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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
INLAND STEEL INDUSTRIES, INC.
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(Name of Registrant as Specified in Its Charter)
INLAND STEEL INDUSTRIES, INC.
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule O-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
O-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11:(1)
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(4) Proposed maximum aggregate value of transaction:
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/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule O-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
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INLAND STEEL INDUSTRIES, INC.
ROBERT J. DARNALL
Chairman, President and
Chief Executive Officer
April 18, 1994
Dear Stockholder:
You are cordially invited to attend the 1994 Annual Meeting of Stockholders
of Inland Steel Industries, Inc. The meeting will be held at the First Chicago
Center, One First National Plaza, Chicago, Illinois, on Wednesday, May 25, 1994,
at 10:30 a.m., Chicago time.
The notice of the meeting and the proxy statement on the following pages
cover the formal business of the meeting, which consists of the election of the
directors, the approval of the Inland Steel Industries, Inc. Annual Incentive
Plan, and the election of auditors for the coming year.
At the meeting, I will address the outlook for the Company; Earl L. Mason,
Vice President, will review the Company's strategic progress and financial
performance; and Maurice S. Nelson, Jr., Senior Vice President of the Company
and President and Chief Operating Officer of Inland Steel Company, will discuss
the partnership with labor at the Indiana Harbor Works. There will also be an
opportunity for stockholder questions and comments.
The attendance of stockholders at the meeting has been helpful in
maintaining communications. Whether or not you plan to personally attend, it is
important that your stock be represented at the meeting. Please complete and
mail the enclosed proxy card in the return envelope.
Cordially,
/s/ Robert J. Darnall
Chairman, President and
Chief Executive Officer
30 West Monroe Street, Chicago, Illinois 60603
<PAGE> 3
INLAND STEEL INDUSTRIES, INC.
30 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 25, 1994
To the Stockholders of INLAND STEEL INDUSTRIES, INC.:
The Annual Meeting of Stockholders of Inland Steel
Industries, Inc., a Delaware corporation, will be held at
the First Chicago Center, One First National Plaza, Chicago,
Illinois, on Wednesday, May 25, 1994, at 10:30 a.m., Chicago
time, for the following purposes:
1. To elect directors of the Company;
2. To consider and vote upon the Inland Steel
Industries, Inc. Annual Incentive Plan;
3. To elect a firm of independent public accountants to
audit the accounts of the Company and its
subsidiaries for the year 1994; and
4. To transact any other business that may properly
come before the meeting.
The close of business on April 5, 1994 has been fixed
as the record date for determination of stockholders
entitled to notice of and to vote at the Annual Meeting.
A Proxy Statement with respect to the Annual Meeting
accompanies and forms a part of this Notice. The Annual
Report of the Company for the fiscal year ended December 31,
1993 was previously mailed to stockholders.
By order of the Board of
Directors,
DAVID B. ANDERSON, Secretary
April 18, 1994
Chicago, Illinois
Stockholders are cordially invited to attend this meeting.
Each stockholder, whether or not he or she expects to be
present in person at the Annual Meeting, is requested to
SIGN, DATE AND RETURN THE ENCLOSED PROXY in the accompanying
envelope as promptly as possible. A stockholder may revoke
his or her proxy at any time prior to voting.
<PAGE> 4
INLAND STEEL INDUSTRIES, INC.
30 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
PROXY STATEMENT
The enclosed proxy is solicited on behalf of the Board of Directors of the
Company. Such solicitation is being made by mail commencing approximately April
18, 1994, and also may be made by directors, officers and regular employees of
the Company. The expense of such solicitation will be paid by the Company. In
addition, the Company has retained Kissel-Blake Inc. to assist in the
solicitation of proxies for a fee of $10,500 plus out-of-pocket expenses.
Brokers, banks and similar organizations will be reimbursed for out-of-pocket
and reasonable clerical expenses incurred in obtaining instructions from
beneficial owners.
A stockholder giving a proxy may revoke it at any time prior to the voting
of the proxy. Shares represented by an effective proxy given by a stockholder
will be voted as directed by the stockholder. The voting securities of the
Company outstanding on the record date (April 5, 1994), together with the vote
to which each share is entitled, consist of 41,228,794 shares of common stock
(one vote per share), 96,355 shares of Series A $2.40 Cumulative Convertible
Preferred Stock (one vote per share), 3,097,377 shares of Series E ESOP
Convertible Preferred Stock (1.25 votes per share), and 185,000 shares of Series
F Exchangeable Preferred Stock (30.604 votes per share). All such shares vote
together without regard to class on the matters expected to be voted upon at the
Annual Meeting.
Shares standing to the credit of a participant in the Shareholder
Investment Service for the automatic reinvestment of common stock dividends will
be voted only if and in the same manner as such participant shall vote his or
her shareholdings of record. In the event a participant is not a stockholder of
record, Harris Trust and Savings Bank, as custodian, will vote shares held for
his or her account only in accordance with his or her instructions. Shares
standing to the credit of a participant in the Inland Steel Industries Thrift
Plan will be voted as such participant directs, provided that any such direction
(or any revocation of a prior direction) must be received by Harris Trust and
Savings Bank, as Trustee under the Thrift Plan, by 5:00 p.m., Chicago time, on
May 24, 1994. Shares in the Thrift Plan as to which no direction is received by
such time will be voted in the same proportion as shares that have been timely
directed.
It is the policy of the Company that proxies, consents, ballots and voting
materials that identify the vote of specific stockholders are kept confidential
until the final vote is tabulated, except in a contested proxy or consent
solicitation or to meet applicable legal requirements. All such documents are
returned to the tabulator and are available to the
<PAGE> 5
inspectors of election to enable them to certify the results of the vote. Harris
Trust and Savings Bank acts as the tabulator, and one or more officers or
employees of the Harris Bank will serve as inspectors of election. Comments
written on or accompanying proxy cards will be provided to the Company without
indication of the vote of the stockholder except where the vote is included in
the comment or is necessary for an understanding of the comment.
ELECTION OF DIRECTORS
Proxies not limited to the contrary will be voted for the 11 nominees
listed below as directors of the Company for terms expiring on the date of the
Annual Meeting of the Company in 1995 and until their successors are duly
elected and qualified. Directors shall be elected by a plurality of the votes of
the shares present in person or by proxy at the Annual Meeting and entitled to
vote in the election, and the outcome of the election will therefore not be
affected by shares of stockholders who abstain from voting or withhold authority
to vote in the election. All of such nominees are presently serving as directors
of the Company and of Inland Steel Company, a wholly owned subsidiary of the
Company. The period of service as a director shown for each nominee includes the
period for which such nominee served as a director of Inland Steel Company prior
to the effective date (May 1, 1986) of the plan of restructuring pursuant to
which the Company became a holding company for Inland Steel Company and its
subsidiaries. The Board of Directors held eight meetings during 1993. Dr.
Emerson Kampen attended fewer than 75% of the combined total number of meetings
of the Board of Directors and committees on which he served while contending
with illness. All other incumbent directors attended at least 75% of the
combined total number of meetings of the Board of Directors and committees on
which they served.
The terms of the six-year labor agreement finalized in July 1993 between
Inland Steel Company and the United Steelworkers of America provided the
Steelworkers with the ability to designate as a director an individual
acceptable to the Board of the Company. Dr. McKersie has been so designated.
If any nominee should become unavailable for election (an event that is not
anticipated), proxies will be voted for the election of such other person or
persons as may be designated by the Board of Directors of the Company, unless
the Board has taken prior action to reduce its membership.
2
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INFORMATION CONCERNING NOMINEES
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<TABLE>
<S> <C> <C>
A. ROBERT ABBOUD Director since 1974
Mr. Abboud, age 64, is President of A. Robert Abboud and Company, a
private investment firm established by him in 1984. From April 1988
until March 1991 Mr. Abboud was Chairman and Chief Executive Officer of
First City Bancorporation of Texas, Inc., a bank holding company, which
[Graphic in November 1992 consented to an involuntary bankruptcy petition, is
No. 1] operating under Chapter 11 of the U.S. Bankruptcy Code, and filed a plan
of reorganization with the bankruptcy court on March 11, 1994. He is a
member of Inland's Audit and Finance and Retirement Committees. Mr.
Abboud is also a director of First City Bancorporation of Texas, Inc.,
AAR Corp., and Hartmarx Corporation.
JAMES W. COZAD Director since 1991
Mr. Cozad, age 67, was Chairman and Chief Executive Officer of Whitman
Corporation, a diversified producer of consumer and commercial products,
prior to his retirement in May 1992. He was elected to that position in
January 1990. Mr. Cozad previously had been employed, starting in 1969,
[Graphic by Amoco Corporation, a producer and distributor of petroleum products,
No.2] natural gas and chemicals, was its Chief Financial Officer from 1976 and
in addition served as Vice Chairman from 1983 until joining Whitman.
He is a member of Inland's Audit and Executive Committees. Mr. Cozad is
a director of Eli Lilly and Company, GATX Corporation, Sears, Roebuck
and Co., and Whitman Corporation.
ROBERT J. DARNALL Director since 1983
Mr. Darnall, age 56, is Chairman, President and Chief Executive Officer
of the Company, Chairman and Chief Executive Officer of Inland Steel
Company, and Chairman of the Executive and Finance and Retirement
[Graphic Committees. He joined Inland Steel Company in 1962, served as its
No.3] President from 1984 until 1986 and was re-elected to that position in
1987. Mr. Darnall was elected President and Chief Operating Officer of
the Company in 1986. He assumed his present position with the Company in
1992. Mr. Darnall is also a director of Cummins Engine Company, Inc. and
Household International, Inc.
</TABLE>
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INFORMATION CONCERNING NOMINEES (CONTINUED)
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<TABLE>
<S> <C> <C>
JAMES A. HENDERSON Director since 1978
Mr. Henderson, age 59, is President and Chief Operating Officer of
Cummins Engine Company, Inc., a manufacturer of diesel engines. He
[Graphic joined that company in 1964, was elected Executive Vice President in
No.4] 1971, elected Executive Vice President and Chief Operating Officer in
1975, and assumed his present position in 1977. He is Chairman of
Inland's Audit Committee. Mr. Henderson is also a director of Cummins
Engine Company, Inc., Ameritech Corporation, and Rohm and Haas Company.
