reference
herein.)
10.W.(12) Letter Agreement dated April 20, 1990 between ISC Tek, Inc. (an
indirectly wholly owned subsidiary of the Company) and NS Tek, Inc. (an
indirectly wholly owned subsidiary of Nippon Steel Corporation) relating
to amendment of the partnership agreement of I/N Tek. (Filed as Exhibit
10-R-(12) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, and incorporated by reference herein.)
10.W.(13) CCM Override Amendment dated as of April 20, 1990 among the Company;
Nippon Steel Corporation; Inland Steel Company; ISC Tek, Inc.; I/N Tek;
NS Sales, Inc.; and NS Tek, Inc. relating to I/N Tek. (Filed as Exhibit
10-R-(13) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, and incorporated by reference herein.)
10.X Copy of ESOP Stock Purchase Agreement, dated May 30, 1990, between the
Company and Harris Trust and Savings Bank, as ESOP Trustee. (Filed as
Exhibit 10-T to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1990, and incorporated by reference herein.)
10.Y Copy of Inland Steel Industries Thrift Plan ESOP Trust, dated July 7,
1989, between the Company and Harris Trust and Savings Bank, as ESOP
Trustee. (Filed as Exhibit 10-P to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1989, and incorporated by reference
herein.)
10.Z Letter Agreement dated March 1, 1991 between Nippon Steel Corporation and
the Company regarding Series F Exchangeable Preferred Stock. (Filed as
Exhibit 10-U to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1990, and incorporated by reference herein.)
</TABLE>
25
<PAGE> 27
<TABLE>
<S> <C>
10.AA Letter Agreement dated May 10, 1991 by and between Nippon Steel
Corporation and Inland Steel Industries, Inc. relating to Letter
Agreement dated December 18, 1989. (Filed as Exhibit 10-V to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1991, and incorporated by reference herein.)
11 Statement of Earnings per Share of Common Stock.
13 Information incorporated by reference from Annual Report to Stockholders
for the fiscal year ended December 31, 1993.
21 List of certain subsidiaries of the Company.
23 Consent of Independent Accountants, appearing on page 27 of this Annual
Report on Form 10-K.
24 Powers of attorney.
99 Letter to stockholders of common stock of the Company dated December 22,
1987 explaining Stockholder Rights Plan adopted by Board of Directors on
November 25, 1987. (Filed as Exhibit 3 to the Company's Current Report on
Form 8-K filed on December 18, 1987, and incorporated by reference
herein.)
</TABLE>
26
<PAGE> 28
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors
of Inland Steel Industries, Inc.
Our audits of the consolidated financial statements referred to in our
report dated February 23, 1994 appearing on page 26 of the 1993 Annual Report to
Stockholders of Inland Steel Industries, Inc. (which report and consolidated
financial statements are incorporated by reference in this Annual Report on Form
10-K) also included an audit of the Financial Statement Schedules listed in Item
14(a)2 of this Annual Report on Form 10-K. In our opinion, these Financial
Statement Schedules present fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements.
PRICE WATERHOUSE
Chicago, Illinois
February 23, 1994
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statement on Form S-8 (No. 33-48770),
Registration Statement on Form S-8 (No. 33-22902); Registration Statement on
Form S-8 (No. 33-32504); and Post-Effective Amendment No. 2 to Form S-8
Registration Statement (No. 33-6627) of Inland Steel Industries, Inc. of our
report dated February 23, 1994, appearing on page 26 of the 1993 Annual Report
to Stockholders of Inland Steel Industries, Inc. which is incorporated in this
Annual Report on Form 10-K. We also consent to the incorporation by reference of
our report on the Financial Statement Schedules, which appears above.
PRICE WATERHOUSE
Chicago, Illinois
March 30, 1994
27
<PAGE> 29
INLAND STEEL INDUSTRIES, INC.
Schedule III--Condensed Financial Information
(Parent Company Only)
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1993 1992 1991
------ ------- -------
<S> <C> <C> <C>
Income:
Intercompany interest income.................................. $ 18.5 $ 15.9 $ 31.6
Equity in losses of subsidiaries.............................. (34.4) (868.9) (395.7)
Interest income and other revenue............................. 1.2 2.0 1.6
------ ------- -------
(14.7) (851.0) (362.5)
Expenses:
Interest and other expenses................................... 22.6 10.1 4.2
Intercompany interest expense................................. 2.4 1.6 .9
Restructuring provision....................................... -- -- 10.0
------ ------- -------
25.0 11.7 15.1
Loss before income taxes........................................ (39.7) (862.7) (377.6)
Provision for income taxes...................................... 2.1Cr. 6.5Cr. 102.5Cr.
------ ------- -------
Loss before cumulative effect of changes in accounting
principles.................................................... (37.6) (856.2) (275.1)
Cumulative effect of changes in accounting principles:
Adoption of FASB Statement No. 109 (Accounting for Income
Taxes)..................................................... -- 47.2 --
Adoption of FASB Statement No. 106 (Employers' Accounting for
Postretirement Benefits other than Pensions)............... -- (6.6) --
------ ------- -------
Net loss........................................................ $(37.6) $(815.6) $(275.1)
------ ------- -------
------ ------- -------
</TABLE>
- ---------------
Cr. = Credit
See Notes to Consolidated Financial Statements in Item 8.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
28
<PAGE> 30
INLAND STEEL INDUSTRIES, INC.
Schedule III--Condensed Financial Information
(Parent Company Only)
STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<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:
Equity in undistributed earnings of subsidiaries.......... 34.4 868.9 395.7
Depreciation.............................................. .6 .7 .6
Deferred income tax....................................... 11.5 (45.2) (93.7)
Deferred employee benefit cost............................ .1 .7 1.5
Stock issued for coverage of employee benefit plan
expense................................................. 19.1 13.4 14.0
Restructuring provision................................... -- -- 7.9
Change in: Intercompany accounts.......................... 183.6 (73.0) 228.2
Notes receivable............................... .2 .4 (.6)
Accounts payable............................... (1.9) .5 (.9)
Accrued liabilities............................ .3 7.2 (2.8)
Other deferred items...................................... (3.0) (.9) (.5)
------- ------- -------
Net adjustments......................................... 244.9 772.7 549.4
------- ------- -------
Net cash provided from (used for) operating
activities........................................... 207.3 (42.9) 274.3
------- ------- -------
INVESTING ACTIVITIES
Net investments in subsidiaries................................ (312.1) (76.0) (350.0)
Dividends received from subsidiaries........................... 25.8 24.4 8.6
------- ------- -------
Net cash used for investing activities.................. (286.3) (51.6) (341.4)
------- ------- -------
FINANCING ACTIVITIES
Sale of common stock........................................... 178.7 97.9 --
Sale of preferred stock........................................ -- -- 72.8
Long-term debt issued.......................................... -- 145.4 --
Long-term debt retired......................................... (7.1) (6.6) (2.0)
Dividends paid................................................. (35.7) (35.8) (37.6)
Acquisition of treasury stock.................................. (9.5) (3.5) (2.3)
------- ------- -------
Net cash provided from financing activities............. 126.4 197.4 30.9
------- ------- -------
Net increase (decrease) in cash and cash equivalents........... 47.4 102.9 (36.2)
Cash and cash equivalents--beginning of year................... 157.4 54.5 90.7
------- ------- -------
Cash and cash equivalents--end of year......................... $ 204.8 $ 157.4 $ 54.5
------- ------- -------
------- ------- -------
</TABLE>
See Notes to Consolidated Financial Statements in Item 8.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
29
<PAGE> 31
INLAND STEEL INDUSTRIES, INC.
Schedule III--Condensed Financial Information
(Parent Company Only)
BALANCE SHEET
AT DECEMBER 31, 1993 AND 1992
(DOLLARS IN MILLIONS--EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1993 1992
-------- -------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.......................................... $ 204.8 $ 157.4
Receivables from subsidiary companies.............................. 99.3 282.9
Deferred income taxes.............................................. .3 --
Notes receivable................................................... -- .2
-------- -------
Total current assets............................................. 304.4 440.5
Investment in subsidiary companies...................................... 614.2 365.3
Investment in Nippon Steel Corporation, net of valuation allowances of
$5.1 and $5.8, respectively........................................... 9.5 8.8
Property, net of accumulated depreciation of $6.1 and $5.5,
respectively.......................................................... 2.8 3.3
Deferred income taxes................................................... 16.3 21.5
Deferred charges and other assets....................................... 7.8 8.2
-------- -------
Total assets..................................................... $ 955.0 $ 847.6
-------- -------
-------- -------
LIABILITIES
Current Liabilities:
Accounts payable................................................... $ 9.0 $ 10.9
Accrued liabilities................................................ 17.8 17.3
Deferred federal income taxes...................................... -- .2
Long-term debt due within one year................................. 7.7 7.1
-------- -------
Total current liabilities........................................ 34.5 35.5
Long-term debt.......................................................... 273.6 281.2
Deferred employee benefits.............................................. 16.3 16.2
Deferred income......................................................... 7.2 8.4
-------- -------
Total liabilities................................................ 331.6 341.3
-------- -------
TEMPORARY EQUITY
Redeemable preferred stock, Series F, $1.00 par value, 185,000 shares
issued and outstanding, redeemable at $1,000 per share................ 185.0 185.0
Common stock repurchase commitment...................................... 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 $230.6 in 1993
and $231.6 in 1992.................................................... 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..... 47.9 42.1
Capital in excess of par value.......................................... 1,106.4 945.0
Accumulated deficit..................................................... (371.9) (302.3)
Unearned compensation--ESOP............................................. (112.2) (122.2)
Common stock repurchase commitment...................................... (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.... $ 955.0 $ 847.6
-------- -------
-------- -------
</TABLE>
Maturities of Long-Term Debt due within five years are: $7.7 million in 1994,
$8.3 million in 1995, $9.0 million in 1996, $9.7 million in 1997, and $10.5
million in 1998.
See Notes to Consolidated Financial Statements in Item 8.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
30
<PAGE> 32
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OTHER
BALANCE CHANGES BALANCE
AT ---------- AT
BEGINNING ADDITIONS RETIREMENTS INCREASE END
CLASSIFICATION OF YEAR AT COST OR SALES (DECREASE) OF YEAR
- ---------------------------------------- --------- --------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993
------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT:
Land, land improvements and mineral
properties......................... $ 155.9 $ 1.2 $ .8 $ .2(A) $ 156.5
Buildings, machinery and equipment.... 3,786.0 104.0 140.6 1.2(A) 3,749.0
(1.6)(B)
Transportation equipment.............. 136.7 .4 2.0 -- 135.1
Property under capital
leases--primarily machinery and
equipment.......................... 44.2 -- -- (1.1)(A) 43.1
--------- --------- ----------- ---------- --------
Total............................ $ 4,122.8 $ 105.6 $ 143.4 $ (1.3) $4,083.7
--------- --------- ----------- ---------- --------
--------- --------- ----------- ---------- --------
YEAR ENDED DECEMBER 31, 1992
------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT:
Land, land improvements and mineral
properties......................... $ 154.6 $ 1.4 $ .1 $-- $ 155.9
Buildings, machinery and equipment.... 3,797.7 62.5 66.8 (4.8)(A) 3,786.0
(2.6)(B)
Transportation equipment.............. 144.2 .5 8.0 -- 136.7
Property under capital
leases--primarily machinery and
equipment.......................... 44.2 -- -- -- 44.2
--------- --------- ----------- ---------- --------
Total............................ $ 4,140.7 $ 64.4 $ 74.9 $ (7.4) $4,122.8
--------- --------- ----------- ---------- --------
--------- --------- ----------- ---------- --------
YEAR ENDED DECEMBER 31, 1991
------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT:
Land, land improvements and mineral
properties......................... $ 149.1 $ 6.0 $ .5 $-- $ 154.6
Buildings, machinery and equipment.... 3,754.8 131.7 87.5 (1.3)(B) 3,797.7
Transportation equipment.............. 149.1 2.4 7.3 -- 144.2
Property under capital
leases--primarily machinery and
equipment.......................... 43.4 .1 -- .7(A) 44.2
--------- --------- ----------- ---------- --------
Total............................ $ 4,096.4 $ 140.2 $ 95.3 $ (.6) $4,140.7
--------- --------- ----------- ---------- --------
--------- --------- ----------- ---------- --------
</TABLE>
- ---------------
NOTES:
(A) Transfer between property, plant and equipment and other assets and other
miscellaneous adjustments.
(B) Reflects the change in book value of rolls, annealing covers and convector
plates.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
31
<PAGE> 33
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
SCHEDULE VI--RESERVE FOR DEPRECIATION, AMORTIZATION AND DEPLETION OF
PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OTHER
CHANGES
BALANCE AT ---------- BALANCE AT
BEGINNING ADDITIONS RETIREMENTS INCREASE END OF
CLASSIFICATION OF YEAR AT COST OR SALES (DECREASE) YEAR
- --------------------------------------- ----------- --------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993
---------------------------------------------------------------------
DEPRECIATION, AMORTIZATION, DEPLETION:
Land improvements and mineral
properties........................ $ 68.7 $ 2.7 $ .3 $-- $ 71.1
Buildings, machinery and equipment... 2,242.3 122.5 128.9 (.7)(A) 2,235.2
Transportation equipment............. 122.3 5.0 1.5 -- 125.8
Property under capital
leases--primarily machinery and
equipment......................... 34.5 1.6 -- (.6)(A) 35.5
----------- --------- ----------- ---------- ----------
2,467.8 131.8 130.7 (1.3) 2,467.6
Allowance for terminated facilities
costs............................. 106.2 7.7 6.8 1.3(A) 108.4
----------- --------- ----------- ---------- ----------
Total........................... $ 2,574.0 $ 139.5 $ 137.5 $-- $2,576.0
----------- --------- ----------- ---------- ----------
----------- --------- ----------- ---------- ----------
YEAR ENDED DECEMBER 31, 1992
---------------------------------------------------------------------
DEPRECIATION, AMORTIZATION, DEPLETION:
Land improvements and mineral
properties........................ $ 66.0 $ 2.7 $-- $-- $ 68.7
Buildings, machinery and equipment... 2,186.1 118.8 62.7 .1(A) 2,242.3
Transportation equipment............. 123.8 6.0 7.3 (.2)(A) 122.3
Property under capital
leases--primarily machinery and
equipment......................... 32.5 2.1 -- (.1)(A) 34.5
----------- --------- ----------- ---------- ----------
2,408.4 129.6 70.0 (.2) 2,467.8
Allowance for terminated facilities
costs............................. 97.3 11.6 2.7 -- 106.2
----------- --------- ----------- ---------- ----------
Total........................... $ 2,505.7 $ 141.2 $ 72.7 $ (.2) $2,574.0
----------- --------- ----------- ---------- ----------
----------- --------- ----------- ---------- ----------
YEAR ENDED DECEMBER 31, 1991
---------------------------------------------------------------------
DEPRECIATION, AMORTIZATION, DEPLETION:
Land improvements and mineral
properties........................ $ 63.5 $ 2.5 $-- $-- $ 66.0
Buildings, machinery and equipment... 2,159.0 105.2 75.5 (2.6)(A) 2,186.1
Transportation equipment............. 122.5 6.4 5.3 .2(A) 123.8
Property under capital
leases--primarily machinery and
equipment......................... 28.1 4.0 -- .4(A) 32.5
----------- --------- ----------- ---------- ----------
2,373.1 118.1 80.8 (2.0) 2,408.4
Allowance for terminated facilities
costs............................. 15.0 85.0 2.7 -- 97.3
----------- --------- ----------- ---------- ----------
Total........................... $ 2,388.1 $ 203.1 $ 83.5 $ (2.0) $2,505.7
----------- --------- ----------- ---------- ----------
----------- --------- ----------- ---------- ----------
</TABLE>
- ---------------
NOTE:
(A) Reclassification among indicated reserve accounts and other miscellaneous
adjustments.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
32
<PAGE> 34
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
SCHEDULE VIII--RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROVISIONS FOR ALLOWANCES
CLAIMS AND DOUBTFUL ACCOUNTS
------------------------------------------------------
YEARS BALANCE AT ADDITIONS DEDUCTIONS BALANCE AT
ENDED BEGINNING CHARGED FROM END OF
DECEMBER 31 OF YEAR TO INCOME RESERVES YEAR
- ----------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
1993 $ 23.2 $14.4 $ (3.7)(A) $ 28.2
(5.7)(B)
1992 $ 30.2 $ 6.9 $ (7.6)(A) $ 23.2
(6.3)(B)
1991 $ 29.9 $13.7 $ (5.2)(A) $ 30.2
(8.2)(B)
</TABLE>
- ---------------
NOTES:
(A) Bad debts written off during year.
(B) Allowances granted during year.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
33
<PAGE> 35
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
SCHEDULE IX--SHORT-TERM BORROWINGS
FOR YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAXIMUM AVERAGE WEIGHTED
AMOUNT AMOUNT AVERAGE
YEARS CATEGORY OF BALANCE OUTSTANDING OUTSTANDING INTEREST RATE
ENDED SHORT-TERM AT END DURING THE DURING THE DURING THE
DECEMBER 31 BORROWINGS OF YEAR YEAR YEAR(A) YEAR(B)
- ----------- ----------- ------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
1993 -- -- -- --
1992 Bank -- $ 40.0 $13.4 4.9%
1991 Bank -- $ 140.0 $85.0 6.6%
</TABLE>
- ---------------
NOTES:
(A) The average outstanding amount was computed by aggregating the daily
balances of short-term debt outstanding and dividing the aggregate by the
number of days in the year.
(B) The weighted average interest rate during the year was computed by dividing
interest expense on short-term debt by the average short-term debt
outstanding during the year.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
34
<PAGE> 36
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
SCHEDULE X--SUPPLEMENTARY PROFIT AND LOSS INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Maintenance and repairs.................................. $178.4 $182.4 $179.7
------ ------ ------
------ ------ ------
Taxes, other than payroll and income taxes:
Real estate and personal property...................... $ 48.8 $ 50.3 $ 46.2
Excise, sales and use, and other....................... 11.5 11.3 12.4
------ ------ ------
$ 60.3 $ 61.6 $ 58.6
------ ------ ------
------ ------ ------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
35
<PAGE> 37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
INLAND STEEL INDUSTRIES, INC.
By: /s/ ROBERT J. DARNALL
Robert J. Darnall
Chairman, President and
Chief Executive Officer
Date: March 30, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
----------- ----------- -----------
<S> <C> <C>
/s/ ROBERT J. DARNALL Chairman, President and March 30, 1994
Robert J. Darnall Chief Executive Officer
and Director
/s/ EARL L. MASON Vice President and March 30, 1994
Earl L. Mason Chief Financial Officer
(Principal Financial
Officer)
/s/ OLIVIA M. THOMPSON Controller and Principal March 30, 1994
Olivia M. Thompson Accounting Officer
A. Robert Abboud Director
James W. Cozad Director
James A. Henderson Director
Emerson Kampen Director
Robert B. McKersie Director By: /s/ EARL L. MASON
Earl L. Mason
Attorney in-fact
March 30, 1994
Donald S. Perkins Director
Joshua I. Smith Director
Nancy H. Teeters Director
Raymond C. Tower Director
Arnold R. Weber Director
</TABLE>
36
<PAGE> 38
APPENDIX A
INDEX
TO
CONSOLIDATED FINANCIAL STATEMENTS
OF
INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
<TABLE>
<CAPTION>
ITEM PAGE
- -------------------------------------------------------------------------------------- -----
<S> <C>
Report of Independent Accountants..................................................... A-2
Consolidated Statements of Operations and Reinvested Earnings for the three years
ended December 31, 1993............................................................. A-3
Consolidated Statement of Cash Flows for the three years ended December 31, 1993...... A-4
Consolidated Balance Sheet at December 31, 1993 and 1992.............................. A-5
Statement of Accounting and Financial Policies........................................ A-6
Notes to Consolidated Financial Statements............................................ A-7
</TABLE>
A-1
<PAGE> 39
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDER OF
INLAND MATERIALS DISTRIBUTION GROUP, INC.
In our opinion, the consolidated financial statements listed in the index
appearing on page A-1 present fairly, in all material respects, the financial
position of Inland Materials Distribution Group, Inc. (a wholly owned subsidiary
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 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 4 and 5 to the consolidated financial statements, in 1992
the Company changed its method of accounting for postretirement benefits other
than pensions and for income taxes.
PRICE WATERHOUSE
Chicago, Illinois
February 23, 1994
A-2
<PAGE> 40
INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS AND REINVESTED EARNINGS
DOLLARS IN MILLIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
NET SALES.................................................... $1,893.3 $1,716.6 $1,655.9
-------- -------- --------
OPERATING COSTS AND EXPENSES:
Cost of goods sold (excluding depreciation)............... 1,663.8 1,516.1 1,465.9
Selling, general and administrative expenses.............. 144.4 145.5 145.4
Depreciation and amortization............................. 20.6 20.1 19.7
State, local and miscellaneous taxes...................... 8.1 7.8 8.7
-------- -------- --------
Total................................................... 1,836.9 1,689.5 1,639.7
-------- -------- --------
OPERATING PROFIT............................................. 56.4 27.1 16.2
OTHER EXPENSE:
General corporate expense................................. 7.4 8.4 10.6
Interest expense, net of interest income.................. 10.9 12.8 17.1
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES............................ 38.1 5.9 (11.5)
PROVISION FOR INCOME TAXES (NOTE 5).......................... 11.4 2.6 2.3Cr.
-------- -------- --------
Income (loss) before cumulative effect of changes in
accounting principles..................................... 26.7 3.3 (9.2)
Cumulative effect of changes in accounting principles (Notes
4 and 5).................................................. -- (84.1) --
-------- -------- --------
NET INCOME (LOSS)............................................ $ 26.7 $ (80.8) $ (9.2)
-------- -------- --------
-------- -------- --------
CONSOLIDATED STATEMENT OF REINVESTED EARNINGS
Balance at beginning of year................................. $ 5.4 $ 86.2 $ 95.4
Net income (loss) for the year............................... 26.7 (80.8) (9.2)
-------- -------- --------
Reinvested earnings at end of year........................... $ 32.1 $ 5.4 $ 86.2
-------- -------- --------
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-3
<PAGE> 41
INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
CONSOLIDATED STATEMENT OF CASH FLOWS
DOLLARS IN MILLIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN
CASH
YEARS ENDED DECEMBER 31
--------------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)................................................. $ 26.7 $(80.8) $ (9.2)
------ ------ ------
Adjustments to reconcile net income (loss) to net cash provided
from (used for) operating activities:
Depreciation and amortization.................................. 20.6 20.1 19.7
Net loss (gain) on sales of assets............................. (.1) .5 .1
Deferred employee benefit cost, including cumulative effect of
change in accounting principle................................. 3.9 121.5 (.4)
Deferred income taxes, including cumulative effect of change in
accounting principle........................................... (8.3) (31.9) --
Change in:
Receivables.................................................. (22.8) 2.7 24.2
Inventories.................................................. (18.2) (.1) 29.8
Accounts payable............................................. (31.5) 10.0 (15.3)
Payable to related companies................................. 1.7 2.4 (5.7)
Accrued liabilities.......................................... 2.7 1.7 (2.8)
------ ------ ------
Net adjustments.............................................. (52.0) 126.9 49.6
------ ------ ------
Net cash provided from (used for) operating activities....... (25.3) 46.1 40.4
------ ------ ------
INVESTING ACTIVITIES
Capital expenditures.............................................. (19.3) (9.3) (9.8)
Proceeds from the sales of assets................................. .9 .5 .3
------ ------ ------
Net cash used for investing activities....................... (18.4) (8.8) (9.5)
------ ------ ------
FINANCING ACTIVITIES
Long-term debt issued............................................. 7.5 -- --
Long-term debt retired............................................ (5.3) (6.2) (6.3)
Capital contribution from Inland Steel Industries................. 150.0 -- --
Decrease in notes payable to related companies.................... (79.0) (31.1) (24.6)
------ ------ ------
Net cash provided from (used for) financing activities....... 73.2 (37.3) (30.9)
------ ------ ------
Net increase in cash and cash equivalents......................... 29.5 -- --
Cash and equivalents -- beginning of year......................... -- -- --
------ ------ ------
Cash and equivalents -- end of year............................... $ 29.5 $ -- $ --
------ ------ ------
------ ------ ------
SUPPLEMENTAL DISCLOSURES
Cash paid (received) during the year for:
Interest, net of amount capitalized............................ $ 11.3 $ 13.5 $ 15.2
Income taxes, net.............................................. 22.6 (4.6) (2.2)
</TABLE>
The accompanying notes are an integral part of these statements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-4
<PAGE> 42
INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
CONSOLIDATED BALANCE SHEET
DOLLARS IN MILLIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AT DECEMBER 31
----------------
1993 1992
------ ------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................. $ 29.5 $ --
Receivables less provision for allowances, claims and doubtful accounts of
$5.5 and $5.4, respectively............................................ 196.0 173.2
Inventories (Note 1)...................................................... 278.9 260.7
Deferred income taxes (Note 5)............................................ 11.8 9.3
------ ------
Total current assets................................................. 516.2 443.2
------ ------
Property, plant and equipment, at cost:
Buildings, machinery and equipment........................................ 427.4 412.1
Land and land improvements................................................ 27.8 26.9
------ ------
455.2 439.0
Less accumulated depreciation............................................. 198.0 181.2
------ ------
257.2 257.8
------ ------
Excess of cost over net assets acquired..................................... 26.4 27.7
Deferred income taxes (Note 5).............................................. 28.5 22.7
------ ------
Total assets......................................................... $828.3 $751.4
------ ------
------ ------
LIABILITIES
Current liabilities:
Accounts payable, including outstanding checks in excess of funds on
deposit................................................................ $ 77.2 $108.7
Payables to related companies:
Notes.................................................................. 29.6 108.5
Other.................................................................. 9.0 7.3
Accrued Liabilities:
Salaries and wages..................................................... 17.1 15.2
Taxes other than Federal income tax.................................... 7.5 7.2
Other.................................................................. 4.0 3.4
Long-term debt due within one year........................................ 5.0 5.2
------ ------
Total current liabilities............................................ 149.4 255.5
Long-term debt (Note 3)................................................... 28.2 25.7
Deferred employee benefits and other liabilities (Note 4)................. 124.0 120.2
------ ------
Total liabilities.................................................... 301.6 401.4
------ ------
STOCKHOLDER'S EQUITY
Common stock, par value $1.00; 3,000 shares authorized; one share
issued................................................................. -- --
Additional paid-in capital (Note 6)....................................... 494.6 344.6
Earnings reinvested in the business....................................... 32.1 5.4
------ ------
Total stockholder's equity........................................... 526.7 350.0
------ ------
Total liabilities and stockholder's equity........................... $828.3 $751.4
------ ------
------ ------
</TABLE>
The accompanying notes are an integral part of these statements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-5
<PAGE> 43
INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES
(A Wholly Owned Subsidiary of Inland Steel Industries, Inc.)
STATEMENT OF ACCOUNTING AND FINANCIAL POLICIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following briefly describes the Company's principal accounting and
financial policies.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Joseph T. Ryerson & Son, Inc., and J. M. Tull Metals Company, Inc., which are
wholly owned subsidiaries of the Company. The accounts of J. M. Tull Metals
Company, Inc. are consolidated with its wholly owned subsidiary, AFCO Metals,
Inc.
Inventory valuation
Inventories are valued at cost which is not in excess of market. Cost is
determined principally by the last-in, first-out (LIFO) method.
Property, plant and equipment
Property, plant and equipment is depreciated, for financial reporting
purposes, on the straight-line method over the estimated useful lives of the
assets. Expenditures for normal repair and maintenance are charged against
income in the period incurred.
Excess of cost over net assets acquired
The excess of cost over fair value of net assets of businesses acquired
(goodwill) is amortized on the straight-line method over a 25-year period.
Accumulated amortization of goodwill totaled $7.5 million at December 31, 1993
and $6.1 million at December 31, 1992.
Benefits for retired employees
Pension benefits are provided by the Company to substantially all employees
under a trusteed noncontributory plan of Inland Steel Industries, Inc.
("Industries"). 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, 1992, the
cost of health care benefits for retirees, previously recognized as incurred, is
now being accrued during their term of employment (see Note 4). 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 and cash equivalents
Cash management activities are performed by the Company's parent, Inland
Steel Industries, Inc., to which cash is periodically transferred. Cash
equivalents are highly liquid, short-term investments with maturities of three
months or less. 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" (see Note 5).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-6
<PAGE> 44
INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES
(A Wholly Owned Subsidiary of Inland Steel Industries, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 1/INVENTORIES:
The Company's inventories consist principally of finished steel, nonferrous
and industrial plastic products for sale at service center locations.
The difference between LIFO values and approximate replacement costs for
the LIFO inventories was $106.0 million at December 31, 1993 and $103.3 million
at December 31, 1992.
NOTE 2/BORROWING ARRANGEMENTS:
At December 31, 1993 and 1992, the Company's subsidiaries had available two
unused credit facilities totaling $125 million. Each facility requires
compliance with various financial covenants including minimum net worth and
leverage ratio tests. The covenants also limit the amount of cash that the
Company can transfer to Industries in the form of dividends and other advances.
A $100 million unsecured credit agreement between Joseph T. Ryerson and
Son, Inc. and a group of banks provides a revolving credit facility to March 31,
1995.
J. M. Tull Metals Company, Inc. has a $25 million unsecured revolving
credit agreement with other banks, which extends to December 15, 1994.
NOTE 3/LONG-TERM DEBT:
The Company's long-term debt is as follows:
<TABLE>
<CAPTION>
DECEMBER 31
----------------
1993 1992
----- -----
DOLLARS IN
MILLIONS
<S> <C> <C>
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.................................................... 1.9 2.0
J. M. TULL METALS COMPANY, INC.
Senior Notes, 9.43% due through July 29, 1997.............. 14.3 17.8
Term note--LIBOR plus 62.5 basis points per annum; due
August 17, 1998......................................... 7.4 --
Industrial Revenue Bonds with interest rates ranging from
4.8% to 6.5% through January 1, 1997.................... 2.1 2.8
Other...................................................... .5 1.3
----- -----
33.2 30.9
Less maturities due within one year........................ 5.0 5.2
----- -----
Long-term debt.......................................... $28.2 $25.7
----- -----
----- -----
</TABLE>
Maturities of long-term debt are: $5.0 million in 1994, $4.7 million in
1995, $4.7 million in 1996, $5.6 million in 1997, $6.2 million in 1998 and $7.0
million thereafter.
