<PAGE> 1
1995
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________________ TO _______________
COMMISSION FILE NUMBER 1-9117
INLAND STEEL INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 36-3425828
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
30 WEST MONROE STREET, CHICAGO, ILLINOIS 60603
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (312) 346-0300
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- -------------------------------------------- ------------------------------------
<S> <C>
COMMON STOCK ($1.00 PAR VALUE),
INCLUDING NEW YORK STOCK EXCHANGE, INC.
PREFERRED STOCK PURCHASE RIGHTS
SERIES A $2.40 CUMULATIVE CONVERTIBLE CHICAGO STOCK EXCHANGE, INCORPORATED
PREFERRED STOCK ($1.00 PAR VALUE)
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X . NO .
----- ----
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. / /
AS OF MARCH 12, 1996 THE AGGREGATE MARKET VALUE OF THE VOTING STOCK OF THE
REGISTRANT HELD BY NON-AFFILIATES OF THE REGISTRANT WAS $1,236,438,207.(1)
THE NUMBER OF SHARES OF COMMON STOCK ($1.00 PAR VALUE) OF THE REGISTRANT
OUTSTANDING AS OF MARCH 12, 1996 WAS 48,778,146.
(1)EXCLUDING STOCK HELD BY DIRECTORS AND OFFICERS OF REGISTRANT, WITHOUT
ADMISSION OF AFFILIATE STATUS OF SUCH INDIVIDUALS FOR ANY OTHER PURPOSE; ALSO,
EXCLUDING SERIES E ESOP CONVERTIBLE PREFERRED STOCK OF THE REGISTRANT, WHICH
SERIES IS NOT PUBLICLY TRADED.
DOCUMENTS INCORPORATED BY REFERENCE
PARTS I AND II OF THIS REPORT ON FORM 10-K INCORPORATE BY REFERENCE CERTAIN
INFORMATION FROM THE ANNUAL REPORT TO STOCKHOLDERS FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1995. PART III OF THIS REPORT ON FORM 10-K INCORPORATES BY
REFERENCE CERTAIN INFORMATION FROM THE COMPANY'S DEFINITIVE PROXY STATEMENT
WHICH WILL BE FURNISHED TO STOCKHOLDERS IN CONNECTION WITH THE ANNUAL MEETING OF
STOCKHOLDERS OF THE COMPANY SCHEDULED TO BE HELD ON MAY 22, 1996.
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<PAGE> 2
PART I
ITEM 1. BUSINESS.
Inland Steel Industries, Inc. (the "Company"), a Delaware corporation, is
the sole stockholder of Inland Steel Company and Inland Materials Distribution
Group, Inc. ("Distribution"). Inland Steel Company is a fully integrated
domestic steel company that produces and sells a wide range of steels, of which
approximately 99% consists of carbon and high-strength low-alloy steel grades.
It is also a participant in certain iron ore production and steel-finishing
joint ventures. Distribution is the sole stockholder of Joseph T. Ryerson & Son,
Inc. ("Ryerson") and J. M. Tull Metals Company, Inc. ("Tull"). Ryerson and Tull
are leading steel service, distribution and materials processing organizations.
BUSINESS SEGMENTS
The business segments of the Company and its subsidiaries are Steel
Manufacturing (including iron ore operations) and Materials Distribution. For
the three years ended December 31, 1995, information relating to net sales,
operating profit, identifiable assets, depreciation and capital expenditures for
both business segments of the Company appears in Note 16 of Notes to
Consolidated Financial Statements in the Company's Annual Report to Stockholders
for the fiscal year ended December 31, 1995. Such information is hereby
incorporated by reference herein.
Steel Manufacturing Operations
- ------------------------------
General
Inland Steel Company, a wholly owned subsidiary of the Company, is directly
engaged in the production and sale of steel and related products and the
transportation of iron ore, limestone and certain other commodities (primarily
for its own use) on the Great Lakes. Certain subsidiaries and associated
companies of Inland Steel Company are engaged in the mining and pelletizing of
iron ore and in the operation of a cold-rolling mill and steel galvanizing
lines. All raw steel made by Inland Steel Company is produced at its Indiana
Harbor Works located in East Chicago, Indiana, which also has facilities for
converting the steel produced into semi-finished and finished steel products.
Inland Steel Company has two divisions -- the Inland Steel Flat Products
Company division and the Inland Steel Bar Company division. The Flat Products
division manages Inland Steel Company's iron ore operations, conducts its
ironmaking operations, and produces the major portion of its raw steel. This
division also manufactures and sells steel sheet and strip and certain related
semi-finished products for the automotive, appliance, office furniture, steel
service center and electrical motor markets. The Flat Products division closed
its plate operations at year-end 1995. The Bar division manufactures and sells
special quality bars and certain related semi-finished products for forgers,
steel service centers, heavy equipment manufacturers, cold finishers and the
transportation industry. The Bar division closed its 28-inch structural mill in
early 1991, completing Inland Steel Company's withdrawal from the structural
steel manufacturing business.
Inland Steel Company and Nippon Steel Corporation ("NSC") are participants,
through subsidiaries, in two joint ventures that operate steel-finishing
facilities near New Carlisle, Indiana. The total cost of these two facilities
was approximately $1.1 billion. I/N Tek, owned 60% by a wholly owned subsidiary
of Inland Steel Company and 40% by an indirect wholly owned subsidiary of NSC,
operates a cold-rolling mill that achieved operation at its design capacity in
1992. I/N Kote, owned equally by wholly owned subsidiaries of Inland Steel
Company and NSC (indirect in the case of NSC), operates two galvanizing lines
that achieved operation at their design capacity in 1993. Inland Steel Company
is also a participant, through a subsidiary, in another galvanizing joint
venture located near Walbridge, Ohio.
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Raw Steel Production and Mill Shipments
The following table shows, for the five years indicated, Inland Steel
Company's production of raw steel and, based upon American Iron and Steel
Institute data, its share of total domestic raw steel production:
<TABLE>
<CAPTION>
RAW STEEL PRODUCTION
---------------------------------
INLAND STEEL
INLAND STEEL COMPANY AS A % OF
COMPANY U.S STEEL
(000 TONS*) INDUSTRY
------------ -----------------
<S> <C> <C>
1995..................................................... 5,419 5.3 %**
1994..................................................... 5,309 5.3
1993..................................................... 5,003 5.2
1992..................................................... 4,740 5.2
1991..................................................... 4,677 5.3
</TABLE>
- ---------------
* Net tons of 2,000 pounds.
** Based on preliminary data from the American Iron and Steel Institute.
The annual raw steelmaking capacity of Inland Steel Company was reduced to
6.0 million net tons from 6.5 million net tons effective September 1, 1991, as
Inland Steel Company ceased making ingots. The basic oxygen process accounted
for 91% and 94% of raw steel production of Inland Steel Company in 1995 and
1994, respectively. The remainder of such production was accounted for by
electric furnace.
The total tonnage of steel mill products shipped by Inland Steel Company
for each of the five years 1991 through 1995 was 5.1 million tons in 1995; 5.2
million tons in 1994; 4.8 million tons in 1993; 4.3 million tons in 1992; and
4.2 million tons in 1991. In 1995, sheet, strip, plate and certain related
semi-finished products accounted for 84% of the total tonnage of steel mill
products shipped from the Indiana Harbor Works, and bar and certain related
semi-finished products accounted for 16%.
In 1995 and 1994, approximately 93% and 95% respectively of the shipments
of the Flat Products division and 93% in both years of the shipments of the Bar
division were to customers in 20 mid-American states. Approximately 76% of the
shipments of the Flat Products division and 84% of the shipments of the Bar
division in 1995 were to customers in a five-state area comprised of Illinois,
Indiana, Ohio, Michigan and Wisconsin, compared to 77% and 84% in 1994. Both
divisions compete in these geographical areas, principally on the basis of
price, service and quality, with the nation's largest producers of raw steel as
well as with foreign producers and with many smaller domestic mills.
The steel market is highly competitive with major integrated producers,
including Inland Steel Company, facing competition from a variety of sources.
Many steel products compete with alternative materials such as plastics,
aluminum, ceramics, glass and concrete. Domestic steel producers have also been
adversely impacted by imports from foreign steel producers. Imports of steel
mill products accounted for 21.4% of the domestic market in 1995, below the 1984
peak of 26.4%, and 24.7% in 1994. Many foreign producers are owned, controlled,
or subsidized by their governments, allowing them to ship steel products into
the domestic market despite decreased profit margins or losses on such sales.
Mini-mills provide significant competition in certain product lines,
primarily structural shapes, bars and rods. Mini-mills are relatively efficient,
low-cost producers that manufacture steel principally from scrap in electric
furnaces and, at this time, generally have lower capital, overhead, employment
and environmental costs than the integrated steel producers, including Inland
Steel Company. Mini-mills have been adding capacity and expanding their product
lines in recent years to produce larger structural products and certain
flat-rolled products, including coated products. A significant increase in
modern mini-mill capacity is anticipated within the next two years.
Certain facilities at the Indiana Harbor Works have been permanently closed
and others have been shut down for temporary periods. The 28-inch structural
mill was closed in early 1991, reflecting a decision to withdraw from the
structural steel markets. In late 1991 the mold foundry, No. 8 Coke Oven
Battery, and selected other facilities were closed either as part of a program
to permanently reduce costs through the closure of uneconomic facilities or for
environmental reasons. Provisions with respect to the shutdown of the
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<PAGE> 4
structural mill were taken in 1987. Provisions for estimated costs incurred in
connection with the closure of the mold foundry, No. 8 Coke Oven Battery, and
selected other facilities were made in 1991. Included in such provisions were
costs associated with Inland Steel Company's closure of its No. 11 Coke Oven
Battery in June 1992. All remaining coke batteries were closed by year-end 1993,
a year earlier than previously anticipated. An additional provision was required
with respect to those closures. (See "Environment" below.) At year-end 1995 the
plate mill was closed. Provisions for such closure were taken prior to and in
1991.
For the five years indicated, shipments by market classification of steel
mill products produced by Inland Steel Company at its Indiana Harbor Works,
including shipments to affiliates of the Company, are set forth below. As shown
in the table, a substantial portion of shipments by the Flat Products division
was to steel service centers and transportation-related markets. The Bar
division shipped more than 54% of its products to the steel
converters/processors market over the five-year period shown in the table.
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL TONNAGE
OF STEEL SHIPMENTS
----------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Steel Service Centers:
Affiliates....................................... 9% 9% 9% 7% 8%
Non-Affiliates................................... 23 20 22 22 24
--- --- --- --- ---
32 29 31 29 32
Automotive......................................... 30 32 30 28 25
Steel Converters/Processors........................ 14 12 13 18 12
Appliance.......................................... 8 9 9 9 8
Industrial, Electrical and Farm Machinery.......... 7 8 7 8 9
Construction and Contractors' Products............. 2 2 3 3 4
Other.............................................. 7 8 7 5 10
--- --- --- --- ---
100% 100% 100% 100% 100%
=== === === === ===
</TABLE>
Some value-added steel processing operations for which Inland Steel Company
does not have facilities are performed by outside processors, including joint
ventures, prior to shipment of certain products to Inland Steel Company's
customers. In 1995, approximately 32% of the products produced by Inland Steel
Company were processed further through value-added services such as
electrogalvanizing, painting and slitting, excluding products processed further
by affiliates.
Approximately 78% of the total tonnage of shipments by Inland Steel Company
during 1995 from the Indiana Harbor Works was transported by truck, with the
remainder transported primarily by rail. A wholly owned truck transport
subsidiary of Inland Steel Company was responsible for shipment of approximately
15% of the total tonnage of products transported by truck from the Indiana
Harbor Works in 1995.
Substantially all of the steel mill products produced by the Flat Products
division are marketed through its own selling organization, with offices located
in Chicago; Southfield, Michigan; and Nashville, Tennessee. Substantially all of
the steel mill products produced by the Bar division are marketed through its
sales office in East Chicago, Indiana.
See "Product Classes" below for information relating to the percentage of
consolidated net sales accounted for by certain classes of similar products of
steel manufacturing operations.
Raw Materials
Inland Steel Company obtains iron ore pellets primarily from three iron ore
properties, located in the United States and Canada, in which subsidiaries of
Inland Steel Company have varying interests -- the Empire Mine in Michigan, the
Minorca Mine in Minnesota and the Wabush Mine in Labrador and Quebec, Canada.
Inland Steel Company has closed or terminated certain less cost-efficient iron
ore mining operations.
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<PAGE> 5
See "Properties Relating to Steel Manufacturing Segment -- Raw Materials
Properties and Interests" in Item 2 below for further information relating to
such iron ore properties.
The following table shows (1) the iron ore pellets available to Inland
Steel Company, as of December 31, 1995, from properties of its subsidiaries and
through interests in raw materials ventures; (2) 1995 and 1994 iron ore pellet
production or purchases from such sources; and (3) the percentage of Inland
Steel Company's iron ore requirements represented by production or purchases
from such sources in 1995 and 1994.
<TABLE>
<CAPTION>
IRON ORE
TONNAGES IN THOUSANDS
(GROSS TONS OF PELLETS)
--------------------------------- % OF
AVAILABLE AS OF PRODUCTION REQUIREMENTS(1)
DECEMBER 31, -------------- -------------
1995(2) 1995 1994 1995 1994
--------------- ----- ----- ---- ----
<S> <C> <C> <C> <C> <C>
INLAND STEEL MINING COMPANY PROPERTY
Minorca -- Virginia, MN.............. 62,000 2,769 2,717 38% 39%
IRON ORE VENTURES AND LONG-TERM
PURCHASE CONTRACTS
Empire (40% owned) -- Palmer, MI;
Wabush (15.09% owned) -- Wabush,
Labrador and Pointe Noire, Quebec,
Canada............................ 124,000 3,961 3,625 55 52
------- ----- ----- -- --
Total Iron Ore.................... 186,000 6,730 6,342 93% 91%
======= ===== ===== == ==
</TABLE>
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(1) Requirements in excess of production are purchased or taken from stockpile.
(2) Net interest in proven reserves.
All of Inland Steel Company's coal requirements are satisfied from
independent sources, with a portion of such requirements being met under a
significant purchase contract. The contract requires Inland Steel Company to
purchase (subject to force majeure provisions) a total of 1,270,000 tons of
metallurgical and/or steam coal at prices (intended to approximate market)
determined with respect to certain cost factors. The term of the contract has
been extended through April 1996, with the extension covering solely steam coal
due to the shutdown of Inland Steel Company's coke batteries in December 1993.
During 1995, Inland Steel Company purchased 25% of its coal requirements under
such contract, representing 66% of its steam coal requirements. It is
anticipated that steam coal purchases will be made under short-term contracts
and through spot-market purchases.
Inland Steel Company's other coal requirements are for the PCI Associates
joint venture, in which a subsidiary of Inland Steel Company holds a 50%
interest. The PCI facility pulverizes coal for injection into Inland Steel
Company's blast furnaces. Inland Steel Company had entered into a contract
(subject to force majeure provisions) to purchase 95% of the PCI facility's
requirements for injection-quality coal through the term of the contract (which
expired at the end of 1995). Early in 1994, Inland Steel Company suspended its
purchases under the contract's force majeure provisions and coal was not
purchased under this contract during 1995. As a result, the PCI facility's coal
requirements are satisfied under short-term purchase contracts.
In December 1993, the last of Inland Steel Company's coke-making facilities
was permanently shut down. Inland Steel Company has entered into two long-term
purchase contracts, one of which requires the purchase of 1,400,000 tons of coke
and extends through July 1999 subject to force majeure provisions and may be
extended by mutual agreement of the parties. The second contract requires the
purchase of 350,000 tons of coke for the period January 1, 1996 through December
31, 2000 on a take or pay basis, with a provision allowing Inland to sell the
coke to others. Both contract terms require purchases on an annualized basis at
prices negotiated annually based on certain market determinants. During 1995,
Inland Steel Company satisfied 70% of its total coke needs under such
arrangements. The remainder of its purchased coke requirements was obtained
through contracts with independent domestic and foreign sources.
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<PAGE> 6
Inland Steel Company sold all of its limestone and dolomite properties in
September 1990. Inland Steel Company has entered into a long-term contract with
the buyer of the properties to purchase, subject to certain exceptions and at
prices which approximate market, the full amount of its annual limestone needs
through 2002, with a required minimum annual purchase of one million gross tons
through 1996.
Approximately 80% of the iron ore pellets and all of the limestone received
by Inland Steel Company at its Indiana Harbor Works in 1995 were transported by
its Great Lakes carriers. Contracts are in effect for the transportation on the
Great Lakes of the remainder of its iron ore pellet requirements. Approximately
25% of Inland Steel Company's coal requirements were transported in its hopper
cars by unit train in 1995. The remainder of Inland Steel Company's coal
requirements was transported in independent carrier-owned equipment or leased
equipment. Approximately 23% of Inland Steel Company's coke requirements in 1995
were transported in its own hopper cars, 47% in leased hopper cars, 17% in
independent carrier-owned hopper cars, and 13% in independent carrier-owned
river barges.
See "Energy" below for further information relating to the use of coal in
the operations of Inland Steel Company.