EMERSON KAMPEN Director since 1988
Dr. Kampen, age 66, is Chairman, President and Chief Executive Officer
of Great Lakes Chemical Corporation, a producer of specialized
industrial chemicals. He began his career with that company in 1951 as a
chemical engineer and served successively as plant manager, Vice
[Graphic President for Production and Marketing, Senior Vice President, and
No.5] Executive Vice President. He was elected President in 1972, Chief
Executive Officer in 1977 and Chairman in 1988. He is a member of
Inland's Compensation, Finance and Retirement, and Nominating
Committees. Dr. Kampen is also a director of Great Lakes Chemical
Corporation, NBD Bancorp, Inc., and PSI Energy, Inc.
ROBERT B. MCKERSIE Director since 1994
Dr. McKersie, age 64, is Deputy Dean and professor at the Sloan School
of Management at Massachusetts Institute of Technology. He is a member
[Graphic of Inland's Audit Committee. Prior to joining MIT in 1980, he served as
No.6] Dean of the New York State School of Industrial and Labor Relations at
Cornell University, and prior to that was on the faculty of the Graduate
School of Business at the University of Chicago.
DONALD S. PERKINS Director since 1967
Mr. Perkins, age 67, was Chairman of Jewel Companies, Inc., a
diversified retailer, prior to his retirement in 1980. He is Chairman
of Inland's Nominating Committee and a member of its Compensation and
[Graphic Executive Committees. Mr. Perkins is also a director of American
No.7] Telephone and Telegraph Company, Aon Corporation, Cummins Engine
Company, Inc., Illinois Power Company, Kmart Corporation, LaSalle Street
Fund Incorporated, the Putnam Funds, Springs Industries, Inc., and Time
Warner Inc.
</TABLE>
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INFORMATION CONCERNING NOMINEES (CONTINUED)
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<TABLE>
<S> <C> <C>
JOSHUA I. SMITH Director since 1991
Mr. Smith, age 53, is Chairman and Chief Executive Officer of The MAXIMA
Corporation, an information management service company established by
[Graphic him in 1978. He serves as a trustee or director of a number of
No.8] professional, educational, and business boards and associations and
was formerly Chairman of the U. S. Commission on Minority Business
Development. He is a member of Inland's Compensation, Finance and
Retirement, and Nominating Committees. Mr. Smith is also a director of
Caterpillar, Inc. and Federal Express Corporation.
NANCY H. TEETERS Director since 1991
Ms. Teeters, age 63, was Vice President and Chief Economist of IBM
Corporation, a manufacturer of business machines, from 1984 until her
[Graphic retirement in 1990. She is a member of Inland's Audit and Finance and
No.9] Retirement Committees. Ms. Teeters is also a director of a number of
registered investment companies managed by Prudential Securities Mutual
Funds and advised by Prudential Securities Mutual Funds, Wellington
Management or Blackrock Group.
RAYMOND C. TOWER Director since 1986
Mr. Tower, age 69, was President and Chief Operating Officer of FMC
Corporation, a producer of machinery and chemicals for industry,
agriculture and government, prior to his retirement on March 1, 1990.
[Graphic He was first employed by that company in 1946, was elected President in
No.10] 1977, and was named Chief Operating Officer in 1980. He is Chairman of
Inland's Compensation Committee and a member of its Executive and
Nominating Committees. Mr. Tower is also a director of Household
International, Inc., Morton International, Inc., and Wellman, Inc.
ARNOLD R. WEBER Director since 1985
Dr. Weber, age 64, is President of Northwestern University. He began his
career in education in 1958 in the field of urban and labor economics,
served as a professor at the University of Chicago and Dean of the
Graduate School of Industrial Administration at Carnegie-Mellon
[Graphic University, and was President of the University of Colorado from 1980
No.11] until he assumed his present position in 1985. He has served as an
economic advisor to four national administrations and as a consultant to
several governmental agencies. He is a member of Inland's Compensation,
Executive and Nominating Committees. Dr. Weber is also a director of Aon
Corporation, Burlington Northern, Inc., PepsiCo, Inc., and Tribune
Company.
</TABLE>
5
<PAGE> 9
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company or any of its subsidiaries
receive an annual retainer of $30,000, 20% of which is paid in shares of common
stock of the Company pursuant to the Inland 1992 Stock Plan for Non-Employee
Directors. Such directors also receive $1,000 for each special meeting of the
Board of Directors of the Company and of Inland Steel Company attended by them,
except that if special meetings of both Boards are held on the same day, only
one meeting attendance fee is paid. In addition, each such director who serves
as a member of a standing committee of the Board of Directors is paid an
additional annual fee of $3,000 for service on each such committee on which he
or she serves, except that membership on the Compensation and Nominating
Committees is regarded as membership on only one committee for purposes of the
payment of such additional fee and that only one meeting attendance fee is paid
if standing committee meetings of both Boards are held on the same day. In
addition, such directors also receive $1,000 for each special committee meeting
attended that is not held in connection with a regular or special meeting of the
Board of Directors except that only one meeting attendance fee is paid if
special meetings of the same committees of both Boards are held on the same day
and that membership on the Compensation and Nominating Committees is regarded as
membership on only one committee for purposes of the payment of such additional
fee. No fees are paid for any meeting of the Executive Committee. Any such
director who is also the chairman of a standing committee of the Board of
Directors of the Company receives an additional annual retainer of $3,000 except
that a chairman of the same committee of both Boards receives only one fee. A
director may elect to defer payment of all or a portion of such fees until he or
she ceases to be a director of the Company. Interest on the cash portion of any
fees with respect to which payment is deferred is accrued at the prime rate in
effect from time to time at The First National Bank of Chicago. Amounts
equivalent to dividends that would have been paid on the stock portion of any
deferred fees are credited to the account of such director and converted into
additional deferred shares at market prices. The Company also pays the premiums
on a business accident insurance policy insuring each non-employee director for
amounts up to $500,000.
The Company provides retirement benefits to certain members of the Board of
Directors. Each director who serves on the Board as a non-employee director for
at least ten consecutive years, or for at least five consecutive years and
remains on the Board until age 70, and who is not eligible to receive benefits
under any Company pension plan, is eligible for retirement benefits. Benefit
payments begin at the later of the director's retirement or his or her attaining
age 65 and continue for the number of full years of service as a non-employee
director, up to a maximum of ten years. The amount of the annual benefit is
equal to the amount of the annual retainer paid for services as a member of the
Board in effect at the last Board meeting attended by such director. The
directors' retirement plan provides that in the case of any director who is 60
or older, the Company may purchase annuities (and provide a tax gross-up payment
to the director at the time of purchase) either prior to or at the time of
retirement to satisfy the Company's obligations
6
<PAGE> 10
under these plans for benefits payable at age 70. Any annuities purchased for a
director would be designed to provide an after-tax benefit equivalent to the
benefit provided under the plan.
COMMITTEES OF THE BOARD OF DIRECTORS
Among the standing committees of the Board of Directors, the Company has an
Audit Committee, a Compensation Committee and a Nominating Committee. The
members of these three committees, none of whom is an employee of the Company or
any of its subsidiaries, are identified above under "ELECTION OF DIRECTORS."
The duties of the Audit Committee are to review the proposed scope of the
annual audit and the results and recommendations of the independent auditors on
completion of the annual audit; to review the financial review sections of the
Company's annual report to stockholders and annual report on Form 10-K; to
review the minutes of the quarterly audit review of the independent auditors and
each quarterly report on Form 10-Q; to nominate a firm of independent auditors
to be submitted to the stockholders for election at the annual meeting; to
approve all non-audit services to be performed by the independent auditors; to
approve the compensation of the independent auditors; to review the Company's
system of internal accounting controls and its system of internal operating
controls and the performance of its internal auditors; to monitor compliance by
management with certain Company policies; and to review registration statements
prepared in connection with financings by the Company and its subsidiaries. The
Audit Committee held six meetings in 1993.
The duties of the Compensation Committee are to make recommendations to the
Board of Directors with respect to the salaries of the officers of the Company
and approve the salary of the president of each of the Company's major
subsidiaries; to administer the Inland Steel Industries, Inc. Annual Incentive
Plan, the Inland 1975 Executive Stock Option Plan, the Inland 1984 Incentive
Stock Plan, the Inland 1988 Incentive Stock Plan and the Inland 1992 Incentive
Stock Plan; and to make recommendations to the Board of Directors with respect
to the establishment or modification of executive compensation plans and
programs. The Compensation Committee held five meetings in 1993.
The duties of the Nominating Committee are to prepare and maintain a list
of qualified candidates to fill vacancies on the Board of Directors and
recommend to the Board of Directors candidates to fill any such vacancies; to
recommend to the Board of Directors annually a slate of candidates for election
as directors by the stockholders at the annual meeting; and to recommend the
compensation to be paid to non-management directors for their services as
directors. The Nominating Committee held three meetings in 1993.
The Nominating Committee will consider qualified candidates recommended by
the stockholders for designation as nominees for election at the Annual Meeting
of Stockholders to be held in 1995 and subsequent years. In order for a
candidate recommended by a stockholder to be considered by the Nominating
Committee for designation as a nominee for election at the Annual Meeting of
Stockholders to be held in 1995, the name of such
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<PAGE> 11
candidate, together with a written description of his or her qualifications,
must be received by the Secretary of the Company prior to January 1, 1995. The
By-laws of the Company provide a formal procedure, including an advance notice
requirement, for nominations by stockholders of persons for election as
directors at annual meetings of the Company.
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table presents, as of April 5, 1994, the equity securities
beneficially owned (as that term is defined by the Securities and Exchange
Commission) by all directors of the Company, the named executive officers of the
Company, and the directors and executive officers of the Company as a group, in
each case, except as indicated, with sole voting and investment power. Common
stock, in each case, includes preferred stock purchase rights distributed in
1987 to holders of common stock. The shares of Series E ESOP Preferred Stock
shown as beneficially owned by the executive officers are held for their
respective accounts in the Inland Steel Industries Thrift Plan and could be
converted upon retirement or other termination of employment into an equal
number of shares of common stock of the Company (subject to adjustment in
certain events). Excluded from the number of shares listed as beneficially owned
are unallocated shares of Series E ESOP Preferred Stock that the ESOP Trustee is
required to vote or dispose of in the manner and proportion in which allocated
shares are directed to be voted or disposed of.