The Company has entered into an interest rate swap agreement to reduce the
impact of changes in LIBOR on the term note. At December 31, 1993 the Company
had outstanding an interest rate swap
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-7
<PAGE> 45
INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES
(A Wholly Owned Subsidiary of Inland Steel Industries, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
agreement with the bank having a notional principal amount equal to the
outstanding principal of the related term note. This agreement effectively
changes the Company's interest rate exposure on its term note to a fixed rate of
5.925%. The interest rate swap matures August 17, 1998. The Company is exposed
to potential credit loss in the event of nonperformance by the bank; however,
the Company does not anticipate such nonperformance.
Under the provisions of certain loan agreements, the Company is required to
maintain specified amounts of working capital and net worth, as outlined in the
agreements, and is restricted as to dividends that may be paid to Industries.
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 $.7 million greater than the carrying value of $33.2 million
included in the balance sheet at year-end 1993.
NOTE 4/RETIREMENT BENEFITS:
Pensions
The Inland Steel Industries Pension Plan and Pension Trust (the "Plan"),
covers certain employees, retirees and their beneficiaries of Industries and its
subsidiaries, including the Company. The Plan is a noncontributory defined
benefit plan that provides benefits based on final pay and years of service for
all salaried employees and certain wage employees, and years of service and a
fixed rate (in most instances based on frozen pay level or on job class) for all
other wage employees, including employees under collective bargaining
agreements. Because the fair value of pension plan assets pertains to all
participants in the Plan, no separate determination is made solely with respect
to the Company. At year-end 1993 and 1992, the actuarial present value of
benefits for service rendered to date and the fair value of plan assets
available for benefits for the Industries consolidated group were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
----------------
1993 1992
------ ------
DOLLARS IN
MILLIONS
<S> <C> <C>
Fair value of plan assets.................................... $1,794 $1,686
------ ------
Actuarial present value of benefits for service rendered to
date:
Accumulated Benefit Obligation based on compensation to
date.................................................... 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>
In 1993, Industries recorded an additional minimum pension liability of
$122.1 million representing 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.
A weighted average discount (settlement) rate of 7.25% in 1993 and 8.6% in
1992 was used in the determination of the actuarial present value of benefits.
The Company recorded a net pension charge of $.1 million in 1993 and
credits of $.4 million in 1992 and $.6 million in 1991.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-8
<PAGE> 46
INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES
(A Wholly Owned Subsidiary of Inland Steel Industries, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The cost of other industry welfare and retirement funds, for bargaining
unit employees, was $2.9 million in 1993, $2.5 million in 1992, and $2.7 million
in 1991.
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.
The Company has 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 $4.9 million or $3.2 million after tax. For 1992,
the incremental expense was $10.9 million or $7.1 million after tax.
The amount of net periodic postretirement benefit cost for 1993 and 1992 is
composed of the following:
<TABLE>
<CAPTION>
1993 1992
---- -----
DOLLARS IN
MILLIONS
<S> <C> <C>
Service cost................................................. $3.2 $ 3.2
Interest cost................................................ 8.0 11.1
Net amortization and deferral................................ (1.9) --
---- -----
Total net periodic postretirement benefit cost........ $9.3 $14.3
---- -----
---- -----
</TABLE>
The following table sets forth components of the accumulated postretirement
benefit obligation:
<TABLE>
<CAPTION>
DECEMBER 31
----------------
1993 1992
------ ------
DOLLARS IN
MILLIONS
<S> <C> <C>
Accumulated postretirement benefit obligation attributable
to:
Retirees................................................... $ 51.0 $ 54.1
Fully eligible plan participants........................... 19.5 22.8
Other active plan participants............................. 25.8 31.5
------ ------
Accumulated postretirement benefit obligation.............. 96.3 108.4
Unrecognized net gain........................................ 18.4 --
Unrecognized prior service credit............................ 22.2 24.0
------ ------
Accrued postretirement benefit obligation.................... $136.9 $132.4
------ ------
------ ------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-9
<PAGE> 47
INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES
(A Wholly Owned Subsidiary of Inland Steel Industries, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Any net gain or loss in excess of 10 percent of the accumulated
postretirement benefit obligations will be amortized over the remaining service
period of active plan participants.
The assumptions used to determine the data on the preceding tables are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31
---------------
1993 1992
------ ------
<S> <C> <C>
Discount Rate................................................ 7.25% 9.0%
Rate of compensation increase................................ 5.0% 5.0%
Medical cost trend rate...................................... 7%-5% 9%-5%
Year ultimate rate reached................................... 1996 1997
</TABLE>
A one percentage point increase in the assumed health care cost trend rates
for each future year increases annual periodic postretirement benefit cost and
the accumulated postretirement benefit obligation as of December 31, 1993 by
$1.5 million and $12.0 million, respectively.
Postemployment Benefits
In November 1992, the FASB issued Statement No. 112, "Employer's 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 5/TAXES ON INCOME:
The Company adopted FASB Statement No. 109, "Accounting for Income Taxes,"
effective January 1, 1992. As a result of adopting Statement No. 109, the
Company recorded a $11.8 million charge reflecting the cumulative effect of the
change on prior years. The Company is now required to record deferred tax assets
and liabilities on its balance sheet as compared with the Company's past
practice under APB Opinion No. 11 and Industries' former tax-sharing agreement
under which no such recording was required. To comply with the provisions of
FASB Statement No. 109, a new tax-sharing agreement was adopted under which
current and deferred income tax provisions are determined for each company in
the Industries group on a stand-alone basis. Companies with taxable losses
record current income tax credits not to exceed current income tax charges
recorded by profitable companies. NOL and tax credit carryforwards are allocated
to each company in accordance with applicable tax regulations as if a company
were to leave the consolidated group.
The elements of the provision for income taxes for three years indicated
below are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
----- ---- ----
DOLLARS IN MILLIONS
<S> <C> <C> <C>
Current income taxes:
Federal............................................. $17.3 $5.5 $1.6Cr.
State and local..................................... 2.6 .9 .7Cr.
----- ---- ----
19.9 6.4 2.3Cr.
Deferred income taxes................................. 8.5Cr. 3.8Cr. --
----- ---- ----
Total provision for income taxes.................... $11.4 $2.6 $2.3Cr.
----- ---- ----
----- ---- ----
</TABLE>
In accordance with FASB 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-10
<PAGE> 48
INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES
(A Wholly Owned Subsidiary of Inland Steel Industries, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A credit to income of $.6 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
------ ------
DOLLARS IN
MILLIONS
<S> <C> <C>
Deferred tax assets (excluding postretirement benefits other
than pensions):
Net operating loss carryforwards....................... $17.8 $15.3
Other deductible temporary differences................. 23.6 20.6
------ ------
41.4 35.9
------ ------
Deferred tax liabilities:
Fixed asset basis difference........................... 40.2 39.8
Other taxable temporary differences.................... 11.2 11.1
------ ------
51.4 50.9
------ ------
Net deferred tax liability (excluding postretirement
benefits other
than pensions)............................................ (10.0) (15.0)
FASB Statement No. 106 impact............................... 50.3 47.0
------ ------
Net deferred tax asset...................................... $40.3 $32.0
------ ------
------ ------
</TABLE>
At December 31, 1993, the Company had approximately $50.7 million of net
operating loss carryforwards available for regular Federal income tax purposes,
expiring as follows: $16.3 million in the year 2005, $20.9 million in the year
2006, $7.8 million in the year 2007, and $5.7 million in the year 2008.
The Company believes that it is more likely than not that the $50.7 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 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 continuing to achieve future profitable operations.
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 4). This adoption
resulted in a $47.0 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-11
<PAGE> 49
INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES
(A Wholly Owned Subsidiary of Inland Steel Industries, Inc.)
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 tax rate as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31
----------------
1993 1992
----- ----
DOLLARS IN
MILLIONS
<S> <C> <C>
Federal income tax provision computed at statutory tax rate
of 35% in 1993 and 34% in 1992........................... $13.4 $2.0
Additional taxes or credits from:
State and local income taxes, net of Federal income tax
effect................................................ 1.7 .6
Change in Federal statutory rate......................... .6Cr. --
All other, net........................................... 3.1Cr. --
----- ----
Total income tax provision.......................... $11.4 $2.6
----- ----
----- ----
</TABLE>
- ---------------
Cr. = Credit
Due to the existence of the former tax-sharing agreement, such
reconciliation does not provide meaningful information for 1991 and has
therefore been omitted.
A state tax sharing agreement, similar to the Federal agreement, also
exists with Industries for those states in which the consolidated group is
charged state taxes on a unitary or combined basis.
NOTE 6/RELATED PARTY TRANSACTIONS:
The Company sells products to and purchases products from related companies
primarily at prevailing market prices. These transactions were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------
1993 1992 1991
------ ------ ------
DOLLARS IN MILLIONS
<S> <C> <C> <C>
Net product sales..................................... $ 10.7 $ 9.4 $ 10.2
Net product purchases................................. 187.1 132.5 147.1
</TABLE>
Administrative expenses covering management, financial and legal services
provided to the Company were charged to the Company by Industries. Such charges
totaled $7.4 million in 1993, $8.4 million in 1992 and $10.6 million in 1991.
Additionally, interest, at prevailing prime market rates, is charged on all
intercompany loans within the Industries consolidated group. Net intercompany
interest expense amounted to $7.7 million in 1993, $8.9 million in 1992 and $8.2
million in 1991.
In December 1993, Industries made a capital contribution of $150 million to
the Company. The capital contribution has been recorded as "additional paid in
capital" at December 31, 1993.
NOTE 7/COMMITMENTS AND CONTINGENCIES:
The Company has noncancellable operating leases for which future minimum
rental commitments are estimated to total $31.9 million, including approximately
$9.2 million in 1994, $6.8 million in 1995, $4.5 million in 1996, $3.8 million
in 1997, $3.8 million in 1998, and $3.8 million thereafter.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-12
<PAGE> 50
INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES
(A Wholly Owned Subsidiary of Inland Steel Industries, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Rental expense under operating leases totaled $16.8 million in 1993, $18.6
million in 1992, and $17.4 million in 1991.
Ryerson is the guarantor of $131 million of the Inland Steel Industries
Thrift Plan ESOP notes. The notes are payable in installments through July,
2004.
There are various claims and pending actions against the Company. The
amount of liability, if any, for these claims and actions at December 31, 1993
is not determinable but, in the opinion of management, such liability, if any,
will not have a material adverse effect on the Company's financial position or
results of operations.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-13
<PAGE> 51
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- --------- ----------------------------------------------------------------------- ----------
<S> <C> <C>
3.(i) Copy of Certificate of Incorporation, as amended, of the Company.
(Filed as Exhibit 4-A to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1991, and incorporated by reference
herein.) --
3.(ii) Copy of By-laws, as amended, of the Company. (Filed as Exhibit 3-B to
the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992, and incorporated by reference herein.) --
4.A Copy of Certificate of Designations, Preferences and Rights of Series A
$2.40 Cumulative Convertible Preferred Stock of the Company. (Filed as
part of Exhibit B to the definitive Proxy Statement of Inland Steel
Company dated March 21, 1986 that was furnished to stockholders in
connection with the annual meeting held April 23, 1986, and
incorporated by reference herein.) --
4.B Copy of Certificate of Designation, Preferences and Rights of Series D
Junior Participating Preferred Stock of the Company. (Filed as Exhibit
4-D to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1987, and incorporated by reference herein.) --
4.C Copy of Rights Agreement, dated as of November 25, 1987, as amended and
restated as of May 24, 1989, between the Company and The First National
Bank of Chicago, as Rights Agent (Harris Trust and Savings Bank, as
successor Rights Agent). (Filed as Exhibit 1 to the Company's Current
Report on Form 8-K filed on May 24, 1989, and incorporated by reference
herein.) --
4.D Copy of Certificate of Designations, Preferences and Rights of Series E
ESOP Convertible Preferred Stock of the Company. (Filed as Exhibit 4-F
to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1989, and incorporated by reference herein.) --
4.E Copy of Certificate of Designations, Preferences and Rights of Series F
Exchangeable Preferred Stock of the Company. (Filed as Exhibit 4(b) to
the Company's Current Report on Form 8-K filed on December 18, 1989,
and incorporated by reference herein.)
4.F Copy of 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.G Copy of Indenture dated as of December 15, 1992, between the Company
and Harris Trust and Savings Bank, as Trustee, respecting the Company's
$150,000,000 12 3/4% Notes due December 15, 2002. (Filed as Exhibit 4-G
to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992, and incorporated by reference herein.) --
4.H Copy of First Mortgage Indenture, dated April 1, 1928, between Inland
Steel Company (The "Steel Company") and First Trust and Savings Bank
and Melvin A. Traylor, as Trustees, and of supplemental indentures
thereto, to and including the Thirty-Second Supplemental Indenture,
incorporated by reference from the following Exhibits: (i) Exhibits
B-1(a), B-1(b), B-1(c), B-1(d) and B-1(e), filed with Steel Company's
Registration Statement on Form A-2 (No. 2-1855); (ii) Exhibits D-1(f)
and D-1(g), filed with Steel Company's Registration Statement on Form
E-1 (No. 2-2182); (iii) Exhibit B-1(h), filed with Steel Company's
Current Report on Form 8-K dated January 18, 1937; (iv) Exhibit B-1(i),
filed with Steel
</TABLE>
(i)
<PAGE> 52
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
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<S> <C> <C>
Company's Current Report on Form 8-K, dated February 8, 1937; (v)
Exhibits B-1(j) and B-1(k), filed with Steel Company's Current Report
on Form 8-K for the month of April, 1940; (vi) Exhibit B-2, filed with
Steel Company's Registration Statement on Form A-2 (No. 2-4357); (vii)
Exhibit B-1(l), filed with Steel Company's Current Report on Form 8-K
for the month of January, 1945; (viii) Exhibit 1, filed with Steel
Company's Current Report on Form 8-K for the month of November, 1946;
(ix) Exhibit 1, filed with Steel Company's Current Report on Form 8-K
for the months of July and August, 1948; (x) Exhibits B and C, filed
with Steel Company's Current Report on Form 8-K for the month of March,
1952; (xi) Exhibit A, filed with Steel Company's Current Report on Form
8-K for the month of July, 1956; (xii) Exhibit A, filed with Steel
Company's Current Report on Form 8-K for the month of July, 1957;
(xiii) Exhibit B, filed with Steel Company's Current Report on Form 8-K
for the month of January, 1959; (xiv) the Exhibit filed with Steel
Company's Current Report on Form 8-K for the month of December, 1967;
(xv) the Exhibit filed with Steel Company's Current Report on Form 8-K
for the month of April, 1969; (xvi) the Exhibit filed with Steel
Company's Current Report on Form 8-K for the month of July, 1970;
(xvii) the Exhibit filed with the amendment on Form 8 to Steel
Company's Current Report on Form 8-K for the month of April, 1974;
(xviii) Exhibit B, filed with Steel Company's Current Report on Form
8-K for the month of September, 1975; (xix) Exhibit B, filed with Steel
Company's Current Report on Form 8-K for the month of January, 1977;
(xx) Exhibit C, filed with Steel Company's Current Report on Form 8-K
for the month of February, 1977; (xxi) Exhibit B, filed with Steel
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1978; (xxii) Exhibit B, filed with Steel Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1980; (xxiii) Exhibit 4-D,
filed with Steel Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1980; (xxiv) Exhibit 4-D, filed with Steel
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1982; (xxv) Exhibit 4-E, filed with Steel Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1983; (xxvi)
Exhibit 4(i) filed with the Steel Company's Registration Statement on
Form S-2 (No. 33-43393); and (xxvii) Exhibit 4 filed with Steel
Company's Current Report on form 8-K dated June 23, 1993 --
4.I Copy of consolidated reprint of First Mortgage Indenture, dated April
1, 1928, between Inland Steel Company and First Trust and Savings Bank
and Melvin A. Traylor, as Trustees, as amended and supplemented by all
supplemental indentures thereto, to and including the Thirteenth
Supplemental Indenture. (Filed as Exhibit 4-E to Form S-1 Registration
Statement No. 2-9443, and incorporated by reference herein.) --
[The registrant hereby agrees to provide a copy of any other agreement
relating to long-term debt at the request of the Commission.]
10A* Copy of Inland Steel Industries, Inc. Annual Incentive Plan, as
amended................................................................
10.B* Copy of Inland Steel Industries, Inc. Special Achievement Award Plan.
(Filed as Exhibit 10-I to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1987, and incorporated by reference
herein.) --
</TABLE>
- ---------------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to the Company's Annual Report on Form 10-K
(ii)
<PAGE> 53
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
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<S> <C> <C>
10.C* Copy of Inland 1975 Executive Stock Option Plan, as amended. (Filed as
Exhibit 10-A to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1987, and incorporated by reference herein.) --
10.D* Copy of Inland 1984 Incentive Stock Plan, as amended...................
10.E* Copy of Inland 1988 Incentive Stock Plan, as amended...................
10.F* Copy of Inland 1992 Incentive Stock Plan, as amended...................
10.G* Copy of Inland Steel Industries Non-Qualified Thrift Plan, as amended.
(Filed as Exhibit 10-H to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1989, and incorporated by reference
herein.) --
10.H* Copy of Inland 1992 Stock Plan for Non-Employee Directors. (Filed as
Exhibit B to the Company's definitive Proxy Statement dated March 16,
1992 that was furnished to stockholders in connection with the annual
meeting held April 22, 1992, and incorporated by reference herein.) --
10.I* Copy of Inland Steel Industries Supplemental Retirement Benefit Plan
for Covered Employees, as amended......................................
10.J* Copy of Inland Steel Industries Special Retirement Benefit Plan for
Covered Employees, as amended..........................................
10.K* Copy of the Inland Steel Industries Deferred Compensation Plan for
Certain Employees. (Filed as Exhibit 10-K to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1989, and
incorporated by reference herein.) --
10.L* Copy of Inland Steel Industries Deferred Compensation Plan for
Directors, as amended. (Filed as Exhibit 10-L to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1992, and
incorporated by reference herein.) --
10M* Copy of Inland Steel Industries Director Retirement Plan...............
10.N* Copy of Outside Directors Accident Insurance Policy. (Filed as Exhibit
10-F to Inland Steel Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1983, and incorporated by reference
herein.) --
10.O.(1)* Copy of form of Severance Agreement dated June 28, 1989 between the
Company and each of the seven executive officers of the Company
identified on the exhibit relating to terms and conditions of
termination of employment following a change in control of the Company.
(Filed as Exhibit 10-O-(1) to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1989, and incorporated by
reference herein.) --
10.O.(2)* Amended listing of executive officers of the Company who are parties to
the form of Severance Agreement dated June 28, 1989 in Exhibit 10.O.(1)
hereof.................................................................
10.O.(3)* Copy of Severance Agreement dated June 28, 1989 between the Company and
Judd R. Cool. (Filed as Exhibit 10-O-(2) to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1989, and
incorporated by reference herein.) --
10.O.(4)* Copy of Severance Agreement dated September 4, 1990 between the Company
and H. William Howard. (Filed as Exhibit 10-M-(5) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1990,
and incorporated by reference herein.) --
</TABLE>
- ---------------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to the Company's Annual Report on Form 10-K
(iii)
<PAGE> 54
<TABLE>
<CAPTION>
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NUMBER DESCRIPTION PAGE NO.
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<S> <C> <C>
10.O.(5)* Copy of Severance Agreement dated June 26, 1991 between the Company and
Earl L. Mason. (Filed as Exhibit 10-X to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1991, and incorporated by
reference herein.) --
10.O.(6)* Copy of Severance Agreement dated November 27, 1991 between the Company
and Maurice S. Nelson, Jr. (Filed as Exhibit 10-O-(6) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1992,
and incorporated by reference herein.) --
10.O.(7)* Copy of Severance Agreement dated August 17, 1992 between the Company
and Olivia M. Thompson. (Filed as Exhibit 10-O-(7) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1992,
and incorporated by reference herein.) --
10.O.(8)* Copy of Severance Agreement dated March 23, 1994 between the Company
and Vicki L. Avril.....................................................
10.P.(1)* Copy of letter to Judd R. Cool dated September 2, 1987 relating to
terms and conditions of employment. (Filed as Exhibit 10-K to the
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1987, and incorporated by reference herein.) --
10.P.(2)* Copy of letter agreement dated November 23, 1987 between the Company
and Judd R. Cool. (Filed as Exhibit 10-L to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1987, and
incorporated by reference herein.) --
10.P.(3)* Copy of letter agreement dated December 10, 1993 between the Company
and Judd R. Cool restating certain provisions of the September 2, 1987
and November 23, 1987 letters in Exhibits 10.P.(1) and (2).............
10.Q* Copy of letter to H. William Howard dated July 17, 1990 relating to
terms and conditions of employment. (Filed as Exhibit 10-P to the
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1990, and incorporated by reference herein.) --
10.R* Copy of letter to Earl L. Mason dated May 17, 1991 relating to terms
and conditions of employment. (Filed as Exhibit 10-W to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1991, and
incorporated by reference herein.) --
10S* Copy of letter to Maurice S. Nelson, Jr. dated March 26, 1993 relating
to supplemental pension arrangement. (Filed as Exhibit 10-S to the
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1992, and incorporated by reference herein.) --
10.T* Copy of Letter of Credit with respect to the Supplemental and Special
Retirement Benefit Plan obligations of the Company to W. Gordon Kay....
10.U* Copy of letter to Olivia M. Thompson dated June 24, 1992 relating to
terms and conditions of employment. (Filed as Exhibit 10-T to the
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1992, and incorporated by reference herein.) --
</TABLE>
- ---------------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to the Company's Annual Report on Form 10-K
(iv)
<PAGE> 55
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
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<S> <C> <C>
10.V Copy of Stock Purchase Agreement, dated as of July 7, 1989, between the
Company and Harris Trust and Savings Bank, as ESOP Trustee. (Filed as
Exhibit 4-G to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1989, and incorporated by reference herein.) --
10.W.(1) Copy of Letter Agreement dated December 18, 1989 among the Company,
Nippon Steel Corporation and NS Finance III, Inc. (an indirectly wholly
owned subsidiary of Nippon Steel Corporation) relating to sale to NS
Finance III, Inc. of 185,000 shares 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.) --
10.W.(2) Copy of Steel Technology Agreement dated as of July 14, 1989 between
Inland Steel Company and Nippon Steel Corporation relating to
technology sharing between the signatories. (Filed as Exhibit 10-S-(2)
to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1989, and incorporated by reference herein.) --
10.W.(3) Copy of Basic Agreement dated as of July 21, 1987 between the Company
and Nippon Steel Corporation relating to the I/N Tek joint venture.
(Filed as Exhibit 10-S-(3) to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1989, and incorporated by
reference herein.) --
10.W.(4) Copy of Partnership Agreement dated as of July 21, 1987 between ISC
Tek, Inc. (an indirectly wholly owned subsidiary of the Company) and NS
Tek, Inc. (an indirectly wholly owned subsidiary of Nippon Steel
Corporation) relating to the I/N Tek joint venture. (Filed as Exhibit
10-S-(4) to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989, and incorporated by reference herein.) --
10.W.(5) Copy of Basic Agreement dated as of September 12, 1989 between the
Company and Nippon Steel Corporation relating to the I/N Kote joint
venture. (Filed as Exhibit 10-S-(5) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1989, and incorporated
by reference herein.) --
10.W.(6) Copy of Partnership Agreement dated as of September 12, 1989 between
ISC Kote, Inc. (an indirectly wholly owned subsidiary of the Company)
and NS Tek, Inc. (an indirectly wholly owned subsidiary of Nippon Steel
Corporation) relating to the I/N Kote joint venture. (Filed as Exhibit
10-S-(6) to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989, and incorporated by reference herein.) --
10.W.(7) Copy of Substrate Supply Agreement dated as of September 12, 1989
between Inland Steel Company and I/N Kote, an Indiana general
partnership. (Filed as Exhibit 10-S-(7) to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1989, and
incorporated by reference herein.) --
10.W.(8) First Amendment to Substrate Supply Agreement dated as of May 1, 1990
between Inland Steel Company and I/N Kote relating to the I/N Kote
joint venture. (Filed as Exhibit 10-R-(8) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1990, and
incorporated by reference herein.) --
10.W.(9) Letter Agreement dated as of May 1, 1990 among I/N Kote, the Company
and Nippon Steel Corporation relating to partner loans. (Filed as
Exhibit 10-R-(9) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990, and incorporated by reference
herein.) --
10.W.(10) First Amendment to I/N Kote Basic Agreement dated as of May 1, 1990
between the Company and Nippon Steel Corporation relating to the I/N
Kote joint venture. (Filed as Exhibit 10-R-(10) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1990, and
incorporated by reference herein.) --
</TABLE>
(v)
<PAGE> 56
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
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<S> <C> <C>
10.W.(11) Letter Agreement dated as of April 19, 1990 between the Company and
Nippon Steel Corporation relating to capital contributions to I/N Tek.
(Filed as Exhibit 10-R-(11) to Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990, and incorporated by reference
herein.) --
10.W.(12) Letter Agreement dated April 20, 1990 between ISC Tek, Inc. (an
indirectly wholly owned subsidiary of the Company) and NS Tek, Inc. (an
indirectly wholly owned subsidiary of Nippon Steel Corporation)
relating to amendment of the partnership agreement of I/N Tek. (Filed
as Exhibit 10-R-(12) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990, and incorporated by reference
herein.) --
10.W.(13) CCM Override Amendment dated as of April 20, 1990 among the Company;
Nippon Steel Corporation; Inland Steel Company; ISC Tek, Inc.; I/N Tek;
NS Sales, Inc.; and NS Tek, Inc. relating to I/N Tek. (Filed as Exhibit
10-R-(13) to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1990, and incorporated by reference herein.) --
10.X Copy of ESOP Stock Purchase Agreement, dated May 30, 1990, between the
Company and Harris Trust and Savings Bank, as ESOP Trustee. (Filed as
Exhibit 10-T to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1990, and incorporated by reference
herein.) --
10.Y Copy of Inland Steel Industries Thrift Plan ESOP Trust, dated July 7,
1989, between the Company and Harris Trust and Savings Bank, as ESOP
Trustee. (Filed as Exhibit 10-P to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1989, and incorporated by
reference herein.) --
10.Z Letter Agreement dated March 1, 1991 between Nippon Steel Corporation
and the Company regarding Series F Exchangeable Preferred Stock. (Filed
as Exhibit 10-U to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990, and incorporated by reference
herein.) --
10.AA Letter Agreement dated May 10, 1991 by and between Nippon Steel
Corporation and Inland Steel Industries, Inc. relating to Letter
Agreement dated December 18, 1989. (Filed as Exhibit 10-V to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1991, and incorporated by reference herein.) --
11 Statement of Earnings per Share of Common Stock........................
13 Information incorporated by reference from Annual Report to
Stockholders for the fiscal year ended December 31, 1993...............
21 List of certain subsidiaries of the Company............................
23 Consent of Independent Accountants, appearing on page 27 of this Annual
Report on Form 10-K. --
24 Powers of attorney.....................................................
99 Letter to stockholders of common stock of the Company dated December
22, 1987 explaining Stockholder Rights Plan adopted by Board of
Directors on November 25, 1987 (Filed as Exhibit 3 to the Company's
Current Report on Form 8-K filed on December 18, 1987, and incorporated
by reference herein.) --
</TABLE>
(vi)
<PAGE> 1
Exhibit 10.A
INLAND STEEL INDUSTRIES, INC.
ANNUAL INCENTIVE PLAN
1. PURPOSE
The purpose of the Annual Incentive Plan (the "Plan") of Inland Steel
Industries, Inc. (the "Company") is to promote the interests of the Company and
its stockholders by (i) attracting and retaining salaried employees of
outstanding ability; (ii) strengthening the Company's capability to develop,
maintain and direct a competent employee population; (iii) motivating salaried
employees, by means of performance-related incentives, to achieve financial
rewards; (iv) providing annual incentive compensation opportunities which are
competitive with those of other major corporations; and (v) enabling salaried
employees to participate in the growth and financial success of the Company.
2. DEFINITIONS
"Affiliate" -- means any corporation or other entity which is not a
Subsidiary but as to which the Company possesses a direct or indirect ownership
interest and has power to exercise management control.
"Award" -- means an amount for an Award Period determined to be payable to
a Participant under the Plan.
"Award Period" -- means a calendar quarter or a calendar year, as the
Committee may establish from time to time with respect to any Hay point class
or resulting salary grade designations, to any Corporate Unit, or to a
combination of these factors.
"Award Schedule" -- means the schedule to be used for determining Awards
as established by the Committee and set forth in the Addendum to the Plan
applicable to the Corporate Unit covered thereby.
"Committee" -- means the Compensation Committee of the Board of Directors
of the Company.
"Consolidated Earnings" -- means the net income for the relevant Award
Period, on a consolidated basis, of the Company and all Subsidiaries, adjusted
as follows: (i) by adding back any amounts credited to the fund or funds under
the Plan for the Award Period in question; (ii) by adding back any provisions
of federal, state or municipal taxes which are based on or determined by
earnings or net income and imposed on the Company or any Subsidiary; (iii) by
eliminating gains or losses from sales or other dispositions of assets arising
other than in the ordinary course of business or arising from discontinued
operations (after adjusting for taxes in
<PAGE> 2
the manner provided in (ii) above); and (iv) by deducting or adding back any
other earnings or charges (after adjusting for taxes in the manner provided in
(ii) above) that have been designated by the Committee for exclusion or
inclusion under the Plan.
"Corporate Unit" -- means the Company, Inland Steel Company, Inland
Materials Distribution Group, Inc., Joseph T. Ryerson & Son, Inc./East, Joseph
T. Ryerson & Son/Central, Joseph T. Ryerson & Son/West, Ryerson Coil
Processing, J. M. Tull Metals Company, Inc., and any Affiliate, other
Subsidiary or any division or group of the Company or any Subsidiary designated
as a Corporate Unit from time to time by the Board of Directors of the Company.
"Employee" -- means an employee eligible to be designated a Participant in
the Plan.
"Operating Assets" -- means the average for an Award Period of the sum
(computed on a month-end basis) of (i) working capital (with inventory adjusted
to current value and excluding cash, marketable securities, interest-bearing
receivables, notes payable and long-term debt due in one year); (ii) property,
plant and equipment, net of accumulated depreciation; and (iii) any other
operating assets.