Materials Distribution Operations
The Company's materials distribution operations in the United States are
conducted by its wholly owned materials distribution subsidiary, Inland
Materials Distribution Group, Inc., through its operating subsidiaries -- Joseph
T. Ryerson & Son, Inc. and J. M. Tull Metals Company, Inc. Ryerson, Tull and
Ryerson Coil Processing, a specialized processing unit, are organized into five
business units along regional and product lines. Ryerson, on a nationwide basis,
and Tull, in the southeastern and south-central United States, each compete with
a large number of steel service centers, some of which are affiliated with
foreign steelmakers. Competition is primarily on the basis of service, quality
and price. The ability to meet just-in-time delivery requirements of customers
depends on maintaining adequate inventories and processing capacity and highly
trained personnel.
Depending on location, the Company's materials distribution operations are
engaged in the sale of carbon, alloy and stainless steel; aluminum and aluminum
alloys; nickel and nickel alloys; copper; brass; specialty metals; and
industrial plastics. The materials distribution centers sell products in various
forms, including, again depending on location, plate, sheet, coil, wire, rod,
bar, tubing, pipe, structural, and expanded metal and grating. During 1995, the
Materials Distribution segment shipped approximately 38% of its product (by
sales revenue) to machinery manufacturers, 25% to metal producers and
fabricators, 10% to transportation equipment producers, 9% to electrical
machinery producers, 3% to wholesale distributors, 3% to construction-related
purchasers, 3% to metal mills and foundries, and 9% to other customers.
Approximately 17% of the tons of product purchased in 1995 by the Materials
Distribution segment were from affiliates.
Joseph T. Ryerson & Son, Inc.
Ryerson, with business unit headquarters in Philadelphia, Chicago, and
Seattle is a leading materials distribution organization. With full-line service
centers in 30 major cities, Ryerson is engaged in the nationwide sale of its
products through its own sales organization. Ryerson maintains heavy-duty
shears, slitters, precision cut-to-length lines, high-speed saws, flame-cutting
machines and other processing equipment for use in furnishing custom cutting and
miscellaneous shapes in accordance with customer orders. The Ryerson Coil
Processing Company division, headquartered in Chicago, performs processing
through five facilities for customers who traditionally buy large quantities of
sheet steel products. Ryerson also markets plant equipment products through a
wholesale industrial catalog.
J. M. Tull Metals Company, Inc.
Tull is one of the largest distributors of metals in the southeastern
United States. Tull and its wholly owned subsidiary, AFCO Metals, Inc., operate
19 service centers and two processing facilities located throughout the
southeastern and south-central United States. Tull produces a variety of metal
products with
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value-added processing, including welded steel tubing and roll-formed shapes.
Tull's products are sold principally through its own sales staff.
PRODUCT CLASSES
The following table sets forth the percentage of consolidated net sales,
for the five years indicated, contributed by each class of similar products in
the Steel Manufacturing segment that accounted for 10% or more of consolidated
net sales in such time period. The Materials Distribution segment of the Company
did not have any class of similar products that accounted for 10% or more of
such sales in any of such years.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Steel Manufacturing Operations
Sheet, Strip and Plate...................... 40% 43% 45% 45% 45%
Bar and Structural.......................... 9 8 7 6 6
--- --- --- --- ---
Total Steel Manufacturing Operations.......... 49 51 52 51 51
Materials Distribution Products............... 51 49 48 49 49
--- --- --- --- ---
100% 100% 100% 100% 100%
=== === === === ===
</TABLE>
CAPITAL EXPENDITURES AND INVESTMENTS IN JOINT VENTURES
In recent years, the Company and its subsidiaries have made substantial
capital expenditures, principally at the Indiana Harbor Works, to improve
quality and reduce costs, and for pollution control. Additions by the Company
and its subsidiaries to property, plant and equipment, together with retirements
and adjustments, for the five years ended December 31, 1995, are set forth
below. Net capital additions during such period aggregated $267.6 million.
<TABLE>
<CAPTION>
DOLLARS IN MILLIONS
------------------------------------------------------------
RETIREMENTS NET CAPITAL
ADDITIONS OR SALES ADJUSTMENTS ADDITIONS
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1995................................ $ 134.6 $ 41.3 $ 1.5 $ 94.8
1994................................ 245.3 61.9 2.1 185.5
1993................................ 105.6 143.4 (1.3) (39.1)
1992................................ 64.4 74.9 (7.4) (17.9)
1991................................ 140.2 95.3 (.6) 44.3
</TABLE>
In recent years, the Company's largest capital improvement projects at the
Indiana Harbor Works have emphasized reducing costs and improving quality in the
steel-processing sequence of Inland Steel Company. In 1995, the Company and its
subsidiaries made capital expenditures of $135 million. Approximately $114
million was spent for Steel Manufacturing capital projects in 1995, including
replacements and renewals. Capital expenditures of $245 million in 1994 included
$146 million related to the purchase of the No. 2 Basic Oxygen Furnace Shop
caster facility which had previously been leased, including $83 million for the
purchase of the equity interest plus assumption of $63 million of caster-related
debt.
In July 1987, a wholly owned subsidiary of Inland Steel Company formed a
partnership, I/N Tek, with an indirect wholly owned subsidiary of NSC to
construct, own, finance and operate a cold-rolling facility with an annual
capacity of 1,500,000 tons, of which approximately one-third is cold-rolled
substrate for I/N Kote (described below). The I/N Tek facility, located near New
Carlisle, Indiana, achieved operation at its design capacity in 1992. Inland
Steel Company, which owns, through its subsidiary, a 60% interest in the I/N Tek
partnership is, with certain limited exceptions, the sole supplier of hot band
to be processed by the I/N Tek facility and generally has exclusive rights to
the production capacity of the facility.
In September 1989, a wholly owned subsidiary of Inland Steel Company formed
a second partnership, I/N Kote, with an indirect wholly owned subsidiary of NSC
to construct, own, finance and operate two sheet steel galvanizing lines
adjacent to the I/N Tek facility. The subsidiary of Inland Steel Company owns a
50%
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<PAGE> 8
interest in I/N Kote. The I/N Kote facility consists of a hot-dip galvanizing
line and an electrogalvanizing line with a combined annual capacity of 900,000
tons. The facility achieved operation at its design capacity in 1993. Inland
Steel Company has guaranteed 50% of I/N Kote's permanent financing. I/N Kote has
contracted to acquire its cold-rolled steel substrate from Inland Steel Company,
which supplies the substrate from the I/N Tek facility and Inland Steel
Company's Indiana Harbor Works.
Further information regarding the I/N Tek and I/N Kote joint venture
projects will be set forth under the caption "Certain Relationships and Related
Transactions -- Joint Ventures" in the Company's definitive Proxy Statement
which will be furnished to stockholders in connection with the Annual Meeting
scheduled to be held on May 22, 1996, and is incorporated by reference into Item
13 of this Report.
The amount budgeted for 1996 capital expenditures by the Company and its
subsidiaries is approximately $200 million. It is anticipated that capital
expenditures will be funded from cash generated by operations, cash on hand at
year-end 1995, plus possible funding from third-party financing. (See
"Environment" below for a discussion of capital expenditures for pollution
control purposes.)
EMPLOYEES
The monthly average number of active employees of the Company and its
subsidiaries receiving pay during 1995 was approximately 15,400, of whom
approximately 10,200 were employed at Inland Steel Company. The majority of the
remaining employees were employed at the Company's materials distribution
operations. At year-end, approximately 7,900 of the Company's employees,
including 7,400 at Inland Steel Company, were represented by the United
Steelworkers of America, of whom approximately 600 at Inland Steel Company were
on furlough or indefinite layoff. Approximately 1,100 employees were represented
by other unions during 1995. Total employment costs decreased from $950 million
in 1994 to $941 million in 1995, as lower costs for pensions and other
postretirement benefits were almost entirely offset by higher direct
compensation expense, including profit sharing provisions.
Beginning in 1991, the Company embarked upon a major turnaround strategy,
with the assistance of an outside consulting firm, to significantly reduce
costs, increase revenues and improve asset utilization at both the Company and
Inland Steel Company. With the closure of the plate operations at year-end 1995,
the Company has completed the workforce reduction program which was part of the
turnaround strategy, reducing employment by 25%.
The current labor agreement between Inland Steel Company and the United
Steelworkers of America, effective August 1, 1993, covers wages and benefits
through July 31, 1999. Among other things, the agreement provided a wage
increase of $.50 per hour in 1995 and a $500 bonus in each of 1993 and 1994
(totalling in each case approximately $4 million). All active employees receive
an additional week of vacation in 1994 and in 1996. The agreement provides for a
reopener on wages and certain benefits in 1996 with an arbitration provision to
resolve unsettled issues, thereby precluding a work stoppage during the six-year
term of the contract. The agreement also provides for election of a Union
designee acceptable to the Company to the Company's Board of Directors (Dr.
Robert B. McKersie is such Union designee), restrictions on the ability of
Inland Steel Company to reduce the Union workforce (generally limited to
attrition and major facilities shutdowns) while allowing greater flexibility to
institute work rule changes, quarterly rather than annual payment of
profit-sharing amounts, significant improvements in pension benefits for active
employees, and the securing of retiree health care obligations through certain
trust and second mortgage arrangements. "First dollar" health care coverage is
eliminated under the agreement through the institution of co-payments and
increased deductibles on medical benefits.
As of December 31, 1995, the number of active employees at Ryerson was
approximately 4,000, of whom approximately 1,100 were covered by collective
bargaining agreements. Of those employees covered by collective bargaining
agreements, approximately 500 production, maintenance, and transportation
employees were represented by the United Steelworkers of America and
approximately 300 such employees were represented by the International
Brotherhood of Teamsters. The current agreement with the United Steelworkers
will expire on July 31, 1996. During 1995, Ryerson reached agreement at three
separate plants (Los Angeles, Spokane and Seattle) represented by various unions
covering 86 employees. These agreements
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<PAGE> 9
expire on various dates from April 30, 1997 through April 30, 1999. The
agreements, as well as the current agreement with the United Steelworkers of
America, provide for modest wage increases, lump sum bonuses, pension
improvements, and increased employee sharing of health care costs. Ryerson
maintains agreements with the Teamsters covering 10 facilities. Teamster
agreements expire on various dates during the period beginning June 30, 1996,
and ending May 15, 1999. In addition, Ryerson contracts with independent third
parties to provide approximately 170 drivers on a leased basis to ten Ryerson
facilities. These leased drivers are covered by agreements between the Teamsters
and such independent third parties, which agreements expire on March 31, 1998.
FOREIGN OPERATIONS
In 1994, the Company formed Inland International, Inc. to conduct the
Company's international operations, consisting of supporting its domestic
strategic customers' foreign operations, providing materials management and
technical services, selling products of the Company and its affiliates and
purchasing certain of their requirements, in each instance, outside of the
United States. In 1994, Inland International, Inc. organized Inland
International Trading, Inc. to sell products and services of the Company and its
affiliates and to purchase materials abroad. In order to implement such
purposes, in 1995 Inland International Trading, Inc. entered into a joint
venture to organize I.M.F. Steel International Limited, a Hong Kong company (in
which it holds a 50% interest), with the Hong Kong-based trading company
subsidiary of the MacSteel Group (South Africa) and Russel Metals, Inc.
(Canada). In 1994, an Inland International, Inc. subsidiary and Altos Hornos de
Mexico, S.A. de C.V., formed Ryerson de Mexico, S.A. de C.V. to provide
materials management and technical services to the Mexican market through 19
distribution locations in Mexico. In the People's Republic of China, the Company
has entered into a joint venture agreement with Baoshan Iron & Steel
Corporation, which is subject to certain government approvals. Other foreign
joint ventures are in the negotiation or planning stage. Substantially all of
the Company's operations are located in the United States and at year-end 1995,
investments in foreign operations and foreign sales were not material.
ENVIRONMENT
The Company is subject to environmental laws and regulations concerning
emissions into the air, discharges into ground water and waterways, and the
generation, handling, labeling, storage, transportation, treatment and disposal
of waste material. These include various federal statutes regulating the
discharge or release of pollutants to the environment, including the Clean Air
Act, Clean Water Act, Resource Conservation and Recovery Act, Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA," also
known as "Superfund"), Safe Drinking Water Act, and Toxic Substances Control
Act, as well as state and local requirements. Violations of these laws and
regulations can give rise to a variety of civil, administrative, and, in some
cases, criminal actions and could also result in substantial liabilities or
require substantial capital expenditures. In addition, under CERCLA the United
States Environmental Protection Agency (the "EPA") has authority to impose
liability for site remediation on waste generators, past and present site owners
and operators, and transporters, regardless of fault or the legality of the
original disposal activity. Liability under CERCLA is strict, joint and several.
On June 10, 1993, the U.S. District Court for the Northern District of
Indiana entered a consent decree that resolved all matters raised by a lawsuit
filed by the EPA in 1990. The consent decree included a $3.5 million cash fine,
environmentally beneficial projects at the Indiana Harbor Works through 1997
costing approximately $7 million, and sediment remediation of portions of the
Indiana Harbor Ship Canal and Indiana Harbor Turning Basin estimated to cost
approximately $19 million over the next several years. The fine and estimated
remediation costs were provided for in 1991 and 1992. After payment of the fine,
the Company's reserve for environmental liabilities totalled $19 million. In
1995 such reserve was increased to $26 million primarily to cover the costs of
assessing environmental contamination, discussed below. The consent decree also
defines procedures for corrective action at Inland Steel Company's Indiana
Harbor Works. The procedures defined establish essentially a three-step process,
each step of which requires agreement of the EPA before progressing to the next
step in the process, consisting of: assessment of the site, evaluation of
corrective measures for remediating the site, and implementation of the
remediation plan according to the
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<PAGE> 10
agreed-upon procedures. The Company is presently assessing the extent of
environmental contamination. The Company anticipates that this assessment will
cost approximately $1 million to $2 million per year and take another two to
four years to complete. Because neither the nature and extent of the
contamination nor the corrective actions can be determined until the assessment
of environmental contamination and evaluation of corrective measures is
completed, the Company cannot presently reasonably estimate the costs of or the
time required to complete such corrective actions. Such corrective actions may,
however, require significant expenditures over the next several years that may
be material to the financial position and results of operations of the Company.
Insurance coverage with respect to such corrective actions is not significant.
By year-end 1993, the last of Inland Steel Company's coke-making facilities
was permanently shut down. All coke battery closures were necessitated by the
inability of the facilities to meet environmental regulations and their
deteriorating condition and performance. The Company had anticipated the closure
of such remaining coke-making facilities at year-end 1994. The October 1993
decision to close these facilities early necessitated a fourth-quarter 1993
pre-tax charge of $22.3 million that included the write-off of property, plant
and equipment costs which were to be depreciated in 1994 and additional costs
related to the earlier-than-anticipated displacement of personnel. Inland Steel
Company has entered into two long-term contracts to satisfy the majority of its
coke needs. (See "Raw Materials" above.) In addition, Inland Steel Company
participates in a joint venture that has constructed and is operating a
pulverized coal injection facility for blast furnace application, reducing
Inland Steel Company's coke needs by approximately 25%. The facility achieved
operation at its design capacity in 1994.
Capital spending for pollution control projects totaled $19 million in
1995, up from $18 million in 1994. Another $39 million was spent in 1995 to
operate and maintain such equipment, versus $41 million a year earlier. During
the five years ended December 31, 1995, the Company has spent $274 million to
construct, operate and maintain environmental control equipment at its various
locations.
Environmental projects previously authorized and presently under
consideration, including those designed to comply with the 1990 Clean Air Act
Amendments, but excluding any amounts that would be required under the consent
decree settling the 1990 EPA lawsuit, will require capital expenditures of
approximately $23 million in 1996. It is anticipated that the Company will make
annual capital expenditures of $10 million to $15 million in each of the four
years thereafter. In addition, Inland Steel Company will have ongoing annual
expenditures of $40 million to $50 million for the operation of air and water
pollution control facilities to comply with current federal, state and local
laws and regulations. Due to the inability to predict the costs of corrective
action that may be required under the Resource Conservation and Recovery Act and
the consent decree in the 1990 EPA lawsuit, the Company cannot predict the
amount of additional environmental expenditures that will be required. Such
additional environmental expenditures, excluding amounts that may be required in
connection with the consent decree in the 1990 EPA lawsuit, however, are not
expected to be material to the financial position or results of operations of
Inland Steel Company.
See Item 3 below for information concerning certain proceedings pertaining
to environmental matters in which Inland Steel Company is involved.
ENERGY
Coal, together with coke, all of which are purchased from independent
sources, accounted for approximately 71% of the energy consumed by Inland Steel
Company at the Indiana Harbor Works in 1995. See "Environment" above for a
discussion of coke-making by Inland Steel Company.
Natural gas and fuel oil supplied approximately 26% of the energy
requirements of the Indiana Harbor Works in 1995 and are used extensively by the
Company at other facilities that it owns or in which it has an interest.
Utilization of the pulverized coal injection facility (see "Environment" above)
has reduced natural gas and fuel oil consumption at the Indiana Harbor Works.
The Company both purchases and, through Inland Steel Company, generates
electricity to satisfy electrical energy requirements at the Indiana Harbor
Works. In 1995, Inland Steel Company produced approximately 58% of its
requirements at the Indiana Harbor Works. The purchase of electricity at the
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<PAGE> 11
Indiana Harbor Works is subject to curtailment under rules of the local utility
when necessary to maintain appropriate service for various classes of its
customers.