<TABLE>
<CAPTION>
AMOUNT AND NATURE AMOUNT AND NATURE
OF BENEFICIAL OF BENEFICIAL
OWNERSHIP OF OWNERSHIP OF
COMMON SERIES E ESOP
STOCK(1)(2)(3) PREFERRED STOCK(4)
------------------ ------------------
<S> <C> <C>
Directors
A. Robert Abboud........................... 5,443 --
James W. Cozad............................. 943 --
Robert J. Darnall.......................... 120,532 1,258
James A. Henderson......................... 1,443 --
Emerson Kampen............................. 1,443 --
Robert B. McKersie......................... 200 --
Donald S. Perkins.......................... 2,943 --
Joshua I. Smith............................ 443 --
Nancy H. Teeters........................... 743 --
Raymond C. Tower........................... 1,143 --
Arnold R. Weber............................ 543 --
</TABLE>
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<PAGE> 12
<TABLE>
<CAPTION>
AMOUNT AND NATURE AMOUNT AND NATURE
OF BENEFICIAL OF BENEFICIAL
OWNERSHIP OF OWNERSHIP OF
COMMON SERIES E ESOP
STOCK(1)(2)(3) PREFERRED STOCK(4)
------------------ ------------------
<S> <C> <C>
Named Executive Officers
Robert J. Darnall.......................... 120,532 1,258
David B. Anderson.......................... 59,683 1,183
W. Gordon Kay.............................. 52,243 486
Earl L. Mason.............................. 31,150 827
Maurice S. Nelson, Jr. .................... 34,105 712
All Directors and Executive Officers as a
Group...................................... 444,885 8,141
</TABLE>
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(1) Excludes shares of common stock into which Series E ESOP Convertible
Preferred Stock may be converted. No director or named executive officer
individually owns 1% or more of the outstanding common stock of the Company;
all directors and executive officers as a group own 1.07% of the outstanding
common stock of the Company.
(2) Includes 1,000 shares held by Emerson Kampen jointly with his wife, 200
shares held by Robert B. McKersie jointly with his wife, and 290 shares held
by Robert J. Darnall jointly with his wife, and shares which the following
individuals have the right to acquire under exercisable options within 60
days after April 5, 1994: Robert J. Darnall, 77,667; David B. Anderson,
44,500; W. Gordon Kay, 38,667; Earl L. Mason, 20,500; and Maurice S. Nelson,
Jr., 19,167.
(3) Includes 287,135 shares which executive officers have the right to acquire
within 60 days after April 5, 1994 under outstanding options, 65,743 shares
held under restricted stock awards, 1,490 shares that two directors and an
executive officer hold jointly with their spouses, and 100 shares held by
the spouse of an executive officer, for which beneficial ownership is
disclaimed.
(4) Each named executive officer individually owns and all executive officers as
a group collectively own less than 1% of the Series E ESOP Preferred Stock
of the Company.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, officers and certain stockholders to file with the Securities and
Exchange Commission an initial statement of beneficial ownership and certain
statements of changes in beneficial ownership of equity securities of the
Company. To the Company's knowledge, based on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to its
executive officers, directors and greater than 10% beneficial owners were
complied with.
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<PAGE> 13
ADDITIONAL INFORMATION RELATING TO VOTING SECURITIES
The following table sets forth the only holders known to the Company to own
beneficially more than 5% of its common stock, Series E ESOP Preferred Stock,
and Series F Exchangeable Preferred Stock.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME AND ADDRESS OF SHARES OWNED AT CLASS AT
BENEFICIAL OWNER DECEMBER 31, 1993 APRIL 5, 1994
- --------------------------------------------------------- ----------------- -------------
<S> <C> <C>
Common Stock
Norwest Corporation.................................... 4,499,412(1) 10.83
Norwest Center
Sixth and Marquette
Minneapolis, MN 55479
FMR Corp............................................... 4,424,742(2) 10.57
82 Devonshire Street
Boston, MA 02109
Harris Bankcorp, Inc. ................................. 6,052,542(3) 13.68
111 West Monroe Street
Chicago, IL 60603
Series E ESOP Preferred Stock
Harris Bankcorp, Inc. ................................. 3,008,804(3) 100
Series F Exchangeable Preferred Stock
NS Finance III, Inc. .................................. 185,000(4) 100
c/o Nippon Steel U.S.A., Inc.
10 East 50th Street, 29th Floor
New York, New York 10022
</TABLE>
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(1) Includes 316,071 shares issuable upon conversion of Series G Convertible
Preferred Stock. Norwest Corporation on behalf of itself and Norwest
Colorado, Inc., Norwest Bank Colorado, National Association, and certain
subsidiaries, reported aggregate sole voting power as to 3,937,304 shares of
common stock (including 282,373 shares issuable upon conversion of Series G
Convertible Preferred Stock), shared voting power as to 47,848 shares, sole
dispositive power as to 4,466,197 shares (including 311,205 shares issuable
upon conversion of Series G Preferred Stock), and shared dispositive power
as to 10,249 shares.
(2) Includes 642,773 shares issuable upon conversion of Series G Convertible
Preferred Stock. FMR Corp., on behalf of itself, Edward C. Johnson 3rd, and
Fidelity Management & Research Company, reported sole voting power as to
130,426 shares of common stock and sole dispositive power as to 4,424,742
shares.
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<PAGE> 14
(3) Harris Bankcorp, Inc., on behalf of itself, its parent, Bankmont Financial
Corporation (which is a wholly owned subsidiary of the Bank of Montreal),
and its subsidiaries (including Harris Trust and Savings Bank), reported
sole voting power as to 6,051,401 shares of common stock and sole
dispositive power as to 6,038,251 shares of common stock (both including
3,008,804 shares issuable upon conversion of the Series E ESOP Preferred
Stock and 606,947 shares of common stock held by Harris Trust and Savings
Bank as Trustee of the employee stock ownership plan contained within the
Inland Steel Industries Thrift Plan) and shared dispositive power as to
14,150 shares of common stock, expressly denying beneficial ownership of all
shares held in the Thrift Plan. As of April 5, 1994, the outstanding shares
of Series E ESOP Preferred Stock represented approximately 7.61% of the
voting power of the Company's outstanding voting securities.
(4) NS Finance III, Inc., is an indirect wholly owned subsidiary of Nippon Steel
Corporation ("NSC"). NS Finance III, Inc. has agreed that it will be deemed
to be present for quorum purposes at all stockholder meetings. As of April
5, 1994, the outstanding shares of Series F Exchangeable Preferred Stock
represented approximately 11.13% of the voting power of the Company's
outstanding voting securities. In addition, as of April 5, 1994, NS Finance
III, Inc. owned 352,400 shares, or approximately .85% of the outstanding
shares, of common stock of the Company. See "Certain Relationships and
Related Transactions" below.
Certain persons were also known to the Company to be the beneficial owners
of more than 5% of the outstanding shares of Series A $2.40 Cumulative
Convertible Preferred Stock. Such persons vote together with the holders of the
common stock, the Series E ESOP Preferred Stock, and the Series F Exchangeable
Preferred Stock as a single class on each matter being submitted to
stockholders, and none of the owners of the Series A Preferred Stock owns shares
of Series A Preferred Stock having more than 1% of the combined voting power of
the Company's outstanding voting securities.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1993 subsidiaries of the Company maintained credit facilities with
banking groups that include Harris Trust and Savings Bank, which is a beneficial
owner of more than 5% of certain classes of the Company's securities as
described above. There were no borrowings outstanding at any time during 1993
under these facilities. Subsidiaries of the Company incurred approximately
$147,600 in fees payable to Harris Trust and Savings Bank.
During 1989, the Company and NSC, through its indirect wholly owned
subsidiary NS Finance, Inc., each purchased in the open market approximately
$15,000,000 of the other company's common stock. The Company purchased 2,500,000
shares of NSC common stock, representing .04% of the then outstanding shares of
NSC. NS Finance, Inc. later transferred ownership of its Company common stock to
NS Finance III, Inc., also an indirect wholly owned subsidiary of NSC. On
December 18, 1989, the Company sold 185,000 shares of its
11
<PAGE> 15
Series F Exchangeable Preferred Stock to NS Finance III, Inc., for $1,000 per
share. NSC, on behalf of itself and its affiliates, has agreed not to acquire
additional shares of the Company's stock prior to the redemption of the Series F
Exchangeable Preferred Stock or to transfer such Preferred Stock without the
Company's approval. Such Preferred Stock is exchangeable at the Company's
option, with the consent of NS Finance III, Inc., for $185,000,000 principal
amount of 10.23% Subordinated Voting Notes. So long as NS Finance III, Inc. and
certain transferees beneficially own at least 100,000 shares of such Preferred
Stock or $100,000,000 aggregate principal amount of such Subordinated Voting
Notes, the Company has agreed to nominate a mutually agreeable individual as
NSC's designee for election to the Board of Directors. No such individual is
being nominated by the Company at this time. In connection with such sale, the
Company agreed to repurchase $185,000,000 of its common stock. At year-end 1993,
a total of approximately $144,000,000 had been spent to buy back approximately
4,600,000 shares of common stock. The Company suspended further open-market
stock purchases in December 1990 pending return to acceptable levels of
profitability. Until the repurchase is completed, the Company has agreed to
maintain cash, certain securities, a surety bond or letter of credit, or some
combination thereof, currently equal to $22,000,000, in order to meet its
remaining repurchase obligation.
The Company and NSC or their respective affiliates previously had entered
into a number of agreements related primarily to certain joint ventures and
certain technical projects concerning the Company's integrated steel operations,
and additional transactions have been and may be entered into in the future upon
terms to be determined through negotiation between the parties. The following is
a summary of arrangements and transactions between the Company and NSC or their
affiliates in effect since at least the beginning of 1994 or presently proposed.
JOINT VENTURES
In July 1987, the Company and NSC entered into a joint venture for a
cold-rolling facility to be constructed near New Carlisle, Indiana. I/N Tek, the
general partnership formed for this joint venture, is 60% owned by a wholly
owned subsidiary of Inland Steel Company ("ISC") and 40% owned by an indirect
wholly owned subsidiary of NSC. The facility was completed in April 1990 at a
cost of approximately $525,000,000. Funds for the project were provided by
capital contributions by the two partners ($111,600,000 by ISC's subsidiary and
$74,400,000 by NSC's subsidiary) and by third-party financing. The partners made
subordinated loans to the partnership in the aggregate amount of approximately
$6,302,000 (in proportion to their respective partnership interests) in 1993 and
$5,558,000 during 1991. No such loans were made in 1992. Additional equity
contributions of $3,900,000 were made by the partners in proportion to their
partnership interests in 1993 and $3,000,000 in 1992 for capital projects.