"Operating Profit" -- means the operating profit set forth in the
Company's Quarterly Report on Form 10-Q or Annual Report to Stockholders for a
Corporate Unit for the applicable Award Period, or if not separately stated, as
determined in accordance with generally accepted accounting principles based on
the financial results presented in such Quarterly Report on Form 10-Q or Annual
Report, in each case as adjusted by the Committee to reflect such items as the
Committee determines appropriate.
"Participant" -- means an Employee who is selected by the Committee to
receive an Award under the Plan.
"Return on Equity" -- means Consolidated Earnings divided by Stockholders'
Equity.
"Return on Operating Assets" -- means Operating Profit divided by
Operating Assets (expressed as a percentage), provided that Operating Profit
shall be computed for this purpose without giving effect to any payments to
Participants for the Award Period in question.
"Stockholders' Equity" -- means the average of the amounts so designated
on a consolidated basis in the Company's Quarterly Report on Form 10-Q or
Annual Report to Stockholders as of the close of the applicable Award Period
for which Awards under the Plan are being made and with respect to annual Award
Periods, as of the close of the preceding fiscal year, and with respect to
quarterly Award Periods, as of the close of the preceding fiscal
-2-
<PAGE> 3
quarter, less the aggregate amount of any equity financings from external
sources during the applicable Award Period for which Awards are being made.
"Subsidiary" -- means any corporation in which the Company possesses
directly or indirectly more than fifty percent (50%) of the total combined
voting power of all classes of its stock.
"Target Award" -- means the percentage of a Participant's base salary
earnings for an Award Period as established by the Committee pursuant to
paragraph 6 of the Plan and set forth in the Addendum to the Plan applicable to
the Corporate Unit in which such Participant is employed.
"Threshold" -- means the minimum financial performance (established by the
Committee and set forth in the Addendum to the Plan applicable to such
Corporate Unit) required by a Corporate Unit before an Award may be paid to a
Participant employed in such Corporate Unit.
3. ADMINISTRATION
The Plan shall be administered by the Committee. No member of the
Committee shall be eligible to receive an Award while serving on the Committee.
The Committee shall have authority to interpret the Plan and to establish,
amend and rescind rules and regulations for the administration of the Plan, and
all such interpretations, rules and regulations shall be conclusive and binding
on all persons. In addition, the Committee may delegate to one or more senior
executive officers of the Company the right to administer the Plan as it
pertains to employees who are not officers of the Company or any other
Corporate Unit. Notwithstanding any other provision of the Plan to the
contrary, the Committee may impose such conditions on participation in and
Awards under the Plan as it deems appropriate. Such conditions may include
conditions applicable to one or more Participants which are intended to cause
Awards payable to such Participants to be disregarded for purposes of Section
162(m) of the Internal Revenue Code of 1986, as amended, including but not
limited to conditions which subject payment of Awards to stockholder approval
of the Plan and conditions which preclude the Committee from exercising any
discretion otherwise provided by the Plan to adjust Consolidated Earnings or
Operating Profits or to adjust individual Awards in accordance with paragraph
7, if the effect of any such adjustment would be to increase the amount of any
Award otherwise payable to such Participants.
4. ELIGIBILITY
Except as otherwise provided by the Committee, all full-time salaried
employees of a Corporate Unit as of (a) the first day and the last day of a
quarterly Award Period, or (b) June 30 and December 31 of an annual Award
Period, as applicable, are eligible
-3-
<PAGE> 4
to be designated Participants in the Plan for such Award Period, provided,
however, that the Committee may adopt criteria restricting the number of
full-time salaried employees of a Corporate Unit eligible to be so designated,
which criteria shall be set forth in the Addendum to the Plan applicable to
such Corporate Unit.
5. DESIGNATION OF PARTICIPANTS
The Committee shall determine and designate from time to time those
Employees who shall be Participants. The designation of an Employee as a
Participant in the Plan for any Award Period shall not bestow upon such
Employee any right to receive an Award for such Award Period or the right to be
designated a Participant for any subsequent Award Period.
6. INDIVIDUAL AWARD OPPORTUNITY
For each Award Period, the Committee shall establish for each Participant
a Target Award, expressed as a percentage of his or her base salary earnings
for such Award Period, on the basis of his or her Hay point classification or
resulting salary grade designation.
7. DETERMINATION OF AWARDS
Awards for each Award Period for Participants in each Corporate Unit shall
be determined in accordance with the Award Schedule established by the
Committee for such Corporate Unit, provided, however, that no Award shall be
paid to any Participant in a Corporate Unit for any Award Period in which the
performance of such Corporate Unit did not equal or exceed the Threshold
applicable to such Corporate Unit. The Award for each Participant in a
Corporate Unit shall be the percentage of his or her Target Award determined in
accordance with the applicable Award Schedule, provided, however, that subject
to Paragraph 3 hereof, the Committee may adjust such Award for individual
performance on the basis of such quantitative and qualitative performance
measures and evaluations as it deems appropriate, and provided, further, that
the Committee may also make such adjustments as it deems appropriate in the
case of Participants whose Hay point classifications or resulting salary grade
designations have changed during the applicable Award Period or who have been
employed in more than one Corporate Unit during an Award Period. In no event
may a participant be paid an Award in any calendar year in excess of
$2,000,000. No segregation of any moneys or the creation of any trusts or the
making of any special deposits shall be required in connection with any Awards
made or to be made under the Plan.
8. PAYMENT OF AWARDS
Awards shall be paid in cash as soon as practicable after the end of the
Award Period for which the Award is made. If a
-4-
<PAGE> 5
Participant to whom an Award has been made dies prior to the payment of the
Award, such Award shall be delivered to his or her legal representative or to
such other person or persons as shall be determined by the Chief Executive
Officer of the Company. The Company or other applicable Corporate Unit shall
have the right to deduct from all Awards payable under the Plan any taxes
required by law to be withheld by the Company or other Corporate Unit with
respect thereto, provided however, that to the extent provided by the
Committee, any payment under the Plan may be deferred and to the extent
deferred, may be credited with an interest or earnings factor as determined by
the Committee.
9. TERMINATION OF EMPLOYMENT
Except in the case of death, disability or retirement or except as
provided in paragraph 10, a Participant must be an employee as of the end of
the Award Period in order to be eligible for an Award.
10. CHANGE OF CONTROL
In the event of a Change of Control of the Company (as hereinafter
defined), the Plan shall remain in full force and effect for the remainder of
the calendar year in which such Change of Control occurs, and each Participant
shall receive an Award for all Award Periods occurring in such calendar year,
at least equal to his or her Target Award, regardless of whether or not Awards
would otherwise have been payable under the Plan for such Award Periods and
regardless of whether or not such Participant was an Employee at the end of any
Award Period occurring in such calendar year. A "Change of Control of the
Company" shall be deemed to have occurred if there shall have been a change in
the composition of the Board of Directors of the Company such that a majority
of the Board of Directors shall have been members of the Board of Directors for
less than twenty-four months, unless the election of each new director who was
not a director at the beginning of the twenty-four month period was approved by
a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of such period.
11. TRANSFERABILITY
Any payment to which a Participant may be entitled under the Plan shall be
free from the control or interference of any creditor of such Participant and
shall not be subject to attachment or susceptible of anticipation or
alienation. The interests of a Participant shall not be transferable except by
will or the laws of descent and distribution.
-5-
<PAGE> 6
12. NO RIGHT TO PARTICIPATION; EMPLOYMENT
Neither the adoption of the Plan nor any action of the Committee shall be
deemed to give any Employee any right to be designated as a Participant under
the Plan. Further, nothing contained in the Plan, nor any action by the
Committee or any other person hereunder, shall be deemed to confer upon any
Employee any right of continued employment with any Corporate Unit or to limit
or diminish in any way the right of any Corporate Unit to terminate his or her
employment any time with or without cause.
13. NONEXCLUSIVITY OF THE PLAN
This Plan is not intended to and shall not preclude the Board of Directors
of the Company from adopting or continuing such additional compensation
arrangements as it deems desirable for Participants under this Plan, including
any thrift, savings, investment, stock purchase, stock option, profit sharing,
pension, retirement, insurance or other incentive plan.
14. AMENDMENT
Except as provided in paragraph 10 hereof, the Board of Directors of the
Company may amend, suspend or terminate the Plan at any time.
-6-
<PAGE> 1
Exhibit 10.D
Inland Steel Industries
INLAND 1984 INCENTIVE STOCK PLAN
AS AMENDED THROUGH JANUARY 26, 1994
<PAGE> 2
INLAND 1984 INCENTIVE STOCK PLAN
AS AMENDED THROUGH JANUARY 26, 1994
1. Purpose.
The purpose of the Inland 1984 Incentive Stock Plan (the "Plan") is to
attract and retain outstanding individuals as officers and key employees of the
"Company" (which, on and after May 1, 1986, shall be Inland Steel Industries,
Inc., and prior to that date shall be Inland Steel Company) and its
subsidiaries, and to furnish incentives to such individuals through rewards
based upon the ownership and performance of the common stock of the Company. To
this end, the Committee hereinafter designated may grant stock options, stock
appreciation rights, restricted stock awards, and performance awards, or
combinations thereof, to officers and other key employees of the Company and
its subsidiaries, on the terms and subject to the conditions set forth in this
Plan.
2. Participants.
Participants in the Plan shall consist of such officers and other key
employees of the Company and its subsidiaries as the Committee in its sole
discretion may select from time to time to receive stock options, stock
appreciation rights, restricted stock awards or performance awards, either
singly or in combination, as the Committee may in its sole discretion
determine. Any director of the Company or any of its subsidiaries who is not
also an employee of the Company or any of its subsidiaries shall not be
eligible to receive stock options, stock appreciation rights, restricted stock
awards or performance awards under the Plan.
3. Shares Reserved under the Plan.
The maximum number of shares of common stock, $1.00 par value, of the Company
which may be issued pursuant to all grants made under the Plan shall not exceed
800,000, of which no more than 300,000 shares shall be issued pursuant to
restricted stock awards and performance awards granted under the Plan. Any
shares subject to any grant which terminates by expiration, cancellation or
otherwise prior to the issuance of such shares or, in the case of a restricted
stock award, prior to vesting shall again be available for future grants under
the Plan. Shares of common stock to be issued pursuant to grants under the Plan
may be authorized and unissued shares of common stock, treasury common stock,
or any combination thereof.
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<PAGE> 3
4. Administration of the Plan.
The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Company. No member of the
Committee shall be eligible to receive any grant, or shall have been eligible
to receive any grant for at least one year prior to becoming a member, under
the Plan or any other stock option, stock appreciation rights or other
incentive stock plan of the Company or any subsidiary of the Company. Subject
to the provisions of the Plan, the Committee shall have authority (i) to
determine which employees of the Company and its subsidiaries shall be eligible
for participation in the Plan; (ii) to select employees to receive grants under
the Plan; (iii) to determine the form of the grant, whether as a stock option,
stock appreciation right, restricted stock award, performance award or a
combination thereof, the number of shares or units subject to the grant, the
time and conditions of exercise or vesting, the fair market value of the common
stock of the Company for purposes of the Plan, and all other terms and
conditions of any grant; and (iv) to prescribe the form of agreement,
certificate or other instrument evidencing the grant. The Committee shall also
have authority to interpret the Plan and to establish, amend and rescind rules
and regulations for the administration of the Plan, and all such
interpretations, rules and regulations shall be conclusive and binding on all
persons.
5. Effective Date and Term of Plan.
The Plan shall be submitted to the stockholders of the Company for approval
at the annual meeting to be held on April 25, 1984, or any adjournment thereof,
and, if approved by the affirmative vote of the holders of a majority of the
shares of common stock and Series A $2.40 Cumulative Convertible Preferred
Stock of the Company (voting together and not as separate classes) present in
person or by proxy, shall become effective on the date of such approval. The
Plan shall terminate five years after it becomes effective unless terminated
sooner by action of the Board of Directors. No further grants may be made
under the Plan after termination, but termination shall not affect the rights
of any participant under, or the authority of the Committee with respect to,
any grants or awards made prior to termination.
6. Stock Options.
(a) Grants. Options to purchase shares of common stock of the Company,
including "incentive stock options" within the meaning of Section 422A of the
Internal Revenue Code of 1954, as amended (the "Code"), may be granted from
time to time to such officers and other key employees of the Company and its
subsidiaries as may be selected by the Committee.
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<PAGE> 4
(b) Terms of Options. An option shall be exercisable in whole or in such
installments and at such times as may be determined by the Committee in its
sole discretion, provided that no option shall be exercisable less than one or
more than ten years after the date of grant. The per share option price shall
not be less than 100% of the fair market value of a share of common stock of
the Company on the date the option is granted. Upon exercise, the option price
may be paid in cash, in shares of common stock of the Company having a fair
market value equal to the option price, or in a combination thereof.
(c) Restrictions Relating to Incentive Stock Options. No incentive stock
option granted prior to January 1, 1987, may be exercised by an optionee while
there is outstanding (within the meaning of Section 422A(c)(7) of the Code) any
incentive stock option previously granted to such optionee to purchase stock in
the Company or any subsidiary of the Company or in a corporation which is a
predecessor to the Company or any subsidiary. The aggregate fair market value
(determined as of the time the option is granted) of the common stock of the
Company for which any employee may be granted incentive stock options in any
calendar year (under this Plan or any other plan of the Company or any of its
subsidiaries) shall not exceed $100,000 (or such other individual grant limit
as may be in effect under the Code on the date of grant) plus any unused limit
carryover to such year permitted under Section 422A of the Code.
(d) Termination of Employment. If an optionee ceases to be employed by the
Company or any of its subsidiaries by reason of (i) death, (ii) physical or
mental incapacity, (iii) retirement on or after the normal retirement date
provided for in and pursuant to any pension plan of the Company or any
subsidiary of the Company in effect at the time of such retirement, or (iv)
early retirement (with the consent of the Company) provided for in and pursuant
to any such pension plan, any option held by such optionee may be exercised,
with respect to all or any part of the common stock of the Company as to which
such option was not theretofore exercised (whether or not such option was
otherwise then exercisable), for a period ending on the first anniversary of
the date of such cessation of employment or the date of expiration of such
option, whichever first occurs. If an optionee ceases to be employed by the
Company and any of its subsidiaries for any reason other than a reason set
forth in the immediately preceding sentence, any option held by such optionee
may be exercised for a period ending on the 30th day following the date of such
cessation of employment or the date of expiration of such option, whichever
first occurs, but only with respect to that number of shares of common stock
for which such option was exercisable immediately prior to the date of
cessation of employment.
(e) Additional Terms and Conditions. The agreement or instrument evidencing
the grant of a stock option may contain such
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<PAGE> 5
other terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Committee in its sole discretion.
7. Stock Appreciation Rights.
(a) Grants. Rights entitling the grantee to receive cash or shares of
common stock of the Company having a fair market value market value equal to
the appreciation in market value of a stated number of shares of such common
stock from the date of the grant to the date of exercise, or, in the case of
rights granted in tandem with or by reference to a stock option granted prior
to the grant of such rights, from the date of grant of such related stock
option to the date of exercise, may be granted from time to time to such
officers and other key employees of the Company and its subsidiaries as may be
selected by the Committee.
(b) Terms of Grant. Such rights may be granted in tandem with or by
reference to a related stock option, in which event the grantee may elect to
exercise either the stock option or the rights, but not both, as to any of the
same shares subject to the stock option and the rights, or the rights may be
granted independently of a related stock option. Rights granted in tandem with
or by reference to a related stock option shall be exercisable to the extent,
and only to the extent, that the related option is exercisable, provided that
no such right (except in the case of death, or physical or mental incapacity)
shall be exercisable prior to the expiration of six months following the date
the right is granted. Rights granted independently of a stock option shall be
exercisable in whole or in such installments and at such times as may be
determined by the Committee, provided that no right shall be exercisable less
than one or more than ten years after the date of grant. Further, in the event
that any employee to whom rights are granted independently of a stock option
ceases to be an employee of the Company and its subsidiaries, such rights shall
be exercisable only to the extent and upon the conditions that stock options
are exercisable in accordance with the provisions of paragraph 6(d) of the
Plan. The Committee may at any time of grant or at any time thereafter impose
such additional terms and conditions on the exercise of stock appreciation
rights as it deems necessary or desirable for compliance with section 16(a) or
16(b) of the Securities Exchange Act of 1934 and the rules and regulations
thereunder.
(c) Payment on Exercise. Upon exercise of a stock appreciation right, the
grantee shall be paid the excess of the then fair market value of the number of
shares of common stock of the Company to which the right relates over the fair
market value of such number of shares at the date of grant of the right or of
the related stock option, as the case may be. Such excess shall be paid in
cash or in shares of common stock having a fair market value equal to such
excess, or in such combination thereof, as may be provided in the grant of such
right (which may permit the
4
<PAGE> 6
grantee to elect between cash and common stock or to elect a combination
thereof), or, if no such provision is made in the grant, as the Committee shall
determine upon exercise of the right, provided, in any event, that the grantee
shall be paid cash in lieu of any fractional share of common stock to which
such grantee would otherwise be entitled. The number of shares which may be
issued pursuant to all grants under the Plan shall be reduced in connection
with the exercise of any stock appreciation right by the number of shares paid
out pursuant to such exercise.
(d) Additional Terms and Conditions. The agreement or instrument evidencing
the grant of stock appreciation rights may contain such other terms, provisions
and conditions not inconsistent with the Plan as may be determined by the
Committee in its sole discretion.
8. Restricted Stock Awards.
Restricted stock awards consisting of shares of common stock of the Company
may be made from time to time to such officers and other key employees of the
Company and its subsidiaries as may be selected by the Committee, provided that
any such employee (except an employee whose terms of employment include the
granting of a restricted stock award) shall have been employed by the Company
or any of its subsidiaries for at least six months. Such awards shall be
contingent on the employee's continuing employment with the Company or its
subsidiaries for a period to be specified in the award, which shall not be less
than one or more than ten years from the date of award, and shall be subject to
such additional terms and conditions as the Committee in its sole discretion
deems appropriate, including, but not by way of limitation, restrictions on the
sale or other disposition of such shares during the restriction period. The
Committee may in its sole discretion at the time of the award or at any time
thereafter provide for the early vesting of such award in the event of
termination of employment by retirement, death, incapacity or otherwise prior
to the end of the restriction period. The holder of a restricted stock award
shall have the right to vote the restricted shares and to receive dividends
thereon, unless and until such shares are forfeited.
9. Performance Awards.
(a) Awards. Performance awards consisting of monetary units or units which
are equivalent to shares of common stock of the Company may be made from time
to time to such officers and other key employees of the Company and its
subsidiaries as may be selected by the Committee. Such awards shall be
contingent on the achievement over a period of not less than three or more than
ten years of such corporate, division, subsidiary, group or other objectives as
shall be established by the Committee. Such objectives shall be established by
the Committee prior to the beginning of the performance period, but may be
revised by the
5
<PAGE> 7
Committee from time to time during the performance period to take into account
significant unforeseen events or changes in circumstances.
(b) Termination of Employment. Except as may otherwise be determined by the
Committee at the time of the award or at any time thereafter, a performance
award shall terminate if the holder of the award does not remain continuously
in the employ of the Company and its subsidiaries at all time during the
applicable performance period.
(c) Payment. Following the end of the performance period, the holder of a
performance award shall be entitled to receive payment of an amount, not
exceeding the maximum value of the performance award established by the
Committee, based on the level of achievement of the objectives for the
performance period as determined by the Committee. Payment may be made in
cash, shares of common stock, or a combination thereof, as determined by the
Committee. Any payment to be made in common stock shall be based on the fair
market value of such stock on the payment date.
10. Adjustments for Changes in Capitalization, Etc.
Stock options, stock appreciation rights, restricted stock awards, and
performance awards shall be subject to adjustment by the Committee in its sole
discretion as to the number, kind and price of shares or other consideration
subject to such grants in the event of changes in the outstanding common stock
by reason of stock dividends, stock splits, recapitalizations, reorganizations,
mergers, consolidations, combinations, exchanges or other relevant changes in
corporate structure or capitalization occurring after the date of the grant of
any stock option, stock appreciation right, restricted stock award or
performance award. In the event of any such change in the outstanding common
stock, the maximum number of shares which may be issued pursuant to all grants
under the Plan and pursuant to restricted stock awards and performance awards
may also be appropriately adjusted by the Committee.
11. Effect of Liquidation, Merger, Consolidation or Other Events.
Unless otherwise determined by the Committee, and notwithstanding any other
provisions of the Plan, each outstanding stock option and stock appreciation
right and each restricted stock award and performance award shall automatically
terminate upon the effective date of (i) the liquidation or dissolution of the
Company, (ii) any merger or consolidation in which the Company is not the
surviving corporation or pursuant to which the common stock of the Company does
not remain outstanding, or (iii) the acquisition by another person of all or
substantially all of the assets of the Company; provided, however, that the
Committee in anticipation of any such event or any similar event, or in the
event of (a) the acquisition by any person of the beneficial ownership of 25%
or
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<PAGE> 8
more of the outstanding voting securities of the Company or (b) any offer by
any person to acquire any voting securities of the Company which, if accepted,
would result in the beneficial ownership by such person of 25% or more of the
outstanding voting securities of the Company, may accelerate the time within
which such stock options and stock appreciation rights may be exercised as well
as the time for the vesting of restricted stock and performance awards.
12. Amendment and Termination of Plan.
The Plan may be amended or terminated by the Board of Directors of the
Company in any respect except that (other than pursuant to paragraph 10 of the
Plan) no amendment may be made without stockholder approval if such amendment
would increase the maximum number of shares available for issuance pursuant to
all grants under the Plan or pursuant to restricted stock awards and
performance awards.
13. Miscellaneous.
(a) No Right to a Grant. Neither the adoption of the Plan nor any action
of the Board of Directors or of the Committee shall be deemed to give any
employee any right to be selected as a participant or to be granted a stock
option, stock appreciation right, restricted stock award or performance award.
(b) Rights as Stockholder. No person shall have any rights as a stockholder
of the Company with respect to any shares covered by a stock option, stock
appreciation right, or performance award until the date of the issuance of a
stock certificate to such person pursuant to such stock option right or award.
(c) Employment. Nothing contained in this Plan shall be deemed to confer
upon any employee any right of continued employment with the Company or any of
its subsidiaries or to limit or diminish in any way the right of the Company or
any such subsidiary to terminate his or her employment at any time with or
without cause.
(d) Taxes. The Company shall be entitled to deduct from any payment under
the Plan the amount of any tax required by law to be withheld with respect to
such payment or may require any participant to pay such amount to the Company
prior to and as a condition of making such payment. In addition, the Committee
may, in its discretion and subject to such rules as it may adopt from time to
time, permit a participant to elect to have the Company withhold from any
payment under the Plan (or to have the Company accept from the participant),
for tax withholding purposes, cash or shares of common stock of the Company,
valued at their fair market value, but in no event shall the cash or fair
market value of the number of shares so withheld (or accepted) exceed the
amount necessary to
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<PAGE> 9
meet the maximum Federal, state and local marginal tax rates then in effect
that are applicable to the participant and to the particular transaction.
(e) Nontransferability. No stock option, stock appreciation right,
restricted stock award or performance award shall be transferable except by
will or the laws of descent and distribution. During the holder's lifetime,
stock options and stock appreciation rights shall be exercisable only by, and
shares subject to restricted stock awards and payments pursuant to performance
awards shall be delivered or made only to, such holder or such holder's duly
appointed legal representative.
8
<PAGE> 1
Exhibit 10.E
Inland Steel Industries
INLAND 1988 INCENTIVE STOCK PLAN
AS AMENDED THROUGH JANUARY 26, 1994
<PAGE> 2
INLAND 1988 INCENTIVE STOCK PLAN
1. Purpose.
The purpose of the Inland 1988 Incentive Stock Plan (the "Plan") is to
attract and retain outstanding individuals as officers and key employees of
Inland Steel Industries, Inc. (the "Company") and its subsidiaries, and to
furnish incentives to such individuals through rewards based upon the ownership
and performance of the common stock of the Company. To this end, the Committee
hereinafter designated may grant stock options, stock appreciation rights,
restricted stock awards, and performance awards, or combinations thereof, to
officers and other key employees of the Company and its subsidiaries, on the
terms and subject to the conditions set forth in this Plan.
2. Participants.
Participants in the Plan shall consist of such officers and other key
employees of the Company and its subsidiaries as the Committee in its sole
discretion may select from time to time to receive stock options, stock
appreciation rights, restricted stock awards or performance awards, either
singly or in combination, as the Committee may determine in its sole
discretion. Any director of the Company or any of its subsidiaries who is not
also an employee of the Company or any of its subsidiaries shall not be
eligible to receive stock options, stock appreciation rights, restricted stock
awards or performance awards under the Plan. As used in the Plan, the term
"subsidiary" means (a) any corporation of which the Company owns or controls,
directly or indirectly, 50% or more of the outstanding shares of capital stock
entitled to vote for the election of directors or (b) any partnership, joint
venture, or other business entity in respect of which the Company, directly or
indirectly, has comparable ownership or control.
3. Shares Reserved under the Plan.
The maximum number of shares of common stock, $1.00 par value per share, of
the Company which may be issued pursuant to grants made under the Plan shall
not exceed 1,700,000 plus such number of shares as shall have been authorized
for issuance pursuant to the Inland 1984 Incentive Stock Plan (heretofore
approved by stockholders) and shall not have been or be issued pursuant to such
plan. Any shares subject to any grant (including any grant under the Inland
1984 Incentive Stock Plan) which terminates by expiration, cancellation or
otherwise without the issuance of such shares or without payment thereunder, or
in the case of a restricted stock award without vesting, shall again be
available for future grants under the Plan. Shares of common stock to be
issued pursuant to grants under the Plan may be authorized and unissued shares
of common stock, treasury common stock, or any combination thereof.
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4. Administration of the Plan.
The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Company. No member of the
Committee shall be eligible to receive any grant, or shall have been eligible
to receive any grant for at least one year prior to becoming a member, under
the Plan or any other stock option, stock appreciation rights or other
incentive stock plan of the Company or any subsidiary of the Company. Subject
to the provisions of the Plan, the Committee shall have authority (i) to
determine which employees of the Company and its subsidiaries shall be eligible
for participation in the Plan; (ii) to select employees to receive grants under
the Plan; (iii) to determine the form of grant, whether as a stock option,
stock appreciation right, restricted stock award, performance award or a
combination thereof, the number of shares or units subject to the grant, the
time and conditions of exercise or vesting, the fair market value of the common
stock of the Company for purposes of the Plan, and all other terms and
conditions of any grant; and (iv) to prescribe the form of agreement,
certificate or other instrument evidencing the grant. The Committee shall also
have authority to interpret the Plan and to establish, amend and rescind rules
and regulations for the administration of the Plan, and all such
interpretations, rules and regulations shall be conclusive and binding on all
persons.
5. Effective Date of Plan.
The Plan shall be submitted to the stockholders of the Company for approval
at the annual meeting to be held on April 27, 1988, or any adjournment thereof,
and, if approved by the affirmative vote of the holders of a majority of the
shares of common stock and Series A $2.40 Cumulative Convertible Preferred
Stock of the Company, voting as a single class, represented in person or by
proxy, shall be deemed to have become effective on the date of such approval.
6. Stock Options.
(a) Grants. Options to purchase shares of common stock of the Company,
including "incentive stock options" within the meaning of Section 422A of the
Internal Revenue Code of 1986, as amended (the "Code"), may be granted from
time to time to such officers and other key employees of the Company and its
subsidiaries as may be selected by the Committee.
(b) Terms of Options. An option shall be exercisable in whole or in such
installments and at such times as may be determined by the Committee in its
sole discretion, provided that no option shall be exercisable less than one or
more than ten years after the date of grant. The per share option price shall
not be less than 100% of the fair market value of a share of common stock of
the Company on the date the option is granted. Upon exercise,
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<PAGE> 4
the option price may be paid in cash, in shares of common stock of the Company
having a fair market value equal to the option price, or in a combination
thereof.
(c) Restrictions Relating to Incentive Stock Options. To the extent
required by the Code, the aggregate fair market value (determined as of the
time the option is granted) of the common stock of the Company with respect to
which incentive stock options are exercisable for the first time by an employee
during any calendar year (under this Plan or any other plan of the Company or
any of its subsidiaries) shall not exceed $100,000.
(d) Termination of Employment. If an optionee ceases to be employed by the
Company or any of its subsidiaries by reason of (i) death, (ii) physical or
mental incapacity, (iii) retirement on or after the normal retirement date
provided for in and pursuant to any pension plan of the Company or any
subsidiary of the Company in effect at the time of such retirement, or (iv)
early retirement (with the consent of the Committee) provided for in and
pursuant to any such pension plan, any option held by such optionee may be
exercised, with respect to all or any part of the common stock of the Company
as to which such option was not theretofore exercised (whether or not such
option was otherwise then exercisable), for a period ending on the third
anniversary of the date of such cessation of employment or the date of
expiration of such option, whichever first occurs. If an optionee ceases to be
employed by the Company and any of its subsidiaries for any reason other than a
reason set forth in the immediately preceding sentence, any option held by such
optionee may be exercised for a period ending on the 30th day following the
date of such cessation of employment or the date of expiration of such option,
whichever first occurs, but only with respect to that number of shares of
common stock for which such option was exercisable immediately prior to the
date of cessation of employment.
(e) Additional Terms and Conditions. The agreement or instrument evidencing
the grant of a stock option may contain such other terms, provisions and
conditions not inconsistent with the Plan as may be determined by the Committee
in its sole discretion.
7. Stock Appreciation Rights.
(a) Grants. Rights entitling the grantee to receive cash or shares of
common stock of the Company having a fair market value equal to the
appreciation in market value of a stated number of shares of such common stock
from the date of the grant to the date of exercise, or, in the case of rights
granted in tandem with or by reference to a stock option granted prior to the
grant of such rights, from the date of grant of such related stock option to
the date of exercise, may be granted from time to time to such officers and
other key employees of the Company and its subsidiaries as may be selected by
the Committee.