A subsidiary of Nipsco Industries, Inc. ("Nipsco") has leased land at the
Indiana Harbor Works and built a 75 megawatt steam turbine on such land.
Pursuant to a 15-year toll-charge contract between Inland Steel Company and the
Nipsco subsidiary, the turbine facility is expected to generate electricity for
use by Inland Steel Company utilizing steam produced by burning waste blast
furnace gas. It is anticipated that the facility will become operational in the
first half of 1996 and that it will fulfill approximately 75% of the purchased
electricity requirements of the Indiana Harbor Works at prices below those
currently available to Inland Steel Company.
ITEM 2. PROPERTIES.
PROPERTIES RELATING TO STEEL MANUFACTURING SEGMENT
Steel Production
All raw steel made by Inland Steel Company is produced at its Indiana
Harbor Works located in East Chicago, Indiana. The property on which this plant
is located, consisting of approximately 1,900 acres, is held by Inland Steel
Company in fee. The basic production facilities of Inland Steel Company at its
Indiana Harbor Works consist of furnaces for making iron; basic oxygen and
electric furnaces for making steel; a continuous billet caster, a continuous
combination slab/bloom caster and two continuous slab casters; and a variety of
rolling mills and processing lines which turn out finished steel mill products.
Certain of these production facilities, including a continuous anneal line, are
held by Inland Steel Company under leasing arrangements. Inland Steel Company
purchased the equity interest of the lessor of the No. 2 BOF Shop caster
facility and assumed caster-related debt in March 1994, which debt was repaid by
year-end 1994. Substantially all of the remaining property, plant and equipment
at the Indiana Harbor Works, other than such caster facility and the leased
equipment, is subject to the lien of the First Mortgage of Inland Steel Company
dated April 1, 1928, as amended and supplemented. See "Business Segments --
Steel Manufacturing Operations -- Raw Steel Production and Mill Shipments" in
Item 1 above for further information relating to capacity and utilization of
Inland Steel Company's properties. Inland Steel Company's properties are
adequate to serve its present and anticipated needs, taking into account those
issues discussed in "Capital Expenditures and Investments in Joint Ventures" in
Item 1 above.
I/N Tek, a partnership in which a subsidiary of Inland Steel Company owns a
60% interest, has constructed a 1,500,000-ton annual capacity cold-rolling mill
on approximately 200 acres of land, which it owns in fee, located near New
Carlisle, Indiana. Substantially all the property, plant and equipment owned by
I/N Tek is subject to a lien securing related indebtedness. The I/N Tek facility
is adequate to serve the present and anticipated needs of Inland Steel Company
planned for such facility.
I/N Kote, a partnership in which a subsidiary of Inland Steel Company owns
a 50% interest, has constructed a 900,000-ton annual capacity steel galvanizing
facility on approximately 25 acres of land, which it owns in fee, located
adjacent to the I/N Tek site. Substantially all the property, plant and
equipment owned by I/N Kote is subject to a lien securing related indebtedness.
The I/N Kote facility is adequate to serve the present and anticipated needs of
Inland Steel Company planned for such facility.
PCI Associates, a partnership in which a subsidiary of Inland Steel Company
owns a 50% interest, has constructed a pulverized coal injection facility on
land located within the Indiana Harbor Works. Inland Steel Company leases PCI
Associates the land upon which the facility is located. Substantially all the
property, plant and equipment owned by PCI Associates is subject to a lien
securing related indebtedness. The PCI facility is adequate to serve the present
and anticipated needs of Inland Steel Company planned for such facility.
Inland Steel Company owns three vessels for the transportation of iron ore
and limestone on the Great Lakes, and a subsidiary of Inland Steel Company owns
a fleet of 404 coal hopper cars (100-ton capacity each) used in unit trains to
move coal and coke to the Indiana Harbor Works. See "Business Segments -- Steel
Manufacturing Operations -- Raw Materials" in Item 1 above for further
information relating to utilization of
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<PAGE> 12
Inland Steel Company's transportation equipment. Such equipment is adequate,
when combined with purchases of transportation services from independent
sources, to meet Inland Steel Company's present and anticipated transportation
needs.
Inland Steel Company also owns and maintains research and development
laboratories in East Chicago, Indiana, which facilities are adequate to serve
its present and anticipated needs.
Raw Materials Properties and Interests
Certain information relating to raw materials properties and interests of
Inland Steel Company and its subsidiaries is set forth below. See "Business
Segments -- Steel Manufacturing Operations -- Raw Materials" in Item 1 above for
further information relating to capacity and utilization of such properties and
interests.
Iron Ore
The operating iron ore properties of Inland Steel Company's subsidiaries
and of the iron ore ventures in which Inland Steel Company has an interest are
as follows:
<TABLE>
<CAPTION>
ANNUAL
PRODUCTION CAPACITY
(IN THOUSANDS OF
GROSS TONS OF
PROPERTY LOCATION PELLETS)
- ------------------------------------------ ------------------------ -------------------
<S> <C> <C>
Empire Mine............................... Palmer, Michigan 8,100
Minorca Mine.............................. Virginia, Minnesota 2,700
Wabush Mine............................... Wabush, Labrador and 5,700
Pointe Noire, Quebec,
Canada
</TABLE>
The Empire Mine is operated by the Empire Iron Mining Partnership, in which
Inland Steel Company has a 40% interest. Inland Steel Company, through a
subsidiary, is the sole owner and operator of the Minorca Mine. The Wabush Mine
is a taconite project in which Inland Steel Company owns an approximately 15%
interest. Inland Steel Company also owns a 38% interest in the Butler Taconite
project (permanently closed in 1985) in Nashwauk, Minnesota.
The reserves at the Empire Mine, the Minorca Mine and the Wabush Mine are
held under leases expiring, or expected at current production rates to expire,
between 2012 and 2040. Substantially all of the reserves at Butler Taconite are
held under leases. Inland Steel Company's share of the production capacity of
its interests in such iron ore properties is sufficient to provide the majority
of its present and anticipated iron ore pellet requirements. Any remaining
requirements have been and are expected to continue to be readily available from
independent sources. During 1992, the Minorca Mine's original ore body was
depleted and production shifted to a new major iron ore body, the Laurentian
Reserve, acquired by lease in 1990.
Coal
Inland Steel Company's sole remaining coal property, the Lancashire No. 25
Property, located near Barnesboro, Pennsylvania, is permanently closed. All
Inland Steel Company coal requirements for the past several years have been and
are expected to continue to be met through contract purchases and other
purchases from independent sources.
PROPERTIES OF MATERIALS DISTRIBUTION SEGMENT
Joseph T. Ryerson & Son, Inc.
Ryerson owns its regional business unit headquarters offices in Chicago and
leases regional headquarters offices in West Chester (PA) and Renton (WA).
Ryerson/East division maintains materials distribution centers at Buffalo,
Carnegie (PA), Charlotte, Chattanooga, Cleveland, Philadelphia, and Wallingford
(CT).
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Ryerson/Central's service centers are in Chicago, Cincinnati, Dallas, Des
Moines, Detroit, Houston, Indianapolis, Kansas City, Milwaukee, Omaha, Plymouth
(MN), St. Louis, and Tulsa. Ryerson/West's service centers are in Commerce City
(CO), Emeryville (CA), Los Angeles, Phoenix, Portland (OR), Renton (WA),
Spokane, and Salt Lake City. Ryerson Coil Processing division's processing
facilities are located in Chicago, Marshalltown (IA), Plymouth (MN) and New Hope
(MN).
All of Ryerson's operating facilities are held in fee with the exception of
a portion of the property at St. Louis (held under long-term lease), a portion
of the property in Portland (held under short-term lease), a satellite facility
at Omaha (held under short-term lease), one facility in Chicago (held under
short-term lease), two facilities in New Hope (MN) (one partly held in fee and
partly under short-term lease, the other held under short-term lease), one
facility in Marshalltown (IA) (held under an installment purchase contract) and
one facility in Salt Lake City (held under short-term lease). In addition,
Ryerson holds in fee approximately 44 acres of unimproved property in Powder
Springs (GA), and the approximately 11-acre site of a former operating facility
in Allston (MA). Ryerson's properties are adequate to serve its present and
anticipated needs.
J. M. Tull Metals Company, Inc.
Tull maintains service centers in Birmingham, Columbia (SC), Jacksonville,
Miami, Tampa, Baton Rouge, New Orleans, Charlotte, Greensboro (NC), Greenville
(SC), Richmond, and Norcross (GA), where its headquarters is located. All of
these facilities are owned by Tull in fee, except for the Columbia facility,
which is held under short-term lease. Tull's AFCO Metals, Inc. subsidiary
operates service centers in Fort Smith (AR), Oklahoma City, Shreveport, West
Memphis (AR), Wichita, Jackson (MS) and Little Rock. AFCO's headquarters are
located in Norcross (GA), where it leases space owned in fee by Tull. Each of
AFCO's facilities is held in fee except the Wichita facility, which is held
under a short-term lease. Tull's properties are adequate to serve its present
and anticipated needs.
OTHER PROPERTIES
The Company and certain of its subsidiaries lease, under a long-term
arrangement, approximately 63% of the space in the Inland Steel Building located
at 30 West Monroe Street, Chicago, Illinois (where the Company's principal
executive offices are located), which property interest is adequate to serve the
Company's present and anticipated needs. Approximately 33% of such space is
under sublease to other parties.
Magnetics International, Inc., a subsidiary of the Company, owns
approximately 63 acres in northern Indiana, on which site it has constructed an
iron oxide plant that began operation in April 1991. Such facility is adequate
to serve the present and anticipated needs of Magnetics International, Inc.
Certain subsidiaries of the Company hold in fee at various locations an
aggregate of approximately 355 acres of land, all of which is for sale. Inland
Steel Company also holds in fee approximately 300 acres of land adjacent to the
I/N Tek and I/N Kote sites, which land is available for future development.
Approximately 1,060 acres of rural land, which are held in fee at various
locations in the north-central United States by various raw materials ventures,
are also for sale. I R Construction Products Company, Inc. (formerly Inryco,
Inc.), a subsidiary of Inland Steel Company and the Company's former
Construction Products business segment, owns, in fee, a combination office
building and warehouse in Hoffman Estates (IL), which is for sale.
ITEM 3. LEGAL PROCEEDINGS.
On June 10, 1993, the U.S. District Court for the Northern District of
Indiana entered a consent decree that resolved all matters raised by the lawsuit
filed by the EPA in 1990. The consent decree includes a $3.5 million cash fine,
environmentally beneficial projects at the Indiana Harbor Works through 1997
costing approximately $7 million, and sediment remediation of portions of the
Indiana Harbor Ship Canal and Indiana Harbor Turning Basin estimated to cost
approximately $19 million over the next several years. The fine and estimated
remediation costs were provided for in 1991 and 1992. After payment of the fine,
the Company's reserve for environmental liabilities totalled $19 million. In
1995 such reserve was increased to $26 million primarily to cover the costs of
assessing environmental contamination discussed below. The consent decree
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<PAGE> 14
also defines procedures for corrective action at Inland Steel Company's Indiana
Harbor Works. The procedures defined establish essentially a three-step process,
each step of which requires agreement of the EPA before progressing to the next
step in the process, consisting of: assessment of the site, evaluation of
corrective measures for remediating the site, and implementation of the
remediation plan according to the agreed-upon procedures. The Company is
presently assessing the extent of environmental contamination. The Company
anticipates that this assessment will cost approximately $1 million to $2
million per year and take another two to four years to complete. Because neither
the nature and extent of the contamination nor the corrective actions can be
determined until the assessment of environmental contamination and evaluation of
corrective measures is completed, the Company cannot presently reasonably
estimate the costs of or the time required to complete such corrective actions.
Such corrective actions may, however, require significant expenditures over the
next several years that may be material to the financial position and results of
operations of the Company. Insurance coverage with respect to such corrective
actions is not significant.
On March 22, 1985, the EPA issued an administrative order to Inland Steel
Company's former Inland Steel Container Company Division ("Division") naming the
former Division and various other unrelated companies as responsible parties
under the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") in connection with the cleanup of a waste disposal facility operated
by Duane Marine Salvage Corporation at Perth Amboy, New Jersey. The
administrative order alleged that certain of the former Division's wastes were
transported to, and disposed of at, that facility and required Inland Steel
Company to join with other named parties in taking certain actions relating to
the facility. Inland Steel Company and the other administrative order recipients
have completed the work required by the order. In unrelated matters, the EPA
also advised the former Division and various other unrelated parties of other
sites located in New Jersey at which the EPA expects to spend public funds on
any investigative and corrective measures that may be necessary to control any
releases or threatened releases of hazardous substances, pollutants and
contaminants pursuant to the applicable provisions of CERCLA. The notice also
indicated that the EPA believes Inland Steel Company may be a responsible party
under CERCLA. The extent of Inland Steel Company's involvement and participation
in these matters has not yet been determined. While it is not possible at this
time to predict the amount of Inland Steel Company's potential liability, none
of these matters is expected to materially affect Inland Steel Company's
financial position. Results of operations could be materially affected for the
particular reporting periods in which expenses are incurred.
The EPA has adopted a national policy of seeking substantial civil
penalties against owners and operators of sources for noncompliance with air and
water pollution control statutes and regulations under certain circumstances. It
is not possible to predict whether further proceedings will be instituted
against the Company or any of its subsidiaries pursuant to such policy, nor is
it possible to predict the amount of any such penalties that might be assessed
in any such proceeding.
Inland Steel Company received a Notice of Violation from the Indiana
Department of Environmental Management ("IDEM") dated March 3, 1989 alleging
violations of Inland Steel Company's National Pollutant Discharge Elimination
System ("NPDES") permit regarding water discharges. IDEM advised Inland Steel
Company by letter dated November 22, 1995 that this Notice of Violation was
withdrawn inasmuch as the consent decree discussed in the first paragraph of
this section adequately addressed all of the violations noted in said Notice of
Violation.
By letter dated March 12, 1996, Inland Steel Company was informed that, at
the request of the EPA, the Department of Justice is preparing to bring civil
claims against Inland Steel Company for alleged violations of effluent limits
contained in its NPDES permit and for the alleged discharge of pollutants
without the authorization of an NPDES permit. While it is not possible at this
time to predict the amount of Inland Steel Company's potential liability, this
matter is not expected to materially affect Inland Steel Company's financial
position. Results of operations could be materially affected for the particular
reporting periods in which expenses are incurred.
Inland Steel Company received a Special Notice of Potential Liability
("Special Notice") from IDEM on February 18, 1992 relating to the Four County
Landfill Site, Fulton County, Indiana (the "Facility"). The Special Notice
stated that IDEM has documented the release of hazardous substances, pollutants
and
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<PAGE> 15
contaminants at the Facility and was planning to spend public funds to undertake
an investigation and control the release or threatened release at the Facility
unless IDEM determined that a potentially responsible party ("PRP") will
properly and promptly perform such action. The Special Notice further stated
that Inland Steel Company may be a PRP and that Inland Steel Company, as a PRP,
may have potential liability with respect to the Facility. In August 1993,
Inland Steel Company, along with other PRPs, entered into an Agreed Order with
IDEM, pursuant to which the PRPs agreed to perform a Remedial
Investigation/Feasibility Study ("RI/FS") for the Facility and pay certain past
and future IDEM costs. In addition, the PRPs agreed to provide funds for
operation and maintenance necessary for stabilization of the Facility. Those
costs which Inland Steel Company has agreed to assume under the Agreed Order are
not currently anticipated to exceed $250,000. The cost of the final remedies
which will be determined to be required with respect to the Facility cannot be
reasonably estimated until, at a minimum, the RI/FS is completed. Inland Steel
Company is therefore unable to determine the extent of its potential liability,
if any, relating to the Facility or whether this matter could materially affect
Inland Steel Company's financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
Not applicable.
EXECUTIVE OFFICERS OF REGISTRANT.
Officers are elected by the Board of Directors of the Company to serve for
a period ending with the next succeeding annual meeting of the Board of
Directors held immediately after the annual meeting of stockholders. All
executive officers of the Company, with the exception of Earl L. Mason, Maurice
S. Nelson, Jr., Neil S. Novich, and George A. Ranney, Jr., have been employed by
the Company or a subsidiary of the Company throughout the past five years.
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<PAGE> 16
Set forth below are the executive officers of the Company as of March 1,
1996 and the age of each as of such date. Their principal occupations at present
and during the past five years, including positions and offices held with the
Company or a significant subsidiary of the Company, are shown below.
<TABLE>
<CAPTION>
NAME, AGE AND POSITIONS AND OFFICES HELD
PRESENT POSITION WITH REGISTRANT DURING THE PAST FIVE YEARS
- ----------------------------------- --------------------------------------------------------
<S> <C>
Robert J. Darnall, 57.............. Mr. Darnall has been Chairman, President and Chief
Chairman, President, Chief Executive Officer of the Company since September 1,
Executive Officer and Director 1992. A Director of the Company since April 23, 1986, he
became Chairman of the Executive Committee on January 1,
1993. He has been Chairman of Inland Materials
Distribution Group, Inc. and Chairman and Chief
Executive Officer of Joseph T. Ryerson & Son, Inc. since
April 1995. He has also been Chairman of Inland Steel
Company since September 1992 and a Director of Inland
Steel Company since April 1983. He was President and
Chief Operating Officer of the Company from April 1986
to September 1992. Mr. Darnall was also Chief Executive
Officer of Inland Steel Company from September 1992 to
January 1995, and was also its President from November
1987 to September 1992, and was Chairman of Inland
Materials Distribution Group, Inc. from November 1990 to
June 1994.