Additional subordinated loans of approximately $2,500,000 are expected to be
made in 1994 by the partners in proportion to their partnership interests for
capital projects. I/N Tek made equity distributions in 1993 totalling
approximately $31,834,000 to the partners in proportion to their partnership
12
<PAGE> 16
interests. ISC generally has exclusive rights to the production capacity of the
facility and an obligation to use the facility for its production of cold-rolled
steel through a tolling arrangement with I/N Tek. I/N Tek charged ISC
approximately $141,193,000 in tolling fees during 1993. NSC has the right to
purchase up to 400,000 tons of cold-rolled steel from ISC in each year at
market-based negotiated prices, including steel processed by I/N Tek. During
1993, NSC, through NS Sales, Inc., an indirect wholly owned subsidiary of NSC,
made purchases from ISC of cold-rolled steel, including I/N Tek products,
totalling approximately $157,800,000. The joint venture will terminate on
December 31, 2009, unless otherwise terminated or extended pursuant to the
provisions of the joint venture agreement. I/N Tek and its partners have entered
into various technology, management, administrative services and commercial
agreements with respect to the project, which agreements will terminate upon
termination of the joint venture. Pursuant to such agreements, I/N Tek paid to
NSC approximately $1,540,000 in 1993 and is required to pay to NSC approximately
$1,400,000 plus certain costs over the next two years for technology transfer
and services. I/N Tek also paid to ISC approximately $140,000 in 1993 for
administrative support services. During 1993 I/N Tek made purchases from Company
subsidiaries of approximately $7,945,000. In 1993, the partnership made payments
to the partners in proportion to their partnership interests of approximately
$1,595,000 in connection with subordinated loans the partners previously made to
the partnership.
In September 1989, the Company and NSC entered into a joint venture for a
400,000-ton electrogalvanizing line and 500,000-ton hot-dip galvanizing line
adjacent to the I/N Tek venture. I/N Kote, the general partnership formed for
this joint venture, is 50% owned by subsidiaries of each of ISC and NSC. The
electrogalvanizing line began start-up operations in September 1991 and the
hot-dip galvanizing line began start-up operations in November 1991. The project
cost approximately $554,000,000. 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 by the two partners of
$60,000,000 each and by subordinated partner loans of $30,000,000 each. ISC and
NSC have each guaranteed the share of project indebtedness attributable to their
respective subsidiaries. I/N Kote had approximately $516,000,000 outstanding
under its long-term financing agreement at December 31, 1993. The joint venture
will terminate on December 31, 2007, unless otherwise terminated or extended
pursuant to provisions of the joint venture agreement. I/N Kote is required to
buy all of its cold-rolled steel from ISC, 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% after
operating and financing costs; this price is subject to an upward price
adjustment if ISC's return on sales is less than I/N Kote's return on sales.
Prices of cold-rolled steel sold by ISC to I/N Kote are determined pursuant to
the terms of the joint venture agreement and are based, in part, on operating
costs of I/N Kote. During 1993, ISC sold cold-rolled sheet steel to I/N Kote at
a price that approximated its cost of production compared to 1992, when such
sales were at less than its cost of production. The amount of such adjustments
for 1992 and 1993 are approximately $2,500,000 and $4,400,000 respectively. The
total amount of such adjustments is expected to be paid by the partnership to
ISC in 1994. The
13
<PAGE> 17
partners are not expected to be required to make price adjustment payments for
1994. ISC acts as sales agent for I/N Kote's products in North America, and NSC
has agreed to certain limitations on its shipment of similar products into the
U.S. and Canada. ISC incurred costs of approximately $31,101,000 to I/N Kote for
certain tolling services and scrap purchases in 1993. I/N Kote and its partners
also have entered into various technology, management, administrative services
and other agreements with respect to the project. All of these agreements will
terminate upon termination of the joint venture. I/N Kote paid ISC approximately
$191,700,000 for cold-rolled sheet steel during 1993. I/N Kote paid
approximately $270,000 to NSC in 1993 for engineering services and technology
transfers and does not expect to pay any amounts to NSC for such services during
1994. In 1993, I/N Kote made purchases from NSC subsidiaries of approximately
$14,000. I/N Kote made payments of approximately $6,713,000 to ISC in 1993 in
connection with various administrative, engineering and sales services provided
to I/N Kote by ISC. In addition to the transactions described above, Company
subsidiaries made purchases of approximately $1,492,000 from I/N Kote in 1993
and during the year I/N Kote made purchases from Company subsidiaries of
approximately $93,000.
In the event of certain changes in control of either the Company or NSC, or
if the Company makes or permits certain dispositions of specified portions of
ISC's business or interests in ISC, the other party has the right to purchase
the first party's interests in these ventures or to require the first party to
buy its interests, in each case at fair market value.
OTHER AGREEMENTS
Commencing in 1981, the Company and NSC have entered into various
agreements pursuant to which NSC has provided technical services and licenses
with respect to specific Company research and engineering projects. ISC and NSC
also entered into a Steel Technology Agreement in 1989 that provides a framework
for technology cooperation, furnishing of technical services, and licensing of
proprietary steel technology by NSC to ISC. The agreement has an initial term of
five years, with provision for annual renewals. Pursuant to certain of such
agreements, ISC incurred charges of approximately $4,751,000 for technical
services and engineering services provided to ISC by NSC in 1993 and for related
administrative costs, and anticipates incurring charges of at least $2,000,000
in 1994 for such NSC services (and related costs) to be provided under such
agreements. ISC also has agreed to purchase approximately $49,000,000 of steel
slabs from NSC in 1994 and approximately $18,000,000 of steel slabs in 1995, at
prices which approximate market prices.
14
<PAGE> 18
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table presents the compensation for fiscal 1991, 1992 and
1993 paid by the Company or its subsidiaries to the chief executive officer and
the four other most highly compensated executive officers of the Company.
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
-----------------------
Annual Compensation Securities
-------------------------------------- Restricted Underlying
Name and Principal Other Annual Stock Stock All Other
Position Year(1) Salary Bonus Compensation(2) Awards(3) Options(#) Compensation(2)(4)
- ---------------------- ---- -------- -------- --------------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert J. Darnall 1993 $548,522 $ 0 $ 0 $267,000 40,000 $ 27,431
Chairman, President 1992 471,812 0 0 0 30,000 26,088
and Chief Executive
Officer
David B. Anderson 1993 299,208 0 0 89,000 18,000 14,956
Vice President- 1992 299,208 0 0 0 15,000 17,349
Corporate Planning, 1991 289,237 0 -- 0 15,000 --
General Counsel
and Secretary(5)
W. Gordon Kay 1993 316,589 127,000 332,114(6) 144,625 25,000 418,540
Senior Vice 1992 302,627 66,000 0 0 20,000 15,764
President 1991 280,008 0 -- 0 15,000 --
Earl L. Mason 1993 317,740 0 0 111,250 18,000 15,895
Vice President and 1992 309,166 0 130,116(7) 0 15,000 16,744
Chief Financial 1991 161,112(8) 100,000(9) -- 129,454 15,000 --
Officer
Maurice S. Nelson, Jr. 1993 448,589 0 210,519(6) 222,500 25,000 282,237
Senior Vice President 1992 344,009 0 4,218 0 20,000 14,943
</TABLE>
- ---------------
(1) Mr. Darnall became Chief Executive Officer of the Company during 1992 and
Mr. Nelson became an executive officer during 1992. Compensation for such
individuals for 1991 is therefore not shown.
(2) Information is not required to be given for 1991.
(3) Awards consist of restricted common stock made during the three-year
reporting period and are valued at the aggregate market value as of the date
of grant. Dividends are paid on such shares to the extent paid on the
Company's common stock. The vesting schedule for all such restricted stock
awards made in 1993 provides that all shares will vest at the end of the
three-year period beginning April 1, 1993. However, vesting may be
accelerated at the discretion of the Compensation Committee in the event of
exceptional individual performance and (or) significant progress by the
Company or the appropriate business unit in meeting its operating and
financial objectives. The number and value of the aggregate restricted stock
holdings at
15
<PAGE> 19
December 31, 1993, based on the closing market price of the Company's common
stock on such date, were: Mr. Darnall, 12,000 shares/$397,500; Mr. Anderson,
4,000 shares/$132,500; Mr. Kay, 6,500 shares/$215,313; Mr. Mason, 9,495
shares/$314,522; and Mr. Nelson, 14,938 shares/$494,821.
(4) Amounts for 1993 include a premium of $270,685 paid by the Company for an
annuity for Mr. Nelson and a letter of credit in the face amount of $421,290
(with a present value of $402,716) for Mr. Kay to fund non-qualified
retirement benefits. The remainder of such amounts in each case and all
amounts for other named executive officers for 1993 represent the value of
vested and unvested employer contributions and allocations to the Inland
Steel Industries Thrift Plan and the Inland Steel Industries Non-qualified
Thrift Plan.
(5) Mr. Anderson became Corporate Secretary effective January 1, 1994.
(6) Amounts for 1993 include tax gross-up payments in connection with the
purchase of annuities or with establishment of a letter of credit for
funding nonqualified retirement benefits, as follows: Mr. Kay, $320,825; and
Mr. Nelson, $200,595.
(7) Includes primarily $81,944 related to Company-paid relocation expenses and a
related $41,291 tax payment.
(8) Mr. Mason was first employed by the Company in June 1991; compensation shown
is for the remainder of that year.
(9) Bonus paid pursuant to an employment agreement.
INDIVIDUAL OPTION GRANTS IN 1993
The following table presents information with respect to (a) individual
grants of options that were made during the last fiscal year to each of the
named executive officers and (b) the grant date present value of such options.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------------
OPTIONS GRANTED
AS A PERCENT
NUMBER OF PERCENT OF OF SHARES OF
SECURITIES TOTAL OPTIONS COMMON STOCK
UNDERLYING GRANTED TO OUTSTANDING
OPTIONS EMPLOYEES IN AT FISCAL EXERCISE EXPIRATION GRANT DATE
NAME GRANTED(1) FISCAL YEAR YEAR-END(2) PRICE(3) DATE PRESENT VALUE(4)
- ----------------------------- --------- ------------- --------------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Darnall............ 40,000 7.0% 0.10% $26.125 5/25/2003 $462,000
David B. Anderson............ 18,000 3.1 0.04 26.125 5/25/2003 207,900
W. Gordon Kay................ 25,000 4.3 0.06 26.125 5/25/2003 288,750
Earl L. Mason................ 18,000 3.1 0.04 26.125 5/25/2003 207,900
Maurice S. Nelson, Jr........ 25,000 4.3 0.06 26.125 5/25/2003 288,750
</TABLE>
- ---------------
(1) All options are for common stock and were granted on May 26, 1993. They
become exercisable with respect to 16 2/3% of the shares after May 26, 1994,
an additional 33 1/3% after December 31, 1994, an additional 16 2/3% after
May 26, 1995, and are fully exercisable after May 26, 1996. See "Change in
Control of the Company" for option provisions regarding any change in
control of the Company.