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(b) Terms of Grant. Such rights may be granted in tandem with or by
reference to a related stock option, in which event the grantee may elect to
exercise either the stock option or the right, but not both, as to the shares
subject to the stock option and the right, or the right may be granted
independently of a stock option. Rights granted in tandem with or by reference
to a related stock option shall be exercisable to the extent, and only to the
extent, that the related option is exercisable, provided that no such right
(except in the case of death or physical or mental incapacity) shall be
exercisable prior to the expiration of six months following the date the right
is granted. Rights granted independently of a stock option shall be
exercisable in whole or in such installments and at such times as may be
determined by the Committee, provided that no right shall be exercisable less
than one or more than ten years after the date of grant. Further, in the event
that any employee to whom rights are granted independently of a stock option
ceases to be an employee of the Company and its subsidiaries, such rights shall
be exercisable only to the extent and upon the conditions that stock options
are exercisable in accordance with the provisions of paragraph (d) of Section 6
of the Plan. The Committee may at the time of grant or at any time thereafter
impose such additional terms and conditions on the exercise of stock
appreciation rights as it deems necessary or desirable for compliance with
Section 16(a) or Section 16(b) of the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
(c) Payment on Exercise. Upon exercise of a stock appreciation right, the
grantee shall be paid the excess of the then fair market value of the number of
shares of common stock of the Company to which the right relates over the fair
market value of such number of shares at the date of grant of the right or of
the related stock option, as the case may be. Such excess shall be paid in
cash or in shares of common stock having a fair market value equal to such
excess, or in such combination thereof, as may be provided in the grant of such
right (which may permit the grantee to elect between cash and common stock or
to elect a combination thereof) or, if no such provision is made in the grant,
as the Committee shall determine upon exercise of the right, provided, in any
event, that the grantee shall be paid cash in lieu of any fractional share of
common stock to which such grantee would otherwise be entitled. The number of
shares which may be issued pursuant to grants under the Plan shall be reduced
in connection with the exercise of any stock appreciation right by the number
of shares with respect to which such right is exercised.
(d) Additional Terms and Conditions. The agreement or instrument evidencing
the grant of stock appreciation rights may contain such other terms, provisions
and conditions not inconsistent with the Plan as may be determined by the
Committee in its sole discretion.
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8. Restricted Stock Awards.
Restricted stock awards consisting of shares of common stock of the Company
may be made from time to time to such officers and other key employees of the
Company and its subsidiaries as may be selected by the Committee, provided that
any such employee (except an employee whose terms of employment include the
granting of a restricted stock award) shall have been employed by the Company
or any of its subsidiaries for at least six months. Such awards shall be
contingent on the employee's continuing employment with the Company or its
subsidiaries for a period to be specified in the award, which shall not be less
than one or more than ten years from the date of award, and shall be subject to
such additional terms and conditions as the Committee in its sole discretion
deems appropriate, including, but not by way of limitation, restrictions on the
sale or other disposition of such shares during the restriction period. The
Committee may in its sole discretion at the time of the award or at any time
thereafter provide for the early vesting of such award in the event of
termination of employment by retirement, death, incapacity or otherwise prior
to the end of the restriction period. The holder of a restricted stock award
shall have the right to vote the restricted shares and to receive dividends
thereon, unless and until such shares are forfeited.
9. Performance Awards.
(a) Awards. Performance awards consisting of (i) shares of common stock of
the Company, (ii) monetary units or (iii) units which are expressed in terms of
shares of common stock of the Company may be made from time to time to such
officers and other key employees of the Company and its subsidiaries as may be
selected by the Committee. Such awards shall be contingent on the achievement
over a period of not less than one or more than ten years of such corporate,
division, subsidiary, group or other objectives as shall be established by the
Committee. Such objectives may be revised by the Committee at any time and
from time to time during the performance period to take into account
significant unforeseen events or changes in circumstances. Except as may
otherwise be determined by the Committee at the time of the award or at any
time thereafter, a performance award shall terminate if the holder of the award
does not remain continuously in the employ of the Company or its subsidiaries
at all times during the applicable performance period.
(b) Rights with Respect to Shares and Share Units. If a performance award
consists of shares of common stock of the Company or units which are expressed
in terms of shares of such common stock, amounts equal to dividends otherwise
payable on a like number of shares may, if the award so provides, be converted
into additional such shares (to the extent that shares are then available for
issuance under the Plan) or credited as additional
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units and paid to the participant if and when, and to the extent that, payment
is made pursuant to such award.
(c) Payment. Payment of a performance award following the end of the
performance period, if such award consists of monetary units or units expressed
in terms of shares of common stock of the Company, may be made in cash, shares
of common stock, or a combination thereof, as determined by the Committee. Any
payment made in common stock shall be based on the fair market value of such
stock on the payment date. In the case of any payment made in whole or in part
in cash (other than amounts attributable to dividend equivalents payable in
cash), the number of shares of common stock which may be issued pursuant to
grants under the Plan shall be reduced by that number of shares of such stock
(including any fraction as a whole share) having a fair market value that is
equal to the amount of such cash.
10. Adjustments for Changes in Capitalization, Etc.
Subject to the provisions of Section 11 of the Plan, stock options, stock
appreciation rights, restricted stock awards, and performance awards shall be
appropriately adjusted by the Committee as to the number, kind and price of
shares or other consideration subject to such grants in the event of changes in
the outstanding common stock by reason of stock dividends, stock splits,
recapitalizations, reorganizations, mergers, consolidations, combinations,
exchanges or other relevant changes in capitalization occurring after the date
of the grant of any stock option, stock appreciation right, restricted stock
award or performance award. In the event of any such change in the outstanding
common stock, the maximum number of shares which may be issued pursuant to
grants under the Plan shall also be appropriately adjusted by the Committee.
No adjustment to either (i) the number or price of shares of common stock
subject to incentive stock options or (ii) the maximum number of shares which
may be issued pursuant to incentive stock options shall be permitted hereunder
to the extent that such adjustment would cause an incentive stock option to be
considered as modified or the Plan to be treated as newly adopted under the
Code.
11. Effect of Merger, Consolidation, Liquidation and Certain Other
Events.
(a) Acceleration of Benefits. In the event of a "Change of Control" as
defined in paragraph (b) of this Section 11, (i) the value of all outstanding
stock options, stock appreciation rights and restricted stock awards (whether
or not then fully exercisable or vested) shall be cashed out on the basis of
the "Change of Control Price" (as defined in paragraph (c) of this Section 11)
as of the date the Change of Control occurs, provided, however, that any stock
options or stock appreciation rights outstanding for less than six months shall
not be cashed out until six months after the
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<PAGE> 8
respective date of grant, and provided, further, that the Committee may provide
for the immediate vesting instead of the cashing out of restricted stock awards
in such circumstances as it deems appropriate; and (ii) all outstanding
performance awards shall be cashed out in such manner and in such amount or
amounts as determined by the Committee in its sole discretion at the time such
awards are made.
(b) Change of Control. For purposes of this Section 11, a Change of Control
means the happening of any of the following: (i) the Company is merged into or
consolidated with another corporation, or the stockholders of the Company
approve a definitive agreement to sell or otherwise dispose of all or
substantially all of its assets or adopt a plan of liquidation, provided,
however, that a Change of Control shall not be deemed to have occurred by
reason of a transaction, or a substantially concurrent or otherwise related
series of transactions, upon the completion of which the beneficial ownership
of the voting power of the Company, the surviving corporation or corporation
directly or indirectly controlling the Company or the surviving corporation, as
the case may be, is held only by the same persons (as defined below) (although
not necessarily in the same proportion) as held the beneficial ownership of the
voting power of the Company immediately prior to the transaction or the
substantially concurrent or otherwise related series of transactions, except
that upon the completion thereof, employees or employee benefit plans of the
Company may be a new holder of such beneficial ownership; or (ii) the
"beneficial ownership" (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) of securities representing 30% or
more of the combined voting power of the Company is acquired by any "person" as
defined in Sections 13(d) and 14(d) of the Exchange Act (other than any trustee
or other fiduciary holding securities under an employee benefit or other
similar stock plan of the Company); or (iii) at any time during any period of
two consecutive years, individuals who at the beginning of such period were
members of the Board of Directors of the Company cease for any reason to
constitute at least a majority thereof (unless the election, or the nomination
for election by the Company's stockholders, of each new director was approved
by a vote of at least two-thirds of the directors still in office at the time
of such election or nomination who were directors at the beginning of such
period).
(c) Change of Control Price. For purposes of this Section 11, Change of
Control Price means (i) with respect to a Change of Control by reason of a
merger or consolidation of the Company described in paragraph (b)(i) of this
Section 11 in which the consideration per share of the Company's common stock
to be paid for the acquisition of shares of common stock specified in the
agreement of merger or consolidation is all in cash, the highest such
consideration per share, (ii) with respect to a Change of Control by reason of
an acquisition of securities described in
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paragraph (b)(ii) of this Section 11, the highest price per share for any share
of the Company's common stock paid by any holder of any of the securities
representing 30% or more of the combined voting power of the Company giving
rise to the Change of Control, and (iii) with respect to a Change of Control by
reason of a merger or consolidation of the Company (other than a merger or
consolidation described in paragraph (c)(i) of this Section 11), stockholder
approval of an agreement or plan described in paragraph (b)(i) of this Section
11 or a change in the composition of the Board of Directors described in
paragraph (b)(iii) of this Section 11, the highest price per share of common
stock reported on the New York Stock Exchange Composite Tape (or, if such
shares are not traded on the New York Stock Exchange, such other principal
market on which such shares are traded) during the sixty-day period ending on
the date the Change of Control occurs, except that, in the case of incentive
stock options and stock appreciation rights relating to incentive stock
options, the holder may not receive an amount in excess of the maximum amount
that will enable such option to continue to qualify as an incentive stock
option.
12. Amendment and Termination of Plan.
The Plan may be amended by the Board of Directors of the Company in any
respect, provided that, without stockholder approval, no amendment (other than
pursuant to Section 10 of the Plan) shall increase the maximum number of shares
available for issuance under the Plan. In addition, no amendment may impair
the rights of a participant under any stock option, stock appreciation right,
restricted stock award or performance award previously granted under the Plan
without the consent of such participant, unless required by law. The Plan may
also be terminated at any time by the Board of Directors. No further grants
may be made under the Plan after termination, but termination shall not affect
the rights of any participant under, or the authority of the Committee with
respect to, any grants or awards made prior to termination.
13. Prior Plan.
Upon the effectiveness of this Plan, no further grants shall be made under
the Inland 1984 Incentive Stock Plan. The discontinuance of the Inland 1984
Incentive Stock Plan shall not affect the rights of any participant under, or
the authority of the Committee (therein referred to) with respect to, any
grants or awards made thereunder prior to such discontinuance.
14. Miscellaneous.
(a) No Right to a Grant. Neither the adoption of the Plan nor any action of
the Board of Directors or of the Committee shall be deemed to give any employee
any right to be selected as a participant or to be granted a stock option,
stock appreciation right,
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<PAGE> 10
restricted stock award or performance award.
(b) Rights as Stockholders. No person shall have any rights as a stockholder
of the Company with respect to any shares covered by a stock option, stock
appreciation right, or performance award until the date of the issuance of a
stock certificate to such person pursuant to such stock option, right or award.
(c) Employment. Nothing contained in this Plan shall be deemed to confer
upon any employee any right of continued employment with the Company or any of
its subsidiaries or to limit or diminish in any way the right of the Company or
any such subsidiary to terminate his or her employment at any time with or
without cause.
(d) Taxes. The Company shall be entitled to deduct from any payment under
the Plan the amount of any tax required by law to be withheld with respect to
such payment or may require any participant to pay such amount to the Company
prior to and as a condition of making such payment. In addition, the Committee
may, in its discretion and subject to such rules as it may adopt from time to
time, permit a participant to elect to have the Company withhold from any
payment under the Plan (or to have the Company accept from the participant),
for tax withholding purposes, cash or shares of common stock of the Company,
valued at their fair market value, but in no event shall the cash or the fair
market value of the number of shares so withheld (or accepted) exceed the
amount necessary to meet the maximum Federal, state and local marginal tax
rates then in effect that are applicable to the participant and to the
particular transaction.
(e) Nontransferability. No stock option, stock appreciation right,
restricted stock award or performance award shall be transferable except by
will or the laws of descent and distribution. During the holder's lifetime,
stock options and stock appreciation rights shall be exercisable only by, and
shares subject to restricted stock awards and payments pursuant to performance
awards shall be delivered or made only to, such holder or such holder's duly
appointed legal representative.
9
<PAGE> 1
EXHIBIT 10.F
INLAND 1992 INCENTIVE STOCK PLAN
AS AMENDED THROUGH MAY 26, 1993
1. Purpose.
The purpose of the Inland 1992 Incentive Stock Plan (the "Plan") is to
attract and retain outstanding individuals as officers and key employees of
Inland Steel Industries, Inc. (the "Company") and its subsidiaries, and to
furnish incentives to such individuals through rewards based upon the
ownership and performance of the common stock of the Company. To this end, the
Committee hereinafter designated may grant stock options, stock appreciation
rights, restricted stock awards, and performance awards, or combinations
thereof, to officers and other key employees of the Company and its
subsidiaries, on the terms and subject to the conditions set forth in this
Plan.
2. Participants.
Participants in the Plan shall consist of such officers and other key
employees of the Company and its subsidiaries as the Committee in its sole
discretion may select from time to time to receive stock options, stock
appreciation rights, restricted stock awards or performance awards, either
singly or in combination, as the Committee may determine in its sole
discretion. Any director of the Company or any of its subsidiaries who is not
also an employee of the Company or any of its subsidiaries shall not be
eligible to receive stock options, stock appreciation rights, restricted stock
awards or performance awards under the Plan. As used in the Plan, the term
"subsidiary" means (a) any corporation of which the Company owns or controls,
directly or indirectly, 50% or more of the outstanding shares of capital stock
entitled to vote for the election of directors or (b) any partnership, joint
venture, or other business entity in respect of which the Company, directly or
indirectly, has comparable ownership or control.
3. Shares Reserved under the Plan.
The maximum number of shares of common stock, $1.00 par value per share,
of the Company which may be issued pursuant to grants or awards made under the
Plan shall not exceed 2,200,000, subject, however, to adjustment pursuant to
the provisions of Section 10 of the Plan. Except to the extent otherwise
determined by the Committee, any shares subject to any grant or award which
terminates by expiration, cancellation or otherwise without the issuance of
such shares or which is settled in cash (to the extent so settled), or in the
case of a restricted stock award without vesting, shall again be available for
future grants under the Plan. Shares of common stock to be issued pursuant to
grants under the Plan may be authorized and unissued shares of common stock,
treasury common stock, or any combination thereof.
4. Administration of the Plan.
The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Company. No member of the
Committee shall be eligible to receive any grant, or shall have been eligible
to receive any grant for at least one year prior to becoming a member, under
the Plan or any other stock option, stock appreciation rights or other
incentive stock plan for employees of the Company or any subsidiary of the
Company. Subject to the provisions of the Plan, the Committee shall have
authority (i) to determine which employees of the Company and its subsidiaries
shall be eligible for participation in the Plan; (ii) to select employees to
<PAGE> 2
receive grants under the Plan; (iii) to determine the form of grant, whether
as a stock option, stock appreciation right, restricted stock award,
performance award or a combination thereof, the number of shares or units
subject to the grant, the time and conditions of exercise or vesting, the fair
market value of the common stock of the Company for purposes of the Plan, and
all other terms and conditions of any grant; and (iv) to prescribe the form of
agreement, certificate or other instrument evidencing the grant. The Committee
shall also have authority to interpret the Plan and to establish, amend and
rescind rules and regulations for the administration of the Plan, and all such
interpretations, rules and regulations shall be conclusive and binding on all
persons.
5. Effective Date of Plan.
The Plan shall be submitted to the stockholders of the Company for
approval at the annual meeting to be held on April 22, 1992, or any
adjournment thereof, and, if approved by the stockholders, shall be deemed to
have become effective on the date of such approval.
6. Stock Options.
(a) Grants. Options to purchase shares of common stock of the Company,
including "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), may be granted from
time to time to such officers and other key employees of the Company and its
subsidiaries as may be selected by the Committee.
(b) Terms of Options. An option shall be exercisable in whole or in such
installments and at such times as may be determined by the Committee in its
sole discretion, provided that no option shall be exercisable less than one or
more than ten years after the date of grant. The per share option price shall
not be less than 100% of the fair market value of a share of common stock of
the Company on the date the option is granted. Upon exercise, the option price
may be paid in cash, in shares of common stock of the Company having a fair
market value equal to the option price, or in a combination thereof.
(c) Restrictions Relating to Incentive Stock Options. To the extent
required by the Code, the aggregate fair market value (determined as of the
time the option is granted) of the common stock of the Company with respect to
which incentive stock options are exercisable for the first time by an employee
during any calendar year (under the Plan or any other plan of the Company or
any of its subsidiaries) shall not exceed $100,000.
(d) Termination of Employment. If an optionee ceases to be employed by
the Company or any of its subsidiaries by reason of (i) death, (ii) physical
or mental incapacity, (iii) retirement on or after the normal retirement date
provided for in and pursuant to any pension plan of the Company or any
subsidiary of the Company in effect at the time of such retirement, or (iv)
early retirement (with the consent of the Committee) provided for in and
pursuant to any such pension plan, any option held by such optionee may be
exercised, with respect to all or any part of the common stock of the Company
as to which such option was not theretofore exercised (whether or not such
option was otherwise then exercisable), for such period from and after the
date of such cessation of employment (not extending, however, beyond the date
of expiration of such option) as the Committee may determine at the time of
the grant. If an optionee ceases to be employed by the Company and any of its
subsidiaries for any reason other than a reason set forth in the immediately
preceding sentence, any option held by such optionee may be exercised for a
period ending on the 30th day following the date of such cessation of
employment or the date of expiration of such option, whichever first occurs,
but only with respect to that number of shares of common stock for which such
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option was exercisable immediately prior to the date of cessation of
employment.
(e) Additional Terms and Conditions. The agreement or instrument
evidencing the grant of a stock option may contain such other terms,
provisions and conditions not inconsistent with the Plan as may be determined
by the Committee in its sole discretion.
7. Stock Appreciation Rights.
(a) Grants. Rights entitling the grantee to receive cash or shares of
common stock of the Company having a fair market value equal to the
appreciation in market value of a stated number of shares of such common stock
from the date of the grant to the date of exercise, or, in the case of rights
granted in tandem with or by reference to a stock option granted prior to the
grant of such rights, from the date of grant of such related stock option to
the date of exercise, may be granted from time to time to such officers and
other key employees of the Company and its subsidiaries as may be selected by
the Committee.
(b) Terms of Grant. Such rights may be granted in tandem with or by
reference to a related stock option, in which event the grantee may elect to
exercise either the stock option or the right, but not both, as to the shares
subject to the stock option and the right, or the right may be granted
independently of a stock option. Rights granted in tandem with or by reference
to a related stock option shall be exercisable to the extent, and only to the
extent, that the related option is exercisable, provided that no such right
(except in the case of death or physical or mental incapacity) shall be
exercisable prior to the expiration of six months following the date the right
is granted. Rights granted independently of a stock option shall be exercisable
in whole or in such installments and at such times as may be determined by the
Committee, provided that no right shall be exercisable less than one or more
than ten years after the date of grant. Further, in the event that any employee
to whom rights are granted independently of a stock option ceases to be an
employee of the Company and its subsidiaries, such rights shall be exercisable
only to the extent and upon the conditions that stock options are exercisable
in accordance with the provisions of paragraph (d) of Section 6 of the Plan.
The Committee may at the time of grant or at any time thereafter impose such
additional terms and conditions on the exercise of stock appreciation rights as
it deems necessary or desirable for compliance with Section 16(a) or Section
16(b) of the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder.
(c) Payment on Exercise. Upon exercise of a stock appreciation right, the
grantee shall be paid the excess of the then fair market value of the number
of shares of common stock of the Company to which the right relates over the
fair market value of such number of shares at the date of grant of the right
or of the related stock option, as the case may be. Such excess shall be paid
in cash or in shares of common stock having a fair market value equal to such
excess, or in such combination thereof, as may be provided in the grant of
such right (which may permit the grantee to elect between cash and common
stock or to elect a combination thereof), or, if no such provision is made in
the grant, as the Committee shall determine upon exercise of the right,
provided, in any event, that the grantee shall be paid cash in lieu of any
fractional share of common stock to which such grantee would otherwise be
entitled. The number of shares which may be issued pursuant to grants under
the Plan shall be reduced in connection with the exercise of any stock
appreciation right by the number of shares issued pursuant to such exercise.
(d) Additional Terms and Conditions. The agreement or instrument
evidencing the grant of stock appreciation rights may contain such other
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<PAGE> 4
terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Committee in its sole discretion.
8. Restricted Stock Awards.
Restricted stock awards consisting of shares of common stock of the
Company may be made from time to time to such officers and other key employees
of the Company and its subsidiaries as may be selected by the Committee,
provided that any such employee (except an employee whose terms of employment
include the granting of a restricted stock award) shall have been employed by
the Company or any of its subsidiaries for at least six months. Such awards
shall be contingent on the employee's continuing employment with the Company
or its subsidiaries for a period to be specified in the award, which shall not
be less than one or more than ten years from the date of award, and shall be
subject to such additional terms and conditions as the Committee in its sole
discretion deems appropriate, including, but not by way of limitation,
restrictions on the sale or other disposition of such shares during the
restriction period. The Committee may in its sole discretion at the time of
the award or at any time thereafter provide for the early vesting of such
award in the event of termination of employment by retirement, death,
incapacity or otherwise prior to the end of the restriction period. Except as
otherwise determined by the Committee at the time of the award, the holder of
a restricted stock award shall have the right to vote the restricted shares
and to receive dividends thereon, unless and until such shares are forfeited.
9. Performance Awards.
(a) Awards. Performance awards consisting of (i) shares of common stock
of the Company, (ii) monetary units or (iii) units which are expressed in
terms of shares of common stock of the Company may be made from time to time
to such officers and other key employees of the Company and its subsidiaries
as may be selected by the Committee. Such awards shall be contingent on the
achievement over a period of not less than one or more than ten years of such
corporate, division, subsidiary, group or other objectives as shall be
established by the Committee. Such objectives may be revised by the Committee
at any time and from time to time during the performance period to take into
account significant unforeseen events or changes in circumstances. Except as
may otherwise be determined by the Committee at the time of the award or at
any time thereafter, a performance award shall terminate if the holder of the
award does not remain continuously in the employ of the Company or its
subsidiaries at all times during the applicable performance period.
(b) Rights with Respect to Shares and Share Units. If a performance award
consists of shares of common stock of the Company or units which are expressed
in terms of shares of such common stock, amounts equal to dividends otherwise
payable on a like number of shares may, if the award so provides, be converted
into additional such shares (to the extent that shares are then available for
issuance under the Plan) or credited as additional units and paid to the
participant if and when, and to the extent that, payment is made pursuant to
such award.
(c) Payment. Payment of a performance award following the end of the
performance period, if such award consists of monetary units or units
expressed in terms of shares of common stock of the Company, may be made in
cash, shares of common stock, or a combination thereof, as determined by the
Committee. Any payment made in common stock shall be based on the fair market
value of such stock on the payment date.
10. Adjustments for Changes in Capitalization, Etc.
Subject to the provisions of Section 11 of the Plan, stock options, stock
appreciation rights, restricted stock awards, and performance awards may be
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appropriately adjusted by the Committee as to the number, kind and price of
shares or other consideration subject to such grants in the event of stock
dividends, stock splits, spinoffs or other distributions of assets (other than
normal cash dividends), recapitalizations, reorganizations, mergers,
consolidations, combinations, exchanges or other relevant changes in corporate
structure or capitalization occurring after the date of the grant of any stock
option, stock appreciation right, restricted stock award or performance award.
In any such event, the maximum number of shares which may be issued pursuant
to grants under the Plan may also be appropriately adjusted by the Committee.
11. Effect of Merger, Consolidation, Liquidation and Certain Other Events.
(a) Acceleration of Benefits. In the event of a "Change in Control" as
defined in paragraph (b) of this Section 11, (i) the value of all outstanding
stock options, stock appreciation rights and restricted stock awards (whether
or not then fully exercisable or vested) shall be cashed out on the basis of
the "Change in Control Price" (as defined in paragraph (c) of this Section 11)
as of the date the Change in Control occurs, provided, however, that any stock
options or stock appreciation rights outstanding for less than six months
shall not be cashed out until six months after the respective date of grant,
and provided, further, that the Committee may provide for the immediate
vesting instead of the cashing out of restricted stock awards in such
circumstances as it deems appropriate; and (ii) all outstanding performance
awards shall be cashed out in such manner and in such amount or amounts as
determined by the Committee in its sole discretion at the time such awards are
made.
(b) Change in Control. For purposes of this Section 11, a Change in
Control means the happening of any of the following: (i) the Company is merged
into or consolidated with another corporation, or the stockholders of the
Company approve a definitive agreement to sell or otherwise dispose of all or
substantially all of its assets or adopt a plan of liquidation, provided,
however, that a Change in Control shall not be deemed to have occurred by
reason of a transaction, or a substantially concurrent or otherwise related
series of transactions, upon the completion of which the beneficial ownership
of the voting power of the Company, the surviving corporation or corporation
directly or indirectly controlling the Company or the surviving corporation,
as the case may be, is held only by the same persons (as defined below)
(although not necessarily in the same proportion) as held the beneficial
ownership of the voting power of the Company immediately prior to the
transaction or the substantially concurrent or otherwise related series of
transactions, except that upon the completion thereof, employees or employee
benefit plans of the Company may be a new holder of such beneficial ownership;
or (ii) the "beneficial ownership" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of
securities representing 40% or more of the combined voting power of the
Company is acquired by any "person" as defined in Sections 13(d) and 14(d) of
the Exchange Act (other than any trustee or other fiduciary holding securities
under an employee benefit or other similar stock plan of the Company); or
(iii) at any time during any period of two consecutive years, individuals who
at the beginning of such period were members of the Board of Directors of the
Company cease for any reason to constitute at least a majority thereof (unless
the election, or the nomination for election by the Company's stockholders, of
each new director was approved by a vote of at least two-thirds of the
directors still in office at the time of such election or nomination who were
directors at the beginning of such period).
(c) Change in Control Price. For purposes of this Section 11, Change in
Control Price means (i) with respect to a Change in Control by reason of a
merger or consolidation of the Company described in paragraph (b)(i) of this
Section 11 in which the consideration per share of the Company's common stock
to be paid for the acquisition of shares of common stock specified in the
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agreement of merger or consolidation is all in cash, the highest such
consideration per share, (ii) with respect to a Change in Control by reason of
an acquisition of securities described in paragraph (b)(ii) of this Section 11,
the highest price per share for any share of the Company's common stock paid by
any holder of any of the securities representing 40% or more of the combined
voting power of the Company giving rise to the Change in Control, and (iii)
with respect to a Change in Control by reason of a merger or consolidation of
the Company (other than a merger or consolidation described in paragraph (c)(i)
of this Section 11), stockholder approval of an agreement or plan described in
paragraph (b)(i) of this Section 11 or a change in the composition of the Board
of Directors described in paragraph (b)(iii) of this Section 11, the highest
price per share of common stock reported on the New York Stock Exchange
Composite Tape (or, if such shares are not traded on the New York Stock
Exchange, such other principal market on which such shares are traded) during
the sixty-day period ending on the date the Change in Control occurs, except
that, in the case of incentive stock options and stock appreciation rights
relating to incentive stock options, the holder may not receive an amount in
excess of the maximum amount that will enable such option to continue to
qualify as an incentive stock option.
12. Amendment and Termination of Plan.
The Plan may be amended by the Board of Directors of the Company in any
respect, provided that, without stockholder approval, no amendment (other than
pursuant to Section 10 of the Plan) shall increase the maximum number of
shares available for issuance under the Plan. In addition, no amendment may
impair the rights of a participant under any stock option, stock appreciation
right, restricted stock award or performance award previously granted under
the Plan without the consent of such participant, unless required by law. The
Plan may also be terminated at any time by the Board of Directors. No further
grants may be made under the Plan after termination, but termination shall not
affect the rights of any participant under, or the authority of the Committee
with respect to, any grants or awards made prior to termination.
13. Prior Plan.
Upon the effectiveness of this Plan, no further grants shall be made
under the Inland 1988 Incentive Stock Plan. The discontinuance of the Inland
1988 Incentive Stock Plan shall not affect the rights of any participant
under, or the authority of the Committee (therein referred to) with respect
to, any grants or awards made thereunder prior to such discontinuance.
14. Miscellaneous.
(a) No Right to a Grant. Neither the adoption of the Plan nor any action
of the Board of Directors or of the Committee shall be deemed to give any
employee any right to be selected as a participant or to be granted a stock
option, stock appreciation right, restricted stock award or performance award.
(b) Rights as Stockholders. No person shall have any rights as a
stockholder of the Company with respect to any shares covered by a stock
option, stock appreciation right, or performance award until the date of the
issuance of a stock certificate to such person pursuant to such stock option,
right or award.
(c) Employment. Nothing contained in this Plan shall be deemed to confer
upon any employee any right of continued employment with the Company or any of
its subsidiaries or to limit or diminish in any way the right of the Company
or any such subsidiary to terminate his or her employment at any time with or
without cause.
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<PAGE> 7
(d) Taxes. The Company shall be entitled to deduct from any payment under
the Plan the amount of any tax required by law to be withheld with respect to
such payment or may require any participant to pay such amount to the Company
prior to and as a condition of making such payment. In addition, the Committee
may, in its discretion and subject to such rules as it may adopt from time to
time, permit a participant to elect to have the Company withhold from any
payment under the Plan (or to have the Company accept from the participant),
for tax withholding purposes, shares of common stock of the Company, valued at
their fair market value, but in no event shall the fair market value of the
number of shares so withheld (or accepted) exceed the amount necessary to meet
the maximum Federal, state and local marginal tax rates then in effect that are
applicable to the participant and to the particular transaction.
(e) Nontransferability. No stock option, stock appreciation right,
restricted stock award or performance award shall be transferable except by
will or the laws of descent and distribution. During the holder's lifetime,
stock options and stock appreciation rights shall be exercisable only by, and
shares subject to restricted stock awards and payments pursuant to performance
awards shall be delivered or made only to, such holder or such holder's duly
appointed legal representative.