Maurice S. Nelson, Jr., 58......... Mr. Nelson has been Executive Vice President and
Executive Vice President and Director of the Company and President and Chief
Director Executive Officer of Inland Steel Company since January
25, 1995. He was Senior Vice President of the Company
and President and Chief Operating Officer of Inland
Steel Company from September 1992 to January 1995. He
also holds the position of President of the Inland Steel
Flat Products Company division of Inland Steel Company,
which he assumed on joining the Company on November 1,
1991. Prior to joining Inland Steel Company, he was
President, Sheet and Plate Division, Aluminum Company of
America ("ALCOA"), from August 1991 to October 1991 and
Vice President, Sheet and Plate Division, ALCOA, from
October 1986 to July 1991. Mr. Nelson has elected to
retire April 1, 1996. Mr. Darnall will assume his
responsibilities.
Neil S. Novich, 41................. Mr. Novich has been Senior Vice President of the Company
Senior Vice President since January 25, 1995, and President and Chief
Operating Officer of Inland Materials Distribution
Group, Inc., Chairman and President of Joseph T. Ryerson
& Son, Inc., and Chairman of J.M. Tull Metals Company,
Inc. since June 15, 1994. He also was Vice President of
the Company from June 15, 1994 to January 25, 1995.
Prior to joining the Company, he led the Distribution
and Logistics Practice at Bain & Company, an
international management consulting firm, from 1987 and
was employed by Bain since 1981.
</TABLE>
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<PAGE> 17
<TABLE>
<CAPTION>
NAME, AGE AND POSITIONS AND OFFICES HELD
PRESENT POSITION WITH REGISTRANT DURING THE PAST FIVE YEARS
- ----------------------------------- --------------------------------------------------------
<S> <C>
Earl L. Mason, 48.................. Mr. Mason has been Senior Vice President of the Company
Senior Vice President and Chief since January 25, 1995, and has been its Chief Financial
Financial Officer Officer and President of Inland International, Inc.
since January 24, 1994. He was Vice President of the
Company from January 1994 to January 25, 1995, and was
Vice President -- Finance and Principal Financial
Officer of the Company from June 1991 to January 1994.
Prior to joining the Company, he was Group Executive --
Logistics and Asset Management of Digital Equipment
Corporation (a manufacturer of data processing
equipment) from July 1990 until joining the Company in
June 1991.
George A. Ranney, Jr., 55.......... Mr. Ranney has been Vice President and General Counsel
Vice President and General of the Company since July 26, 1995. He is also a partner
Counsel of the law firm of Mayer, Brown & Platt, counsel to the
Company. He has been a partner with such firm since
1986.
Judd R. Cool, 60................... Mr. Cool has been Vice President -- Human Resources of
Vice President -- Human Resources the Company since September 21, 1987 and Vice President
-- Human Resources of Inland Steel Company since May 24,
1995. He was Vice President-Human Resources of Inland
Steel Flat Products Company division from January 1993
to May 1995.
H. William Howard, 61.............. Mr. Howard has been Vice President -- Information
Vice President -- Information Technology of the Company since September 1, 1990 and
Technology Vice President -- Automation and Information Technology
of Inland Steel Company since May 24, 1995. He was Vice
President-Automation and Information Technology of
Inland Steel Flat Products Company division from January
1993 to May 1995.
Vicki L. Avril, 41................. Ms. Avril has been Treasurer of the Company and of
Treasurer and Director -- Inland Steel Company since January 24, 1994, and
Corporate Planning Treasurer of Inland Materials Distribution Group, Inc.,
Joseph T. Ryerson & Son, Inc. and J.M. Tull Metals
Company, Inc. since February 1994. She also has been
Director -- Corporate Planning since January 25, 1995.
In addition, she was Director of Pension Investments and
Administration from June 1991 to January 1995, Assistant
Treasurer of the Company from May 1993 to January 1994,
and Manager of Distribution Business
Development-Corporate Planning and Development from
February 1990 to June 1991.
James M. Hemphill, 52.............. Mr. Hemphill has been Controller of the Company since
Controller September 15, 1994. He was Director of Financial
Management of the Company from August 1992 to September
1994 and was Director of Taxes of the Company from March
1988 to August 1992.
Charles B. Salowitz, 47............ Mr. Salowitz has been Secretary of the Company since
Secretary and Associate General September 27, 1995 and Associate General Counsel since
Counsel January 22, 1995. He was an Assistant General Counsel of
the Company from July 1989 to January 1995 and was
Assistant Secretary from July 1989 to September 1995.
</TABLE>
16
<PAGE> 18
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
The common stock of the Company is listed and traded on the New York Stock
Exchange. As of March 12, 1996, the number of holders of record of common stock
of the Company was 14,843.
The remaining information called for by this Item 5 is set forth under the
caption "Summary by Quarter" in the Company's Annual Report to Stockholders for
the fiscal year ended December 31, 1995, and is hereby incorporated by reference
herein.
ITEM 6. SELECTED FINANCIAL DATA.
The information called for by this Item 6 with respect to each of the last
five years of the Company is set forth under the caption "Eleven-Year Summary of
Selected Financial Data and Operating Results" in the Company's Annual Report to
Stockholders for the fiscal year ended December 31, 1995, and is hereby
incorporated by reference herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information called for by this Item 7 is set forth in the Financial
Review section of the Company's Annual Report to Stockholders for the fiscal
year ended December 31, 1995, and, excluding the tables entitled "Inland Steel
Company -- Steel Shipments by Market" and "Inland Materials Distribution Group
- -- Shipments by Market" and the bar charts entitled "Inland Steel Industries --
Earnings Before Interest, Taxes, and Depreciation," "Inland Steel Company
Productivity," "Inland Materials Distribution Group -- Quarterly Improvement in
Operating Profit," and "Inland Steel Industries -- Debt to Total
Capitalization," contained therein, is hereby incorporated by reference herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of the Company called for by this
Item 8, together with the report thereon of the independent accountants dated
February 19, 1996, are set forth under the captions "Report of Independent
Accountants" and "Statement of Accounting and Financial Policies" as well as in
all consolidated financial statements and schedules of the Company and the
"Notes to Consolidated Financial Statements" in the Company's Annual Report to
Stockholders for the fiscal year ended December 31, 1995, and are hereby
incorporated by reference herein. The financial statement schedules listed under
Item 14(a)2 of this Report on Form 10-K, together with the report thereon of the
independent accountants dated February 19, 1996, should be read in conjunction
with the consolidated financial statements. Financial statement schedules not
included in this Report on Form 10-K have been omitted because they are not
applicable or because the information called for is shown in the consolidated
financial statements or notes thereto. Separate consolidated financial
statements for Inland Steel Company are set forth in Inland Steel Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995. Separate
consolidated financial statements for Inland Materials Distribution Group, Inc.
are set forth in Appendix A to this Report.
Consolidated quarterly sales, earnings and per share common stock
information for 1994 and 1995 are set forth under the caption "Summary by
Quarter" in the Company's Annual Report to Stockholders for the fiscal year
ended December 31, 1995, and are hereby incorporated by reference herein.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
17
<PAGE> 19
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information called for by this Item 10 with respect to directors of the
Company will be set forth under the captions "Election of Directors" and
"Security Ownership of Directors and Management" in the Company's definitive
Proxy Statement which will be furnished to stockholders in connection with the
Annual Meeting of Stockholders to be held on May 22, 1996, and is hereby
incorporated by reference herein. The information called for with respect to
executive officers of the Company is included in Part I of this Report on Form
10-K under the caption "Executive Officers of Registrant."
ITEM 11. EXECUTIVE COMPENSATION.
The information called for by this Item 11 will be set forth under the
caption "Executive Compensation" in the Company's definitive Proxy Statement
which will be furnished to stockholders in connection with the Annual Meeting of
Stockholders to be held on May 22, 1996, and is hereby incorporated by reference
herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) The information called for by this Item 12 with respect to security
ownership of more than five percent of the Company's common stock, Series E ESOP
Convertible Preferred Stock and its 10.23% Subordinated Voting Note will be set
forth under the caption "Additional Information Relating to Voting Securities"
in the Company's definitive Proxy Statement which will be furnished to
stockholders in connection with the Annual Meeting of Stockholders scheduled to
be held on May 22, 1996, and is hereby incorporated by reference herein.
The following beneficial owners of Series A $2.40 Cumulative Convertible
Preferred Stock, neither of whom owns shares of Series A Preferred Stock having
more than one percent of the combined voting power of the Company's outstanding
voting securities, are the only persons known to the Company to be the
beneficial owners (as defined by the Securities and Exchange Commission), as of
March 12, 1996, of more than five percent of that class of the Company's voting
securities:
<TABLE>
<CAPTION>
NUMBER PERCENT
NAME AND ADDRESS OF SHARES OF CLASS
---------------- --------- --------
<S> <C> <C>
Janice F. McCollough.............................................. 7,200 7.65
5778 Lake Breeze Court
Sarasota, FL 34233
Donald F. Reinhardt............................................... 5,181 5.50
24638 Elmhurst Drive
Elkhart, IN 46517
</TABLE>
(b) The information called for by this Item 12 with respect to the security
ownership of directors and of management will be set forth under the caption
"Security Ownership of Directors and Management" in the Company's definitive
Proxy Statement which will be furnished to stockholders in connection with the
Annual Meeting of Stockholders to be held on May 22, 1996, and is hereby
incorporated by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information called for by this Item 13 will be set forth under the caption
"Certain Relationships and Related Transactions" in the Company's definitive
Proxy Statement which will be furnished to stockholders in connection with the
Annual Meeting of Stockholders to be held on May 22, 1996, and is hereby
incorporated by reference herein.
18
<PAGE> 20
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) DOCUMENTS FILED AS A PART OF THIS REPORT.
1. CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY. The consolidated
financial statements listed below are set forth in the Company's Annual
Report to Stockholders for the fiscal year ended December 31, 1995, and
are incorporated by reference in Item 8 of this Annual Report on Form
10-K.
Report of Independent Accountants dated February 19, 1996.
Statement of Accounting and Financial Policies.
Consolidated Statements of Operations and Reinvested Earnings for the
three years ended December 31, 1995.
Consolidated Statement of Cash Flows for the three years ended
December 31, 1995.
Consolidated Balance Sheet at December 31, 1995 and 1994.
Schedules to Consolidated Financial Statements at December 31, 1995
and 1994, relating to:
Investments and Advances.
Property, Plant and Equipment.
Long-Term Debt.
Notes to Consolidated Financial Statements.
2. FINANCIAL STATEMENT SCHEDULES OF THE COMPANY.
Report of Independent Accountants on Financial Statement Schedules
dated February 19, 1996. (Included on page 26 of this Report)
Consent of Independent Accountants. (Included on page 26 of this
Report)
For the years ended December 31, 1995, 1994 and 1993:
Schedule I -- Condensed Financial Information (Parent Company
Only). (Included on pages 27 to 29, inclusive, of this Report)
Schedule II -- Reserves. (Included on page 30 of this Report)
3. CONSOLIDATED FINANCIAL STATEMENTS OF INLAND MATERIALS DISTRIBUTION
GROUP, INC.
The consolidated financial statements listed below are set forth in
Appendix A on pages A-1 to A-14 inclusive, of this Report.
Report of Independent Accountants dated February 19, 1996. (Page A-2)
Consolidated Statements of Operations and Reinvested Earnings for the
three years ended December 31, 1995. (Page A-3)
Consolidated Statement of Cash Flows for the three years ended
December 31, 1995.
(Page A-4)
Consolidated Balance Sheet at December 31, 1995 and 1994. (Page A-5)
Statement of Accounting and Financial Policies. (Pages A-6 to A-7)
Notes to Consolidated Financial Statements. (Pages A-8 to A-14,
inclusive)
19
<PAGE> 21
4. EXHIBITS. The exhibits required to be filed by Item 601 of Regulation
S-K are listed under the caption "Exhibits" below.
(B) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed by the Company during the quarter
ended December 31, 1995.
(C) EXHIBITS.
<TABLE>
<S> <C>
3.(i) Copy of Certificate of Incorporation, as amended, of the Company.
3.(ii) Copy of By-laws, as amended, of the Company. (Filed as Exhibit 3.(ii) to
the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995, and incorporated by reference herein.)
4.A Copy of Certificate of Designations, Preferences and Rights of Series A
$2.40 Cumulative Convertible Preferred Stock of the Company. (Filed as
part of Exhibit B to the definitive Proxy Statement of Inland Steel
Company dated March 21, 1986 that was furnished to stockholders in
connection with the annual meeting held April 23, 1986, and incorporated
by reference herein.)
4.B Copy of Certificate of Designation, Preferences and Rights of Series D
Junior Participating Preferred Stock of the Company. (Filed as Exhibit
4-D to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1987, and incorporated by reference herein.)
4.C Copy of Rights Agreement, dated as of November 25, 1987, as amended and
restated as of May 24, 1989, between the Company and The First National
Bank of Chicago, as Rights Agent (Harris Trust and Savings Bank, as
successor Rights Agent). (Filed as Exhibit 1 to the Company's Current
Report on Form 8-K filed on May 24, 1989, and incorporated by reference
herein.)
4.D Copy of Certificate of Designations, Preferences and Rights of Series E
ESOP Convertible Preferred Stock of the Company. (Filed as Exhibit 4-F to
the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1989, and incorporated by reference herein.)
4.E Copy of Subordinated Voting Note due December 17, 1999 in the amount of
$185,000,000 from the Company to NS Finance, III, Inc. (Filed as Exhibit
4.8 to Form S-3 Registration Statement No. 33-62897 and incorporated by
reference herein.)
4.F Copy of Indenture dated as of December 15, 1992, between the Company and
Harris Trust and Savings Bank, as Trustee, respecting the Company's
$150,000,000 12 3/4% Notes due December 15, 2002. (Filed as Exhibit 4-G
to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992, and incorporated by reference herein.)
4.G Copy of First Mortgage Indenture, dated April 1, 1928, between Inland
Steel Company (the "Steel Company") and First Trust and Savings Bank and
Melvin A. Traylor, as Trustees, and of supplemental indentures thereto,
to and including the Thirty-Fourth Supplemental Indenture, incorporated
by reference from the following Exhibits: (i) Exhibits B-1(a), B-1(b),
B-1(c), B-1(d) and B-1(e), filed with Steel Company's Registration
Statement on Form A-2 (No. 2-1855); (ii) Exhibits D-1(f) and D-1(g),
filed with Steel Company's Registration Statement on Form E-1 (No.
2-2182); (iii) Exhibit B-1(h), filed with Steel Company's Current Report
on Form 8-K dated January 18, 1937; (iv) Exhibit B-1(i), filed with Steel
Company's Current Report on Form 8-K, dated February 8, 1937; (v)
Exhibits B-1(j) and B-1(k), filed with Steel Company's Current Report on
Form 8-K for the month of April, 1940; (vi) Exhibit B-2, filed with Steel
Company's Registration Statement on Form A-2 (No. 2-4357); (vii) Exhibit
B-1(l), filed with Steel Company's Current Report on
</TABLE>
20
<PAGE> 22
<TABLE>
<S> <C>
Form 8-K for the month of January, 1945; (viii) Exhibit 1, filed with
Steel Company's Current Report on Form 8-K for the month of November,
1946; (ix) Exhibit 1, filed with Steel Company's Current Report on Form
8-K for the months of July and August, 1948; (x) Exhibits B and C, filed
with Steel Company's Current Report on Form 8-K for the month of March,
1952; (xi) Exhibit A, filed with Steel Company's Current Report on Form
8-K for the month of July, 1956; (xii) Exhibit A, filed with Steel
Company's Current Report on Form 8-K for the month of July, 1957; (xiii)
Exhibit B, filed with Steel Company's Current Report on Form 8-K for the
month of January, 1959; (xiv) the Exhibit filed with Steel Company's
Current Report on Form 8-K for the month of December, 1967; (xv) the
Exhibit filed with Steel Company's Current Report on Form 8-K for the
month of April, 1969; (xvi) the Exhibit filed with Steel Company's
Current Report on Form 8-K for the month of July, 1970; (xvii) the
Exhibit filed with the amendment on Form 8 to Steel Company's Current
Report on Form 8-K for the month of April, 1974; (xviii) Exhibit B, filed
with Steel Company's Current Report on Form 8-K for the month of
September, 1975; (xix) Exhibit B, filed with Steel Company's Current
Report on Form 8-K for the month of January, 1977; (xx) Exhibit C, filed
with Steel Company's Current Report on Form 8-K for the month of
February, 1977; (xxi) Exhibit B, filed with Steel Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1978; (xxii) Exhibit
B, filed with Steel Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1980; (xxiii) Exhibit 4-D, filed with Steel
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1980; (xxiv) Exhibit 4-D, filed with Steel Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1982; (xxv) Exhibit 4-E,
filed with Steel Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1983; (xxvi) Exhibit 4(i) filed with the Steel
Company's Registration Statement on Form S-2 (No. 33-43393); (xxvii)
Exhibit 4 filed with Steel Company's Current Report on Form 8-K dated
June 23, 1993; (xxviii) Exhibit 4.H filed with the Steel Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995; and
(xxix) Exhibit 4.H filed with the Steel Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995.