16
<PAGE> 20
(2) The percentage is based on 41,087,069 shares of common stock outstanding at
December 31, 1993.
(3) The exercise price is equal to the average of the high and low price of the
Company's common stock on the New York Stock Exchange Composite Transactions
on the date of grant. The exercise price may be paid by delivery of
already-owned shares, and an optionee may elect to have the Company withhold
shares of stock (or accept already-owned shares) to satisfy tax withholding
obligations with respect to option exercises or payments.
(4) In accordance with Securities and Exchange Commission rules, the
Black-Scholes option pricing model was chosen to estimate the grant date
present value of the options granted during 1993. The Company's use of this
model should not be construed as an endorsement of the model's accuracy at
valuing options. The following assumptions were made for purposes of
calculating the present value of the options as of the grant date: the
option term is 10 years, the volatility of Company common stock is 35.9%
(calculated using daily stock prices for the one-year period prior to the
grant date), the ten-year risk-free interest rate is 6.04%, the dividend
rate is 0%, and a reduction of approximately 26.2% reflects the probability
of (i) forfeiture due to termination prior to vesting, and (ii) a shortened
option term due to termination of employment prior to the option expiration
date. The value of the options granted in 1993 depends upon the actual
performance of the Company's common stock during the applicable period; the
actual value, if any, that an optionee will realize upon exercise of an
option will depend on the excess of the market value of the Company's stock
over the exercise price on the date the option is exercised.
AGGREGATED OPTION EXERCISES IN 1993 AND YEAR-END OPTION/SAR VALUES
The following table presents the value of the option/SAR holdings of the
named executive officers at the end of 1993; no options or SARs were exercised
by them during the year.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS/SARS AT
OPTIONS/SARS AT FISCAL FISCAL YEAR-END(1)
YEAR-END (EXERCISABLE/ (EXERCISABLE/
NAME UNEXERCISABLE) UNEXERCISABLE)
- ----------------------------------------- ---------------------- --------------------
<S> <C> <C>
Robert J. Darnall........................ 61,000/74,000 $ 272,313/$576,375
David B. Anderson........................ 36,500/35,500 186,625/ 280,063
W. Gordon Kay............................ 27,833/46,667 148,070/ 360,836
Earl L. Mason............................ 12,500/35,500 136,563/ 280,063
Maurice S. Nelson, Jr. .................. 8,333/41,667 92,289/ 302,086
</TABLE>
- ---------------
(1) All such options are for common stock of the Company; value is based on the
closing price of Company common stock on the New York Stock Exchange
Composite Transactions on December 31, 1993.
17
<PAGE> 21
PENSION BENEFITS
The following table shows the maximum annual pension benefits payable on a
straight life annuity basis to employees in various earnings classifications
upon retirement at age 65. All benefit amounts shown in such table are subject
to offset based upon Social Security earnings.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE ANNUAL
EARNINGS FOR
THE APPLICABLE ANNUAL PENSION BENEFITS FOR YEARS OF SERVICE SHOWN
YEAR-OF-SERVICE --------------------------------------------------------------------------
PERIOD 5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- --------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 200,000.............. $ 17,000 $ 34,000 $ 51,000 $ 68,000 $ 85,000 $102,000 $119,000
400,000.............. 34,000 68,000 102,000 136,000 170,000 204,000 238,000
600,000.............. 51,000 102,000 153,000 204,000 255,000 306,000 357,000
800,000.............. 68,000 136,000 204,000 272,000 340,000 408,000 476,000
1,000,000.............. 85,000 170,000 255,000 340,000 425,000 510,000 595,000
1,200,000.............. 102,000 204,000 306,000 408,000 510,000 612,000 714,000
1,400,000.............. 119,000 238,000 357,000 476,000 595,000 714,000 833,000
1,600,000.............. 136,000 272,000 408,000 544,000 680,000 816,000 952,000
</TABLE>
As of April 5, 1994, executive officers named in the table under the
heading "Summary Compensation Table" were credited with the following years of
service under the plan: Robert J. Darnall -- 32 years; David B. Anderson -- 11
years; W. Gordon Kay -- 2 years; Earl L. Mason -- 3 years; and Maurice S.
Nelson, Jr. -- 2 years.
Pensions are provided by the Company and certain of its subsidiaries and
affiliates under a non-contributory plan to eligible employees (including
employees who are directors or officers) who, at retirement, have met certain
service or service and age requirements. In general for salaried employees,
benefits are based on years of service and individual earnings for the highest
consecutive 36-month period of earnings during the last ten 12-month periods of
service prior to retirement. For this purpose, earnings generally consist of
salary compensation plus bonus compensation.
Certain pension benefits in excess of limitations imposed by the Internal
Revenue Code will be paid by the Company pursuant to unfunded non-contributory
supplemental retirement plans. For any officer or employee with at least five
years of service (including in the case of Maurice S. Nelson, Jr., service with
his prior employer), annual compensation in excess of $150,000, and age 55 or
older, these plans permit the Company to satisfy its obligations for benefits
payable upon retirement at age 65 by (a) purchase of annuities either prior to
or at the time of retirement (and a tax gross-up payment to the officer or
employee at the time of purchase), or (b) the payment of a lump-sum amount at
the time of retirement. The Company also established individual letters of
credit naming certain executive officers or employees, including W. Gordon Kay,
as beneficiaries to provide
18
<PAGE> 22
lump-sum payments at retirement to satisfy Company obligations pursuant to such
supplemental retirement plans.
All accrued benefits under the pension plan vest, and all benefits accrued
under the supplemental retirement plans will become fully and irrevocably vested
and distributable to participants as provided by the terms of such plans then in
effect, in the event of a change in control of the Company. Any surplus assets
under the plan are to be used to provide additional benefits in the event of a
termination, merger or consolidation of the plan, or a transfer of assets to
another plan, within three years of such a change in control, and limitations
have been placed on amendments to the plan within such three-year period.
Pension benefits are provided to eligible salaried employees of J. M. Tull
Metals Company, Inc. under a separate benefit schedule of the Inland Steel
Industries Pension Plan. The maximum annual pension benefits payable under such
schedule are approximately three percent higher than those shown in the above
table for comparable earnings and service. Prior to becoming covered by the
Company's benefit schedule on January 1, 1992, W. Gordon Kay was covered by the
Tull benefit schedule and is credited with 32 years of service under that
schedule.
The Company has an Agreement with Mr. Nelson under which he will receive
supplemental pension benefits under the highest of whichever of three separate
formulas applies. If his employment is terminated for any reason after five or
more years of service with the Company, he will receive the excess, if any, of
the amounts he would receive under the Company's pension plans if he were
credited under those plans with his 21 years of service and his earnings with
his prior employer over the sum of his actual benefits under the Company's
pension plans plus those received by him under his prior employer's pension
plans. If his employment is terminated at any time for any reason other than his
voluntary resignation, he will receive the excess, if any, of 50% of the amounts
he would receive under the Company's pension plans if he were credited under
those plans with his years of service and earnings with his prior employer over
his actual benefits under the Company's plans. If he retires as an employee of
the Company on or after age 62, he will receive the excess, if any, of 50% of
his "average monthly earnings" (as defined in the Company's plans) over amounts
received by him under his prior employer's and the Company's pensions plans.
CHANGE IN CONTROL OF THE COMPANY
Upon the occurrence of an event constituting a change in control of the
Company, (i) the value of all outstanding stock options, stock appreciation
rights and restricted stock awards (whether or not then fully exercisable or
vested) will be cashed out at specified prices as of the date of the change in
control, except that (a) any stock options or stock appreciation rights
outstanding for less than six months are not cashed out until six months after
the applicable date of grant and (b) the Compensation Committee of the Board of
Directors may provide for immediate vesting instead of cashing out of restricted
stock awards; and (ii) all outstanding performance awards will be cashed out in
the
19
<PAGE> 23
amounts and manner determined by the Compensation Committee at the time such
awards are made. In this connection, a "change in control of the Company" shall
generally be deemed to occur if (i) any person becomes the owner of 40% or more
of the combined voting power of the Company's voting securities (30% or more in
the case of the Inland 1988 Incentive Stock Plan); (ii) during any two-year
period the majority of the membership of the Company's Board changes without the
approval of two-thirds of the directors who either were directors at the
beginning of the period or whose election was previously so approved; (iii) the
Company's stockholders approve a merger or consolidation with another company in
which the Company's voting securities do not continue to represent at least 80%
of the combined voting power of the voting securities of the surviving entity
(excepting certain recapitalizations of the Company); or (iv) the Company's
stockholders approve a liquidation, sale or disposition of all or substantially
all of the Company's assets.
The Company has entered into agreements with the named executive officers,
the present terms of which expire on December 31, 1994, but are automatically
extended for additional one-year periods thereafter unless the Company gives
prior notice that it does not wish to extend such agreements for another year.
These agreements provide that if such executive's employment is terminated
within two years after a change in control of the Company either (i) by the
Company other than for "cause" or other than as a consequence of death,
disability or retirement (all as defined in such agreements) or (ii) by such
executive for reasons relating to a diminution of responsibilities, compensation
or benefits or relocation requiring a change in residence or a significant
increase in travel, he will receive: (a) a lump-sum payment equal to two times
the sum of (1) his current annual base salary plus (2) his average incentive
bonus paid in the two years preceding termination of employment; (b) an amount
in cash in lieu of any allocations, unpaid awards or rights under the Company's
annual or other incentive compensation plans; (c) an amount in cash equal to the
value of outstanding stock options granted under the Company's stock option
plans; (d) an amount in cash equal to the value of shares of common stock
awarded or issuable as performance and/or restricted shares under the Company's
incentive stock plans; (e) life, disability, accident and health insurance as
provided in the Company's insurance programs for a period of 24 months after
termination of employment; and (f) an amount in cash in lieu of two years of
additional accrued benefits under the Company pension plan. The severance
agreements contain an excise tax "gross-up" provision pursuant to which the
executive will be paid an additional amount upon the imposition of any excise
tax. While this provision will preserve the benefits receivable under the
severance agreements for the executives, the Company will not be entitled to a
federal income tax deduction for a portion of the severance payment.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
REGARDING EXECUTIVE COMPENSATION
The Company's executive compensation programs are designed to attract and
retain outstanding individuals as officers and key employees and to reward such
individuals based on their personal performance and contributions and on the
financial performance of the
20
<PAGE> 24
Company and its business units. Such programs consist of three elements -- base
salary compensation, short-term incentive compensation, and long-term incentive
compensation -- and are administered by the Compensation Committee of the Board
of Directors. The Compensation Committee consists of five directors, none of
whom is or has been an employee of the Company or any of its subsidiaries. The
Committee currently employs and periodically meets with outside compensation
consultants for assistance regarding the Company's executive compensation
programs.