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<PAGE> 1
Exhibit 10.I
INLAND STEEL INDUSTRIES
SUPPLEMENTAL RETIREMENT BENEFIT PLAN
FOR COVERED EMPLOYEES
As Amended and Restated, Through and Including
January 26, 1994, Effective As Of July 1, 1990
ARTICLE 1
1.1 Purpose.
It is the intention of Inland Steel Industries, Inc. (the "Company") to
maintain appropriate levels of retirement benefits for individuals who are
entitled to benefits under the Inland Steel Industries Pension Plan Supplement
for Salaried Employees of Inland Steel Industries, Inc. and Certain
Subsidiaries, Revised As Of January 1, 1989, and as thereafter amended, and for
individuals who are entitled to benefits under the Inland Steel Industries
Pension Plan Supplement for Employees of J. M. Tull Metals Company, Inc.,
Effective As Of December 31, 1988, and as thereafter amended (each a "Pension
Plan Supplement"). Accordingly, the Board of Directors of Inland Steel
Industries, Inc., acting on behalf of the Company, hereby establishes this
amended and restated Inland Steel Industries Supplemental Retirement Benefit
Plan for Covered Employees (the "Supplemental Retirement Benefit Plan") as a
successor to and continuation of the Inland Steel Company Supplemental
Retirement Benefit Plan for Covered Employees heretofore adopted by Inland
Steel Company effective as of January 1, 1976 and the Inland Steel Industries
Supplemental Retirement Benefit Plan for Covered Employees heretofore adopted
by the Company effective as of January 1, 1989. This Supplemental Retirement
Benefit Plan is intended to provide benefits to eligible persons in a manner so
as to maintain the level of total retirement benefits which, but for the
limitations on benefits required by Section 415 of the Internal Revenue Code of
1986, as amended (the "Code"), would otherwise be payable under the Pension
Plan Supplement. The Supplemental Retirement Benefit Plan shall maintain such
total retirement benefit levels by means of supplemental unfunded payments made
by the Company to the individuals eligible for such payments as more fully
described in Articles 3 and 4. This Supplemental Retirement Benefit Plan is
intended to be an "excess benefit plan" described in Section 3(36) of the
Employee Retirement Income Security Act of 1974, as amended.
1.2 Effective Date.
This amended and restated Supplemental Retirement Benefit Plan is effective
as of July 1, 1990 (the "Effective Date").
<PAGE> 2
1.3 Funding Not Required.
The Company shall not be required to establish any fund or set aside any
monies for the payment of Supplemental Retirement Benefits under this
Supplemental Retirement Benefit Plan.
ARTICLE 2
2.1 Retirement Committee.
The Company hereby delegates authority to administer the Supplemental
Retirement Benefit Plan to the Inland Steel Industries Retirement Committee
(the "Committee") as established under the Inland Steel Industries Pension
Plan, As Revised, Effective December 1, 1988, and as may thereafter be amended
(the "Inland Steel Industries Pension Plan"). Any action by the Committee
shall be evidenced by a written document, certified by the Secretary of the
Committee. References to the Company's authority, right, or power to act
contained in any notice, disclosure, or communication which is made with a view
toward effectuating the purposes of this Supplemental Retirement Benefit Plan
shall be construed to include such actions by the Committee on the Company's
behalf and such actions by others to whom the Committee has delegated its
authority.
2.2 Authority of Committee.
The Committee shall have authority to control and manage the operation and
administration of the Supplemental Retirement Benefit Plan, including the
authority and discretion to construe and interpret the Supplemental Retirement
Benefit Plan, decide all questions of eligibility for and the amount, manner
and time of payment of Supplemental Retirement Benefits hereunder and such
other rights and powers necessary or convenient to the carrying out of its
functions hereunder. The authority and responsibilities of the Committee shall
be coextensive with its authority and responsibilities under the Inland Steel
Industries Pension Plan.
ARTICLE 3
3.1 Participation.
Each Employee of the Company and/or its subsidiaries who, on or after the
Effective Date, is entitled to an accrued benefit under the Pension Plan
Supplement the amount of which is limited by reason of the application of the
limitations imposed by Code Section 415, as amended from time to time, and the
regulations and rulings thereunder or the terms of the Inland Steel Industries
Pension Plan implementing those limitations (the "Section 415 Limitations")
shall be a "Participant" in this Supplemental Retirement Benefit Plan and upon
retirement shall be entitled to receive the benefit (the "Supplemental
Retirement Benefit"), if any, determined in accordance with Article 4 hereof.
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<PAGE> 3
3.2 Beneficiary.
The spouse or other person entitled to a benefit under the Pension Plan
Supplement upon the death of a Participant hereunder shall, upon the death of
the Participant, be a "Beneficiary" under this Supplemental Retirement Benefit
Plan entitled to receive the Supplemental Retirement Benefit, if any,
determined in accordance with Article 4 hereof.
ARTICLE 4
4.1 Amount of Supplemental Retirement Benefit.
The amount of Supplemental Retirement Benefit which a Participant or
Beneficiary shall accrue and be entitled to receive and the Company shall be
obligated to pay under this Supplemental Retirement Benefit Plan with respect
to each Limitation Year (as defined below) shall be equal to the excess, if
any, of the amount described in paragraph (a) of this Section 4.1 over the
amount described in paragraph (b) of this Section 4.1:
(a) The amount of the annual benefit which would have been accrued with
respect to such Participant or Beneficiary under the Pension Plan Supplement
as of the last day of the Limitation Year under the terms of the Pension Plan
Supplement as in effect on the last day of such Limitation Year if such
benefit were computed without giving effect to the Section 415 Limitations
for such Limitation Year.
(b) The amount of the annual benefit which was accrued for such Participant
or Beneficiary with respect to such Limitation Year under the terms of the
Pension Plan Supplement as in effect on the last day of that Limitation Year,
including those terms implementing the Section 415 Limitations referred to
above, as indexed.
As used in this Section 4.1, "Limitation Year" means the Plan Year applicable
to the Pension Plan Supplement, being the period beginning on January 1 of each
year and ending on December 31 of the same year. It is the intent of this
Section 4.1 that the Supplemental Retirement Benefit described above shall be
determined at all times in a manner consistent with the then current Section
415 Limitations. Accordingly, the determinations made pursuant to this Section
4.1 shall be based upon adjustments employed in determining the amount of the
annual benefit described above, and shall be subject to adjustments which
reflect the Section 415 Limitations with respect to the computation of benefits
under the Pension Plan Supplement. If a Participant receives a single sum
distribution under the Pension Plan Supplement, but has elected another form of
benefit under this Supplemental Retirement Benefit Plan, the amount of the
annual benefit payable under this Supplemental Retirement Benefit Plan in each
Limitation Year shall be the
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<PAGE> 4
same as that payable in the year in which the single sum distribution is made.
Except as provided in Section 5.3 hereof, no Supplemental Retirement Benefit
shall be payable to any Participant or his Beneficiaries unless, at the time of
the Participant's termination of employment with the Company and all
Affiliates, the Participant has been credited with at least five Years of
Vesting Service under the Pension Plan Supplement.
4.2 Payment of Supplemental Retirement Benefit
(a) Except as provided hereinafter, the Supplemental Retirement Benefit
which a Participant or Beneficiary is eligible to receive shall be paid by
the Company at such time, in the same form and subject to the same
conditions, as is the benefit paid to such Participant or Beneficiary under
the Pension Plan Supplement.
(b) (i) The Committee, in its sole discretion and after considering the
needs and circumstances of the Participant or Beneficiary concerned, may at
any time elect to direct payment of the Supplemental Retirement Benefit to
the Participant or Beneficiary in any form of benefit provided under the
Pension Plan Supplement, including a lump sum.
(ii) A Participant or Beneficiary may in writing request payment of his
Supplemental Retirement Benefit in a form other than the form of benefit
payment under the Pension Plan Supplement. After receiving such a request,
the Committee shall consider the request and the circumstances on which it is
based and shall, in its sole discretion, approve or disapprove the request
and inform the requesting Participant or Beneficiary of its decision.
(iii) Any optional form of benefit shall be the actuarial equivalent of
the benefit otherwise payable to the Participant or Beneficiary, determined
by applying the appropriate interest rate and other actuarial assumptions
then set forth in the Pension Plan Supplement.
(c) The Company may purchase an annuity with respect to any portion of a
Participant's accrued Supplemental Retirement Benefit in full satisfaction
thereof to the extent provided by paragraphs (a) through (i) of Section 4.4
and shall be obligated to purchase an annuity or make a lump sum payment to
the extent provided by paragraph (j) of Section 4.4.
4.3 Pension Plan Supplement Increase.
In the event the Pension Plan Supplement is amended to increase the benefit
payable to participants or beneficiaries then receiving pensions under the
Pension Plan Supplement, benefits payable under this Supplemental Retirement
Benefit Plan shall be adjusted or commenced accordingly for Participants or
Beneficiaries; provided that no such adjustment shall be made if the
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<PAGE> 5
Participant received a single sum distribution under this Supplemental
Retirement Benefit Plan; and provided, further, that no such adjustment shall
be made with respect to any portion of a Participant's accrued Supplemental
Retirement Benefit for which an annuity has been purchased under Section 4.4.
4.4 Purchase of Annuities.
The Company may at any time, in the sole discretion of the Committee or the
Company's Board of Directors, purchase one or more annuities with respect to
all or any portion of the Supplemental Retirement Benefit accrued under the
Plan by any Participant, subject to the following:
(a) The Company shall not be obligated to purchase an annuity for any
Participant or for any portion of a Participant's accrued Supplemental
Retirement Benefit, notwithstanding the purchase of an annuity with respect
to any other Participant or any other portion of the Participant's accrued
Supplemental Retirement Benefit.
(b) The purchase of annuities under this Section 4.4 shall be limited to
Supplemental Retirement Benefits accrued by Participants who meet all of the
following requirements:
(i) completion of at least five years of Vesting Service under the Pension
Plan Supplement;
(ii) annual compensation in excess of $150,000; and
(iii) attainment of age 55.
(c) Any such annuity purchased with respect to any Participant's accrued
Supplemental Retirement Benefit shall be issued to and distributed to such
Participant, who shall be the sole owner of such annuity and shall contain
such terms not inconsistent with this Section 4.4 as the Committee shall
determine in its sole discretion.
(d) Annuity payments to a Participant under any such annuity shall
commence as of the date on which the Participant attains age 65 or the first
day of the month thereafter; provided, however, that any such annuity may
provide that, in the event of the Participant's death prior to attainment of
age 65, benefits payable to any Beneficiary may commence as of any earlier
date provided by the terms of the annuity.
(e) The monthly benefit amount to be provided by any such annuity shall be
such amount as the Committee, in its sole discretion, determines would
provide, on an after-tax basis, an amount equal to the amount estimated to be
the after-tax benefit to the Participant of monthly benefits
- 5 -
<PAGE> 6
payable by the Company commencing at age 65 under Section 4.2. Such
determination shall be made by the Committee, in its sole discretion, based
upon such rates and factors as the Committee, in its sole discretion, deems
appropriate. No change in annuity benefits shall be required by reason of any
subsequent change in such rates and factors; provided, however, that in
determining the amount of any subsequent annuity purchased under this Section
4.4, the Committee may, in its sole discretion, take into account any change
in such rates and factors and the benefits payable under any annuity
previously purchased under this Section 4.4. Notwithstanding the foregoing,
with the consent of the Participant, the Committee may substitute any form of
fixed or variable annuity in lieu of the annuity otherwise provided by this
paragraph (e), provided that such substitution does not result in a change in
the cost of the annuity or the commencement date of the annuity payments.
(f) The Company shall make a tax gross-up payment to any Participant for
whom an annuity is purchased under this Section 4.4 in such amount as the
Committee shall determine, in its sole discretion, would be necessary to make
such Participant whole for federal, state and local income taxes attributable
to the receipt of the annuity and the gross-up payment, based upon such tax
rates as the Committee shall determine in its sole discretion.
(g) To the extent that the Company has purchased an annuity under this
Section 4.4 with respect to any portion of a Participant's accrued
Supplemental Retirement Benefit, such annuity and the tax gross-up payment
under paragraph (f) above shall be in full satisfaction of all obligations of
the Company to the Participant or any Beneficiary of the Participant
attributable to such portion of the Participant's accrued Supplemental
Retirement Benefit.
(h) A purchase of an annuity under this Section 4.4 shall have no effect
on the monthly benefits payable to the Participant under Sections 4.1 and 4.3
prior to the Participant's attainment of age 65. In the event of the
Participant's death prior to attainment of age 65, the benefit payable to any
Beneficiary of the Participant shall be determined solely on the basis of the
monthly benefits which would otherwise have been payable to the Participant
under the Plan prior to attainment of age 65 and taking into account the
amount payable to the Beneficiary under the Pension Plan Supplement.
(i) This Section 4.4 shall apply to Supplemental Retirement Benefits
accrued by any Participant under the Plan prior to October 1, 1993, only if
such Participant consents (in such manner and at such time as the Committee
may require)
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<PAGE> 7
to such application and waives any right which the Participant might
otherwise be entitled to assert under Section 5.2 by reason of the adoption
and application to the Participant of this Section 4.4.
(j) If an annuity has not been purchased in accordance with the foregoing
provisions of this Section 4.4 with respect to any portion of the accrued
Supplemental Retirement Benefit payable after attainment of age 65 to a
Participant who meets all of the requirements of paragraph (b) above and who
has executed a consent and waiver in accordance with paragraph (i) above,
then, except for any portion payable in the form of a lump sum in accordance
with Section 4.2, upon such Participant's termination of employment with the
Company and its affiliates, the Company shall, as soon as practicable
thereafter, purchase an annuity for such portion in accordance with
paragraphs (c) through (h) above.
ARTICLE 5
5.1 Amendment to Conform with Law.
The Company may by amendment make such changes in, additions to, and
substitutions in the provisions of this Supplemental Retirement Benefit Plan,
to take effect retroactively or otherwise, as deemed necessary or advisable for
the purpose of conforming this Supplemental Retirement Benefit Plan to any
present or future law relating to plans of this or a similar nature, and to the
administrative regulations and rulings promulgated thereunder.
5.2 Other Amendments and Termination.
The Company may amend or terminate this Supplemental Retirement Benefit Plan
at any time, without the consent of any Participant or Beneficiary.
Notwithstanding the foregoing, this Supplemental Retirement Benefit Plan shall
not be amended or terminated so as to reduce or cancel the benefits which have
accrued to a Participant or Beneficiary prior to the later of the date of
adoption of the amendment or termination or the effective date thereof, and in
the event of such amendment or termination, any such accrued benefit hereunder
shall not be reduced or cancelled; provided that, in the event the Pension Plan
Supplement is terminated or curtailed with the result that pension payments to
retired employees and survivor and contingent annuity payments to beneficiaries
are discontinued or reduced, the Supplemental Retirement Plan Benefit then
being paid or in the future payable pursuant to the Supplemental Retirement
Benefit Plan shall similarly be discontinued or reduced in the same ratio as
payments under the Pension Plan Supplement are discontinued or reduced.
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<PAGE> 8
5.3 Effect of Change in Control.
(a) In the event of a Change in Control (as defined below), all benefits
accrued as of the date of such Change in Control hereunder shall become fully
(i.e., 100%) and irrevocably vested and shall become distributable to
Participants (and Beneficiaries) at such time and in such manner provided
herein pursuant to the provisions of the Plan as in effect on the day
immediately preceding the date of such Change in Control. The Committee shall,
in its sole discretion, determine whether assets equal in value to the
aggregate of all accrued benefits under the Plan as of the date of such Change
in Control shall be deposited by the Company with a bank or corporate trustee
pursuant to one or more "rabbi trusts".
(b) For purposes of this Section 5.3, a "Change in Control" shall be
deemed to have occurred if:
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than
(A) the Company or any of its subsidiaries, (B) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any of
its subsidiaries, (C) an underwriter temporarily holding securities pursuant
to an offering of such securities, or (D) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company (not including in the
securities beneficially owned by such person any securities acquired directly
from the Company or its affiliates) representing 40% or more of the combined
voting power of the Company's then outstanding securities;
(ii) during any period of two consecutive years (not including any period
prior to November 22, 1989), individuals who at the beginning of such period
constitute the Board of Directors of the Company and any new director (other
than a director designated by a person who has entered into an agreement with
the Company to effect a transaction described in clauses (i), (iii) or (iv)
of this paragraph (b)), whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof;
(iii) the stockholders of the Company approve a merger or consolidation of
the Company with any other corpora-
-8-
<PAGE> 9
tion, other than (A) a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) in combination with the
ownership of any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its subsidiaries, at least 80%
of the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation,
or (B) a merger or consolidation effected to implement a recapitalization of
the Company (or similar transaction) in which no person acquires more than 50%
of the combined voting power of the Company's then outstanding securities; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
(c) The provisions of this Section 5.3 may not be amended after the date of
a Change in Control without the written consent of a majority in both number
and interest of the Participants in this Supplemental Retirement Benefit Plan,
other than those Participants who are both (i) not employed by the Company or a
subsidiary as of the date of the Change in Control and (ii) not receiving nor
could have commenced receiving benefits under the Pension Plan Supplement as of
the date of the Change in Control, both immediately prior to the Change in
Control and at the date of such amendment.
5.4 Manner and Form of Amendment or Termination.
Any amendment or termination of this Supplemental Retirement Benefit Plan by
the Company shall be made only by action of the Board of Directors of the
Company or any officer of the Company duly authorized by the Board of
Directors. Certification of any amendment or termination of this Supplemental
Retirement Benefit Plan shall be furnished to the Committee by the Company.
5.5 Notice of Amendment or Termination.
The Committee shall notify Participants or Beneficiaries who are affected by
any amendment or termination of this Supplemental Retirement Benefit Plan
within a reasonable time thereof.
ARTICLE 6
6.1 No Right to Employment, etc.
Neither the creation of this Supplemental Retirement Benefit Plan nor
anything contained herein shall be construed as
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<PAGE> 10
giving any Participant hereunder or other employees of the Company or any
subsidiary any right to remain in the employ of the Company or any subsidiary.
6.2 Successors and Assigns.
All rights and obligations of this Plan shall inure to, and be binding upon
the successors and assigns of the Company.
6.3 Inalienability.
Except so far as may be contrary to the laws of any state having
jurisdiction in the premises, a Participant or Beneficiary shall have no right
to assign, transfer, hypothecate, encumber, commute or anticipate his interest
in any payments under this Supplemental Retirement Benefit Plan and such
payments shall not in any way be subject to any legal process to levy upon or
attach the same for payment of any claim against any Participant or
Beneficiary.
6.1 Incompetency.
If any Participant or Beneficiary is, in the opinion of the Committee,
legally incapable of giving a valid receipt and discharge for any payment, the
Committee may, at its option, direct that such payment or any part thereof be
made to such person or persons who in the opinion of the Committee are caring
for and supporting such Participant or Beneficiary, unless it has received due
notice of claim from a duly appointed guardian or conservator of the estate of
the Participant or Beneficiary. A payment so made will be a complete discharge
of the obligations under this Supplemental Retirement Benefit Plan to the
extent of and as to that payment, and neither the Committee nor the Company
will have any obligation regarding the application of the payment.
6.5 Controlling Law.
To the extent not preempted by the laws of the United States of America, the
laws of the State of Illinois shall be the controlling state law in all matters
relating to this Supplemental Retirement Benefit Plan.
6.6 Severability.
If any provisions of this Supplemental Retirement Benefit Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of this Supplemental Retirement Benefit Plan, but
this Supplemental Retirement Benefit Plan shall be construed and enforced as if
the illegal and invalid provisions never had been included herein.
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<PAGE> 11
6.7 Limitations on Provisions.
The provisions of this Supplemental Retirement Benefit Plan and any
Supplemental Retirement Benefits shall be limited as described herein. Any
benefit payable under the Pension Plan Supplement shall be paid solely in
accordance with the terms and provisions of the Pension Plan Supplement, as
appropriate, and nothing in this Supplemental Retirement Benefit Plan shall
operate or be construed in any way to modify, amend, or affect the terms and
provisions of the Pension Plan Supplement.
6.8 Gender and Number.
Whenever the context requires or permits, the gender and number of words
shall be interchangeable.
ARTICLE 7
7.1 Application for Benefits and Review Procedures.
The Inland Steel Industries Claims Procedure set forth in the Pension Plan
Supplement shall apply to any claim for benefits under this Supplemental
Retirement Benefit Plan. The "Plan Administrator" for purposes of applying
such Claims Procedure to this Supplemental Retirement Benefit Plan shall be the
Committee.
INLAND STEEL INDUSTRIES, INC.
By: /s/ Judd R. Cool
------------------------------------
Judd R. Cool
Vice President, Human Resources
Date: July 25, 1990
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<PAGE> 1
Exhibit 10.J
INLAND STEEL INDUSTRIES
SPECIAL RETIREMENT BENEFIT PLAN
FOR COVERED EMPLOYEES
As Amended and Restated, Through and Including
January 26, 1994, Effective As Of July 1, 1990
ARTICLE 1
1.1 Purpose.
It is the intention of Inland Steel Industries, Inc. (the "Company") to
continue to maintain certain levels of retirement benefits for employees of the
Company and its subsidiaries who are entitled to benefits under the Inland
Steel Industries Pension Plan Supplement for Salaried Employees of Inland Steel
Industries, Inc. and Certain Subsidiaries, Revised As Of January 1, 1989, and
as thereafter be amended, and for individuals who are entitled to benefits
under the Inland Steel Industries Pension Plan Supplement for Employees of J.
M. Tull Metals Company, Inc., Effective As of December 31, 1988, and as
thereafter amended (each a "Pension Plan Supplement"). Accordingly, the
Company hereby amends and restates the Inland Steel Industries Special
Retirement Benefit Plan for Covered Employees (the "Special Retirement Plan")
to provide benefits to eligible employees in a manner so as to maintain the
level of total retirement benefits which would be payable under the Pension
Plan Supplement but for certain limitations imposed under Section 401(a)(17)
and/or Section 415 of the Internal Revenue Code of 1986 (the "Code") and such
employee's participation in the Inland Steel Industries Nonqualified Thrift
Plan.
1.2 Effective Date.
This amended and restated Special Retirement Benefit Plan is effective as of
July 1, 1990 (the "Effective Date").
1.3 Funding Not Required.
The Company shall not be required to establish any fund or set aside any
monies for the payment of Special Retirement Benefits under this Special
Retirement Benefit Plan.
ARTICLE 2
2.1 Retirement Committee.
The Company hereby delegates authority to administer the Special Retirement
Benefit Plan to the Inland Steel Industries Retirement Committee (the
"Committee") as established under the Inland Steel Industries Pension Plan, As
Revised, Effective December 1, 1988, and as may thereafter be amended (the
"Inland Steel Industries Pension Plan"). Any action by the Committee shall
<PAGE> 2
be evidenced by a written document, certified by the Secretary of the Committee.
References to the Company's authority, right, or power to act contained in any
notice, disclosure, or communication which is made with a view toward
effectuating the purposes of this Special Retirement Benefit Plan shall be
construed to include such actions by the Committee on the Company's behalf and
such actions by others to whom the Committee has delegated its authority.
2.2 Authority Of Committee.
The Committee shall have authority to control and manage the operation and
administration of the Special Retirement Benefit Plan, including the authority
and discretion to construe and interpret the Special Retirement Benefit Plan,
decide all questions of eligibility for and the amount, manner and time of
payment of Special Retirement Benefits hereunder and such other rights and
powers necessary or convenient to the carrying out of its functions hereunder.
The authority and responsibilities of the Committee shall be coextensive with
its authority and responsibilities under the Inland Steel Industries Pension
Plan.
ARTICLE 3
3.1 Participation.
Each Employee of the Company and/or its subsidiaries who on or
after the Effective Date:
(a) is entitled to an accrued benefit under the Pension
Plan Supplement; and
(b) has Earnings used in the determination of "Average
Monthly Earnings" (each as defined in the Pension Plan Supplement)
during any period which exceed the maximum amount of such Earnings
which may be into account under Code Section 401(a)(17) as may be
amended from time to time, and any rulings or regulations
promulgated thereunder or the terms of the Pension Plan Supplement
implementing such Code Section (the "401(a)(17) Earnings
Limitation") in determining the amount of such accrued benefit
payments under the Pension Plan Supplement,
shall be a "Participant" in this Special Retirement Plan and upon retirement
shall be entitled to receive the benefit (the "Special Retirement Benefit"), if
any, determined in accordance with Article 4 hereof.
3.2 Beneficiary.
The spouse or other person entitled to a benefit under the
Pension Plan Supplement upon the death of a Participant hereunder shall, upon
the death of the Participant, be a "Benefi-
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<PAGE> 3
ciary" under this Special Retirement Benefit Plan entitled to receive the
Special Retirement Benefit, if any, determined in accordance with Article 4
hereof.
ARTICLE 4
4.1 Amount of Special Retirement Benefit.
The amount of Special Retirement Benefit which a Participant
or Beneficiary shall accrue and be entitled to receive and the Company shall be
obligated to pay under this Special Retirement Plan with respect to each Plan
Year applicable to the Pension Plan Supplement shall be equal to the excess, if
any, of the amount described in paragraph (a) of this Section 4.1 over the
amount described in paragraph (b) of this Section 4.1:
(a) The amount of the annual benefit which would have
been accrued with respect to such Participant or Beneficiary under the
Pension Plan Supplement as of the last day of the Plan Year under the
terms of the Pension Plan Supplement as in effect on the last day of
the Plan Year if such benefit were computed by including in the
Participant's "Earnings" used in the determination of "Average Monthly
Earnings" (each as defined under the Pension Plan Supplement) the
amount of "Participant Contributions" made by the Participant under
the Inland Steel Industries Nonqualified Thrift Plan as if such
amounts had otherwise been paid currently to the Participant, and
without giving effect to the 401(a)(17) Earnings Limitation or the
limitations imposed by Code Section 415.
(b) The sum of the amount of the annual benefit which was
accrued for the Participant or Beneficiary with respect to such Plan
Year under (i) the terms of the Pension Plan Supplement as in effect
on the last day of such Plan Year plus (ii) the terms of the Inland
Steel Industries Supplemental Retirement Benefit Plan for Covered
Employees.
It is the intent of this Section 4.1 that the Special Retirement Benefit
described above shall be determined at all times in a manner consistent with
the then current 401(a)(17) Earnings Limitation and the limitations imposed by
Code Section 415. Accordingly, the determinations made pursuant to this Section
4.1 shall be based upon adjustments employed in determining the amount of the
annual benefit described above, and shall be subject to adjustments which
reflect the 401(a)(17) Limitation and the limitations imposed by Code Section
415 with respect to the computation of benefits under the Pension Plan
Supplement. If a Participant receives a single sum distribution under the
Pension Plan Supplement, but has elected another form of benefit under this
Special Retirement Benefit Plan, the amount of the annual benefit payable under
this Special Retirement Benefit Plan in each Limitation Year shall be the same
as that payable in the year in which the single sum distribution is
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<PAGE> 4
made. Except as provided in Section 5.3 hereof, no Special Retirement Benefit
shall be payable to any Participant or his Beneficiaries hereunder unless at
the time of the Participant's termination of employment with the Company and
all Affiliates the Participant has been credited with at least five Years of
Vesting Service under the Pension Plan Supplement.
4.2 Payment of Special Retirement Benefit.
(a) Except as provided hereinafter, the Special
Retirement Benefit which a Participant or Beneficiary is eligible to
receive shall be paid by the Company at such time, in the same form
and subject to the same conditions, as is the benefit paid to such
Participant or Beneficiary under the Pension Plan Supplement.
(b) (i) The Committee, in its sole discretion and after
considering the needs and circumstances of the Participant or
Beneficiary concerned, may at any time elect to direct payment of the
Special Retirement Benefit to the Participant or Beneficiary in any
form of benefit provided under the Pension Plan Supplement, including
a lump sum.
(ii) A Participant or Beneficiary may in writing
request payment of his Special Retirement Benefit in a form other than
the form of benefit payment under the Pension Plan Supplement. After
receiving such a request, the Committee shall consider the request and
the circumstances on which it is based and shall, in its sole
discretion, approve or disapprove the request and inform the
requesting Participant or Beneficiary of its decision.
(iii) Any optional form of benefit shall be the
actuarial equivalent of the benefit otherwise payable to the
Participant or Beneficiary, determined by applying the appropriate
interest rate and other actuarial assumptions then set forth in the
Pension Plan Supplement.
(c) The Company may purchase an annuity with respect to
any portion of a Participant's accrued Special Retirement Benefit in
full satisfaction thereof to the extent provided by paragraphs (a)
through (i) of Section 4.4 and shall be obligated to purchase an
annuity or make a lump sum payment to the extent provided by paragraph
(j) of Section 4.4.
4.3 Pension Plan Supplement Increase.
In the event the Pension Plan Supplement is amended to
increase the benefit payable to participants or beneficiaries then receiving
pensions under the Pension Plan Supplement, benefits payable under this Special
Retirement Benefit Plan shall be adjusted or commenced accordingly for
Participants or Beneficiaries; provided
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<PAGE> 5
that no such adjustment shall be made if the Participant received a single sum
distribution under this Special Retirement Benefit Plan; and provided, further,
that no such adjustment shall be made with respect to any portion of a
Participant's accrued Special Retirement Benefit for which an annuity has been
purchased under Section 4.4.
4.4 Purchase of Annuities.
The Company may at any time, in the sole discretion of the
Committee or the Company's Board of Directors, purchase one or more annuities
with respect to all or any portion of the Special Retirement Benefit accrued
under the Plan by any Participant, subject to the following:
(a) The Company shall not be obligated to purchase an
annuity for any Participant or for any portion of a Participant's
accrued Special Retirement Benefit, notwithstanding the purchase of an
annuity with respect to any other Participant or any other portion of
the Participant's accrued Special Retirement Benefit.
(b) The purchase of annuities under this Section 4.4
shall be limited to Special Retirement Benefits accrued by
Participants who meet all of the following requirements:
(i) completion of at least five years of Vesting
Service under the Pension Plan Supplement;
(ii) annual compensation in excess of $150,000; and
(iii) attainment of age 55.
(c) Any such annuity purchased with respect to any
Participant's accrued Special Retirement Benefit shall be issued to
and distributed to such Participant, who shall be the sole owner of
such annuity and shall contain such terms not inconsistent with this
Section 4.4 as the Committee shall determine in its sole discretion.
(d) Annuity payments to a Participant under any such
annuity shall commence as of the date on which the Participant attains
age 65 or the first day of the month thereafter; provided, however,
that any such annuity may provide that, in the event of the
Participant's death prior to attainment of age 65, benefits payable to
any Beneficiary may commence as of any earlier date provided by the
terms of the annuity.