4.H Copy of consolidated reprint of First Mortgage Indenture, dated April 1,
1928, between Inland Steel Company and First Trust and Savings Bank and
Melvin A. Traylor, as Trustees, as amended and supplemented by all
supplemental indentures thereto, to and including the Thirteenth
Supplemental Indenture. (Filed as Exhibit 4-E to Form S-1 Registration
Statement No. 2-9443, and incorporated by reference herein.)
[The registrant hereby agrees to provide a copy of any other agreement
relating to long-term debt at the request of the Commission.]
10.A* Copy of Inland Steel Industries, Inc. Annual Incentive Plan, as amended.
(Filed as Exhibit 10.A to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1995, and incorporated by reference
herein).
10.B* Copy of Inland Steel Industries, Inc. Special Achievement Award Plan.
(Filed as Exhibit 10-I to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1987, and incorporated by reference
herein.)
10.C* Copy of Inland 1995 Incentive Stock Plan. (Filed as Exhibit A to the
Company's definitive Proxy Statement dated April 17, 1995 that was
furnished to stockholders in connection with the annual meeting held May
24, 1995, and incorporated by reference herein.)
</TABLE>
- ---------------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to the Company's Annual Report on Form 10-K.
21
<PAGE> 23
<TABLE>
<S> <C>
10.D* Copy of Inland 1984 Incentive Stock Plan, as amended. (Filed as Exhibit
10.A to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995, and incorporated by reference herein.)
10.E* Copy of Inland 1988 Incentive Stock Plan, as amended. (Filed as Exhibit
10.B to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995, and incorporated by reference herein.)
10.F* Copy of Inland 1992 Incentive Stock Plan, as amended. (Filed as Exhibit
10.C to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995, and incorporated by reference herein.)
10.G* Copy of Inland Steel Industries Non-Qualified Thrift Plan, as amended.
(Filed as Exhibit 10.D to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1995, and incorporated by reference herein.)
10.H* Copy of Inland 1992 Stock Plan for Non-Employee Directors, as amended.
(Filed as Exhibit 10.E to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1995, and incorporated by reference herein.)
10.I* Copy of Inland Steel Industries Supplemental Retirement Benefit Plan for
Covered Employees, as amended. (Filed as Exhibit 10.I to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1993,
and incorporated by reference herein.)
10.J* Copy of Inland Steel Industries Special Retirement Benefit Plan for
Covered Employees, as amended. (Filed as Exhibit 10.J to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1993,
and incorporated by reference herein.)
10.K* Copy of the Inland Steel Industries Deferred Compensation Plan for
Certain Employees, as amended. (Filed as Exhibit 10.J to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994
and incorporated by reference herein.)
10.L* Copy of Inland Steel Industries Deferred Compensation Plan for Directors,
as amended. (Filed as Exhibit 10-L to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1992, and incorporated by
reference herein.)
10.M* Copy of Inland Steel Industries Terminated Retirement Plan for
Non-Employee Directors.
10.N* Copy of Inland Steel Industries, Inc. Deferred Phantom Stock Unit Plan
for Non-Employee Directors.
10.O* Copy of Outside Directors Accident Insurance Policy. (Filed as Exhibit
10-F to Inland Steel Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1983, and incorporated by reference herein.)
10.P.(1)* Copy of form of Severance Agreement dated June 28, 1989 between the
Company and each of the seven executive officers of the Company
identified on the exhibit relating to terms and conditions of termination
of employment following a change in control of the Company. (Filed as
Exhibit 10-0-(1) to the Company's Annual Report or Form 10-K for the
fiscal year ended December 31, 1989, and incorporated by reference
herein.)
10.P.(2)* Amended listing of executive officers of the Company who are parties to
the form of Severance Agreement dated June 28, 1989 in Exhibit 10.P.(1)
hereof. (Filed as Exhibit 10.N.(2) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994, and incorporated by
reference herein.)
</TABLE>
- ---------------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to the Company's Annual Report on Form 10-K.
22
<PAGE> 24
<TABLE>
<S> <C>
10.P.(3)* Copy of Severance Agreement dated June 28, 1989 between the Company and
Judd R. Cool. (Filed as Exhibit 10-O-(2) to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1989, and
incorporated by reference herein.)
10.P.(4)* Copy of Severance Agreement dated June 26, 1991 between the Company and
Earl L. Mason. (Filed as Exhibit 10-X to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1991, and incorporated by
reference herein.)
10.P.(5)* Copy of Severance Agreement dated November 27, 1991 between the Company
and Maurice S. Nelson, Jr. (Filed as Exhibit 10-O-(6) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1992,
and incorporated by reference herein.)
10.P.(6)* Copy of Employment Agreement dated as of April 8, 1994 between the
Company and Neil S. Novich. (Filed as Exhibit 10.N.(8) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994
and incorporated by reference herein.)
10.P.(7)* Copy of Severance Agreement dated as of April 8, 1994 between the Company
and Neil S. Novich. (Filed as Exhibit 10.N.(9) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994, and
incorporated by reference herein.)
10.Q.(1)* Copy of letter to Judd R. Cool dated September 2, 1987 relating to terms
and conditions of employment. (Filed as Exhibit 10-K to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1987,
and incorporated by reference herein.)
10.Q.(2)* Copy of letter agreement dated November 23, 1987 between the Company and
Judd R. Cool. (Filed as Exhibit 10-L to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1987, and incorporated
by reference herein.)
10.Q.(3)* Copy of letter agreement dated December 10, 1993 between the Company and
Judd R. Cool restating certain provisions of the September 2, 1987 and
November 23, 1987 letters in Exhibits 10.P.(1) and (2). (Filed as Exhibit
10.P.(3) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, and incorporated by reference herein.)
10.R* Copy of letter to Earl L. Mason dated May 17, 1991 relating to terms and
conditions of employment. (Filed as Exhibit 10-W to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1991, and
incorporated by reference herein.)
10.S* Copy of letter to Maurice S. Nelson, Jr. dated March 26, 1993 relating to
supplemental pension arrangement. (Filed as Exhibit 10-S to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1992,
and incorporated by reference herein.)
10.T Copy of Stock Purchase Agreement, dated as of July 7, 1989, between the
Company and Harris Trust and Savings Bank, as ESOP Trustee. (Filed as
Exhibit 4-G to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1989, and incorporated by reference herein.)
10.U.(1) Copy of Letter Agreement dated December 18, 1989 among the Company,
Nippon Steel Corporation and NS Finance III, Inc. (an indirectly wholly
owned subsidiary of Nippon Steel Corporation) relating to sale to NS
Finance III, Inc. of 185,000 shares of Series F Exchangeable Preferred
Stock of the Company. (Filed as Exhibit 4(b) to the Company's Current
Report on Form 8-K filed on December 18, 1989, and incorporated by
reference herein.)
</TABLE>
- ---------------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to the Company's Annual Report on Form 10-K.
23
<PAGE> 25
<TABLE>
<S> <C>
10.U.(2) Copy of Steel Technology Agreement dated as of July 14, 1989 between
Inland Steel Company and Nippon Steel Corporation relating to technology
sharing between the signatories. (Filed as Exhibit 10-S-(2) to the
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1989, and incorporated by reference herein.)
10.U.(3) Copy of Basic Agreement dated as of July 21, 1987 between the Company and
Nippon Steel Corporation relating to the I/N Tek joint venture. (Filed as
Exhibit 10-S-(3) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989, and incorporated by reference
herein.)
10.U.(4) Copy of Partnership Agreement dated as of July 21, 1987 between ISC Tek,
Inc. (an indirectly wholly owned subsidiary of the Company) and NS Tek,
Inc. (an indirectly wholly owned subsidiary of Nippon Steel Corporation)
relating to the I/N Tek joint venture. (Filed as Exhibit 10-S-(4) to the
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1989, and incorporated by reference herein.)
10.U.(5) Copy of Basic Agreement dated as of September 12, 1989 between the
Company and Nippon Steel Corporation relating to the I/N Kote joint
venture. (Filed as Exhibit 10-S-(5) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1989, and incorporated
by reference herein.)
10.U.(6) Copy of Partnership Agreement dated as of September 12, 1989 between ISC
Kote, Inc. (an indirectly wholly owned subsidiary of the Company) and NS
Tek, Inc. (an indirectly wholly owned subsidiary of Nippon Steel
Corporation) relating to the I/N Kote joint venture. (Filed as Exhibit
10-S-(6) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1989, and incorporated by reference herein.)
10.U.(7) Copy of Substrate Supply Agreement dated as of September 12, 1989 between
Inland Steel Company and I/N Kote, an Indiana general partnership. (Filed
as Exhibit 10-S-(7) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989, and incorporated by reference
herein.)
10.U.(8) First Amendment to Substrate Supply Agreement dated as of May 1, 1990
between Inland Steel Company and I/N Kote relating to the I/N Kote joint
venture. (Filed as Exhibit 10-R-(8) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1990, and incorporated
by reference herein.)
10.U.(9) Letter Agreement dated as of May 1, 1990 among I/N Kote, the Company and
Nippon Steel Corporation relating to partner loans. (Filed as Exhibit
10-R-(9) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, and incorporated by reference herein.)
10.U.(10) First Amendment to I/N Kote Basic Agreement dated as of May 1, 1990
between the Company and Nippon Steel Corporation relating to the I/N Kote
joint venture. (Filed as Exhibit 10-R-(10) to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1990, and
incorporated by reference herein.)
10.U.(11) Letter Agreement dated as of April 19, 1990 between the Company and
Nippon Steel Corporation relating to capital contributions to I/N Tek.
(Filed as Exhibit 10-R-(11) to Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990, and incorporated by reference
herein.)
10.U.(12) Letter Agreement dated April 20, 1990 between ISC Tek, Inc. (an
indirectly wholly owned subsidiary of the Company) and NS Tek, Inc. (an
indirectly wholly owned subsidiary of Nippon Steel Corporation) relating
to amendment of the partnership agreement of I/N Tek. (Filed as Exhibit
10-R-(12) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, and incorporated by reference herein.)
</TABLE>
24
<PAGE> 26
<TABLE>
<S> <C>
10.U.(13) CCM Override Amendment dated as of April 20, 1990 among the Company;
Nippon Steel Corporation; Inland Steel Company; ISC Tek, Inc.; I/N Tek;
NS Sales, Inc.; and NS Tek, Inc. relating to I/N Tek. (Filed as Exhibit
10-R-(13) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, and incorporated by reference herein.)
10.V Copy of ESOP Stock Purchase Agreement, dated May 30, 1990, between the
Company and Harris Trust and Savings Bank, as ESOP Trustee. (Filed as
Exhibit 10-T to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1990, and incorporated by reference herein.
10.W Copy of Inland Steel Industries Thrift Plan ESOP Trust, dated July 7,
1989, between the Company and Harris Trust and Savings Bank, as ESOP
Trustee. (Filed as Exhibit 10-P to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1989, and incorporated by reference
herein.)
10.X Letter Agreement dated March 1, 1991 between Nippon Steel Corporation and
the Company regarding Series F Exchangeable Preferred Stock. (Filed as
Exhibit 10-U to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1990, and incorporated by reference herein.)
10.Y Letter Agreement dated May 10, 1991 by and between Nippon Steel
Corporation and Inland Steel Industries, Inc. relating to Letter
Agreement dated December 18, 1989. (Filed as Exhibit 10-V to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1991, and incorporated by reference herein.)
11 Statement of Earnings per Share of Common Stock.
13 Information incorporated by reference from Annual Report to Stockholders
for the fiscal year ended December 31, 1995.
21 List of certain subsidiaries of the Company.
23 Consent of Independent Accountants, appearing on page 26 of this Annual
Report on Form 10-K.
24 Powers of attorney.
27 Financial Data Schedules.
99 Letter to stockholders of common stock of the Company dated December 22,
1987 explaining Stockholder Rights Plan adopted by Board of Directors on
November 25, 1987. (Filed as Exhibit 3 to the Company's Current Report on
Form 8-K filed on December 18, 1987, and incorporated by reference
herein.)
</TABLE>
25
<PAGE> 27
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors
of Inland Steel Industries, Inc.
Our audits of the consolidated financial statements referred to in our
report dated February 19, 1996 appearing on page 32 of the 1995 Annual Report to
Stockholders of Inland Steel Industries, Inc. (which report and consolidated
financial statements are incorporated by reference in this Annual Report on Form
10-K) also included an audit of the Financial Statement Schedules listed in Item
14(a)2 of this Annual Report on Form 10-K. In our opinion, these Financial
Statement Schedules present fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements.
PRICE WATERHOUSE LLP
Chicago, Illinois
February 19, 1996
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statement on Form S-8 (No. 33-59783),
Registration Statement on Form S-8 (No. 33-48770), Registration Statement on
Form S-8 (No. 33-22902), Post-Effective Amendment No. 1 on Form S-8 to
Registration Statement on Form S-4 (No. 33-4046), Registration Statement on Form
S-8 (No. 33-32504), Post-Effective Amendment No. 2 to Form S-8 Registration
Statement (No. 33-6627), Registration Statement on Form S-3 (No. 33-59161) and
Registration Statement on Form S-3 (No. 33-62897) of Inland Steel Industries,
Inc. (or, for registrations prior to 1986, Inland Steel Company) of our report
dated February 19, 1996, appearing on page 32 of the 1995 Annual Report to
Stockholders of Inland Steel Industries, Inc. which is incorporated in this
Annual Report on Form 10-K. We also consent to the incorporation by reference of
our report on the Financial Statement Schedules, which appears above.
PRICE WATERHOUSE LLP
Chicago, Illinois
March 28, 1996
26
<PAGE> 28
INLAND STEEL INDUSTRIES, INC.
Schedule I -- Condensed Financial Information
(Parent Company Only)
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Income:
Intercompany interest income................................ $ 16.3 $ 10.0 $ 18.5
Equity in income (losses) of subsidiaries................... 157.8 109.6 (34.4)
Interest income and other revenue........................... 1.6 4.4 1.2
------- ------- -------
175.7 124.0 (14.7)
Expenses:
Interest and other expenses................................. 31.0 22.9 22.6
Intercompany interest expense............................... 5.7 2.1 2.4
------- ------- -------
36.7 25.0 25.0
Income (loss) before income taxes............................. 139.0 99.0 (39.7)
Provision for income taxes.................................... 7.8Cr. 8.4Cr. 2.1Cr.
------- ------- -------
Net income (loss)............................................. $ 146.8 $ 107.4 $ (37.6)
======= ======= =======
</TABLE>
- ---------------
Cr. = Credit
See Notes to Consolidated Financial Statements in Item 8.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
27
<PAGE> 29
INLAND STEEL INDUSTRIES, INC.
Schedule I -- Condensed Financial Information
(Parent Company Only)
STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).............................................. $ 146.8 $ 107.4 $ (37.6)
Adjustments to reconcile net income to net cash provided from
operating activities:
Equity in undistributed earnings of subsidiaries.......... (157.8) (109.6) 34.4
Depreciation.............................................. .6 .6 .6
Deferred income taxes..................................... 4.5 3.2 11.5
Deferred employee benefit cost............................ .3 2.3 .1
Stock issued for coverage of employee benefit plans....... 23.9 35.0 19.1
Change in: Intercompany accounts.......................... 16.0 (7.8) 183.6
Notes receivable............................... (.3) (.3) .2
Accounts payable............................... (2.9) (1.8) (1.9)
Accrued liabilities............................ 4.9 (3.2) .3
Other deferred items...................................... 8.3 (1.4) (3.0)
------- ------- -------
Net adjustments......................................... (102.5) (83.0) 244.9
------- ------- -------
Net cash provided from operating activities............. 44.3 24.4 207.3
------- ------- -------
INVESTING ACTIVITIES
Net investments in subsidiaries................................ (10.2) (120.5) (312.1)
Dividends received from subsidiaries........................... 25.9 25.8 25.8
Capital expenditures........................................... -- (.2) --
------- ------- -------
Net cash provided from (used for) investing
activities......................................... 15.7 (94.9) (286.3)
------- ------- -------
FINANCING ACTIVITIES
Issuance of common stock....................................... 99.1 -- 178.7
Long-term debt retired......................................... (8.3) (7.8) (7.1)
Dividends paid................................................. (31.6) (32.2) (35.7)
Acquisition of treasury stock.................................. (4.0) (4.0) (9.5)
------- ------- -------
Net cash provided from (used for) financing
activities......................................... 55.2 (44.0) 126.4
------- ------- -------
Net increase (decrease) in cash and cash equivalents........... 115.2 (114.5) 47.4
Cash and cash equivalents -- beginning of year................. 90.3 204.8 157.4
------- ------- -------
Cash and cash equivalents -- end of year....................... $ 205.5 $ 90.3 $ 204.8
======= ======= =======
</TABLE>
See Notes to Consolidated Financial Statements in Item 8.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
28
<PAGE> 30
INLAND STEEL INDUSTRIES, INC.