Total compensation opportunities are intended to be competitive with those
offered by manufacturing companies of comparable size, with particular attention
paid to the compensation practices of integrated steel producers, including
those in the S&P Steel Index (see "Comparison of Five-Year and Two-Year
Cumulative Total Return" below), and other metals companies. In recent years, as
a result of economic difficulties in the steel industry in general and for the
Company specifically, the Compensation Committee has been concerned about the
retention of talented executive and management personnel. The Committee has
addressed this concern by paying particular attention to base salary
compensation and by the limited but important use of restricted stock.
Base salary compensation of executive officers is reviewed annually by the
Compensation Committee, and recommendations of the Committee in that regard are
acted upon by the Board of Directors. Base salaries are targeted at the 50th
percentile of comparable positions in the comparison group of companies
described in the immediately preceding paragraph. Such base compensation
generally represents approximately one-half of the total target compensation
opportunity for executive officers of the Company. The other one-half of such
target compensation, consisting of short-term and long-term incentive
compensation in accordance with the factors described below, is variable and
fluctuates significantly from year to year as a result of the highly cyclical
condition of the steel industry. Mr. Darnall's base salary was increased to
$550,000 in September 1992 in recognition of his increased responsibilities and
the accomplishments resulting in his promotion to his current position and was
not adjusted in 1993.
Short-term incentive compensation is payable to officers and other key
employees under the Inland Steel Industries, Inc. Annual Incentive Plan. This
Plan, which is administered by the Compensation Committee, provides for cash
awards based on a specified percentage of a participant's salary earnings and
the extent to which corporate and(or) business unit performance standards based
on return on operating assets are achieved for the year. Due to the financial
performance of the Integrated Steel segment and the Company's net loss, such
segment and the Company as a whole did not achieve the minimum performance
standard established for 1993 and no payments were made under the Plan to Mr.
Darnall or other named executive officers for 1993 except to Mr. Kay. Mr. Kay's
award payments reflected the 1993 return on operating assets achieved by the
Steel Service Center segment, of which he is president and chief operating
officer. Because the Plan currently utilizes return on operating assets as the
performance goal, 1993 awards do not reflect the positive performance by the
Company stock as indicated in the 1993 portion of the two-year performance
graph. The Plan is being submitted to stockholders for
21
<PAGE> 25
approval, as described under the caption "Proposal to Approve the Inland Steel
Industries, Inc. Annual Incentive Plan" below, in order to satisfy the
requirements of Internal Revenue Code Section 162(m) for maximum deductibility
by the Company, for federal income tax purposes, of payments made under the Plan
to named executive officers.
Long-term incentive compensation grants and awards may be made by the
Compensation Committee under the Inland 1992 Incentive Stock Plan. These grants
and awards consist of stock options, stock appreciation rights, restricted stock
awards, and performance awards, or combinations thereof. Stock options and stock
appreciation rights may be granted at not less than 100% of the fair market
value of the Company's common stock on the date of grant and are generally
exercisable for a period not exceeding ten years. Restricted stock awards,
consisting of shares of common stock, are contingent on continuing employment
with the Company for not less than one or more than ten years, and performance
awards, payable in shares of common stock or cash, are contingent on the
achievement over a period of not less than one or more than ten years of such
performance objectives as shall be established by the Compensation Committee.
Grants and awards made by the Compensation Committee under the Plan are intended
to provide executive officers not only with additional incentives for
outstanding individual performance but also with an opportunity to acquire an
ownership stake in the Company and thereby more closely align their interests
with those of the stockholders.
Options to purchase a total of 126,000 shares of common stock and
restricted stock awards totalling 37,500 shares of common stock were granted to
named executive officers by the Compensation Committee in 1993, including
options to purchase 40,000 shares and a restricted stock award of 12,000 shares
to Mr. Darnall. The Compensation Committee considered the amount and terms of
prior awards of options when deciding on option awards for 1993. Such grants of
options and restricted stock, including those made to Mr. Darnall, were targeted
at the 50th percentile of comparable positions based on a compensation analysis
for officer positions of the Company, a comparative company survey of
compensation practices at 26 industrial companies (including two companies in
the S&P Steel Index) with median sales revenues of $2,700,000,000 and a summary
of executive compensation issues prepared by the Company's outside executive
compensation consultants. Grants to named executive officers in 1993 were
approximately 77% stock options and 23% restricted stock awards. These grants
were intended to provide incentives to improve stockholder value, to encourage
executive retention in a highly cyclical industry and to remain competitive in
executive recruitment. The restrictions on the restricted stock awards will
lapse, and the shares vest, at the end of the three-year period beginning April
1, 1993. However, vesting may be accelerated at the discretion of the
Compensation Committee in the event of exceptional individual performance
and(or) significant progress by the Company or the respective business unit in
meeting its operating and financial objectives. No performance awards were made
to named executive officers in 1993.
The Compensation Committee established a Stock Ownership Guidelines Program
in January 1994 for approximately 260 executive officers and key employees. The
Program is designed to align the interest of the Company's executive officers
and key employees with
22
<PAGE> 26
those of Company stockholders to create value for stockholders. The Program
establishes stock ownership goals to be met by such officers and key employees
by December 31, 1998. Stock ownership goals are satisfied by Company stock held
by executives and their families, Company stock held in the Inland Steel
Industries Thrift Plan, and stock options, based on the difference between the
market price and the exercise price.
Certain pension benefits in excess of limitations imposed by the Internal
Revenue Code are required to be paid by the Company pursuant to existing
unfunded non-contributory supplemental retirement plans. These plans were
amended during 1993 to permit the Company, in the case of officers or employees
meeting certain age, service and compensation level requirements, to satisfy its
obligations for benefits payable upon retirement at age 65 by (a) purchase of
annuities either prior to or at the time of retirement (and a tax gross-up
payment to the officer or employee at the time of purchase), or (b) the payment
of a lump-sum amount at the time of retirement. Pursuant to the amended Plan,
the Company purchased an annuity for Mr. Nelson in 1993 covering all accrued
obligations as of December 31, 1993. The Company also established an individual
letter of credit naming W. Gordon Kay as beneficiary to provide a lump-sum
payment at retirement to satisfy Company obligations pursuant to such
supplemental retirement plans. Such annuity and letter of credit and the related
tax gross-ups were designed to provide an after-tax benefit equivalent to the
benefit provided under the plans. Establishing such security for non-qualified
retirement benefits enables the Company to satisfy such obligations on a current
basis, to defer the covered employee's receipt of payment until retirement and
to meet such obligation on retirement by lump-sum payment. The Compensation
Committee amended the plans to adopt the annuity program to encourage executive
retention, to reduce the Company's future obligations with respect to these
plans, and to attain security for eligible employees for pension payments at an
acceptable level of tax consequences to the Company and eligible employees.
Mr. Darnall meets frequently with the Compensation Committee and with the
non-management directors. These meetings include an annual review by the
Committee of his financial, operating, and organizational goals for the Company
for the year and an evaluation of the achievement of the previous year's goals.
The results of that evaluation are an important element in compensation
decisions made by the Committee and the Board of Directors, both with respect to
Mr. Darnall and with respect to the other executive officers of the Company.
The Compensation Committee desires to maximize the ability of the Company
to deduct compensation expenses for federal income tax purposes. Therefore, the
Committee has examined the Company's compensation policy in light of amendments
to the Internal Revenue Code enacted in 1993 that could limit the deductibility
of compensation of the chief executive officer and the four other most highly
compensated officers of the Company. These amendments to the Code allow
compensation paid pursuant to plans that are approved by stockholders and that
meet certain other requirements, including establishing objective performance
goals, to continue to be deductible. Therefore, the Compensation Committee has
recommended, and the Board of Directors has adopted, amendments to the
23
<PAGE> 27
Inland Steel Industries, Inc. Annual Incentive Plan, subject to stockholder
approval, that satisfy these requirements. See "Proposal to Approve the Inland
Steel Industries, Inc. Annual Incentive Plan" below.
<TABLE>
<S> <C>
RAYMOND C. TOWER, Chairman ARNOLD R. WEBER
JOSHUA I. SMITH DONALD S. PERKINS
EMERSON KAMPEN
</TABLE>
COMPARISON OF FIVE-YEAR AND TWO-YEAR CUMULATIVE TOTAL RETURN
The following charts compare the Company's cumulative total stockholder
return on its common stock for the five-year period and the two-year period
ended December 31, 1993, with the cumulative total return of the Standard &
Poor's 500 Composite Stock Price Index (the "S&P 500 Index") and the Standard &
Poor's Steel Index (the "S&P Steel Index"), both of which indexes include the
Company. These comparisons assume the investment of $100 on December 31, 1988
and 1991, respectively, and the reinvestment of dividends. In addition to the
Company, the S&P Steel Index includes Armco, Inc., Bethlehem Steel Corporation,
Nucor Corp., USX-US Steel Group, Inc. and Worthington Industries.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) INLAND S&P 500 S&P STEEL
<S> <C> <C> <C>
1988 100 100 100
1989 84 132 97
1990 65 127 81
1991 57 165 100
1992 60 177 131
1993 87 195 172
</TABLE>
In late 1991, the Company announced a major turnaround strategy to improve
performance by reducing costs and enhancing asset utilization and in this
connection took a $215 million restructuring charge. While the Company's total
return lagged the indices in
24
<PAGE> 28
1992, key elements of the Company's turnaround strategy have now been
implemented and total return for 1993 significantly exceeded both indices.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) INLAND S&P 500 S&P STEEL
<S> <C> <C> <C>
1991 100 100 100
YEQ1 92 105 97 101
Q2 92 120 99 111
Q3 92 86 102 97
Q4 92 105 108 131
Q1 93 102 112 150
Q2 93 133 113 155
Q3 93 130 116 152
Q4 93 153 118 172
</TABLE>
PROPOSAL TO APPROVE THE
INLAND STEEL INDUSTRIES, INC.