(e) The monthly benefit amount to be provided by any such
annuity shall be such amount as the Committee, in its sole discretion,
determines would provide, on an after-tax basis, an amount equal to
the amount estimated to be the after-tax benefit to the Participant of
monthly benefits payable by the
- 5 -
<PAGE> 6
Company commencing at age 65 under Section 4.2. Such determination
shall be made by the Committee, in its sole discretion, based upon
such rates and factors as the Committee, in its sole discretion, deems
appropriate. No change in annuity benefits shall be required by reason
of any subsequent change in such rates and factors; provided, however,
that in determining the amount of any subsequent annuity purchased
under this Section 4.4, the Committee may, in its sole discretion,
take into account any change in such rates and factors and the
benefits payable under any annuity previously purchased under this
Section 4.4. Notwithstanding the foregoing, with the consent of the
Participant, the Committee may substitute any form of fixed or
variable annuity in lieu of the annuity otherwise provided by this
paragraph (e), provided that such substitution does not result in a
change in the cost of the annuity or the commencement date of the
annuity payments.
(f) The Company shall make a tax gross-up payment to any
Participant for whom an annuity is purchased under this Section 4.4 in
such amount as the Committee shall determine, in its sole discretion,
would be necessary to make such Participant whole for federal, state
and local income taxes attributable to the receipt of the annuity and
the gross-up payment, based upon such tax rates as the Committee shall
determine in its sole discretion.
(g) To the extent that the Company has purchased an
annuity under this Section 4.4 with respect to any portion of a
Participant's accrued Special Retirement Benefit, such annuity and the
tax gross-up payment under paragraph (f) above shall be in full
satisfaction of all obligations of the Company to the Participant or
any Beneficiary of the Participant attributable to such portion of the
Participant's accrued Special Retirement Benefit.
(h) A purchase of an annuity under this Section 4.4 shall
have no effect on the monthly benefits payable to the Participant
under Sections 4.1 and 4.3 prior to the Participant's attainment of
age 65. In the event of the Participant's death prior to attainment
of age 65, the benefit payable to any Beneficiary of the Participant
shall be determined solely on the basis of the monthly benefits which
would otherwise have been payable to the Participant under the Plan
prior to attainment of age 65 and taking into account the amount
payable to the Beneficiary under the Pension Plan Supplement.
(i) This Section 4.4 shall apply to Special Retirement
Benefits accrued by any Participant under the Plan prior to
October 1, 1993, only if such Participant consents (in such manner
and at such time as the Committee may require) to such application
and waives any right which the Participant might otherwise be
entitled to assert under Section 5.2 by reason of
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<PAGE> 7
the adoption and application to the Participant of this Section 4.4.
(j) If an annuity has not been purchased in accordance with
the foregoing provisions of this Section 4.4 with respect to any
portion of the accrued Special Retirement Benefit payable after
attainment of age 65 to a Participant who meets all of the
requirements of paragraph (b) above and who has executed a consent
and waiver in accordance with paragraph (i) above, then, except for
any portion payable in the form of a lump sum in accordance with
Section 4.2, upon such Participant's termination of employment with
the Company and its affiliates, the Company shall, as soon as
practicable thereafter, purchase an annuity for such portion in
accordance with paragraphs (c) through (h) above.
ARTICLE 5
5.1 Amendment to Conform with Law.
The Company may by amendment make such changes in, additions
to, and substitutions in the provisions of this Special Retirement Benefit
Plan, to take effect retroactively or otherwise, as deemed necessary or
advisable for the purpose of conforming this Special Retirement Benefit Plan to
any present or future law relating to plans of this or a similar nature, and to
the administrative regulations and rulings promulgated thereunder.
5.2 Other Amendments and Termination.
The Company may amend or terminate this Special Retirement
Benefit Plan at any time, without the consent of any Participant or
Beneficiary. Notwithstanding the foregoing, this Special Retirement Benefit
Plan shall not be amended or terminated so as to reduce or cancel the benefits
which have accrued to a Participant or Beneficiary prior to the later of the
date of adoption of the amendment or termination or the effective date thereof,
and in the event of such amendment or termination, any such accrued benefit
hereunder shall not be reduced or cancelled; provided that, in the event the
Pension Plan Supplement is terminated or curtailed with the result that pension
payments to retired employees and survivor and contingent annuity payments to
beneficiaries are discontinued or reduced, the Special Retirement Plan Benefit
then being paid or in the future payable pursuant to the Special Retirement
Benefit Plan shall similarly be discontinued or reduced in the same ratio as
payments under the Pension Plan Supplement are discontinued or reduced.
5.3 Effect of Change in Control.
(a) In the event of a Change in Control (as defined below),
all benefits accrued as of the date such Change in Control hereunder
shall become full (i.e., 100%) and irrevocably vested and
- 7 -
<PAGE> 8
shall become distributable to Participants (and Beneficiaries) at
such time and in such manner provided herein pursuant to the
provisions of the Plan as in effect on the day immediately preceding
the date of such Change in Control. The Committee shall, in its sole
discretion, determine whether assets equal in value to the aggregate
of all accrued benefits under the Plan as of the date of such Change
in Control shall be deposited by the Company with a bank or
corporate trustee pursuant to one or more "rabbi trusts".
(b) For purposes of this Section 5.3, a "Change in
Control" shall be deemed to have occurred if:
(i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), other than (A) the Company or any of its
subsidiaries, (B) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any of its
subsidiaries, (C) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (D) a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company, is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities
of the Company (not including in the securities beneficially owned by
such person any securities acquired directly from the Company or its
affiliates) representing 40% or more of the combined voting power of
the Company's then outstanding securities;
(ii) during any period of two consecutive years (not
including any period prior to November 22, 1989), individuals who at
the beginning of such period constitute the Board of Directors of the
Company and any new director (other than a director designated by a
person who has entered into an agreement with the Company to effect a
transaction described in clauses (i), (iii) or (iv) of this paragraph
(b)), whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to
constitute a majority thereof;
(iii) the stockholders of the Company approve a
merger or consolidation of the Company with any other corporation,
other than (A) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) in
combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the Company or
any of its
- 8 -
<PAGE> 9
subsidiaries, at least 80% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (B) a merger or
consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no person acquires more than 50% of
the combined voting power of the Company's then outstanding
securities; or
(iv) the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets.
(c) The provisions of this Section 5.3 may not be amended
after the date of a Change in Control without the written consent of a
majority in both number and interest of the Participants in this
Special Retirement Benefit Plan, other than those Participants who are
both (i) not employed by the Company or a subsidiary as of the date of
the Change in Control and (ii) not receiving nor could have commenced
receiving benefits under the Pension Plan Supplement as of the date of
the Change in Control, both immediately prior to the Change in Control
and at the date of such amendment.
5.4. Manner and Form of Amendment or Termination.
Any amendment or termination of this Special Retirement
Benefit Plan by the Company shall be made only by action of the Board of
Directors of the Company or any officer of the Company duly authorized by the
Board of Directors. Certification of any amendment or termination of this
Special Retirement Benefit Plan shall be furnished to the Committee by the
Company.
5.5 Notice of Amendment or Termination.
The Committee shall notify Participants or Beneficiaries who
are affected by any amendment or termination of this Special Retirement Benefit
Plan within a reasonable time thereof.
ARTICLE 6
6.1 No Right to Employment, etc.
Neither the creation of this Special Retirement Benefit Plan
nor anything contained herein shall be construed as giving any Participant
hereunder or other employees of the Company or any subsidiary any right to
remain in the employ of the Company or any subsidiary.
- 9 -
<PAGE> 10
6.2 Successors and Assigns.
All rights and obligations of this Plan shall inure to, and be
binding upon the successors and assigns of the Company.
6.3 Inalienability.
Except so far as may be contrary to the laws of any state
having jurisdiction in the premises, a Participant or Beneficiary shall have no
right to assign, transfer, hypothecate, encumber, commute or anticipate his
interest in any payments under this Special Retirement Benefit Plan and such
payments shall not in any way be subject to any legal process to levy upon or
attach the same for payment of any claim against any Participant or
Beneficiary.
6.4 Incompetency.
If any Participant or Beneficiary is, in the opinion of the
Committee, legally incapable of giving a valid receipt and discharge for any
payment, the Committee may, at its option, direct that such payment or any part
thereof be made to such person or persons who in the opinion of the Committee
are caring for and supporting such Participant or Beneficiary, unless it has
received due notice of claim from a duly appointed guardian or conservator of
the estate of the Participant or Beneficiary. A payment so made will be a
complete discharge of the obligations under this Special Retirement Benefit
Plan to the extent of and as to that payment, and neither the Committee nor the
Company will have any obligation regarding the application of the payment.
6.5 Controlling Law.
To the extent not preempted by the laws of the United States
of America, the laws of the State of Illinois shall be the controlling state
law in all matters relating to this Special Retirement Benefit Plan.
6.6 Severability.
If any provisions of this Special Retirement Benefit Plan
shall be held illegal or invalid for any reason, the illegality or invalidity
shall not affect the remaining parts of this Special Retirement Benefit Plan,
but this Special Retirement Benefit Plan shall be construed and enforced as if
the illegal and invalid provisions never had been included herein.
6.7 Limitations on Provisions.
The provisions of this Special Retirement Benefit Plan and any
Special Retirement Benefits shall be limited as described herein. Any benefit
payable under the Pension Plan Supplement shall be paid solely in accordance
with the terms and provisions of the
- 10 -
<PAGE> 11
Pension Plan Supplement, as appropriate, and nothing in this Special Retirement
Benefit Plan shall operate or be construed in any way to modify, amend, or
affect the terms and provisions of the Pension Plan Supplement.
6.8 Gender and Number.
Whenever the context requires or permits, the gender and
number of words shall be interchangeable.
ARTICLE 7
7.1 Application for Benefits and Review Procedures.
The Inland Steel Industries Claims Procedure set forth in the
Pension Plan Supplement shall apply to any claim for benefits under this
Special Retirement Benefit Plan. The "Plan Administrator" for purposes of
applying such Claims Procedure to this Special Retirement Benefit Plan shall be
the Committee.
INLAND STEEL INDUSTRIES, INC.
By: /s/ Judd R. Cool
Judd R. Cool
Vice President, Human Resources
Date: July 25, 1990
- 11 -
<PAGE> 1
Exhibit 10.M
INLAND STEEL INDUSTRIES, INC.
DIRECTOR RETIREMENT PLAN
AS AMENDED AND RESTATED
THROUGH AND INCLUDING JANUARY 26, 1994
1. PURPOSE. The purpose of the Director Retirement Plan (the
"Plan") of Inland Steel Industries, Inc. (the "Company") is to provide
retirement income to members of the Board of Directors of the Company who serve
as non-employee Directors for a specified number of years.
2. ELIGIBILITY. Each present and future member of the Board of
Directors of the Company (other than any Director who was previously an officer
or other employee of the Company or any subsidiary of the Company and who is
receiving or has received or is eligible to receive any benefit or benefits
under any pension plan of the Company or any of its subsidiaries) who (a)
completes at least ten years of continuous service as a non-employee Director
or (b) completes at least five years of continuous service as a non-employee
Director and remains on the Board of Directors until age 70 shall be eligible
to participate in the Plan.
3. BENEFITS. Benefits shall be paid to an eligible Director in
quarterly installments equal to one-fourth of the annual retainer for services
as a member of the Board of Directors in effect at the time of the last Board
meeting attended by such Director. The payment of benefits shall begin in the
calendar quarter following the date on which an eligible Director ceases to be
a member of the Board of Directors, provided, however, that if such Director
has not then attained the age of 65, the payment of benefits shall begin in the
calendar quarter following the attainment of age 65 by such Director. The
payment of benefits shall continue for the number of full years of non-employee
service by such eligible Director up to a maximum of ten years. Except as
otherwise provided in paragraph 4 hereof, such payments shall terminate on the
death of such Director.
4. SURVIVOR BENEFIT. In the event of the death of a former Director
who is receiving benefits under the Plan or who would be entitled to receive
benefits upon his or her attainment of age 65 or in the event of the death of
any Director who would be entitled to receive benefits thereunder if he or she
had ceased to be a Director on or prior to the date of his or her death, any
benefits that would otherwise have been payable thereafter to such Director
shall be paid to such legal or natural person as is designated by the Director
as his or her beneficiary in a writing filed prior to the Director's death with
the Secretary of the Company. If a Director fails to so designate a
beneficiary, the Director's surviving spouse, if any, will be deemed to have
been designated as the beneficiary. Any beneficiary designation filed with the
Secretary of
<PAGE> 2
- 2 -
the Company may provide that, in lieu of the payments to which the beneficiary
would otherwise be entitled, the beneficiary shall be paid a lump sum amount
which is equal to the present value of such payments. In the event that any
retirement benefits otherwise payable to a Director are not paid prior to the
last to die of the Director and the Director's beneficiary, the present value
of the remaining payments shall be paid in a lump sum to the estate of the
Director or the Director's beneficiary, whichever is the last to die. For
purposes of the Plan, present value shall be determined by using a discount
factor equal to the interest rate applied by the Pension Benefit Guaranty
Corporation for purposes of valuing immediate annuities on the date of death of
the Director or beneficiary, as the case may be.
5. BENEFITS NOT TRANSFERABLE. The interest of a Director or
surviving spouse in benefits under the Plan is personal to such Director or
surviving spouse and may not be assigned or otherwise transferred by him or
her. Any payment to which a Director or surviving spouse may be entitled under
the Plan shall be free from the control or interference of any creditor of such
Director or surviving spouse and shall not be subject to attachment or
susceptible of anticipation or alienation.
6. FUNDING NOT REQUIRED. The Company shall not be required to
establish any fund or segregate or set aside any moneys for the payment of
benefits under the Plan.
7. PAST SERVICE. Past service as a Director of the Company on the
effective date of the Plan and past service as a Director of Inland Steel
Company prior to May 1, 1986 shall be considered service for purposes of the
Plan.
8. EFFECTIVE DATE. The effective date of the Plan is May 1, 1988.
<PAGE> 1
Exhibit 10.O.(2)
Robert J. Darnall
W. Gordon Kay
David B. Anderson
Jay E. Dittus
<PAGE> 1
Exhibit 10.O(8)
Inland Steel Industries, Inc.
30 West Monroe Street
Chicago, Illinois 60603
March 23, 1994
Vicki L. Avril
Inland Steel Industries, Inc.
30 West Monroe Street
Chicago, Illinois 60603
Dear Ms. Avril:
Inland Steel Industries, Inc. (together with its subsidiaries, the
"Company") considers it essential to the best interests of its stockholders to
foster the continuous employment of key management personnel. In this
connection, the Board of Directors of the Company (the "Board") recognizes
that, as is the case with many publicly held corporations, the possibility of a
change in control may exist and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Company and its
stockholders.
The Board has determined that appropriate steps should be taken to reinforce
and encourage the continued attention and dedication of members of the
Company's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from
the possibility of a change in control of the Company, although no such
<PAGE> 2
March 23, 1994
Page 2
change is now contemplated.
In order to induce you to remain in the employ of the Company and in
consideration of your agreement set forth in Subsection 2(ii) hereof, the
Company agrees that you shall receive the severance benefits set forth in this
letter agreement ("Agreement") in the event your employment with the Company is
terminated subsequent to a "change in control of the Company" (as defined in
Section 2 hereof) under the circumstances described below. In the event that
you receive severance benefits hereunder, such benefits shall be in lieu of,
and you shall not be entitled to receive, any benefits or payments under any
other severance plan, policy or agreement of or with the Company.
1. Term of Agreement. This Agreement shall commence
on the date hereof and shall continue in effect through December 31, 1994;
provided, however, that commencing on January 1, 1995 and each January 1
thereafter, the term of this Agreement shall automatically be extended for one
additional year unless, not later than September 30 of the preceding year, the
Company shall have given notice that it does not wish to extend this Agreement;
provided further, if a change in control of the Company shall have occurred
during the original or extended term of this Agreement, this Agreement shall
continue in effect for a period of twenty-four (24) months beyond the month in
which such change in control occurred.
2. Change in Control. (i) No benefits shall be payable hereunder unless
there shall have been a change in control of the
<PAGE> 3
March 23, 1994
Page 3
Company, as set forth below. For purposes of this Agreement, a "change in
control of the Company" shall be deemed to have occurred if (A) any "person"
(as such term is used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")), other than (w) the Company or
any of its subsidiaries, (x) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any of its subsidiaries, (y)
an underwriter temporarily holding securities pursuant to an offering of such
securities, or (z) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company (not including in the securities beneficially owned
by such person any securities acquired directly from the Company or its
affiliates) representing 40% or more of the combined voting power of the
Company's then outstanding securities; (B) during any period of two consecutive
years (not including any period prior to the execution of this Agreement),
individuals who at the beginning of such period constitute the Board and any
new director (other than a director designated by a person who has entered into
an agreement with the Company to effect a transaction described in clauses (A),
(C) or (D) of this Subsection) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the
<PAGE> 4
March 23, 1994
Page 4
beginning of the period or whose election or nomination for election was
previously so approved ("Continuing Directors"), cease for any reason to
constitute a majority thereof; (C) the stockholders of the Company approve a
merger or consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of the Company, at
least 80% of the combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation, or a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no person
acquires more than 50% of the combined voting power of the Company's then
outstanding securities; or (D) the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's assets.
(ii) For purposes of this Agreement, a "potential change in control of the
Company" shall be deemed to have occurred if (A) the Company enters into an
agreement, the consummation of which would result in the occurrence of a change
in control of the Company, (B) any person (including the Company) publicly
announces
<PAGE> 5
March 23, 1994
Page 5
an intention to take or to consider taking actions which if consummated would
constitute a change in control of the Company; (C) any person, other than (w)
the Company or any of its subsidiaries, (x) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any of its
subsidiaries, (y) an underwriter temporarily holding securities pursuant to an
offering of such securities, or (z) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, who is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 9.5% or more of the combined voting power of the Company's then
outstanding securities, increases his beneficial ownership of such securities
by 5% or more over the percentage so owned by such person on the date hereof;
or (D) the Board adopts a resolution to the effect that, for purposes of this
Agreement, a potential change in control of the Company has occurred.
You agree that, subject to the terms and conditions of this Agreement, in
the event of a potential change in control of the Company, you will remain in
the employ of the Company until the earliest of (i) a date which is six (6)
months from the occurrence of such potential change in control of the Company,
(ii) the termination by you of your employment by reason of Disability or
Retirement, as defined in Subsection 3(i), or (iii) the occurrence of a change
in control of the Company.
(iii) The foregoing to the contrary notwithstanding, a change in control
shall not be deemed to have occurred with respect
<PAGE> 6
March 23, 1994
Page 6
to you if (A) the event first giving rise to the potential change in control
involves a publicly announced transaction or publicly announced proposed
transaction which at the time of the announcement has not been previously
approved by the Board of Directors and (B) you are "part of a purchasing group"
proposing the transaction. A change in control shall also not be deemed to
have occurred with respect to you if you are part of a purchasing group which
consummates the change in control transaction. You shall be deemed "part of a
purchasing group" for purposes of the two preceding sentences if you are an
equity participant or have agreed to become an equity participant in the
purchasing company or group (except for (A) passive ownership of less than 1%
of the stock of the purchasing company or (B) ownership of equity participation
in the purchasing company or group which is otherwise not deemed to be
significant, as determined prior to the change in control by a majority of the
non-employee Continuing Directors).
3. Termination Following Change in Control. If a change in control of the
Company, as defined in Section 2 hereof, shall have occurred, you shall be
entitled to the benefits provided in Subsection 4(iii) hereof upon the
subsequent termination of your employment during the term of this Agreement
unless such termination is (A) because of your death, Disability or Retirement,
(B) by the Company for Cause, or (C) by you other than for Good Reason.
(i) Disability; Retirement. If, as a result of your incapacity due to
physical or mental illness, you shall have been
<PAGE> 7
March 23, 1994
Page 7
absent from the full-time performance of your duties with the Company for six
(6) consecutive months, and within thirty (30) days after written notice of
termination is given you shall not have returned to the full-time performance
of your duties, your employment may be terminated for "Disability".
Termination by the Company or you of your employment based on "Retirement"
shall mean termination in accordance with the Company's retirement policy,
including early retirement, generally applicable to its salaried employees or
in accordance with any retirement arrangement established with your consent
with respect to you.
(ii) Cause. Termination by the Company of your employment for "Cause" shall
mean termination upon (A) the willful and continued failure by you to
substantially perform your duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental illness or any such
actual or anticipated failure after the issuance of a Notice of Termination by
you for Good Reason as defined in Subsections 3(iv) and 3(iii), respectively)
after a written demand for substantial performance is delivered to you by the
Board, which demand specifically identifies the manner in which the Board
believes that you have not substantially performed your duties, or (B) the
willful engaging by you in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise. For purposes of this
Subsection, no act, or failure to act, on your part shall be deemed "willful"
unless done, or omitted to be done, by you not in good faith and without
reasonable belief that your action or omission
<PAGE> 8
March 23, 1994
Page 8
was in the best interest of the Company. Notwithstanding the foregoing, you
shall not be deemed to have been terminated for Cause unless and until there
shall have been delivered to you a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the entire membership
of the Board at a meeting of the Board called and held for such purpose (after
reasonable notice to you and an opportunity for you, together with your
counsel, to be heard before the Board), finding that in the good faith opinion
of the Board you were guilty of conduct set forth above in clauses (A) or (B)
of the first sentence of this Subsection and specifying the particulars thereof
in detail.
(iii) Good Reason. You shall be entitled to terminate your employment for
Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without
your express written consent, the occurrence after a change in control of the
Company of any of the following circumstances unless, in the case of paragraphs
(A), (E), (F), (G) or (H), such circumstances are fully corrected prior to the
Date of Termination specified in the Notice of Termination, as defined in
Subsections 3(v) and 3(iv), respectively, given in respect thereof:
(A) the assignment to you of any duties inconsistent with your status as an
executive officer of the Company or a substantial adverse alteration in the
nature or status of your responsibilities from those in effect immediately
prior to the change in control of the Company other than any such
<PAGE> 9
March 23, 1994
Page 9
alteration primarily attributable to the fact that the Company may no longer
be a public company;
(B) a reduction by the Company in your annual base salary as in effect on
the date hereof or as the same may be increased from time to time;
(C) the Company's requiring that your principal place of business be at an
office located more than 75 miles from where your principal place of
business is located immediately prior to the change in control of
the Company, except for required travel on the Company's business to an
extent substantially consistent with your present business travel
obligations;
(D) the failure by the Company, without your consent, to pay to you any
portion of your current compensation, or to pay to you any portion of an
installment of deferred compensation under any deferred compensation program
of the Company, within seven (7) days of the date such compensation is due;
(E) the failure by the Company to continue in effect any compensation plan
in which you participate immediately prior to the change in control of the
Company which is material to your total compensation, including but not
limited to the Company's Annual Incentive Plan, Inland
Special Achievement Award Plan, Inland 1986 Employee Stock Purchase Plan,
Inland 1992 Incentive Stock Plan, Supplemental Retirement Benefit Plan,
Special Retirement Benefit Plan, Inland Steel Industries Non-Qualified
Thrift Plan, Inland Steel Industries Pension
<PAGE> 10
March 23, 1994
Page 10
Plan and the Inland Steel Industries Thrift Plan or any substitute plans
adopted prior to the change in control, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the Company to continue your
participation therein, (or in such substitute or alternative plan) on a basis
not materially less favorable, both in terms of the amount of benefits provided
and the level of your participation relative to other participants, as existed
at the time of the change in control;
(F) the failure by the Company to continue to provide you with benefits
substantially similar to those enjoyed by you under any of the Company's
pension, life insurance, medical, health and accident, or disability plans in
which you were participating at the time of the change in control of the
Company, the taking of any action by the Company which would directly or
indirectly materially reduce any of such benefits or deprive you of any
material fringe benefit enjoyed by you at the time of the change in control
of the Company, or the failure by the Company to provide you with the number
of paid vacation days to which you are entitled on the basis of years of
service with the Company in accordance with the Company's normal vacation
policy in effect at the time of the change in control of the Company;
(G) the failure of the Company to obtain a satisfactory agreement from any
successor to assume and agree to perform
<PAGE> 11
March 23, 1994
Page 11
this Agreement, as contemplated in Section 5 hereof; or
(H) any purported termination of your employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of Subsection
(iv) below (and, if applicable, the requirements of Subsection (ii) above);
for purposes of this Agreement, no such purported termination shall be
effective.
Your right to terminate your employment pursuant to this Subsection shall not
be affected by your incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or a waiver of rights
with respect to, any circumstance constituting Good Reason hereunder.
(iv) Notice of Termination. Any purported termination of your employment by
the Company or by you shall be communicated by written Notice of Termination to
the other party hereto in accordance with Section 6 hereof. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the provision so
indicated.
(v) Date of Termination, Etc. "Date of Termination" shall mean (A) if your
employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the
full-time performance of your duties during such thirty (30) day period), and
(B) if your
<PAGE> 12
March 23, 1994
Page 12
employment is terminated pursuant to Subsection (ii) or (iii) above
or for any other reason (other than Disability), the date specified in the
Notice of Termination (which, in the case of a termination pursuant to
Subsection (ii) above shall not be less than thirty (30) days, and in the case
of a termination pursuant to Subsection (iii) above shall not be less than
fifteen (15) nor more than sixty (60) days, respectively, from the date such
Notice of Termination is given); provided that if within fifteen (15) days
after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this proviso), the party receiving
such Notice of Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the date on which
the dispute is finally determined, either by mutual written agreement of the
parties, by a binding arbitration award, or by a final judgment, order or
decree of a court of competent jurisdiction (which is not appealable or with
respect to which the time for appeal therefrom has expired and no appeal has
been perfected); provided further that the Date of Termination shall be
extended by a notice of dispute only if such notice is given in good faith and
the party giving such notice pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the pendency of any such dispute, the
Company will continue to pay you your full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
base salary) and continue you as a participant in all compensation, benefit and
insurance
<PAGE> 13
March 23, 1994
Page 13
plans in which you were participating when the notice giving rise to the
dispute was given, until the dispute is finally resolved in accordance with
this Subsection. Amounts paid under this Subsection are in addition to all
other amounts due under this Agreement and shall not be offset against or
reduce any other amounts due under this Agreement.
4. Compensation Upon Termination or During Disability. Following a change
in control of the Company, as defined by Subsection 2(i), upon termination of
your employment or during a period of Disability you shall be entitled to the
following benefits:
(i) During any period that you fail to perform your full-time duties with
the Company as a result of incapacity due to physical or mental illness, you
shall continue to receive your base salary at the rate in effect at the
commencement of any such period, together with all compensation payable to you
under the Inland Steel Industries Pension Plan, Supplemental Retirement Benefit
Plan or Special Retirement Benefit Plan during such period, until this
Agreement is terminated pursuant to Section 3(i) hereof. Thereafter, or in the
event your employment shall be terminated by the Company or by you for
Retirement, or by reason of your death, your benefits shall be determined under
the Company's retirement, insurance and other compensation programs then in
effect in accordance with the terms of such programs.
(ii) If your employment shall be terminated by the Company for Cause or by
you other than for Good Reason, Disability,
<PAGE> 14
March 23, 1994
Page 14
death or Retirement, the Company shall pay you your full base salary through
the Date of Termination at the rate in effect at the time Notice of Termination
is given, plus all other amounts to which you are entitled under any
compensation plan of the Company at the time such payments are due, and the
Company shall have no further obligations to you under this Agreement.
(iii) If your employment by the Company shall be terminated (a) by the
Company other than for Cause, Retirement or Disability or (b) by you for Good
Reason, then you shall be entitled to the benefits provided below:
(A) the Company shall pay you your full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given,
plus all other amounts to which you are entitled under any compensation plan
of the Company, at the time such payments are due, except as otherwise
provided below.
(B) in lieu of any further salary payments to you for periods subsequent to
the Date of Termination, the Company shall pay as severance pay to you a lump
sum severance payment (together with the payments provided in paragraphs
C, D and E below, the "Severance Payments") equal to two times the sum of
(x) your annual base salary in effect immediately prior to the occurrence of
the circumstance giving rise to the Notice of Termination given in respect
thereof, and (y) the average annual aggregate amount of the Award paid to
you pursuant to the Annual Incentive Plan or similar predecessor or
successor
<PAGE> 15
March 23, 1994
Page 15
plan with respect to the two years preceding that in which the Date of
Termination occurs.
(C) notwithstanding any provision of the Annual Incentive Plan and the
Inland Special Achievement Award Plan, the Company shall pay to you a lump
sum amount equal to the sum of (x) any incentive compensation which has been
allocated or awarded to you for a completed fiscal year or other measuring
period preceding the Date of Termination but has not yet been paid, and (y) a
pro rata portion to the Date of Termination for the current fiscal year or
other measuring period of the amount equal to the Target Award percentage
applicable to you under the Annual Incentive Plan or similar successor plan
on the Date of Termination times your annual base salary then in effect.
(D) in lieu of shares of common stock of the Company ("Company Shares")
issuable upon exercise of outstanding options ("Options"), if any, granted to
you under the Company's stock option plans (which Options shall be cancelled
upon the making of the payment referred to below), you shall receive an
amount in cash equal to the product of (i) the excess of (x) in the case of
incentive stock options (as defined in Section 422A of the Code) ("ISOs")
granted after the date hereof, the closing price of the Company's shares as
reported on the New York Stock Exchange Composite Tape on or nearest the Date
of Termination, or (y) in the case of all other Options, the higher of such
closing price or the highest
<PAGE> 16
March 23, 1994
Page 16
per share price for Company Shares actually paid in connection with any
change in control of the Company, over the per share exercise price of each
Option held by you (whether or not then fully exercisable), times (ii) the
number of Company Shares covered by each such option.
(E) in lieu of Company Shares awarded or issuable to you as performance
and/or restricted shares, if any, pursuant to the Inland 1992 Incentive Stock
Plan, the Inland 1988 Incentive Stock Plan, the Inland 1984 Incentive Stock
Plan or similar successor plan (which Company Shares shall be cancelled upon
the making of the payment referred to below), you shall receive an amount in
cash equal to the product of (i) the higher of the closing price of Company
Shares as reported on the New York Stock Exchange Composite Tape on the Date
of Termination or the highest per share price for Company Shares actually paid
in connection with any change in control of the Company times (ii) the total
of the number of restricted shares awarded to you and then outstanding pursuant
to the Inland 1992 Incentive Stock Plan, the Inland 1988 Incentive Stock Plan,
the Inland 1984 Incentive Stock Plan and/or any similar successor plan, plus
a number of performance shares equal to the total number of performance shares
paid or payable to you with respect to the two immediately preceding
performance periods under any performance award or awards made pursuant to
the Inland 1992 Incentive Stock Plan and/or any similar successor plan.