Schedule I -- Condensed Financial Information
(Parent Company Only)
BALANCE SHEET
AT DECEMBER 31, 1995 AND 1994
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.......................................... $ 205.5 $ 90.3
Receivables from subsidiary companies.............................. 91.1 107.1
Deferred income taxes.............................................. .3 .3
Notes receivable................................................... .6 .3
-------- --------
Total current assets............................................. 297.5 198.0
Investment in subsidiary companies...................................... 958.1 817.7
Intangible pension asset................................................ 102.6 --
Investment in Nippon Steel Corporation, net of valuation allowances of
$4.0 and $3.5, respectively........................................... 10.6 11.1
Property, net of accumulated depreciation of $7.3 and $6.7,
respectively.......................................................... 1.8 2.4
Deferred income taxes................................................... 13.7 15.8
Deferred charges and other assets....................................... 6.5 7.4
-------- --------
Total assets..................................................... $1,390.8 $1,052.4
======= =======
LIABILITIES
Current Liabilities:
Accounts payable................................................... $ 4.3 $ 7.2
Accrued liabilities................................................ 19.5 14.6
Long-term debt due within one year................................. 94.0 8.3
-------- --------
Total current liabilities........................................ 117.8 30.1
Long-term debt.......................................................... 356.2 265.2
Deferred employee benefits.............................................. 121.5 18.6
Deferred income and other deferred credits.............................. 12.2 6.4
-------- --------
Total liabilities................................................ 607.7 320.3
-------- --------
TEMPORARY EQUITY
Redeemable preferred stock, Series F, $1.00 par value, 185,000 shares
issued and outstanding in 1994........................................ -- 185.0
Common stock repurchase commitment...................................... 34.5 37.9
-------- --------
STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value, 15,000,000 shares authorized for all
series, aggregate liquidation value $155.7 in 1995 and $154.9 in
1994.................................................................. 3.2 3.2
Common stock, $1.00 par value; authorized -- 100,000,000 shares;
issued -- 50,556,350 shares........................................... 50.6 50.6
Capital in excess of par value.......................................... 1,045.7 1,088.0
Accumulated deficit..................................................... (172.8) (292.4)
Unearned compensation -- ESOP........................................... (89.9) (100.5)
Common stock repurchase commitment...................................... (34.5) (37.9)
Treasury stock at cost -- common stock of 1,814,516 shares in 1995 and
6,006,122 shares in 1994.............................................. (51.1) (200.9)
Cumulative translation adjustment....................................... (2.6) (.9)
-------- --------
Total stockholders' equity....................................... 748.6 509.2
-------- --------
Total liabilities, temporary equity, and stockholders' equity.... $1,390.8 $1,052.4
======= =======
</TABLE>
Maturities of Long-Term Debt due within five years are: $94.0 million in
1996, $9.7 million in 1997, $10.5 million in 1998, $111.5 million in 1999, and
$12.5 million in 2000.
See Notes to Consolidated Financial Statements in Item 8.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
29
<PAGE> 31
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
SCHEDULE II -- RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROVISIONS FOR ALLOWANCES
CLAIMS AND DOUBTFUL ACCOUNTS
------------------------------------------------------
YEARS BALANCE AT ADDITIONS DEDUCTIONS BALANCE AT
ENDED BEGINNING CHARGED FROM END OF
DECEMBER 31 OF YEAR TO INCOME RESERVES YEAR
- ----------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
1995 $ 24.9 $11.8 $ (1.1)(A) $ 29.9
(5.7)(B)
1994 $ 28.2 $ 5.8 $ (2.4)(A) $ 24.9
(6.7)(B)
1993 $ 23.2 $14.4 $ (3.7)(A) $ 28.2
(5.7)(B)
</TABLE>
- ---------------
NOTES:
(A) Bad debts written off during year.
(B) Allowances granted during year.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
30
<PAGE> 32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
INLAND STEEL INDUSTRIES, INC.
Date: March 28, 1996 By: ROBERT J. DARNALL
-------------------------------
Robert J. Darnall
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
ROBERT J. DARNALL Chairman, President and Chief March 28, 1996
- ---------------------------------- Executive Officer and
Robert J. Darnall Director
EARL L. MASON Senior Vice President and March 28, 1996
- ---------------------------------- Chief Financial Officer
Earl L. Mason (Principal Financial Officer)
JAMES M. HEMPHILL Controller and Principal March 28, 1996
- ---------------------------------- Accounting Officer
James M. Hemphill Director
A. Robert Abboud Director
James W. Cozad Director
James A. Henderson Director By: GEORGE A. RANNEY, JR.
Robert B. McKersie Director ---------------------------
Maurice S. Nelson, Jr. Director George A. Ranney, Jr.
Donald S. Perkins Director Attorney-in-fact
Jean-Pierre Rosso Director March 28, 1996
Joshua I. Smith Director
Nancy H. Teeters Director
Arnold R. Weber Director
</TABLE>
31
<PAGE> 33
APPENDIX A
INDEX
TO
CONSOLIDATED FINANCIAL STATEMENTS
OF
INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
<TABLE>
<CAPTION>
ITEM PAGE
- ------------------------------------------------------------------------------------- ----
<S> <C>
Report of Independent Accountants.................................................... A-2
Consolidated Statements of Operations and Reinvested Earnings for the three years
ended December 31, 1995............................................................ A-3
Consolidated Statement of Cash Flows for the three years ended December 31, 1995..... A-4
Consolidated Balance Sheet at December 31, 1995 and 1994............................. A-5
Statement of Accounting and Financial Policies....................................... A-6
Notes to Consolidated Financial Statements........................................... A-8
</TABLE>
A-1
<PAGE> 34
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
Inland Materials Distribution Group, Inc.
In our opinion, the consolidated financial statements listed in the index
appearing on page A-1 present fairly, in all material respects, the financial
position of Inland Materials Distribution Group, Inc. (a wholly owned subsidiary
of Inland Steel Industries, Inc.) and Subsidiary Companies at December 31, 1995
and 1994, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Chicago, Illinois
February 19, 1996
A-2
<PAGE> 35
INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS AND REINVESTED EARNINGS
DOLLARS IN MILLIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
Net Sales.................................................... $2,450.1 $2,197.5 $1,893.3
-------- -------- --------
Operating costs and expenses:
Cost of goods sold (excluding depreciation)............... 2,118.1 1,927.7 1,663.8
Selling, general and administrative expenses.............. 153.2 142.1 144.4
Depreciation and amortization............................. 21.8 21.2 20.6
State, local and miscellaneous taxes...................... 8.3 8.4 8.1
-------- -------- --------
Total................................................... 2,301.4 2,099.4 1,836.9
-------- -------- --------
Operating profit............................................. 148.7 98.1 56.4
Other expense:
General corporate expense, net of income items............ .7 6.9 7.4
Interest and other expense on debt........................ 2.6 2.9 10.9
-------- -------- --------
Income before income taxes................................... 145.4 88.3 38.1
Provision for income taxes (Note 6).......................... 56.9 35.0 11.4
-------- -------- --------
Net income................................................... $ 88.5 $ 53.3 $ 26.7
======== ======== ========
CONSOLIDATED STATEMENT OF REINVESTED EARNINGS
Balance at beginning of year................................. $ 85.4 $ 32.1 $ 5.4
Net income for the year...................................... 88.5 53.3 26.7
-------- -------- --------
Reinvested earnings at end of year........................... $ 173.9 $ 85.4 $ 32.1
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-3
<PAGE> 36
INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
CONSOLIDATED STATEMENT OF CASH FLOWS
DOLLARS IN MILLIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCREASE (DECREASE)
IN CASH
YEARS ENDED DECEMBER 31
--------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income........................................................ $ 88.5 $ 53.3 $ 26.7
------ ------ ------
Adjustments to reconcile net income to net cash provided from
(used for) operating activities:
Depreciation and amortization................................ 21.8 21.2 20.6
Net gain on sales of assets.................................. (.2) (.5) (.1)
Deferred employee benefit cost............................... (14.4) 3.9 3.9
Deferred income taxes........................................ .5 .7 (8.3)
Change in:
Receivables............................................... (16.7) (31.1) (22.8)
Inventories............................................... 10.4 5.7 (18.2)
Other assets.............................................. (2.3) (1.6) --
Accounts payable.......................................... (7.0) 22.6 (31.5)
Payables to related companies............................. (.4) 5.8 1.7
Accrued liabilities....................................... 4.2 (.3) 2.7
------ ------ ------
Net adjustments.............................................. (4.1) 26.4 (52.0)
------ ------ ------
Net cash provided from (used for) operating activities....... 84.4 79.7 (25.3)
------ ------ ------
INVESTING ACTIVITIES
Capital expenditures.............................................. (19.3) (20.4) (19.3)
Proceeds from sales of assets..................................... 1.9 5.8 .9
------ ------ ------
Net cash used for investing activities.................... (17.4) (14.6) (18.4)
------ ------ ------
FINANCING ACTIVITIES
Long-term debt issued............................................. -- -- 7.5
Long-term debt retired............................................ (4.7) (4.9) (5.3)
Capital contribution from Inland Steel Industries................. -- -- 150.0
Change in notes to and from related companies..................... (11.2) (87.2) (79.0)
------ ------ ------
Net cash provided from (used for) financing activities.... (15.9) (92.1) 73.2
------ ------ ------
Net increase (decrease) in cash and cash equivalents.............. 51.1 (27.0) 29.5
Cash and cash equivalents -- beginning of year.................... 2.5 29.5 --
------ ------ ------
Cash and cash equivalents -- end of year.......................... $ 53.6 $ 2.5 $ 29.5
====== ====== ======
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for:
Interest, net of amount capitalized............................ $ 3.0 $ 2.9 $ 11.3
Income taxes, net.............................................. 56.4 30.5 22.6
</TABLE>
The accompanying notes are an integral part of these statements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-4
<PAGE> 37
INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
CONSOLIDATED BALANCE SHEET
DOLLARS IN MILLIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AT DECEMBER 31
-----------------
1995 1994
------ ------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................... $ 53.6 $ 2.5
Receivables less provision for allowances, claims and doubtful accounts
of $6.4 and $6.3, respectively....................................... 243.8 227.1
Inventories (Note 1).................................................... 262.8 273.2
Notes receivable from related companies................................. 68.8 57.6
Deferred income taxes (Note 6).......................................... 15.6 13.0
------ ------
Total current assets................................................. 644.6 573.4
------ ------
Property, plant and equipment, at cost:
Buildings, machinery and equipment...................................... 448.2 433.9
Land and land improvements.............................................. 28.0 27.7
------ ------
476.2 461.6
Less accumulated depreciation........................................... 226.5 209.1
------ ------
249.7 252.5
------ ------
Prepaid pension costs (Note 5)............................................ 27.3 12.2
Excess of cost over net assets acquired, net of accumulated
amortization............................................................ 23.6 25.0
Deferred income taxes (Note 6)............................................ 23.5 26.6
Other assets.............................................................. 3.9 1.6
------ ------
Total assets......................................................... $972.6 $891.3
====== ======
LIABILITIES
Current liabilities:
Accounts payable........................................................ $ 92.8 $ 99.8
Payables to related companies........................................... 14.4 14.8
Accrued Liabilities:
Salaries and wages................................................... 20.0 17.6
Taxes other than federal income taxes................................ 8.9 7.4
Other................................................................ 3.6 3.3
Long-term debt due within one year...................................... 4.7 4.7
------ ------
Total current liabilities....................................... 144.4 147.6
------ ------
Long-term debt (Note 3)................................................... 18.9 23.6
Deferred employee benefits and other liabilities (Note 5)................. 140.8 140.1
------ ------
Total liabilities............................................... 304.1 311.3
------ ------
STOCKHOLDER'S EQUITY
Common stock, par value $1.00; 3,000 shares authorized; one share
issued............................................................... -- --
Additional paid-in capital (Note 7)..................................... 494.6 494.6
Earnings reinvested in the business..................................... 173.9 85.4
------ ------
Total stockholder's equity........................................... 668.5 580.0
------ ------
Total liabilities and stockholder's equity........................... $972.6 $891.3
====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-5
<PAGE> 38
INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
STATEMENT OF ACCOUNTING AND FINANCIAL POLICIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following briefly describes the Company's principal accounting and
financial policies.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Joseph T. Ryerson & Son, Inc., and J. M. Tull Metals Company, Inc., which are
wholly owned subsidiaries of the Company. The accounts of J. M. Tull Metals
Company, Inc. are consolidated with its wholly owned subsidiary, AFCO Metals,
Inc.
Inventory valuation
Inventories are valued at cost which is not in excess of market. Cost is
determined principally by the last-in, first-out (LIFO) method.
Property, plant and equipment
Property, plant and equipment is depreciated, for financial reporting
purposes, using the straight-line method over the estimated useful lives of the
assets. Expenditures for normal repair and maintenance are charged against
income in the period incurred.
Excess of cost over net assets acquired
The excess of cost over fair value of net assets of businesses acquired
(goodwill) is amortized on the straight-line method over a 25-year period.
Accumulated amortization of goodwill totaled $10.2 million at December 31, 1995
and $8.8 million at December 31, 1994.
Benefits for retired employees
Pension benefits are provided by the Company to substantially all employees
under a trusteed noncontributory plan of Inland Steel Industries, Inc.
("Industries"). Life insurance and certain medical benefits are provided for
substantially all retired employees.
The estimated costs of pension, medical, and life insurance benefits are
determined annually by consulting actuaries. The cost of these benefits for
retirees is accrued during their term of employment (see Note 5). Pensions are
funded in accordance with ERISA requirements in a trust established under the
plan. Costs for retired employee medical benefits are funded when claims are
submitted.
Cash equivalents
Cash equivalents are highly liquid, short-term investments with maturities
of three months or less.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and related notes to financial statements. Changes in such estimates
may affect amounts reported in future periods.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-6
<PAGE> 39
INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
STATEMENT OF ACCOUNTING AND FINANCIAL POLICIES (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Accounting for the Impairment of Long-lived Assets
In 1995, the Company adopted Financial Accounting Standards Board ("FASB")
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." Adoption of this Statement had no material
impact on the results of operations or financial position of the Company.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-7
<PAGE> 40
INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 1. INVENTORIES
The Company's inventories consist principally of finished steel, nonferrous
metals and industrial plastic products for sale at service center locations.
The difference between LIFO values and approximate replacement costs for
the LIFO inventories was $146.4 million at December 31, 1995 and $132.6 million
at December 31, 1994.
During 1995 and 1994, various inventory quantities were reduced resulting
in liquidations of LIFO inventory quantities carried at costs prevailing in
prior years that were different from current year costs. The effect on cost of
goods sold of LIFO liquidations in 1995, 1994 and 1993 was not material.
NOTE 2. BORROWING ARRANGEMENTS
At December 31, 1995, the Company's subsidiaries had available two unused
credit facilities totaling $225 million. Each facility, as well as the Inland
Steel Industries Thrift Plan ESOP notes guarantee, requires compliance with
various financial covenants including minimum net worth and leverage ratio
tests. The covenants also limit the amount of cash that the subsidiaries can
transfer to the Company and to Industries in the form of dividends and other
advances.
A $200 million unsecured credit agreement between Joseph T. Ryerson & Son,
Inc. and a group of banks provides a revolving credit facility to March 31,
2000.
J. M. Tull Metals Company, Inc. has a $25 million unsecured revolving
credit agreement with other banks, which extends to December 15, 1997.
NOTE 3. LONG-TERM DEBT
The Company's long-term debt is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1994
----- -----
DOLLARS IN
MILLIONS
<S> <C> <C>
JOSEPH T. RYERSON & SON, INC.
Industrial Revenue Bond, floating interest rate set weekly based
on 13-week Treasury bills, due November 1, 2007............... $ 7.0 $ 7.0
Other long-term debt, 10.25%, due through November 30, 1997...... 1.6 1.8
J. M. TULL METALS COMPANY, INC.
Senior Notes, 9.43%, due through July 29, 1997................... 7.1 10.7
Term note, LIBOR plus 62.5 basis points per annum, due through
August 17, 1998............................................... 6.8 7.1
Industrial Revenue Bonds, interest rates ranging from 6.5% to 65%
of the prime rate, due through January 1, 1997................ .9 1.4
Other............................................................ .2 .3
----- -----
23.6 28.3
Less maturities due within one year.............................. 4.7 4.7
----- -----
Long-term debt................................................ $18.9 $23.6
===== =====
</TABLE>
Maturities of long-term debt are: $4.7 million in 1996, $5.6 million in
1997, $6.3 million in 1998, and $7.0 million in 2007.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-8
<PAGE> 41
INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Under the provisions of certain loan agreements, the Company is required to
maintain specified amounts of working capital and net worth, as outlined in the
agreements, and is restricted as to dividends that may be paid to Industries.
Property with a net recorded carrying value of approximately $13.5 million
at December 31, 1995 is pledged as collateral on the industrial revenue bonds
and mortgage loans.
NOTE 4. DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value.