ANNUAL INCENTIVE PLAN
The Company has maintained the Inland Steel Industries, Inc. Annual
Incentive Plan (the "Plan") as an integral part of its compensation plan for
salaried employees for many years. The Board of Directors is now submitting the
Plan to stockholders for approval in order to enable the Company to qualify
payments made under the Plan as deductible for federal income tax purposes for
tax years commencing January 1, 1994. The summary of the Plan which follows is
qualified in its entirety by reference to the complete text of the Plan as set
forth in Exhibit A hereto.
GENERAL DESCRIPTION
All full-time salaried employees of the Company, Inland Steel Company,
Inland Materials Distribution Group, Inc., Joseph T. Ryerson & Son, Inc., and
J.M. Tull Metals Company, Inc., and of any affiliate, subsidiary, division or
group of the Company or any subsidiary of the Company designated from time to
time by the Board of Directors of the Company (each, a "Corporate Unit") as of
the first and last day of a quarterly award period or as of June 30 and December
31 of an annual award period (except as otherwise provided by the Committee) are
eligible to be designated as participants in the Plan for the applicable award
period. As of December 31, 1993, approximately 5,700 employees were
25
<PAGE> 29
eligible to participate in the Plan. Except in the case of death, disability,
retirement or change of control, a participant must be an employee as of the
last day of an award period to be eligible for an award. The Compensation
Committee may adopt criteria restricting the number of full-time salaried
employees eligible to be designated as Plan participants for any applicable
award period. The Compensation Committee may determine and establish from time
to time an award period applicable to any specified Corporate Unit or salary
classification or grade, or combination thereof, which award period may be
either a calendar quarter or a calendar year. The Compensation Committee
determines and designates from time to time those eligible employees who will be
participants in any award period. Notwithstanding any other provision of the
Plan to the contrary, the Compensation Committee may impose such conditions on
participation in and awards under the Plan as it deems appropriate, including
conditions applicable to one or more participants that are intended to cause
awards payable under the Plan to be deductible for purposes of Section 162(m) of
the Internal Revenue Code. Such conditions include (but are not limited to)
conditions that may subject payment of awards to further stockholder approval of
the Plan and conditions that preclude the Compensation Committee from exercising
any discretion otherwise provided by the Plan to adjust Consolidated Earnings or
Operating Profits (as such terms are defined in the Plan) or to adjust
individual awards, if the effect of any such adjustment would be to increase the
amount of any award otherwise payable to such participants.
For each award period, the Compensation Committee must establish (i) a
minimum financial performance required by a Corporate Unit before an award may
be paid to a participant employed in such Corporate Unit, (ii) for each
participant, a Target Award expressed as a percentage of base salary earnings
for each such participant for such award period, on the basis of the
individual's salary grade classification, and (iii) an award schedule for each
Corporate Unit. The Plan permits minimum financial performance to be based upon
either return on equity or return on operating assets. Return on equity is
calculated by dividing consolidated earnings before taxes (with certain
adjustments) by stockholders' equity as adjusted for the relevant award period.
Return on operating assets is calculated by dividing operating profits as
adjusted by operating assets (as defined in the Plan). The Compensation
Committee has established the minimum financial performance of each Corporate
Unit based on return on operating assets.
No award will be paid to any participant in a Corporate Unit which in any
award period did not achieve the minimum financial performance established for
such Corporate Unit. The award for each participant in a Corporate Unit is the
percentage of such individual's Target Award determined in accordance with the
applicable award schedule; provided, however, that, subject to Plan provisions
limiting discretion of the Compensation Committee, the Compensation Committee
may adjust awards on the basis of quantitative and qualitative performance
measures and evaluations as it deems appropriate and may make adjustments as it
deems appropriate in the case of participants whose salary grade classifications
have changed during the relevant award period or who have been employed in more
than one Corporate Unit during the relevant award period. The maximum award
26
<PAGE> 30
payable to a participant in any calendar year is $2,000,000. 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.
Awards are paid in cash as soon as practicable after the end of the
applicable award period for which the award is made. If the participant to whom
an award has been made dies prior to the payment of the award, the award is paid
to the legal representative or to such other person as determined by the chief
executive officer of the Company. The Company or applicable Corporate Unit has
the right to deduct any taxes required by law to be withheld from any award. The
following table shows awards made under the Plan for 1993:
<TABLE>
<CAPTION>
1993 AWARDS
NAME AND POSITION(1) DOLLAR VALUE(2)
------------------------------------------- ---------------
<S> <C>
Robert J. Darnall.......................... $ 0
Chairman, President and
Chief Executive Officer
David B. Anderson.......................... 0
Vice President-Corporate Planning,
General Counsel and Secretary
W. Gordon Kay.............................. 127,000
Senior Vice President
Earl L. Mason.............................. 0
Vice President and
Chief Financial Officer
Maurice S. Nelson, Jr...................... 0
Senior Vice President
Current Executive.......................... 127,000
Officers as a Group
All Employees, including all Current
Officers who are not Executive Officers,
as a Group............................... 2,125,000
</TABLE>
- ---------------
(1) Only employees of the Company and its subsidiaries are eligible for awards
under the Plan.
(2) All awards made under the Plan for 1993 reflected the performance of the
Steel Service Center segment, of which Mr. Kay is President.
CHANGE OF CONTROL
The Plan provides that it will remain in effect for the remainder of any
calendar year in which a Change of Control of the Company occurs, and that each
participant will receive an award for all award periods occurring in such
calendar year at least equal to the Target Award whether or not awards would
otherwise have been payable under the Plan for such
27
<PAGE> 31
award periods occurring in such calendar year and whether or not the participant
was an employee at the end of any award period occurring in such calendar year.
A "Change of Control of the Company" is deemed to have occurred if there has
been a change in the composition of the Company's Board of Directors such that a
majority of the Board of Directors shall have been members for less than 24
months, unless the election of each new director who was not a director at the
beginning of the 24-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.
PLAN ADMINISTRATION
The Plan is administered by the Compensation Committee. Under the terms of
the Plan no member of the Compensation Committee is eligible to receive an award
while serving on such Committee (and no member would receive an award in any
event because awards are limited to employees and no Committee member is or has
been an employee of the Company or any of its subsidiaries). The Compensation
Committee has authority to interpret the Plan, to establish, amend and rescind
rules and regulations for the administration of the Plan, and to 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. Subject to Plan provisions respecting a Change of Control
of the Company, the Board of Directors of the Company may amend, suspend or
terminate the Plan at any time.
FEDERAL TAX ISSUES AND OTHER INFORMATION
An award constitutes ordinary income taxable to a participant in the year
to which the award relates. Subject to the provisions of Section 162(m) of the
Internal Revenue Code of 1986, as amended, and proposed regulations promulgated
thereunder (collectively, the "Code"), the Company or appropriate Corporate Unit
generally will be entitled to a corresponding deduction for the year to which
awards under the Plan relate (or, to the extent deferred, for the year in which
paid) with the possible exception of payments made upon a change of control. In
August 1993, the Omnibus Budget Reconciliation Act of 1993, among other things,
amended Section 162(m) of the Code to limit the allowable deduction for
compensation paid or accrued with respect to the chief executive officer and the
four other most highly compensated officers of a publicly held corporation at
the end of each fiscal year (commencing with fiscal years beginning on or after
January 1, 1994) to no more than $1,000,000 per year. Pursuant to proposed
Internal Revenue Service regulations published in December 1993, certain types
of compensation are excluded from this deduction limit, including payments
subject to the attainment of objective performance goals and satisfaction of a
disinterested director requirement and of a stockholder approval requirement.
Awards under the Plan meet the performance-based compensation requirement
because the awards are paid upon meeting the minimum financial performance
standards established by the Compensation Committee for each award period. The
Plan's administration by the
28
<PAGE> 32
Compensation Committee, as limited by Plan provisions governing the Compensation
Committee's discretion in making awards to the chief executive officer and other
participants for purposes of Section 162(m) of the Code, meets the second
requirement. The submission of the Plan to stockholders for approval and the
establishment of Plan provisions (i) limiting maximum awards, (ii) authorizing
the Compensation Committee to condition awards in order to preserve the
Company's tax deductions under Section 162(m), and (iii) precluding the
Compensation Committee from exercising its discretion to increase awards to
executives subject to Section 162(m) of the Code, are intended to qualify awards
made for 1994 and thereafter so as to preserve the Company's federal tax
deduction, if and when awards are paid under the Plan.
EFFECT OF VOTE
When stockholders approve the Plan, the Company intends to deduct, as
performance-based compensation, the amounts of any awards paid under the Plan to
the chief executive officer and the four other most highly compensated officers
of the Company in determining the Company's federal income tax liability.
Otherwise, the Company will maintain the Plan with respect to salaried employees
but will exclude the chief executive officer and the four other most highly
compensated executive officers at year-end from participating in the Plan.
Approval of the Plan requires the affirmative vote of the holders of shares
of the Company representing more than 50% of the voting power of shares
represented in person or by proxy and entitled to vote at the Annual Meeting.
Abstentions count against the proposal and broker non-votes have no effect on
the outcome of the vote. Proxies not limited to the contrary will be voted for
the approval of the Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
INLAND STEEL INDUSTRIES, INC. ANNUAL INCENTIVE PLAN.
ELECTION OF AUDITORS
Proxies not limited to the contrary will be voted for the election of Price
Waterhouse to audit the accounts of the Company and its subsidiaries for the
year 1994. Any proxy indicating a contrary choice will be voted in accordance
with that choice. Price Waterhouse has audited the accounts of the Company since
January 1, 1918.
Representatives of Price Waterhouse will be present at the Annual Meeting
and will be given the opportunity to make a statement if they desire to do so.
They will also be available to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
ELECTION OF PRICE WATERHOUSE AS AUDITORS.
29
<PAGE> 33
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders must be received in writing by the Secretary of
the Company no later than December 19, 1994 in order to be considered for
inclusion in the Company's proxy statement and form of proxy relating to the
Annual Meeting of Stockholders to be held in 1995. The By-laws of the Company
provide an advance notice procedure for proposals not included in the proxy
statement and in the form of proxy to be properly brought before an annual
meeting of stockholders.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented at the
Annual Meeting other than those set forth in the Notice of the Annual Meeting.