<PAGE> 17
March 23, 1994
Page 17
(F) the Company shall also pay to you all legal fees and expenses incurred
by you as a result of such termination (including all such fees and expenses,
if any, incurred in contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit provided by this Agreement
or in connection with any tax audit or proceeding to the extent attributable
to the application of Section 4999 of the Code to any payment or benefit
provided hereunder). Such payments shall be made at the later of the times
specified in paragraph (I) below, or within five (5) days after your request
for payment accompanied with such evidence of fees and expenses incurred as
the Company reasonably may require.
(G) in the event that the Executive becomes entitled to any payments
provided for hereinabove (the "Contract Payments"), if the Contract Payments
or other portion of the Total Payments (as defined below) will be subject to
the tax (the "Excise Tax") imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"), the Company shall pay to the
Executive, no later than the fifth day following the Date of Termination, an
additional amount (the "Gross-Up Payment") such that the net amount retained
by the Executive, after deduction of any Excise Tax on the Contract Payments
and such other Total Payments and any federal and state and
local income tax and Excise Tax upon the payment provided for by this
subsection, shall be equal to the Contract Payments and such other Total
Payments.
<PAGE> 18
March 23, 1994
Page 18
(H) for purposes of determining whether any of the payments will be subject
to the Excise Tax and the amount of such Excise Tax, (i) any other payments
or benefits received or to be received by the Executive in connection with a
change in control of the Company or the Executive's termination of employment
(whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any person whose actions result in
a change in control or any person affiliated with the Company or such person)
payable pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any person whose actions result in
a change in control or any person affiliated with the Company or such person
(together with the Contract Payments, the "Total Payments"), shall be treated
as "parachute payments" within the meaning of Section 280G(b)(2) of the Code
and all "excess parachute payments" within the meaning of Section 280G(b)(1)
of the Code shall be treated as subject to the Excise Tax unless in the
opinion of tax counsel selected by the Company's independent auditors and
reasonably acceptable to the Executive, such other payments or benefits (in
whole or in part) do not constitute parachute payments, including by reason
of Section 280G(b)(4)(A) of the Code or such excess parachute payments (in
whole or in part) represent reasonable compensation for services actually
rendered within the meaning of Section 280G(b)(B) of the Code, in excess of
the base amount allocable to such reasonable compensation
<PAGE> 19
March 23, 1994
Page 19
within the meaning of Section 280G(b)(3) of the Code, or are otherwise not
subject to the Excise Tax, (ii) the amount of the Total Payments which shall be
treated as subject to the Excise Tax shall be equal to the lesser of (A) the
amount of the Total Payments or (B) the amount of excess parachute payments
within the meaning of Section 280G(b)(1) of the Code (after applying clause (i)
above), and (iii) the value of any noncash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors in accordance
with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes
of determining the amount of the Gross-Up Payment, the Executive shall be
deemed to pay federal income taxes at the highest marginal rate of federal
income taxation in the calendar year in which the Gross-Up Payment is to be
made and state and local income taxes at the highest marginal rate of taxation
in the state and locality of the Executive's residence on the Date of
Termination, net of the maximum reduction in federal income taxes which could
be obtained from deduction of such state and local taxes.
(I) in the event that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of termination of
the Executive's employment, the Executive shall repay to the Company at the
time that the amount of such reduction in Excise Tax is finally determined
the portion of the Gross-
<PAGE> 20
March 23, 1994
Page 20
Up Payment attributable to such reduction (plus the portion of the Gross-Up
Payment attributable to the Excise Tax and federal and state and local income
tax imposed on the Gross-Up Payment being repaid by the Executive if such
repayment results in a reduction in Excise Tax and/or a federal and state and
local income tax deduction) plus interest on the amount of such repayment at
the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the
Excise Tax is determined to exceed the amount taken into account hereunder at
the time of the termination of the Executive's employment (including by reason
of any payment the existence or amount of which cannot be determined at the
time of the Gross-Up Payment), the Company shall make an additional gross-up
payment in respect to such excess (plus any interest payable with respect to
such excess) at the time that the amount of such excess is finally determined.
(J) the payments provided for in paragraphs (B), (C),(D), and (E) above,
shall be made not later than the fifth day following the Date of Termination,
provided, however, that if the amounts of such payments cannot be finally
determined on or before such day, the Company shall pay to you on such day an
estimate, as determined in good faith by the Company, of the minimum amount
of such payments and shall pay the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon
as the amount thereof can be determined but in no event later than the
thirtieth day after the Date of Termination. In the event
<PAGE> 21
March 23, 1994
Page 21
that the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the
Company to you payable on the fifth day after demand by the Company (together
with interest at the rate provided in Section 1274(b)(2)(B) of the Code).
(iv) If your employment shall be terminated (A) by the Company other than
for Cause, Retirement or Disability or (B) by you for Good Reason, then for a
twenty-four (24) month period after such termination, the Company shall arrange
to provide you with: (1) life, disability, accident and health insurance
benefits substantially similar to those which you are receiving immediately
prior to the Notice of Termination, (2) financial advisory services similar to
those provided currently to executives of the Company by Ayco Corporation and
(3) outplacement services. Benefits otherwise receivable by you pursuant to
this Subsection 4(iv) shall be reduced to the extent comparable benefits are
actually received by you during the twenty-four (24) month period following
your termination, and any such benefits actually received by you shall be
reported by the Company.
(v) if your employment shall be terminated (A) by the Company other than for
Cause, Retirement or Disability or (B) by you for Good Reason, then in addition
to the retirement benefits to which you are entitled under the Inland Steel
Industries Pension Plan, Supplemental Retirement Benefit Plan or Special
Retirement Benefit Plan or any successor plans thereto, the Company shall pay
you in cash at the time and in the manner provided in paragraph (K)
<PAGE> 22
March 23, 1994
Page 22
of Subsection 4(iii), a lump sum equal to the excess of (x) the actuarial
equivalent of the retirement pension (taking into account any early retirement
substitute associated therewith and determined as a straight life annuity
commencing at age sixty-five (65) or any earlier date, but in no event earlier
than the second anniversary of the Date of Termination whichever annuity yields
a greater benefit) which you would have accrued under the terms of the Inland
Steel Industries Pension Plan (without regard to any amendment to the Inland
Steel Industries Pension Plan made subsequent to a change in control of the
Company and on or prior to the Date of Termination, which amendment adversely
affects in any manner the computation of retirement benefits thereunder),
determined as if you were fully vested thereunder and had accumulated (after
the Date of Termination) twenty-four (24) additional months of service credit
thereunder at your highest annual rate of compensation during the twelve (12)
months immediately preceding the Date of Termination, over (y) the actuarial
equivalent of the retirement pension (taking into account any early retirement
substitute associated therewith and determined as a straight life annuity
commencing at age sixty-five (65) or any earlier date, but in no event earlier
than the Date of Termination whichever annuity yields a greater benefit) which
you had then accrued pursuant to the provisions of the Inland Steel Industries
Pension Plan. For purposes of this Subsection, "actuarial equivalent" shall be
determined using the same assumptions utilized under the Inland Steel
Industries Pension Plan for purposes of determining
<PAGE> 23
March 23, 1994
Page 23
alternative forms of benefits immediately prior to the change in control of the
Company.
(vi) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or otherwise, nor
shall the amount of any payment or benefit provided for in this Section 4 be
reduced by any compensation earned by you as the result of employment by
another employer, by retirement benefits, by offset against any amount claimed
to be owed by you to the Company, or otherwise.
(vii) In addition to all other amounts payable to you under this Section 4,
you shall be entitled to receive all benefits payable to you under the Inland
Steel Industries Pension Plan, the Inland Steel Industries Thrift Plan,
Supplemental Retirement Benefit Plan, Special Retirement Benefit Plan, Inland
Steel Industries Non-Qualified Thrift Plan and any other plan or agreement
relating to retirement benefit.
5. Successors; Binding Agreement. (i) The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle you to compensation from
the Company in the same amount and on the
<PAGE> 24
March 23, 1994
Page 24
same terms as you would be entitled to hereunder if you terminate your
employment for Good Reason following a change in control of the Company, except
that for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As used
in this Agreement, "Company" shall mean the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable by your
personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or, if there
is no such designee, to your estate.
6. Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notice to the Company shall be directed to the attention of the Board
with a copy to the Secretary of the Company, or to
<PAGE> 25
March 23, 1994
Page 25
such other address as either party may have furnished to the other in writing
in accordance herewith, except that notice of change of address shall be
effective only upon receipt.
7. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by you and such officer as may be specifically designated by
the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be
governed by the laws of the State of Illinois. All references to sections of
the Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder shall be paid
net of any applicable withholding required under federal, state or local law.
The obligations of the Company under Section 4 shall survive the expiration of
the term of this Agreement.
8. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or
<PAGE> 26
March 23, 1994
Page 26
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.
9. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
10. Settlement of Disputes; Arbitration. All claims by the Executive for
benefits under this Agreement shall be directed to and determined by the Board
and shall be in writing. Any denial by the Board of a claim for benefits under
this Agreement shall be delivered to the Executive in writing and shall set
forth the specific reasons for the denial and the specific provisions of this
Agreement relied upon. The Board shall afford a reasonable opportunity to the
Executive for a review of the decision denying a claim and shall further allow
the Executive to appeal to the Board a decision of the Board within sixty (60)
days after notification by the Board that the Executive's claim has been
denied. Any further dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by arbitration in Chicago, Illinois
in accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction; provided, however, that you shall be entitled to seek specific
performance of your right to be paid until the Date Of Termination during the
pendency of any dispute or controversy arising under or in connection with this
Agreement.
<PAGE> 27
March 23, 1994
Page 27
If this letter sets forth our agreement on the subject matter hereof, kindly
sign and return to the Company the enclosed copy of this letter which will then
constitute our agreement on this subject.
Sincerely,
INLAND STEEL INDUSTRIES, INC.
By \s\ Judd R. Cool
-----------------------------------
Judd R. Cool
Vice President - Human Resources
Agreed to this 23rd day
of March 1994
/s/ Vicki L. Avril
- ------------------------
<PAGE> 1
Exhibit 10.P.(3)
December 10, 1993
Mr. Judd R. Cool
Vice President-Human Resources
0 F F I C E
This letter will clarify, restate and supersede in their entirety all
provisions for supplemental pension and other benefits arrangements referred to
(a) under the heading "Benefits" in that certain letter from Frank W. Luerssen,
as Chairman and Chief Executive Officer of Inland Steel Industries, Inc. ("the
Company"), to you dated September 2, 1987 and (b) in that certain letter from
Frank W. Luerssen to you dated November 23, 1987.
A. Supplemental Pension Benefits
Upon your retirement as an employee of the Company, the Company will make
supplemental pension payments to you equal to the excess, if any, of payments
you would have received under the Company's qualified and non-qualified pension
plans as if your total Company and prior employer's (Kennecott's) service and
earnings were included in the calculation of benefit payments under such plans
over (i) payments you would receive from your prior employer's qualified and
non-qualified pension plans (based on your actual vested benefits under those
plans, but paid on the commencement date and in accordance with the annuity
form of payment under the Inland Steel Industries Pension Plan Supplement For
Salaried Employees of Inland Steel Industries, Inc. and Certain Subsidiaries
(the "Plan")) and (ii) payments you actually receive from the Company's
qualified and non-qualified pension plans. Any such supplemental pension
benefits paid to you or to your Surviving Spouse (as defined in the Plan) shall
begin upon the commencement of payments under the Company's pension plans and
shall be of the same annuity form as benefit payments made under the Plan,
provided, however, that upon your death at any time prior to or after your
retirement, your Surviving Spouse will be deemed to be immediately eligible to
receive a Surviving Spouse Benefit (as defined in the Plan), and provided,
further, that if you had not attained the age of 62 at the time your Surviving
Spouse first becomes entitled to receive any supplemental pension payments
hereunder, the amount of such payments shall be calculated as if you had then
attained such age and for service purposes had continued to be employed by the
Company until the attainment of such age.
<PAGE> 2
-2-
B. Salary Continuation Benefit
You shall be entitled to a monthly salary continuation benefit on your
retirement at or after age 60 or on your attainment of age 60 under certain
other circumstances. The amount of such benefit shall be one two hundred
fortieth (1/240) of your Salary Continuation Benefit Amount (referred to
below), payable to you on the first day of each month during the period
commencing with the month immediately following your retirement at or after age
60 and ending with the two hundred fortieth (240th) payment. If your
employment with the Company terminates prior to your attainment of age 60 for
any reason other than your voluntary resignation or for cause, and if you
thereafter live to age 60, you will be entitled to this benefit for a period
commencing with the month immediately following your attainment of age 60 and
ending with the two hundred fortieth (240th) payment. The Salary Continuation
Benefit Amount referred to above, which is a percentage of your annual base
salary at retirement (or in the event that the immediately preceding sentence
applies, 360% of your annual base salary at the time your employment with the
Company terminates), shall be determined in accordance with the following
table:
<TABLE>
<CAPTION>
Salary Continuation
Benefit Amount
(% of Annual Base
Your Age at Retirement Salary at Retirement)
---------------------- ---------------------
<S> <C>
60 360%
61 380
62 or more 400
</TABLE>
If you die prior to receiving all monthly salary continuation benefit payments
to which you are entitled in accordance with these provisions, all remaining
payments shall be made to your spouse (payable to her on the first day of each
month during the remainder of the period), or if she has predeceased you or
dies prior to receiving all payments to which she is entitled, a lump sum
amount equal to the present value of all then remaining monthly payments shall
be made to your estate. The discount rate for purposes of calculating the
present value of such payments shall be the interest rate used by the PBGC in
valuing immediate benefits.
C. Life Insurance Coverage
The Company will provide you with insurance on your life having a death
benefit equal to (a) during the period of your employment with the Company,
300% of your then annual base salary (determined as of each January 1 during
such period) and (b) upon your retirement from the Company and thereafter
during your lifetime, 60% of the death benefit in force at the time of your
<PAGE> 3
-3-
retirement (with the other 40% of such coverage to be retained by you, in whole
or in part, at your option, and at your own personal expense). If the life
insurance program of the Company for eligible employees and retirees provides
for death benefits in your case that are less than the amount or amounts
stipulated above, the Company will provide you with such additional insurance
on your life as may be necessary to provide the stipulated coverage. For this
purpose, you agree to cooperate fully with the company in the acquisition of
such life insurance (or additional life insurance, as the case may be), on a
term or whole-life basis, through the purchase of life insurance on a
"split-dollar" basis, by the exercise of any conversion option available to you
under the Company's life insurance program for eligible employees and retirees,
or otherwise; and it is understood that your interest and(or) the interest of
any beneficiary in such life insurance shall be limited to the death benefit
provided thereunder. All Federal, state and local income taxes payable with
respect to the acquisition and maintenance of any insurance on your life shall
be for your account.
D. Retiree Health Care Coverage
If you are not eligible on your retirement, or if your spouse is not eligible
on your death prior to your retirement, to participate in the Company's health
care program then in force for eligible retirees and their spouses, the Company
will thereafter provide you and(or) your spouse with such health care coverage
as may from time to time be provided by the Company for eligible retirees and
their spouses, subject to the following:
(a) the coverage provided to you and (or) your spouse will be subject to all
of the terms, limitations and conditions of such coverage, other than
the requirement that you complete at least 10 years of service for
eligibility for such coverage;
(b) you (or your spouse) shall be required to make the contributions that
are generally required of other retirees (or their spouses) from time to
time; and
(c) to the extent determined by the Company, the value of the coverage in
excess of the amount described in paragraph (b) shall be reported as
taxable income to you (or your spouse) each year.
To the extent that the value of the health care coverage provided to you (or
your spouse) is includible in your income (or your spouse's income) for income
tax purposes pursuant to paragraph (c) above and to the extent such amounts
would not be includible in your income (or your spouse's income) for income tax
purposes if you had continued in the employ of the Company until such time as
you would otherwise have been eligible for coverage under the
<PAGE> 4
-4-
Company's health care program for eligible retirees and their spouses, the
Company will pay to you (or your spouse) each year an amount which is equal to
the sum of:
(1) the aggregate amount of additional Federal, state or local income taxes
payable by you (or your spouse) for that year as a result of the fact
that the value of the health care coverage was includible in your
taxable income (or your spouse's taxable income) pursuant to paragraph
(c) above;
(2) the aggregate amount of additional Federal, state and local income taxes
payable by you (or your spouse) for that year as a result of the payment
made to you (or your spouse) pursuant to paragraph (1).
Nothing in this Agreement shall require, or shall be construed so as to
require, the Company or any of its affiliates to establish, maintain or
continue to maintain any health care program for retirees of the Company or
their spouses.
Please acknowledge your agreement with respect to these matters by signing
and returning to me the enclosed copy of this letter.
Sincerely,
/s/ Robert J. Darnall
--------------------------
Robert J. Darnall
Chairman, President and
Chief Executive Officer
Acknowledged and agreed
to this 13th day of
December, 1993.
/s/ Judd R. Cool
- ---------------------------
Judd R. Cool
<PAGE> 1
Exhibit 10-T
APPLICATION AND AGREEMENT FOR IRREVOCABLE STANDBY LETTER OF CREDIT
Instructions:
(A) Applicant(s) should consult with a Bank officer before completing
this Application and Agreement. Items 1, 2, 3, 4, 5, and 6 must be
fully completed.
(B) This Application and Agreement must be dated on the date it is
executed by the Applicant(s).
(C) Each Applicant must properly execute this Application and Agreement
in the space provided.
(D) Read the Terms and Conditions set forth on the reverse side hereof.
<TABLE>
<CAPTION>
Issuing Bank: Letter of Credit Number
(To Be Completed by Bank)
Trust Company Bank
International Division Letter of Credit Fee
P.O. Box 4418 (To Be Completed by Bank)
Atlanta, Georgia 30302
<S> <C>
1. APPLICANT(S): (Insert full name and address of 2. BENEFICIARY: (Insert full name and
each person or entity who is applying to address of the person or entity who
Issuing Bank for issuance of the Letter of shall be entitled to draw under the
Credit) Letter of Credit)
J. M. Tull Metals Company, Inc. W. Gordon Kay
4400 Peachtree Industrial Blvd. 6940 Hunters Knoll
Norcross, GA 30071 Atlanta, GA 30328
3. AMOUNT OF LETTER OF CREDIT: (Amount stated is 4. EXPIRATION DATE OF LETTER OF CREDIT
United States Dollars unless specifically
stated otherwise.) February 1, 1995
$421,289.65
</TABLE>
<PAGE> 2
5. Each Applicant hereby applies for and authorizes Issuing Bank to
issue its Irrevocable Standby Letter of Credit in the amount set
forth in item 3 above in favor of the Beneficiary, for the account
of Applicant(s), available by sight draft or drafts drawn by
Beneficiary and presented to Issuing Bank by the close of the
business day on the expiration date set forth in item 4 above. Each
such draft must be accompanied by a signed and dated statement of
the Beneficiary stating as follows (If none, so state):
SEE ATTACHED
6. Each Applicant agrees that Issuing Bank shall include the following
special provisions in the Irrevocable Standby Letter of Credit
issued pursuant to this Application and Agreement (If none, so
state):
SEE ATTACHED
To induce Issuing Bank to issue its Irrevocable Standby Letter of Credit in the
above tenor, and in consideration of such issuance, each Applicant hereby
agrees to the above provisions and to all of the Terms and Conditions set forth
on the reverse side hereof which Terms and Conditions are incorporated herein
by this reference.
Executed under hand and seal on the 17th day of December, 1993.
APPLICANT(S)
/s/ J. E. Dittus
2
<PAGE> 3
Each person or entity signing the reverse side hereof as an "Applicant" hereby
agrees as follows:
1. That the following terms as used herein shall have the meanings
hereinafter set forth:
(A) The term "Applicant" as used herein shall mean each Applicant
individually and any two or more Applicants collectively.
(B) The term "Beneficiary" shall mean the person or entity that
shall be entitled to draw under the Irrevocable Standby Letter
of Credit issued pursuant to this Application and Agreement.
(C) The term "Bank" shall mean the Issuing Bank set forth on the
reverse side hereof.
(D) The term "Credit" shall mean the Irrevocable Stand by Letter
of Credit issued pursuant to the terms of this Application
and Agreement.
2. To pay to Bank in cash or immediately available funds, the amount of
each draft drawn under or purporting to be drawn under the Credit,
such payment to be made immediately upon demand by Bank. Such payment
to Bank will be made by Applicant at Bank's main office, in lawful
money of the United States of America.
As to drafts which are payable in currency other than United States
currency, the amount to be paid by Applicant will be the amount
required to purchase the currency from Bank at Bank's current selling
rate for cable transfers to the place of payment in the currency and
amount in which such draft was drawn. If there is then no current
selling rate generally offered by Bank for effecting such cable
transfers, Applicant agrees on demand to pay Bank an amount which Bank
then deems necessary to pay or provide for the payment of Applicant's
obligations hereunder.
By prior arrangement satisfactory to Bank, as to any draft payable in
currency other than United States currency, Applicant may pay to Bank
the amount of such draft by making such amount immediately available
to Bank by the deposit of such amount (in the currency in which such
draft is payable) to an account maintained by Bank at a financial
institution to be specified by Bank.
Notwithstanding the manner of payment or the currency in which any
draft is drawn, Applicant shall remain liable for any deficiency which
may result if the actual cost to Bank of settlement of Bank's
obligation under the Credit proves to be in excess of the amount so
paid by Applicant and Applicant shall be entitled to a refund, without
interest, of any excess
3
<PAGE> 4
payment made to Bank.
3. To pay to Bank on demand, with respect to the Credit, a fee at such
rate as Bank may determine to be proper, and any and all charges and
expenses which may be paid or incurred by Bank in connection with the
Credit. If a change in any law or regulation, or in the interpretation
thereof by any court or administrative or governmental authority, or
in relevant accounting principles, shall impose, modify or deem
applicable any reserve, capital requirement, special deposit, fee,
assessment or similar requirement with respect to any Credit issued or
committed to pursuant to this Application and Agreement, which change
directly or indirectly increases the expense to Bank of issuing,
committing to issue, or maintaining in effect said Credit, then, upon
demand by Bank and its certification of said increased expense, the
Applicant shall promptly reimburse Bank for such expense.
4. To pay to Bank on demand interest on any and all amounts not paid when
due or payable hereunder at a rate per annum equal to five percentage
points above Bank's prime rate (as publicly announced) from time to
time in effect (which interest rate shall change simultaneously with
any change in the Bank's prime rate) but in no event shall the
interest rate so charged exceed the highest interest rate permitted by
applicable law, if any.
5. Applicant agrees, at any time and from time to time, on Bank's demand
to deliver, transfer or assign to Bank such property of a value and
character satisfactory to Bank (including but not limited to cash
collateral if Bank so requests) which shall be held by Bank as
collateral for: (a) any and all obligations and liabilities of
Applicant to Bank hereunder, and (b) any and all other obligations and
liabilities of Applicant to Bank, whether now existing or hereinafter
arising, due or to become due, whether individually or jointly with
others, and whether direct, indirect, absolute or contingent as maker,
endorser, guarantor, surety or otherwise.
6. Applicant agrees that all property belonging to Applicant of every
kind and nature whatsoever, now or at any time hereafter delivered,
conveyed, transferred, assigned or paid to Bank, or coming into Bank's
possession or into the possession of anyone for Bank in any manner
whatsoever, whether expressly as collateral for any obligations or
liabilities of Applicant to Bank, for safekeeping or otherwise,
including any items received for collection or transmission and the
proceeds thereof, whether or not such property is in whole or in part
released to Applicant on trust or bailee receipt, are hereby made
collateral for all obligations and liabilities of Applicant to Bank
referred to in paragraph 5(a) and (b) above. Applicant further agrees
that any indebtedness due or owing to Applicant from Bank may at any
time be set off and applied
4
<PAGE> 5
against any liability or obligation of Applicant hereunder.
7. An "Event of Default" shall occur hereunder if any one
or more of the following events shall occur: (a) If Applicant shall
fail to make any payment required to be paid to Bank hereunder as and
when such payment is due; or (b) Upon the death of any Applicant who is
a natural person or upon the dissolution or termination of existence of
any Applicant who is not a natural person; or (c) Any involuntary
petition is filed against Applicant under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now or
hereafter in effect and such petition remains undismissed for a period
of thirty (30) days or Applicant approves, consents, or acquiesces
thereto; or (d) If Applicant makes an assignment for the benefit of
creditors or files a voluntary petition seeking relief under any
provision of any bankruptcy, reorganization, arrangement, insolvency or
readjustment of debt, dissolution or liquidation law of any
jurisdiction, whether now or hereafter in effect; or (e) Applicant
shall fail to perform or observe any agreement or undertaking contained
in this Application and Agreement including but not limited to the
agreement of Applicant to provide Bank with collateral as set forth in
paragraph five (5) above; [RIDER A] or (f) Any event shall occur
or any condition shall exist in respect of any indebtedness owed by
Applicant, [RIDER B] the effect of which is to cause (or permit the
holder or owner of such indebtedness to cause) such indebtedness or
any portion thereof, to become due prior to its stated maturity or
prior to its regularly scheduled dates of Payment; or (g) If judgment
for the payment of money in a principal amount in excess of $2,000,000
shall be rendered against Applicant and within thirty (30) days after
the entry of said judgment it shall not have been discharged, or
execution thereof shall not have been stayed pending an appeal; or
(h) If any property ofApplicant which may be in, or come into, the
possession or control of Bank or that of any third party acting for
the Bank should be attached or distrained or should become subject at
any time to any court order or other legal process.
8. Upon the happening of any one or more of the Events of Default
referred to above in paragraph seven (7) then at the Bank's option the
full amount of the Bank's obligation under the Credit, as well as any
and all other amounts payable hereunder to Bank shall, to the extent
not theretofore paid to Bank hereunder, thereupon become immediately
due and payable from Applicant to Bank in full, without notice or
demand of any kind.
9. Should Bank exercise its option to require immediate payment from
Applicant pursuant to paragraph eight (8) above Bank shall further
have full power and authority to sell assign and convey
5
<PAGE> 6
RIDER A
, and such failure is not cured to the Bank's satisfaction within fifteen (15)
days after Applicant receives written notification of such failure from Bank;
6
<PAGE> 7
RIDER B
, having an aggregate principal amount at the time outstanding in excess of
$5,000,000,
7
<PAGE> 8
the whole of the property upon which the Bank has hereinbefore been
given a security interest or lien or any part(s) thereof or any
substitution(s) therefore or any additions thereto at public or
private sale at the option of the Bank, either for cash or on credit
or for future delivery without assumption of any credit risk, and
without either demand, advertisement or notice of any kind, all of
which are hereby waived. If any notification of intended disposition
of any of such property is required by law, such notification shall be
deemed reasonable and properly given if deposited in the United States
mail, first class or certified postage prepaid, at least five (5) days
before any such disposition, addressed to the Applicant at the address
listed on the reverse side hereof or at the Applicant's address
appearing on the records of the Bank. At any sale hereunder, the Bank
may itself purchase the whole or any part of the property sold free
from any right of redemption on the part of Applicant, all such rights
being also hereby waived and released. In event of any sale or other
disposition of any of the property aforesaid after deducting all costs
or expenses of every kind for care, safekeeping, collection, sale,
delivery or otherwise, the Bank may apply the residue of the proceeds
of the sale or other disposition thereof to the payment or reduction,
either in whole or in part, of all or any of Applicant's obligation and
liabilities hereunder, whether then due or not due, and may return any
excess to the Applicant, all without prejudice to the rights of the
Bank as against the Applicant with respect to any and all obligations
which may be or remain unpaid hereunder at any time(s).
10. If prior to Bank paying all or any portion of the Credit, Applicant
should provide Bank with any collateral pursuant to paragraph five (5)
above or should Applicant make any payment to Bank pursuant to
paragraph eight (8) above, and the Beneficiary shall not thereafter
draw under the Credit for all or part of the balance remaining unpaid
thereon, then within ten (10) days after the termination of Bank's
obligation under the Credit, Bank shall return to Applicant all
collateral provided to Bank pursuant to paragraph five (5) above or
pay to Applicant (without interest) all amounts paid to Bank pursuant
to paragraph eight (8) above.
11. That, except as otherwise provided herein or to the extent otherwise
specifically provided in item six (6) set forth on the reverse side
hereof, the "Uniform Customs and Practice for Documentary Credits
(1983 Revision) International Chamber of Commerce Publication No. 400"
shall in all respects be deemed a part hereof as fully as if
incorporated herein and shall apply to the Credit.
12. The Bank shall not be deemed to have waived or modified any of the
Bank's rights hereunder, by course of conduct or otherwise, or under
any other writing signed by the Applicant
8
<PAGE> 9
unless such waiver or modification shall be in writing and signed by an
officer of the Bank and then such waiver or modification shall be
effective only for the period and under the terms and conditions as
are specifically set forth therein. No delay or omission on the part
of the Bank in exercising any right shall operate as a waiver or
modification of such right or any other right. No waiver ofany Event
of Default on one occasion shall operate as a waiver of any other
Event of Default or of the same Event of Default on a future or
different occasion. All the Bank's rights and remedies, whether
evidenced hereby or by any other writing, shall be cumulative and may
be exercised, from time to time, singularly, concurrently, or
successively. If any paragraph or any part of this Application and
Agreement shall be construed to be illegal or invalid, such paragraph
or part thereof shall be considered separately from the remainder
hereof and shall have no effect on the validity or legality of the
remainder of this Application and Agreement.
13. Bank shall not be responsible for, nor shall Bank be under any
obligation to verify (a) the truth, accuracy, or existence of any
facts or information contained in any statement or document required
to be presented with any draft drawn hereunder; or (b) the genuineness
or authenticity of any such document or statement; or (c) the
genuineness of any signature appearing on any such document or
statement; or (d) whether any individual signing such document or
statement is authorized to sign on behalf of the person or entity that
is purporting to execute such document or statement.
14. Applicant agrees to indemnify and save Bank harmless (and to defend
Bank if Bank so demands) from and against all loss, damages, costs,
charges, expenses and attorneys fees arising from or in any way
connected with the Credit. This indemnification shall include but
shall not be limited to all loss, damages, costs, charges, expenses,
and attorneys' fees incurred by Bank in any suit or court action
seeking a court order or injunction prohibiting Bank from paying under
the Credit even though Applicant may be a party seeking such court
order or injunction. The indemnification contained in this paragraph
shall not include any loss, damages, costs, charges, expenses, and
attorneys fees incurred by Bank as a result of Bank's negligence.