Derivatives
The Company has only limited involvement with derivative financial
instruments, none of which are used for trading purposes. The Company has
entered into an interest rate swap agreement to reduce the impact of changes in
LIBOR on its $6.8 million term note. At December 31, 1995 the Company had
outstanding an interest rate swap agreement with the bank having a notional
principal amount equal to the outstanding principal of the related term note.
This agreement effectively changes the Company's interest rate exposure on its
term note to a fixed rate of 5.925%. The interest rate swap matures August 17,
1998. Gains and losses associated with this hedging transaction become part of
the interest expense of the related debt. The Company is exposed to potential
credit loss in the event of nonperformance by the bank; however, the Company
does not anticipate such nonperformance.
Cash and Cash Equivalents
The carrying amount of cash equivalents approximates fair value because of
the short maturity of those instruments.
Long-term Debt
The estimated fair value of the Company's long-term debt (including current
portions thereof) using quoted market prices of Company debt securities recently
traded and market-based prices of similar securities for those securities not
recently traded was $23.6 million at December 31, 1995 and $27.4 million at
December 31, 1994 as compared with the carrying value of $23.6 million and $28.3
million included in the balance sheet at year-end 1995 and 1994, respectively.
NOTE 5. RETIREMENT BENEFITS
In 1995, the measurement date for pensions and benefits other than pensions
was changed from December 31 to September 30 in order to provide for more timely
information and to achieve administrative efficiencies in the collection of
data. The change in the measurement date had no effect on 1995 expense and had
an immaterial impact on the 1995 funded status of the pension plan.
Pensions
The Inland Steel Industries Pension Plan and Pension Trust (the "Plan")
covers certain employees, retirees and their beneficiaries of Industries and its
subsidiaries, including the Company. The Plan is a noncontributory defined
benefit plan that provides benefits based on final pay and years of service for
all salaried employees and certain wage employees, and years of service and a
fixed rate (in most instances based
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-9
<PAGE> 42
INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
on frozen pay level or on job class) for all other wage employees, including
employees under collective bargaining agreements. Because the fair value of
pension plan assets pertains to all participants in the Plan, no separate
determination of the fair value of such assets is made solely with respect to
the Company.
The actuarial present value of benefits for service rendered to date and
the fair value of plan assets available for benefits for the Industries
consolidated group were as follows:
<TABLE>
<CAPTION>
SEPT. 30, DEC. 31,
1995 1994
--------- --------
DOLLARS IN MILLIONS
<S> <C> <C>
Fair value of plan assets......................................... $ 1,919 $1,652
------ ------
Actuarial present value of benefits for service rendered to date:
Accumulated Benefit Obligation based on compensation to date.... 1,956 1,641
Additional benefits based on estimated future compensation
levels....................................................... 90 98
------ ------
Projected Benefit Obligation.................................... 2,046 1,739
------ ------
Plan asset shortfall to Projected Benefit Obligation.............. $ (127) $ (87)
====== ======
</TABLE>
In 1995, Industries recorded an additional minimum pension liability of
$102.6 million representing the excess of the unfunded Accumulated Benefit
Obligation over previously accrued pension costs. A corresponding intangible
asset was recorded as an offset to this additional liability as prescribed.
Neither was required in 1994.
The calculation of benefit obligations was based on a discount (settlement)
rate of 7.75% in 1995 and 8.8% in 1994; a rate of compensation increase of 4.0%
in 1995 and 5.0% in 1994; and a rate of return on plan assets of 9.5% in both
1995 and 1994.
The Company recorded a pension credit of $2.3 million in 1995, and a charge
of $1.8 million in 1994 and $.1 million in 1993. In 1995, the Company paid $13.1
million to Industries for its share of a contribution to the Industries Plan
trust.
The cost of other industry welfare and retirement funds, for bargaining
unit employees, was $3.3 million in 1995, $2.6 million in 1994, and $2.9 million
in 1993.
Benefits Other Than Pensions
Substantially all of the Company's employees are covered under
postretirement life insurance and medical benefit plans that involve deductible
and co-insurance requirements. The postretirement life insurance benefit formula
used in the determination of postretirement benefit cost is primarily based on
applicable annual earnings at retirement for salaried employees and specific
amounts for hourly employees. The Company does not prefund any of these
postretirement benefits.
The amount of net periodic postretirement benefit cost for 1995, 1994 and
1993 is composed of the following:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
DOLLARS IN MILLIONS
<S> <C> <C> <C>
Service cost................................................ $ 2.2 $ 2.7 $ 3.2
Interest cost............................................... 8.4 7.3 8.0
Net amortization and deferral............................... (3.4) (2.0) (1.9)
----- ----- -----
Total net periodic postretirement benefit cost......... $ 7.2 $ 8.0 $ 9.3
===== ===== =====
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-10
<PAGE> 43
INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following table sets forth components of the accumulated postretirement
benefit obligation:
<TABLE>
<CAPTION>
SEPT. 30, DEC. 31,
1995 1994
--------- --------
DOLLARS IN MILLIONS
<S> <C> <C>
Accumulated postretirement benefit obligation attributable to:
Retirees........................................................ $ 59.5 $ 44.4
Fully eligible plan participants................................ 17.6 15.9
Other active plan participants.................................. 28.2 24.9
------ ------
Accumulated postretirement benefit obligation..................... 105.3 85.2
Unrecognized net gain........................................... 16.7 33.7
Unrecognized prior service credit............................... 18.9 20.3
------ ------
Accrued postretirement benefit obligation......................... 140.9 $139.2
======
Expense net of benefits provided, October through December 1995... .2
------
Accrued postretirement benefit obligation at December 31, 1995.... $ 141.1
======
</TABLE>
Any net gain or loss in excess of 10 percent of the accumulated
postretirement benefit obligation is amortized over the remaining service period
of active plan participants.
The assumptions used to determine the plan's accumulated postretirement
obligation are as follows:
<TABLE>
<CAPTION>
SEPT. 30, DEC. 31,
1995 1994
--------- --------
<S> <C> <C>
Discount Rate.................................................... 7.75% 8.8%
Rate of compensation increase.................................... 4.0% 5.0%
Medical cost trend rate.......................................... 4.5% 6%-5%
Year ultimate rate reached....................................... 1996 1996
</TABLE>
A one percentage point increase in the assumed health care cost trend rates
for each future year increases annual periodic postretirement benefit cost and
the accumulated postretirement benefit obligation as of September 30, 1995 by
$2.7 million and $12.2 million, respectively.
NOTE 6. TAXES ON INCOME
The Company participates in a tax-sharing agreement under which current and
deferred income tax provisions are determined for each company in the Industries
group on a stand-alone basis. Any current liability is paid to Industries. If
the Company is unable to use all of its allocated tax attributes (net operating
loss and tax credit carryforwards) in a given year but other companies in the
consolidated group are able to utilize them, then the Company will be paid for
the use of its attributes. NOL and tax credit carryforwards are allocated to
each company in accordance with applicable tax regulations as if a company were
to leave the consolidated group. Companies with taxable losses record current
income tax credits not to exceed current income tax charges recorded by
profitable companies. If Industries uses NOL carryforwards, the Company will use
the appropriate portion of that year's carryforward previously allocated to it,
if any.
A state tax sharing agreement, similar to the federal agreement, also
exists with Industries for those states in which the consolidated group is
charged state taxes on a unitary or combined basis.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-11
<PAGE> 44
INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The elements of the provision for income taxes for the three years
indicated below are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
DOLLARS IN MILLIONS
<S> <C> <C> <C>
Current income taxes:
Federal................................................... $49.7 $30.4 $17.3
State and local........................................... 6.7 3.9 2.6
----- ----- -----
56.4 34.3 19.9
Deferred income taxes....................................... .5 .7 8.5Cr.
----- ----- -----
Total provision for income taxes.......................... $56.9 $35.0 $11.4
===== ===== =====
</TABLE>
- ------------------
Cr. = Credit
In accordance with FASB Statement No. 109, the Company adjusted its
deferred tax assets and liabilities for the effect of the change in the
corporate federal income tax rate from 34 percent to 35 percent, effective
January 1, 1993. A credit to income of $.6 million, which includes the effect of
the rate change on deferred tax asset and liability balances as of January 1,
1993 as well as the effect on 1993 tax benefits recorded by the Company prior to
the enactment date of August 10, 1993, was recorded in the third quarter of
1993.
The components of the deferred income tax assets and liabilities arising
under FASB Statement No. 109 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------
1995 1994
------ ------
DOLLARS IN
MILLIONS
<S> <C> <C>
Deferred tax assets (excluding postretirement benefits other than
pensions):
Net operating loss and tax credit carryforwards................. $ 16.2 $ 15.1
Other deductible temporary differences.......................... 27.9 29.0
------ ------
44.1 44.1
------ ------
Deferred tax liabilities:
Fixed asset basis difference.................................... 37.2 39.7
Other taxable temporary differences............................. 17.2 14.0
------ ------
54.4 53.7
------ ------
Net deferred tax liability (excluding postretirement benefits
other than pensions)............................................ (10.3) (9.6)
FASB Statement No. 106 impact (post retirement benefits other than
pensions)....................................................... 49.4 49.2
------ ------
Net deferred tax asset............................................ $ 39.1 $ 39.6
====== ======
</TABLE>
For tax purposes, the Company had available, at December 31, 1995,
approximately $43 million of net operating loss ("NOL") carryforwards available
for regular federal income tax purposes, expiring as follows: $8 million in
2005, $21 million in 2006, $7 million in 2007, $6 million in 2008, and $1
million in 2009. Additionally, in conjunction with the Alternative Minimum Tax
("AMT") rules, the Company had available AMT credit carryforwards for tax
purposes of approximately $1.1 million, which may be used indefinitely to reduce
regular federal income taxes.
The Company believes that it is more likely than not that all of the NOL
carryforwards will be utilized prior to their expiration. This belief is based
upon the factors discussed below.
The NOL carryforwards and existing deductible temporary differences
(excluding those relating to FASB Statement No. 106) are offset by existing
taxable temporary differences reversing within the
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-12
<PAGE> 45
INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
carryforward period. Furthermore, any such recorded tax benefits which would not
be so offset are expected to be realized by continuing to achieve future
profitable operations.
Subsequent to the adoption of FASB Statement No. 109, the Company adopted
FASB Statement No. 106 and recognized the entire transition obligation at
January 1, 1992, as a cumulative effect charge in 1992. At December 31, 1995,
the deferred tax asset related to the Company's FASB Statement No. 106
obligation was $49.4 million. To the extent that future annual charges under
FASB Statement No. 106 continue to exceed deductible amounts, this deferred tax
asset will continue to grow. Thereafter, even if the Company should have a tax
loss in any year in which the deductible amount would exceed the financial
statement expense, the tax law provides for a 15-year carryforward period of
that loss. Because of the extremely long period that is available to realize
these future tax benefits, a valuation allowance for this deferred tax asset is
not necessary.
Total income taxes reflected in the Consolidated Statement of Operations
differ from the amounts computed by applying the federal tax rate as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------
1995 1994 1993
----- ----- -----
DOLLARS IN MILLIONS
<S> <C> <C> <C>
Federal income tax provision computed at statutory tax rate
of 35%.................................................... $50.9 $30.9 $13.4
Additional taxes or credits from:
State and local income taxes, net of federal income tax
effect................................................. 4.5 2.5 1.7
Change in federal statutory rate.......................... -- -- .6Cr.
All other, net............................................ 1.5 1.6 3.1Cr.
----- ----- -----
Total income tax provision............................. $56.9 $35.0 $11.4
===== ===== =====
</TABLE>
- ---------------
Cr. = Credit
NOTE 7. RELATED PARTY TRANSACTIONS
The Company sells products to and purchases products from related companies
at prevailing market prices. These transactions were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------
1995 1994 1993
------ ------ ------
DOLLARS IN MILLIONS
<S> <C> <C> <C>
Net product sales.......................................... $ 15.7 $ 10.7 $ 10.7
Net product purchases...................................... $176.6 $184.1 $174.2
</TABLE>
Administrative expenses covering management, financial and legal services
provided to the Company were charged to the Company by Industries. Such charges
totaled $6.8 million in 1995 and $7.4 million in 1994 and 1993.
Cash management activities are performed by Industries and cash is
periodically transferred to Industries. Funds transferred to Industries are
supported by interest-bearing notes receivable. Interest, at prevailing prime
market rates, is charged on all intercompany loans within the Industries
consolidated group. There was $3.9 million of net intercompany interest income
in 1995, no net intercompany interest expense in 1994 and $7.7 million of net
intercompany interest expense in 1993.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-13
<PAGE> 46
INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In December 1993, Industries made a capital contribution of $150 million to
the Company. The capital contribution has been recorded as "additional paid-in
capital."
NOTE 8. COMMITMENTS AND CONTINGENCIES
The Company has noncancellable operating leases for which future minimum
rental commitments are estimated to total $38.3 million, including approximately
$8.6 million in 1996, $8.0 million in 1997, $7.0 million in 1998, $6.1 million
in 1999, $4.8 million in 2000, and $3.8 million thereafter.
Rental expense under operating leases totaled $15.9 million in 1995 and
1994, and $16.8 million in 1993.
Ryerson is the guarantor of $115.2 million of the Inland Steel Industries
Thrift Plan ESOP notes. The notes are payable in installments through July 2004.
There are various claims and pending actions against the Company. The
amount of liability, if any, for these claims and actions at December 31, 1995
is not determinable but, in the opinion of management, such liability, if any,
will not have a materially adverse effect on the Company's financial position or
results of operations.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-14
<PAGE> 47
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- --------- ------------------------------------------------------------------------ ----------
<C> <S> <C>
3.(i) Copy of Certificate of Incorporation, as amended, of the Company........
3.(ii) Copy of By-laws, as amended, of the Company. (Filed as Exhibit 3.(ii) to
the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995, and incorporated by reference herein.) --
4.A Copy of Certificate of Designations, Preferences and Rights of Series A
$2.40 Cumulative Convertible Preferred Stock of the Company. (Filed as
part of Exhibit B to the definitive Proxy Statement of Inland Steel
Company dated March 21, 1986 that was furnished to stockholders in
connection with the annual meeting held April 23, 1986, and incorporated
by reference herein.) --
4.B Copy of Certificate of Designation, Preferences and Rights of Series D
Junior Participating Preferred Stock of the Company. (Filed as Exhibit
4-D to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1987, and incorporated by reference herein.) --
4.C Copy of Rights Agreement, dated as of November 25, 1987, as amended and
restated as of May 24, 1989, between the Company and The First National
Bank of Chicago, as Rights Agent (Harris Trust and Savings Bank, as
successor Rights Agent). (Filed as Exhibit 1 to the Company's Current
Report on Form 8-K filed on May 24, 1989, and incorporated by reference
herein.) --
4.D Copy of Certificate of Designations, Preferences and Rights of Series E
ESOP Convertible Preferred Stock of the Company. (Filed as Exhibit 4-F
to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1989, and incorporated by reference herein.) --
4.E Copy of Subordinated Voting Note due December 17, 1999 in the amount of
$185,000,000 from the Company to NS Finance, III, Inc. (Filed as Exhibit
4.8 to Form S-3 Registration Statement No. 33-62897 and incorporated by
reference herein.) --
4.F Copy of Indenture dated as of December 15, 1992, between the Company and
Harris Trust and Savings Bank, as Trustee, respecting the Company's
$150,000,000 121- 3/4% Notes due December 15, 2002. (Filed as Exhibit
4-G to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992, and incorporated by reference herein.) --
4.G Copy of First Mortgage Indenture, dated April 1, 1928, between Inland
Steel Company (the "Steel Company") and First Trust and Savings Bank and
Melvin A. Traylor, as Trustees, and of supplemental indentures thereto,
to and including the Thirty-Fourth Supplemental Indenture, incorporated
by reference from the following Exhibits: (i) Exhibits B-1(a), B-1(b),
B-1(c), B-1(d) and B-1(e), filed with Steel Company's Registration
Statement on Form A-2 (No. 2-1855); (ii) Exhibits D-1(f) and D-1(g),
filed with Steel Company's Registration Statement on Form E-1 (No.