However, if any other matters do come before the meeting, it is intended that
the holders of the proxies will vote thereon in their discretion.
By order of the Board of Directors,
DAVID B. ANDERSON, Secretary
April 18, 1994
Chicago, Illinois
- --------------------------------------------------------------------------------
Each stockholder, whether or not he or she expects to be present in person at
the Annual Meeting, is requested to SIGN, DATE AND RETURN THE ENCLOSED PROXY in
the accompanying envelope as promptly as possible. A stockholder may revoke his
or her proxy at any time prior to voting.
30
<PAGE> 34
EXHIBIT 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 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.
A-1
<PAGE> 35
"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 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.
A-2
<PAGE> 36
"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 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.
A-3
<PAGE> 37
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 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.
A-4
<PAGE> 38
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.
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.
A-5
<PAGE> 39
NOTICE OF
ANNUAL MEETING
OF STOCKHOLDERS
AND PROXY STATEMENT
---------------------------------------------------------
INLAND STEEL INDUSTRIES, INC.
1994
<PAGE> 40
GRAPHICS APPENDIX LIST
Page where
Graphic Appears Description of Graphic or Cross-Reference
- --------------- -----------------------------------------
Pages 3, 4 and 5 Graphics Nos. 1 through 11 are photographs of
each nominee for election as director of the
Company.
Pages 24 and 25 Graphics Nos. 12 and 13 are stock performance
graphs comparing the cumulative total
stockholder return on the Company's common
stock for the five-year period and the two-year
period ended December 31, 1993, with the
cumulative total return of the Standard &
Poor's 500 Composite Stock Price Index and the
Standard & Poor's Steel Index, both of which
indices include the Company. The comparisons
assume the investment of $100 on December 31,
1988 and 1991, respectively, and the
reinvestment of dividends. Data points in each
graph as presented in the EDGAR version follow
the placeholder in the Proxy Statement. In
addition to the Company, the S&P Steel Index
includes Armco, Inc., Bethlehem Steel
Corporation, Nucor Corp., USX-US Steel Group,
Inc. and Worthington Industries.
<PAGE> 41
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INLAND STEEL INDUSTRIES, INC.--CONFIDENTIAL VOTING DIRECTIONS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
As a Participant in the Inland Steel Industries Thrift Plan, I hereby direct
Harris Trust and Savings Bank, as Trustee of the Employee Stock Ownership Plan
contained within the Thrift Plan, to vote all shares of common stock and all
shares of Series E ESOP Convertible Preferred Stock of Inland Steel Industries,
Inc. that are credited to my accounts in the Plan as of April 5, 1994 at the
Annual Meeting of Stockholders of the Company to be held May 25, 1994 and at
any adjournment thereof. UNLESS OTHERWISE SPECIFIED, ALL SHARES ALLOCATED TO
THE UNDERSIGNED'S THRIFT PLAN ACCOUNTS WILL BE VOTED FOR THE ELECTION OF
DIRECTORS, FOR APPROVAL OF THE INLAND STEEL INDUSTRIES, INC. ANNUAL INCENTIVE
PLAN, FOR THE ELECTION OF PRICE WATERHOUSE AS AUDITORS, AND AT THE DISCRETION
OF THE TRUSTEE OR ITS PROXIES UPON ANY AND ALL OTHER MATTERS THAT MAY PROPERLY
COME BEFORE SUCH ANNUAL MEETING OR ANY ADJOURNMENT THEREOF.
(Please complete on other side)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, AND 3.
1. ELECTION OF DIRECTORS.
A. Robert Abboud, James W. Cozad, Robert J. Darnall, James A. Henderson, Emerson
Kampen, Robert B. McKersie, Donald S. Perkins, Joshua I. Smith, Nancy H.
Teeters, Raymond C. Tower and Arnold R. Weber.
For Withheld For All Except
/ / / / / /_________________________
2. APPROVAL OF THE INLAND STEEL INDUSTRIES, INC. ANNUAL INCENTIVE PLAN.
For Against Abstain
/ / / / / /
3. THE ELECTION OF PRICE WATERHOUSE AS AUDITORS FOR THE YEAR 1994.
For Against Abstain
/ / / / / /
4. IN THE DISCRETION OF THE PROXIES, TO VOTE UPON ANY AND ALL OTHER MATTERS
WHICH MAY PROPERLY COME BEFORE SUCH ANNUAL MEETING OR ANY ADJOURNMENT
THEREOF.
--------------------------------
Signature
--------------------------------
Signature (If Held Jointly)
Dated , 1994
------------------------
PLEASE DATE, SIGN, AND RETURN PROMPTLY.
- --------------------------------------------------------------------------------
<PAGE> 42
- --------------------------------------------------------------------------------
INLAND STEEL INDUSTRIES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert J. Darnall, David B. Anderson and
Charles B. Salowitz, and each of them, as attorneys and proxies (with full
power of substitution in each) to vote all common stock of the Company that the
undersigned is entitled to vote (including any common stock credited to the
account of the undersigned under the Company's Shareholder Investment Service)
and all Series A $2.40 Cumulative Convertible Preferred Stock that the
undersigned is entitled to vote at the Annual Meeting of Stockholders of the
Company to be held May 25, 1994 and at any adjournment thereof. UNLESS
OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS,
FOR APPROVAL OF THE INLAND STEEL INDUSTRIES, INC. ANNUAL INCENTIVE PLAN, FOR
THE ELECTION OF PRICE WATERHOUSE AS AUDITORS, AND AT THE DISCRETION OF THE
PROXIES ON ANY AND ALL OTHER MATTERS THAT MAY PROPERLY COME BEFORE SUCH ANNUAL
MEETING OR ANY ADJOURNMENT THEREOF.
(Please complete on other side)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3.
1. ELECTION OF DIRECTORS.
A. Robert Abboud, James W. Cozad, Robert J. Darnall, James A. Henderson, Emerson
Kampen, Robert B. McKersie, Donald S. Perkins, Joshua I. Smith, Nancy H.
Teeters, Raymond C. Tower and Arnold R. Weber.
For Witheld For All Except
/ / / / / /___________________
2. APPROVAL OF THE INLAND STEEL INDUSTRIES, INC. ANNUAL INCENTIVE PLAN.
For Against Abstain
/ / / / / /
3. THE ELECTION OF PRICE WATERHOUSE AS AUDITORS FOR THE YEAR 1994.
For Against Abstain
/ / / / / /
4. IN THE DISCRETION OF THE PROXIES, TO VOTE UPON ANY AND ALL OTHER MATTERS
WHICH MAY PROPERLY COME BEFORE SUCH ANNUAL MEETING OR ANY ADJOURNMENT THEREOF.
------------------------
Signature
------------------------
Signature (If Held Jointly)
Dated , 1994
---------------
PLEASE DATE, SIGN, AND RETURN PROMPTLY.
- --------------------------------------------------------------------------------
<PAGE> 43
- --------------------------------------------------------------------------------
DEAR STOCKHOLDER:
Enclosed are your Proxy and Proxy Statement for the 1994 Annual
Meeting of Stockholders of Inland Steel Industries, Inc. Voting with
respect to any common stock held by you of record in certificate form,
any common stock credited to your account under the Shareholder
Investment Service, and any Series A $2.40 Cumulative Convertible
Preferred Stock held by you of record is consolidated on the enclosed
Proxy.
If, in addition to being a stockholder of the Company on April 5,
1994, you are a participant in the Company's Thrift Plan, you also
will receive Confidential Voting Directions and Instructions to Thrift
Plan Participants from the Company. You are requested to sign, date
and return the Confidential Voting Directions in the postage-paid
envelope provided with such Directions.
PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE, WHETHER OR NOT YOU DECIDE TO ATTEND THE
MEETING, TO ENSURE THAT YOUR VOTE IS REPRESENTED.
- --------------------------------------------------------------------------------
<PAGE> 44
- --------------------------------------------------------------------------------
INSTRUCTIONS TO THRIFT PLAN PARTICIPANTS
Please date and sign your name (exactly as it appears on the
accompanying Confidential Voting Directions) in the space provided and
return the Confidential Voting Directions in the enclosed postage-paid
envelope to direct Harris Trust and Savings Bank, as Trustee of the
Employee Stock Ownership Plan contained within the Thrift Plan, to
vote your shares in the Plan.
All shares of both the Company's common stock and its Series E
ESOP Convertible Preferred Stock allocated to your Thrift Plan
accounts, whether vested or unvested, will be voted by Harris Trust
and Savings Bank, Chicago, Illinois, as the Trustee, according to your
directions. IF THE CONFIDENTIAL VOTING DIRECTIONS ARE RETURNED SIGNED
WITH NO VOTING DIRECTIONS MARKED, YOU WILL BE DEEMED TO HAVE DIRECTED
THE TRUSTEE TO VOTE ALL SHARES ALLOCATED TO YOUR ACCOUNTS IN THE
MANNER SPECIFIED IN BOLDFACE TYPE ON THE FRONT OF THE CONFIDENTIAL
VOTING DIRECTIONS. THE TRUSTEE SHALL VOTE ALL SHARES ALLOCATED TO
PARTICIPANTS' ACCOUNTS FOR WHICH PROPERLY COMPLETED CONFIDENTIAL
VOTING DIRECTIONS ARE NOT RECEIVED PRIOR TO 5:00 P.M., CHICAGO TIME,
ON MAY 24, 1994 AND ALL UNALLOCATED SHARES HELD IN THE THRIFT PLAN IN
THE SAME PROPORTION AS THE SHARES WITH RESPECT TO WHICH PROPERLY
COMPLETED CONFIDENTIAL VOTING DIRECTIONS HAVE BEEN TIMELY RECEIVED
FROM PARTICIPANTS IN THE PLAN.
PLEASE DATE, SIGN AND RETURN THE CONFIDENTIAL VOTING DIRECTIONS
PROMPTLY, WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, SO
THAT YOUR SHARES WILL BE VOTED IN THE MANNER YOU DESIRE. YOU MAY
REVOKE YOUR VOTING DIRECTIONS AT ANY TIME PRIOR TO 5:00 P.M., CHICAGO
TIME, ON MAY 24, 1994.
If, in addition to being a Participant in the Thrift Plan, you
were a stockholder of the Company on April 5, 1994, you will receive a
separate Proxy and Proxy Statement from the Company. You are requested
to sign, date and return that Proxy in the postage-paid envelope
provided. Legal requirements provide for the separate solicitation of
Participants in the Plan who are also stockholders of the Company.
- --------------------------------------------------------------------------------