15. If there be more than one Applicant, all undertakings, warranties,
covenants, and agreements made by Applicant and all rights, powers,
and authorities given to, or conferred on, the Bank shall be made or
given both individually as well as jointly and severally. When used
herein, the singular shall include the plural, and vice versa, where
appropriate.
16. This Application and Agreement (a) shall be binding upon and
9
<PAGE> 10
shall inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors, and assigns, (b) shall become effective
upon its receipt by Bank, (c) shall govern the obligations of Applicant to Bank
with respect to any Credit which Bank may determine, at its sole discretion, to
issue hereunder, and (d) shall be governed and construed in accordance with the
laws of the state of Georgia.
10
<PAGE> 11
Attachment to J. M. Tull/Trust Co. Letter of Credit
#5 "I am W. Gordon Kay, beneficiary under Trust Company Bank letter of
credit number ____________________ . I hereby certify: (1) I am owed
$______________ (not to exceed $421,289.65) under the Inland Steel
Industries, Inc. Special Retirement Benefit Plan for Covered Employees
(as Amended and Restated Effective as of October 1, 1993), and (2) I
have requested payment but have not been paid such amount owed under
such plan."
#6 "It is the condition of this Letter of Credit that: (1) Applicant must
be notified immediately by registered mail by Issuing Bank of any
request to draw under this Letter of Credit, (2) It automatically
expires after one draw against it, and (3) It is automatically
extended for one year from the present or any future expiration date
hereof, unless 30 days prior to any such date the Issuing Bank shall
notify Applicant in writing by registered mail that it elects not to
so renew this Letter of Credit."
11
<PAGE> 1
Exhibit 11
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
Statement of Earnings Per Share of Common Stock
<TABLE>
<CAPTION>
Dollars and Shares in Millions
(except per share data)
-------------------------------------
Years Ended December 31,
-------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
OF COMMON STOCK
Average shares of common stock outstanding 35.5 32.8 30.9
---- ---- ----
---- ---- ----
Loss before cumulative effect of
change in accounting principle $ (37.6) $ (159.4) $ (275.1)
Cumulative effect of change in accounting principle - (656.2) -
-------- -------- --------
Net loss (37.6) (815.6) (275.1)
Dividends on preferred stock, net of tax benefit
on dividends applicable to leveraged Series E
Preferred Stock held by the ESOP 32.0 32.1 30.5
-------- -------- --------
Net loss applicable $ (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)
-------- -------- --------
-------- -------- --------
FULLY DILUTED EARNINGS
PER SHARE OF COMMON STOCK
Average shares of common stock outstanding 35.5 32.8 30.9
---- ---- ----
---- ---- ----
Loss before cumulative effect of
change in accounting principle $ (37.6) $ (159.4) $ (275.1)
Cumulative effect of change in accounting principle - (656.2) -
-------- ------- --------
Net Loss $ (37.6) $ (815.6) $ (275.1)
Dividends on antidilutive preferred stock, net
of tax benefit on dividends applicable to
leveraged Series E Preferred Stock held
by the ESOP 32.0 32.1 30.5
-------- -------- --------
Net loss applicable $ (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)
-------- -------- --------
-------- -------- --------
</TABLE>
Note - Series G Exchangeable Preferred Stock was issued in 1991.
The assumed conversion of Series A, Series E and Series G Preferred
Stock was antidilutive.
<PAGE> 1
EXHIBIT 13
<TABLE>
<CAPTION>
FINANCIAL REVIEW
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------------------------------------
Dollars in Millions (except per share data) 1993 1992 1991
- --------------------------------------------- ---------------------------------------
<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, Financial Accounting
Standards Board ("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.
<PAGE> 2
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 coking 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 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 Financial Review -- 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 adoption of this Statement, 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 Financial Review -- Accounting
Matters for further details.
Excluding the effect of the charge for the early closure of coking
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 cents per share, from the sale of a joint-venture
interest.
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. Average
shares 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.
<TABLE>
<CAPTION>
INTEGRATED STEEL SEGMENT
- ------------------------------------------------------------------------------------------------------------
Dollars and Tons in Millions 1993 1992 1991
- -------------------------------- -------------------------------------------------
<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>
<PAGE> 3
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 the 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 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.
<PAGE> 4
<TABLE>
<CAPTION>
SERVICE CENTER SEGMENT
- ---------------------------------------------------------------------------------------------------------
Dollars and Tons in Millions 1993 1992 1991
- --------------------------------------- -----------------------------------------------------------
<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>
The Service Center Segment, known as Inland Materials Distribution
Group ("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 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,
Inland Steel Company will pay $83 million for the lessor's equity interest in
the No. 2 Basic Oxygen Furnace Shop caster facility that is leased from a
subsidiary of General Electric Capital Corporation. In addition, in connection
with such purchase, Inland Steel Company will record $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 the Company's
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 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
<PAGE> 5
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 the Company's 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 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 amounting to $258 million, $35 million, and $23
million, respectively, at year-end 1993. Because the Empire guarantee has not
been invoked since its inception in 1978 and because of the current strong
demand for steel products, the Company does not believe these guarantees will
be called upon.
The Company's debt ratings at year-end 1993 were unchanged from 1992
and were:
<TABLE>
<CAPTION>
- ---------------------------------------------------
Ratings at Year End 1993
- ---------------------------------------------------
<S> <C>
INLAND STEEL INDUSTRIES NOTES
Moody's Ba3
Standard & Poor's B+
Duff & Phelps BB-
- ---------------------------------------------------
INLAND STEEL COMPANY FIRST MORTGAGE BONDS
Moody's Ba3
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
Standard & Poor's BB-
Duff & Phelps BB+
- -----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES
Dollars in Millions 1993 1992 1991
- -------------------------------- -------------------------------------------------
<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 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
<PAGE> 7
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*
Dollars in Millions (except averages)
1993 1992 1991
- ----------------------------------------------- ---------------------------------------------------
<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 $57,265 $54,750 $48,785
per employee
- ----------------------------------------------- ---------------------------------------------------
</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.
<PAGE> 8
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 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 $34 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
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.
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 that Statement 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
<PAGE> 9
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. The
procedures defined 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 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. 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. 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.
<PAGE> 10
<TABLE>
<CAPTION>
SUMMARY BY QUARTER (Unaudited)
Dollars in Millions (except per share data)
- -----------------------------------------------------------------------------------------------------------------------------
Per Common Share
--------------------------------------------
Market Price
------------------------------
Net Gross Profit Income (Loss) Net Income Net Income
Sales (Loss) Before Taxes (Loss) (Loss) High Low Close
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1993
First Quarter $ 941.5 $ 27.5 $ (47.5) $ (31.4) $ (1.12) $24 3/4 $20 $22
Second Quarter 996.4 72.8 (3.8) (2.5) (.30) 29 1/8 21 1/2 28 3/4
Third Quarter 972.0 84.0 9.0 17.0 .25 30 1/4 24 3/4 28 1/8
Fourth Quarter 978.3 63.3 (31.3)* (20.7)* (.79)* 35 28 33 1/8
-----------------------------------------------------------------------------------------------------------------------------
Year $3,888.2 $ 247.6 $ (73.6) $ (37.6) $ (1.96) $35 $20 $33 1/8
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
1992
First Quarter $ 895.9 $ 15.4 $ (56.3) $(694.0)** $(22.68)** $26 $21 1/8 $22 5/8
Second Quarter 909.4 37.2 (12.6) (8.5) (.53) 27 21 1/4 26
Third Quarter 858.6 4.6 (67.5) (45.4) (1.56) 26 1/4 18 1/8 18 1/2
Fourth Quarter*** 830.4 (50.9) (122.2) (67.7) (2.15) 23 3/8 16 1/4 22 5/8
- -----------------------------------------------------------------------------------------------------------------------------
Year $3,494.3 $ 6.3 $(258.6) $(815.6) $(25.82)**** $27 $16 1/4 $22 5/8
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Includes facility shutdown provision of $22.3 million, $14.7 million
after tax or $.41 per share.
** Includes $(656.2) million, $(21.20) per share, related to the
cumulative effect of the change in accounting for postretirement
benefits other than pensions. See notes to consolidated financial
statements.
*** Lower average selling prices at the Integrated Steel Segment resulted
in a significantly lower gross profit. Such lower gross profit margin
was the primary factor for the increased net loss.
**** Per share amounts for the quarters do not total to the amount reported
for the year, as per share amounts are computed independently for each
quarter and the year based on respective weighted average common
shares outstanding. Includes $(656.2) million, $(19.99) per share,
related to the cumulative effect of the change in accounting for
postretirement benefits other than pensions.
<PAGE> 11
ELEVEN-YEAR SUMMARY OF SELECTED FINANCIAL DATA AND OPERATING RESULTS
Inland Steel Industries, Inc. and Subsidiary Companies
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989 1988
- ---------------------------------------------------------------------------------------------------------------------------------
Dollars in Millions
<S> <C> <C> <C> <C> <C> <C> <C>
Results Net sales $3,888.2 $3,494.3 $3,404.5 $3,870.4 $4,146.7 $4,068.0
of Depreciation 131.8 129.6 118.2 119.7 131.2 134.8
Operations Interest expense 78.0 54.9 46.8 38.7 38.4 46.2
Rent expense 73.7 75.5 81.8 85.5 79.9 72.3
Continuing business
segments:
Income (loss) before
income taxes (73.6) (258.6) (381.1) (36.7) 175.6 364.6
Income taxes 36.0Cr. 99.2Cr. 106.0Cr. 16.1Cr. 55.9 115.8
Income (loss) (37.6) (159.4) (275.1) (20.6) 119.7 248.8
Net income (loss) (37.6) (815.6) (275.1) (20.6) 119.7 262.1
- ---------------------------------------------------------------------------------------------------------------------------------
Shares in Thousands
Data Average number of shares 35,540 32,828 30,943 32,195 35,581 33,623
Applicable Income (loss) per share
to Common Continuing business
Stock segments $ (1.96) $ (5.83) $ (9.88) $ (1.41) $ 3.15 $ 6.99
Net income (loss) (1.96) (25.82) (9.88) (1.41) 3.15 7.39
Dividends per share -- -- .15 1.40 1.40 .75
Stockholders' equity per
share 7.79 6.01 31.10 41.27 43.00 42.50
Stockholders of record 16,000 18,000 18,000 19,000 23,000 24,000
Shares traded (average daily
volume) 134.2 97.3 89.3 95.7 199.5 170.0
- ---------------------------------------------------------------------------------------------------------------------------------
Dollars in Millions
Changes in Cash provided from (used
Financial for) operations $ 112.0 $ (21.4) $ 25.0 $ 189.1 $ 240.2 $ 531.8
Position Capital expenditures 105.6 64.4 140.2 268.1 197.2 136.5
Investments in and advances
to joint ventures, net 1.9 6.3 24.9 49.8 15.5 73.6
Acquisitions -- -- -- -- 28.2 50.2
Dividends declared on common
stock -- -- 4.6 45.3 50.1 25.2
Dividends declared on
preferred stock 32.0 32.1 31.1 27.1 6.9 13.8
Financing
Long-term debt (net of
retirements) (96.6) 108.9 73.1 114.0 (17.8) (43.2)
Preferred stock sold -- -- 72.8 -- 185.0 --
Common stock sold 178.7 97.9 -- -- -- --
Net change in liquidity 112.8 90.6 (11.2) (179.1) (67.9) (124.2)
- ---------------------------------------------------------------------------------------------------------------------------------
Dollars in Millions
Financial Working capital $ 496.4 $ 441.0 $ 322.8 $ 395.9 $ 703.0 $ 719.8
Position Property (net) 1,507.7 1,548.8 1,635.0 1,708.3 1,569.8 1,493.9
at Year End Total assets 3,435.8 3,146.5 2,697.8 2,934.8 3,008.5 2,925.0
Long-term debt 777.1 873.7 764.8 691.7 577.7 595.5
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 1,559.4
Unused credit facilities 225 225 225 325 325 225
- ---------------------------------------------------------------------------------------------------------------------------------
Financial Net income (loss) as a % of
Ratios sales (1.0)% (23.3)% (8.1)% (.5%) 2.9% 6.4%
Long-term debt to total
capitalization 55.5% 63.3% 38.0% 31.9% 25.6% 27.6%
Long-term debt and
redeemable preferred
to total capitalization 68.7% 76.7% 47.2% 40.5% 33.8% 27.6%
Return on stockholders'
equity loss loss loss loss 9.1% 16.8%
- ---------------------------------------------------------------------------------------------------------------------------------
Dollars and Tons in Millions
Production
and Tons of raw steel produced 5.0 4.7 4.7 5.3 5.6 6.1
Employment Tons of steel mill shipments 4.8 4.3 4.2 4.7 4.9 5.0
Statistics Average number of employees 16,152 17,181 18,600 20,154 20,715 20,639
Total employment costs $ 924.9 $ 940.7 $ 907.4 $ 979.0 $ 964.3 $ 945.8
--------------------------------------------------------------------------------------------------------------------
<CAPTION>
1987 1986 1985 1984 1983
- -------------------------------------------------------------------------------------------------------------------
Dollars in Millions
<S> <C> <C> <C> <C> <C> <C>
Results Net sales $3,453.2 $3,173.2 $2,999.4 $3,135.0 $2.748.9
of Depreciation 123.4 124.0 119.7 124.5 119.9
Operations Interest expense 62.8 71.6 64.9 62.3 65.3
Rent expense 68.9 55.2 33.7 28.2 23.8
Continuing business
segments:
Income (loss) before
income taxes 97.5 36.7 (147.5) (36.5) (183.1)
Income taxes 14.2Cr. 1.9 .1Cr. 6.1 67.6Cr.
Income (loss) 111.7 34.8 (147.4) (42.6) (115.5)
Net income (loss) 145.0 19.3 (178.4) (41.4) (116.9)
- -------------------------------------------------------------------------------------------------------------------
Shares in Thousands
Data Average number of shares 31,854 28,479 25,266 25.054 24,727
Applicable Income (loss) per share
to Common Continuing business
Stock segments $ 3.09 $ .95 $ (6.14) $ (2.02) $ (4.70)
Net income (loss) 4.14 .40 (7.37) (1.97) (4.76)
Dividends per share -- -- .375 .50 .50
Stockholders' equity per
share 36.15 32.85 34.20 42.14 44.90
Stockholders of record 26,000 29,000 33,000 38,000 42,000
Shares traded (average daily
volume) 178.9 78.6 55.2 61.1 87.4
- -------------------------------------------------------------------------------------------------------------------
Dollars in Millions
Changes in Cash provided from (used
Financial for) operations $ 169.1 $ 129.1 N/A N/A N/A
Position Capital expenditures 128.0 124.8 $ 174.8 $ 185.1 $ 103.1
Investments in and advances
to joint ventures, net 10.5 9.0 7.8 2.3 --
Acquisitions -- 96.4 -- -- --
Dividends declared on common
stock -- -- 9.5 12.5 12.4
Dividends declared on
preferred stock 13.9 7.8 7.8 8.1 .8
Financing
Long-term debt (net of
retirements) (160.9) (122.5) 87.8 46.6 29.0
Preferred stock sold 96.6 -- -- 72.8 --
Common stock sold 83.7 85.2 -- -- 56.9
Net change in liquidity 71.7 157.2 (70.1) 24.0 (56.6)
- -------------------------------------------------------------------------------------------------------------------
Dollars in Millions
Financial Working capital $ 625.0 $ 428.0 $ 268.0 $ 339.5 $ 232.7
Position Property (net) 1,488.1 1,552.4 1,745.2 1,730.8 1,712.2
at Year End Total assets 2,651.4 2,526.6 2,631.5 2,607.7 2,626.4
Long-term debt 638.7 799.6 922.1 834.3 787.7
Redeemable preferred stock -- -- -- -- --
Other temporary equity -- -- -- -- --
Stockholders' equity 1,391.5 1,067.7 958.4 1,147.2 1,131.3
Unused credit facilities 225 150 135 228 190
- -------------------------------------------------------------------------------------------------------------------
Financial Net income (loss) as a % of
Ratios sales 4.2% .6% (5.9)% (1.3)% (4.3)%
Long-term debt to total
capitalization 31.5% 42.8% 49.0% 42.1% 41.0%
Long-term debt and
redeemable preferred
to total capitalization 31.5% 42.8% 49.0% 42.1% 41.0%
Return on stockholders'
equity 10.4% 1.8% loss loss loss
- -------------------------------------------------------------------------------------------------------------------
Dollars and Tons in Millions
Production
and Tons of raw steel produced 5.5 5.7 6.1 6.5 6.3
Employment Tons of steel mill shipments 4.9 4.9 4.7 5.0 4.8
Statistics Average number of employees 20,740 22,668 24,413 26,921 28,700
Total employment costs $ 878.4 $ 918.6 $ 988.5 $1,006.7 $1,084.4
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Cr. = Credit
<PAGE> 12
FINANCIAL RESPONSIBILITY
Senior management is responsible for the integrity and objectivity of the
financial data reported by Inland Steel Industries, Inc. and its subsidiaries.
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, and in management's judgment reflect
fairly the consolidated financial position, cash flows and results of
operations of Inland and its subsidiary companies.
The Company maintains systems of internal accounting controls and procedures
to provide reasonable assurance of the safeguarding and accountability of
Company assets, and to ensure that its financial records provide a reliable
basis for the preparation of financial statements and other data.
Internal accounting control is maintained through:
- The on-going activities of corporate staff and line officers and a
task force of accounting management which monitors the adequacy of
internal accounting control systems throughout the Company
- The selection and proper training of qualified personnel
- The appropriate separation of duties in organizational arrangements
- The establishment and communication of accounting and business
policies together with detailed procedures for their implementation
- The use of an intensive ongoing program of internal auditing
- The use of a detailed budgeting system to assure that expenditures
are properly approved and charged.
Stockholders annually elect a firm of independent accountants to audit
the annual financial statements (their current report appears below). The
principal role of the Audit Committee of the Board of Directors (consisting
entirely of non-management Directors) is to review the conclusions reached by
management in its evaluation of internal accounting controls, approve the scope
of audit programs and evaluate audit results of both independent accountants
and internal auditors. Both groups have unrestricted access to the Audit
Committee, without the presence of management.
<PAGE> 13
REPORT OF INDEPENDENT ACCOUNTANTS
Price Waterhouse [LOGO]
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
INLAND STEEL INDUSTRIES, INC.
In our opinion, the consolidated financial statements on pages 27 through 41
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
---------------------
Price Waterhouse
Chicago, Illinois
February 23, 1994
<PAGE> 14
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.
<PAGE> 15
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, 1992, the cost of health-care 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.
<PAGE> 16
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS AND REINVESTED EARNINGS
Inland Steel Industries, Inc. and Subsidiary Companies
Dollars in Millions (except per share data) Year Ended December 31 1993 1992 1991
--------------------------------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C>
Consolidated NET SALE $3,882.2 $3,494.3 $3,404.5
Statement of --------------------------------------------------------------------- --------------------------------------
Operations 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 terms 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)
--------------------------------------------------------------------- --------------------------------------
<CAPTION>
1993 1992 1991
--------------------------------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C>
Consolidated Earnings reinvested in the business (accumulated deficit)
Statement at beginning of year $ (302.3) $ 545.4 $ 856.2
of Reinvested Net loss for the year Earnings (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>
See Notes to Consolidated Financial Statements
<PAGE> 17
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Inland Steel Industries, Inc. and Subsidiary Companies
Increase (Decrease) in Cash 1993 1992 1991
Dollars in Millions Years Ended December 31
- ---------------------------------------------------------------------------- ------------------------------------
<S> <C> <C> <C> <C>
Operating NET LOSS $(37.6) $(815.6) $(275.1)
Activities ------------------------------------------------------------- ------------------------------------
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 38.1 1,066.7 (14.3)
effect of change in accounting principle
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 Capital expenditures (105.6) (64.4) (140.2)
Activities 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 Sale of common stock 178.7 97.9 --
Activities 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 Cash paid (received) during the year for:
Disclosures 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
<PAGE> 18
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
Inland Steel Industries, Inc. and Subsidiary Companies
Dollars in Millions At December 31 1993 1992
- -------------------------------------------------------------------------------------------- ----------------------
<S> <C> <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' PREFERRED STOCK, $1.00 par value, 15,000,000 shares authorized for all
Equity 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 stockholder's 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
<PAGE> 19
<TABLE>
<CAPTION>
SCHEDULES TO CONSOLIDATED FINANCIAL STATEMENTS
Inland Steel Industries, Inc. and Subsidiary Companies
Dollars in Millions At December 31 1993 1992
- --------------------------------------------------------------------------------------------- ----------------------
<S> <C> <C> <C>
Investments Steel processing joint ventures $ 168.2 $ 142.5
and Advances 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 Land, land improvements and mineral properties $ 156.5 $ 155.9
and Equipment 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 October 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, 2001 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
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: INVENTORIES
Inventories were classified on December 31 as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Dollars in Millions 1993 1992
- --------------------------------------------------------------- -------------------------------
<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.
<PAGE> 21
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 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.
<PAGE> 22
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 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 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 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 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 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 preferred stock or $100 million
aggregate principal amount of the subordinated notes, 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.
<PAGE> 23
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 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 Industries 12 3/4% Notes prohibits the
Company from declaring or paying cash dividends on the Company common stock
under certain conditions. At year-end 1993, up to $67 million of common
dividends could have been paid under 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).
<PAGE> 24
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.
The following table details changes in capital accounts:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock Treasury Stock Preferred Stock Capital in
------------ -------------- ------------------------------------------- Excess of
Par Value
Series A Series E Series G ---------
Shares in Thousands and -------- -------- --------
Dollars in Millions Shares Dollars Shares Dollars Shares Dollars Shares Dollars Shares Dollars Dollars
- ----------------------------------------------------------------------------------------------------------------------------------
<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 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:
<PAGE> 25
<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:
<PAGE> 26
<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.
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
<PAGE> 27
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.
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>
<PAGE> 28
The funded status of the plan as of December 31, 1993 and 1992 was
as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
December 31
--------------------
Dollars in Millions 1993 1992
-------------------------------------------- --------------------
<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
--------------------
Dollars in Millions 1993 1992
----------------------------------------------------------------------------
<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.
<PAGE> 29
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.
Pension credit for 1993 and 1992 is composed of the components set
forth in the table below:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Dollars in Millions 1993 1992
----------------------------------------------------------------------------
<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>
----------------------------------------------------------------------------
Dollars in Millions 1993 1992
----------------------------------------------------------------------------
<S> <C> <C>
Service cost $15 $ 15
Interest cost 85 96
Net amortization and deferral (4) --
----------------------------------------------------------------------------
Total net periodic postretirement cost $96 $111
----------------------------------------------------------------------------
----------------------------------------------------------------------------
</TABLE>
<PAGE> 30
The following table sets forth components of the accumulated
postretirement benefit obligation:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
December 31
--------------------
Dollars in Millions 1993 1992
----------------------------------------------------------------------------
<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 post-retirement
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.
<PAGE> 31
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 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>
---------------------------------------------------------------------------------------------
Dollars in Millions
Years Ended December 31 1993 1992 1991
-------------------------------- -----------------------------------------
<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:
<PAGE> 32
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
December 31
-------------------
Dollars in Millions 1993 1992
---------------------------------------------- -------------------
<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 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,
<PAGE> 33
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.
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>
---------------------------------------------------------------------------------------------
Dollars in Millions
Years Ended December 31 1993 1992 1991
------------------------------------ -----------------------------------------
<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
<PAGE> 34
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 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.
<PAGE> 35
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 capacity (50 percent at year-end 1991).
Following is a summary of combined financial information of the Company's
unconsolidated joint ventures:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
Dollars in Millions 1993 1992 1991
--------------------------------- -----------------------------------------
<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
<PAGE> 36
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.
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.
<PAGE> 37
<TABLE>
<CAPTION>
INFORMATION ABOUT BUSINESS SEGMENTS
--------------------------------------------------------------------------------------------
Dollars in Millions
Years Ended December 31 1993 1992 1991
---------------------------------- -----------------------------------------
<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>
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF INLAND STEEL INDUSTRIES, INC.
The subsidiaries of Inland Steel Industries, Inc. (other than certain
subsidiaries which, considered in the aggregate as a single subsidiary, do not
constitute a significant subsidiary), each of which is incorporated in the
State of Delaware (except as noted below) and each of which is wholly owned,
either by Inland Steel Industries, Inc. or by one of its wholly owned
subsidiaries, are as follows:
Inland Steel Company
Inland Steel Mining Company
Inland Steel Administrative Service Company (formerly known
as Inland Steel Finance Company)
Inland Materials Distribution Group, Inc.
(formerly known as Inland Steel Services Holding, Inc.)
Joseph T. Ryerson & Son, Inc.
J. M. Tull Metals Company, Inc.
(a Georgia corporation)
<PAGE> 1
Exhibit 24
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, Earl L. Mason, Jay
E. Dittus and David B. Anderson, or any one or more of them, my true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which said attorneys and agents, or any of them, may deem necessary
or advisable to enable said Inland Steel Industries, Inc. to comply with the
Securities Exchange Act of 1934, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
preparation and filing of the Annual Report on Form 10-K of said Inland Steel
Industries, Inc. for the fiscal year ended December 31, 1993, 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
said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and
confirming all that said attorneys and agents, or any of them, shall do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 19th day of January,
1994.
/s/ A. Robert Abboud
--------------------
A. Robert Abboud
<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, Earl L. Mason, Jay
E. Dittus and David B. Anderson, or any one or more of them, my true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which said attorneys and agents, or any of them, may deem necessary
or advisable to enable said Inland Steel Industries, Inc. to comply with the
Securities Exchange Act of 1934, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
preparation and filing of the Annual Report on Form 10-K of said Inland Steel
Industries, Inc. for the fiscal year ended December 31, 1993, 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
said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and
confirming all that said attorneys and agents, or any of them, shall do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 19th day of January,
1994.
/s/ James W. Cozad
-------------------
James W. Cozad
<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, Earl L. Mason, Jay
E. Dittus and David B. Anderson, or any one or more of them, my true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which said attorneys and agents, or any of them, may deem necessary
or advisable to enable said Inland Steel Industries, Inc. to comply with the
Securities Exchange Act of 1934, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
preparation and filing of the Annual Report on Form 10-K of said Inland Steel
Industries, Inc. for the fiscal year ended December 31, 1993, 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
said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and
confirming all that said attorneys and agents, or any of them, shall do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of January,
1994.
/s/ James A. Henderson
------------------------
James A. Henderson
<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, Earl L. Mason, Jay
E. Dittus and David B. Anderson, or any one or more of them, my true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which said attorneys and agents, or any of them, may deem necessary
or advisable to enable said Inland Steel Industries, Inc. to comply with the
Securities Exchange Act of 1934, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
preparation and filing of the Annual Report on Form 10-K of said Inland Steel
Industries, Inc. for the fiscal year ended December 31, 1993, 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
said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and
confirming all that said attorneys and agents, or any of them, shall do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of January,
1994.
/s/ Emerson Kampen
-------------------
Emerson Kampen
<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, Earl L. Mason, Jay
E. Dittus and David B. Anderson, or any one or more of them, my true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which said attorneys and agents, or any of them, may deem necessary
or advisable to enable said Inland Steel Industries, Inc. to comply with the
Securities Exchange Act of 1934, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
preparation and filing of the Annual Report on Form 10-K of said Inland Steel
Industries, Inc. for the fiscal year ended December 31, 1993, 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
said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and
confirming all that said attorneys and agents, or any of them, shall do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 31st day of January,
1994.
/s/ Robert B. McKersie
-----------------------
Robert B. McKersie
<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, Earl L. Mason, Jay
E. Dittus and David B. Anderson, or any one or more of them, my true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which said attorneys and agents, or any of them, may deem necessary
or advisable to enable said Inland Steel Industries, Inc. to comply with the
Securities Exchange Act of 1934, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
preparation and filing of the Annual Report on Form 10-K of said Inland Steel
Industries, Inc. for the fiscal year ended December 31, 1993, 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
said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and
confirming all that said attorneys and agents, or any of them, shall do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of January,
1994.
/s/ Donald S. Perkins
----------------------
Donald S. Perkins
<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, Earl L. Mason, Jay
E. Dittus and David B. Anderson, or any one or more of them, my true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which said attorneys and agents, or any of them, may deem necessary
or advisable to enable said Inland Steel Industries, Inc. to comply with the
Securities Exchange Act of 1934, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
preparation and filing of the Annual Report on Form 10-K of said Inland Steel
Industries, Inc. for the fiscal year ended December 31, 1993, 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
said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and
confirming all that said attorneys and agents, or any of them, shall do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of January,
1994.
/s/ Joshua I. Smith
--------------------
Joshua I. Smith
<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, Earl L. Mason, Jay
E. Dittus and David B. Anderson, or any one or more of them, my true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which said attorneys and agents, or any of them, may deem necessary
or advisable to enable said Inland Steel Industries, Inc. to comply with the
Securities Exchange Act of 1934, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
preparation and filing of the Annual Report on Form 10-K of said Inland Steel
Industries, Inc. for the fiscal year ended December 31, 1993, 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
said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and
confirming all that said attorneys and agents, or any of them, shall do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 18th day of January,
1994.
/s/ Nancy H. Teeters
---------------------
Nancy H. Teeters
<PAGE> 9
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, Earl L. Mason, Jay
E. Dittus and David B. Anderson, or any one or more of them, my true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which said attorneys and agents, or any of them, may deem necessary
or advisable to enable said Inland Steel Industries, Inc. to comply with the
Securities Exchange Act of 1934, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
preparation and filing of the Annual Report on Form 10-K of said Inland Steel
Industries, Inc. for the fiscal year ended December 31, 1993, 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
said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and
confirming all that said attorneys and agents, or any of them, shall do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of January,
1994.
/s/ Raymond C. Tower
--------------------
Raymond C. Tower
<PAGE> 10
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, Earl L. Mason, Jay
E. Dittus and David B. Anderson, or any one or more of them, my true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which said attorneys and agents, or any of them, may deem necessary
or advisable to enable said Inland Steel Industries, Inc. to comply with the
Securities Exchange Act of 1934, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
preparation and filing of the Annual Report on Form 10-K of said Inland Steel
Industries, Inc. for the fiscal year ended December 31, 1993, 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
said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and
confirming all that said attorneys and agents, or any of them, shall do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of January,
1994.
/s/ Arnold R. Weber
--------------------
Arnold R. Weber