2-2182); (iii) Exhibit B-1(h), filed with Steel Company's Current Report
on Form 8-K dated January 18, 1937; (iv) Exhibit B-1(i), filed with
Steel Company's Current Report on Form 8-K, dated February 8, 1937; (v)
Exhibits B-1(j) and B-1(k), filed with Steel Company's Current Report on
Form 8-K for the month of April, 1940; (vi) Exhibit B-2, filed with
Steel Company's Registration Statement on Form A-2 (No. 2-4357); (vii)
Exhibit B-1(l), filed with Steel Company's Current Report on Form 8-K
for the month of January, 1945; (viii) Exhibit 1, filed with Steel
Company's Current Report on Form 8-K for the month of November, 1946;
(ix) Exhibit 1, filed with Steel Company's Current Report on Form 8-K
for the
</TABLE>
(i)
<PAGE> 48
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- --------- ------------------------------------------------------------------------ ----------
<C> <S> <C>
months of July and August, 1948; (x) Exhibits B and C, filed with Steel
Company's Current Report on Form 8-K for the month of March, 1952; (xi)
Exhibit A, filed with Steel Company's Current Report on Form 8-K for the
month of July, 1956; (xii) Exhibit A, filed with Steel Company's Current
Report on Form 8-K for the month of July, 1957; (xiii) Exhibit B, filed
with Steel Company's Current Report on Form 8-K for the month of
January, 1959; (xiv) the Exhibit filed with Steel Company's Current
Report on Form 8-K for the month of December, 1967; (xv) the Exhibit
filed with Steel Company's Current Report on Form 8-K for the month of
April, 1969; (xvi) the Exhibit filed with Steel Company's Current Report
on Form 8-K for the month of July, 1970; (xvii) the Exhibit filed with
the amendment on Form 8 to Steel Company's Current Report on Form 8-K
for the month of April, 1974; (xviii) Exhibit B, filed with Steel
Company's Current Report on Form 8-K for the month of September, 1975;
(xix) Exhibit B, filed with Steel Company's Current Report on Form 8-K
for the month of January, 1977; (xx) Exhibit C, filed with Steel
Company's Current Report on Form 8-K for the month of February, 1977;
(xxi) Exhibit B, filed with Steel Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1978; (xxii) Exhibit B, filed with
Steel Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1980; (xxiii) Exhibit 4-D, filed with Steel Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1980; (xxiv) Exhibit
4-D, filed with Steel Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1982; (xxv) Exhibit 4-E, filed with Steel
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1983; (xxvi) Exhibit 4(i) filed with the Steel Company's
Registration Statement on Form S-2 (No. 33-43393); (xxvii) Exhibit 4
filed with Steel Company's Current Report on Form 8-K dated June 23,
1993; (xxviii) Exhibit 4.H filed with the Steel Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995; and (xxix)
Exhibit 4.H filed with the Steel Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1995. --
4.H Copy of consolidated reprint of First Mortgage Indenture, dated April 1,
1928, between Inland Steel Company and First Trust and Savings Bank and
Melvin A. Traylor, as Trustees, as amended and supplemented by all
supplemental indentures thereto, to and including the Thirteenth
Supplemental Indenture. (Filed as Exhibit 4-E to Form S-1 Registration
Statement No. 2-9443, and incorporated by reference herein.) --
[The registrant hereby agrees to provide a copy of any other agreement
relating to long-term debt at the request of the Commission.]
10A* Copy of Inland Steel Industries, Inc. Annual Incentive Plan, as amended.
(Filed as Exhibit 10.A to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1995, and incorporated by reference
herein.) --
10.B* Copy of Inland Steel Industries, Inc. Special Achievement Award Plan.
(Filed as Exhibit 10-I to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1987, and incorporated by reference
herein.) --
10.C* Copy of Inland 1995 Incentive Stock Plan. (Filed as Exhibit A to the
Company's definitive Proxy Statement dated April 17, 1995 that was
furnished to stockholders in connection with the annual meeting held May
24, 1995, and incorporated by reference herein.) --
</TABLE>
- ---------------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to the Company's Annual Report on Form 10-K.
(ii)
<PAGE> 49
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- --------- ------------------------------------------------------------------------ ----------
<C> <S> <C>
10D* Copy of Inland 1984 Incentive Stock Plan, as amended. (Filed as Exhibit
10.A to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995, and incorporated by reference herein.) --
10.E* Copy of Inland 1988 Incentive Stock Plan, as amended. (Filed as Exhibit
10.B to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995, and incorporated by reference herein.) --
10.F* Copy of Inland 1992 Incentive Stock Plan, as amended. (Filed as Exhibit
10.C to the Company's Quarterly Report Form on 10-Q for the quarter
ended June 30, 1995, and incorporated by reference herein.) --
10.G* Copy of Inland Steel Industries Non-Qualified Thrift Plan, as amended.
(Filed as Exhibit 10.D to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995, and incorporated by reference
herein.) --
10.H* Copy of Inland 1992 Stock Plan for Non-Employee Directors, as amended.
(Filed as Exhibit 10.E to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995, and incorporated by reference
herein.) --
10.I* Copy of Inland Steel Industries Supplemental Retirement Benefit Plan for
Covered Employees, as amended. (Filed as Exhibit 10.I to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1993,
and incorporated by reference herein.) --
10.J* Copy of Inland Steel Industries Special Retirement Benefit Plan for
Covered Employees, as amended. (Filed as Exhibit 10.J to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1993,
and incorporated by reference herein.) --
10.K* Copy of the Inland Steel Industries Deferred Compensation Plan for
Certain Employees, as amended. (Filed as Exhibit 10.J to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994
and incorporated by reference herein.) --
10.L* Copy of Inland Steel Industries Deferred Compensation Plan for
Directors, as amended. (Filed as Exhibit 10-L to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1992, and
incorporated by reference herein.) --
10.M* Copy of Inland Steel Industries Terminated Retirement Plan for
Non-Employee Directors..................................................
10.N* Copy of Inland Steel Industries, Inc. Deferred Phantom Stock Unit Plan
for Non-Employee Directors..............................................
10.O* Copy of Outside Directors Accident Insurance Policy. (Filed as Exhibit
10-F to Inland Steel Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1983, and incorporated by reference herein.) --
10.P.(1)* Copy of form of Severance Agreement dated June 28, 1989 between the
Company and each of the seven executive officers of the Company
identified on the exhibit relating to terms and conditions of
termination of employment following a change in control of the Company.
(Filed as Exhibit 10-0-(1) to the Company's Annual Report or Form 10-K
for the fiscal year ended December 31, 1989, and incorporated by
reference herein.) --
</TABLE>
- ---------------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to the Company's Annual Report on Form 10-K.
(iii)
<PAGE> 50
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- --------- ------------------------------------------------------------------------ ----------
<C> <S> <C>
10.P.(2)* Amended listing of executive officers of the Company who are parties to
the form of Severance Agreement dated June 28, 1989 in Exhibit 10.P.(1)
hereof. (Filed as Exhibit 10.N.(2) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994, and incorporated
by reference herein.) --
10.P.(3)* Copy of Severance Agreement dated June 28, 1989 between the Company and
Judd R. Cool. (Filed as Exhibit 10-O-(2) to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1989, and
incorporated by reference herein.) --
10P.(4)* Copy of Severance Agreement dated June 26, 1991 between the Company and
Earl L. Mason. (Filed as Exhibit 10-X to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1991, and incorporated by
reference herein.) --
10.P.(5)* Copy of Severance Agreement dated November 27, 1991 between the Company
and Maurice S. Nelson, Jr. (Filed as Exhibit 10-O-(6) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1992,
and incorporated by reference herein.) --
10.P.(6)* Copy of Employment Agreement dated as of April 8, 1994 between the
Company and Neil S. Novich. (Filed as Exhibit 10.N.(8) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994
and incorporated by reference herein.) --
10.P.(7)* Copy of Severance Agreement dated as of April 8, 1994 between the
Company and Neil S. Novich. (Filed as Exhibit 10.N.(9) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994,
and incorporated by reference herein.) --
10.Q.(1)* Copy of letter to Judd R. Cool dated September 2, 1987 relating to terms
and conditions of employment. (Filed as Exhibit 10-K to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1987,
and incorporated by reference herein.) --
10.Q.(2)* Copy of letter agreement dated November 23, 1987 between the Company and
Judd R. Cool. (Filed as Exhibit 10-L to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1987, and incorporated
by reference herein.) --
10.Q.(3)* Copy of letter agreement dated December 10, 1993 between the Company and
Judd R. Cool restating certain provisions of the September 2, 1987 and
November 23, 1987 letters in Exhibits 10.P.(1) and (2). (Filed as
Exhibit 10.P.(3) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993, and incorporated by reference
herein.) --
10.R* Copy of letter to Earl L. Mason dated May 17, 1991 relating to terms and
conditions of employment. (Filed as Exhibit 10-W to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1991, and
incorporated by reference herein.) --
10.S* Copy of letter to Maurice S. Nelson, Jr. dated March 26, 1993 relating
to supplemental pension arrangement. (Filed as Exhibit 10-S to the
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1992, and incorporated by reference herein.) --
</TABLE>
- ---------------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to the Company's Annual Report on Form 10-K.
(iv)
<PAGE> 51
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- --------- ------------------------------------------------------------------------ ----------
<C> <S> <C>
10.T Copy of Stock Purchase Agreement, dated as of July 7, 1989, between the
Company and Harris Trust and Savings Bank, as ESOP Trustee. (Filed as
Exhibit 4-G to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1989, and incorporated by reference herein.) --
10.U.(1) Copy of Letter Agreement dated December 18, 1989 among the Company,
Nippon Steel Corporation and NS Finance III, Inc. (an indirectly wholly
owned subsidiary of Nippon Steel Corporation) relating to sale to NS
Finance III, Inc. of 185,000 shares of Series F Exchangeable Preferred
Stock of the Company. (Filed as Exhibit 4(b) to the Company's Current
Report on Form 8-K filed on December 18, 1989, and incorporated by
reference herein.) --
10.U.(2) Copy of Steel Technology Agreement dated as of July 14, 1989 between
Inland Steel Company and Nippon Steel Corporation relating to technology
sharing between the signatories. (Filed as Exhibit 10-S-(2) to the
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1989, and incorporated by reference herein.) --
10.U.(3) Copy of Basic Agreement dated as of July 21, 1987 between the Company
and Nippon Steel Corporation relating to the I/N Tek joint venture.
(Filed as Exhibit 10-S-(3) to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1989, and incorporated by
reference herein.) --
10.U.(4) Copy of Partnership Agreement dated as of July 21, 1987 between ISC Tek,
Inc. (an indirectly wholly owned subsidiary of the Company) and NS Tek,
Inc. (an indirectly wholly owned subsidiary of Nippon Steel Corporation)
relating to the I/N Tek joint venture. (Filed as Exhibit 10-S-(4) to the
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1989, and incorporated by reference herein.) --
10.U.(5) Copy of Basic Agreement dated as of September 12, 1989 between the
Company and Nippon Steel Corporation relating to the I/N Kote joint
venture. (Filed as Exhibit 10-S-(5) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1989, and incorporated
by reference herein.) --
10.U.(6) Copy of Partnership Agreement dated as of September 12, 1989 between ISC
Kote, Inc. (an indirectly wholly owned subsidiary of the Company) and NS
Tek, Inc. (an indirectly wholly owned subsidiary of Nippon Steel
Corporation) relating to the I/N Kote joint venture. (Filed as Exhibit
10-S-(6) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1989, and incorporated by reference herein.) --
10.U.(7) Copy of Substrate Supply Agreement dated as of September 12, 1989
between Inland Steel Company and I/N Kote, an Indiana general
partnership. (Filed as Exhibit 10-S-(7) to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1989, and
incorporated by reference herein.) --
10.U.(8) First Amendment to Substrate Supply Agreement dated as of May 1, 1990
between Inland Steel Company and I/N Kote relating to the I/N Kote joint
venture. (Filed as Exhibit 10-R-(8) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1990, and incorporated
by reference herein.) --
10.U.(9) Letter Agreement dated as of May 1, 1990 among I/N Kote, the Company and
Nippon Steel Corporation relating to partner loans. (Filed as Exhibit
10-R-(9) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, and incorporated by reference herein.) --
</TABLE>
(v)
<PAGE> 52
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- --------- ------------------------------------------------------------------------ ----------
<C> <S> <C>
10.U.(10) First Amendment to I/N Kote Basic Agreement dated as of May 1, 1990
between the Company and Nippon Steel Corporation relating to the I/N
Kote joint venture. (Filed as Exhibit 10-R-(10) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1990, and
incorporated by reference herein.) --
10.U.(11) Letter Agreement dated as of April 19, 1990 between the Company and
Nippon Steel Corporation relating to capital contributions to I/N Tek.
(Filed as Exhibit 10-R-(11) to Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990, and incorporated by reference
herein.) --
10.U.(12) Letter Agreement dated April 20, 1990 between ISC Tek, Inc. (an
indirectly wholly owned subsidiary of the Company) and NS Tek, Inc. (an
indirectly wholly owned subsidiary of Nippon Steel Corporation) relating
to amendment of the partnership agreement of I/N Tek. (Filed as Exhibit
10-R-(12) to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1990, and incorporated by reference herein.) --
10.U.(13) CCM Override Amendment dated as of April 20, 1990 among the Company;
Nippon Steel Corporation; Inland Steel Company; ISC Tek, Inc.; I/N Tek;
NS Sales, Inc.; and NS Tek, Inc. relating to I/N Tek. (Filed as Exhibit
10-R-(13) to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1990, and incorporated by reference herein.) --
10.V Copy of ESOP Stock Purchase Agreement, dated May 30, 1990, between the
Company and Harris Trust and Savings Bank, as ESOP Trustee. (Filed as
Exhibit 10-T to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1990, and incorporated by reference herein.) --
10.W Copy of Inland Steel Industries Thrift Plan ESOP Trust, dated July 7,
1989, between the Company and Harris Trust and Savings Bank, as ESOP
Trustee. (Filed as Exhibit 10-P to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1989, and incorporated by
reference herein.) --
10.X Letter Agreement dated March 1, 1991 between Nippon Steel Corporation
and the Company regarding Series F Exchangeable Preferred Stock. (Filed
as Exhibit 10-U to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990, and incorporated by reference
herein.) --
10.Y Letter Agreement dated May 10, 1991 by and between Nippon Steel
Corporation and Inland Steel Industries, Inc. relating to Letter
Agreement dated December 18, 1989. (Filed as Exhibit 10-V to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1991, and incorporated by reference herein.) --
11 Statement of Earnings per Share of Common Stock.........................
13 Information incorporated by reference from Annual Report to Stockholders
for the fiscal year ended December 31, 1995. ...........................
21 List of certain subsidiaries of the Company.............................
23. Consent of Independent Accountants, appearing on page 26 of this Annual
Report on Form 10-K. --
24 Powers of attorney......................................................
27 Financial Data Schedules................................................
99 Letter to stockholders of common stock of the Company dated December 22,
1987 explaining Stockholder Rights Plan adopted by Board of Directors on
November 25, 1987. (Filed as Exhibit 3 to the Company's Current Report
on Form 8-K filed on December 18, 1987, and incorporated by reference
herein.) --
</TABLE>
(vi)
<PAGE> 1
EXHIBIT 3.(i)
CERTIFICATE OF INCORPORATION
of
INLAND STEEL INDUSTRIES, INC.
as Amended to and Including November 13, 1995
_________________________________________________________________
First: The name of this Corporation is
INLAND STEEL INDUSTRIES, INC.
Second: The address of its registered office in the State of Delaware is
1209 Orange Street, in the City of Wilmington, County of New Castle. The name
of its registered agent at such address is The Corporation Trust Company.
Third: The nature of the business or purpose to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
Fourth: The total number of shares of stock which this Corporation shall
have authority to issue is 115,000,000, of which 15,000,000 shares shall be
Preferred Stock, $1.00 par value per share (hereinafter sometimes referred to
as "Preferred Stock"), and 100,000,000 shares shall be Common Stock, $1.00 par
value per share (hereinafter sometimes referred to as "Common Stock"). The
shares of stock of this Corporation may be issued from time to time for such
consideration as may be fixed from time to time by the Board of Directors.
PART I
PREFERRED STOCK
The Board of Directors is expressly authorized to adopt, from time to
time, a resolution or resolutions providing for the issue of Preferred Stock in
one or more series, to fix the number of shares in each such series and to fix
the designations and the powers, preferences and relative, participating,
optional and other special rights and the qualifications, limitations and
restrictions thereof, of each such series. The authority of the Board of
Directors with respect to each such series shall include a determination of the
following, which may vary as between the different series of Preferred Stock:
<PAGE> 2
-2-
(a) The number of shares constituting the series and the distinctive
designation of the series;
(b) The dividend rate on the shares of the series, the conditions and
dates upon which dividends thereon shall be payable, the extent, if any, to
which dividends thereon shall be cumulative, and the relative rights of
preference, if any, of payment of dividends thereon;
(c) Whether or not the shares of the series are redeemable and, if
redeemable, the time or times during which they shall be redeemable and the
amount per share payable on redemption thereof, which amount may, but need not,
vary according to the time and circumstances of such redemption;
(d) The amount payable in respect of the shares of the series, in the
event of any liquidation, dissolution or winding up of this Corporation, which
amount may, but need not, vary according to the time or circumstances of such
action, and the relative rights of preference, if any, of payment of such
amount;
(e) Any requirement as to a sinking fund for the shares of the series, or
any requirement as to the redemption, purchase or other retirement by this
Corporation of the shares of the series;
(f) The right, if any, to exchange or convert shares of the series into
other securities or property, and the rate or basis, time, manner and condition
of exchange or conversion;
(g) The voting rights, if any, to which the holders of shares of the
series shall be entitled in addition to the voting rights provided by law; and
(h) Any other terms, conditions or provisions with respect to the series
not inconsistent with the provisions of this Article Fourth or any resolution
adopted by the Board of Directors pursuant hereto.
The number of authorized shares of Preferred Stock may be increased or
decreased by the affirmative vote of the holders of a majority of the stock of
this Corporation entitled to vote at a meeting of stockholders. No holder of
shares of Preferred Stock of this Corporation shall, by reason of such holding,
have any preemptive right to subscribe to any additional issue of stock of any
class or series nor to any security convertible into such stock.
<PAGE> 3
-3-
PART II
COMMON STOCK
(a) Dividends. Subject to any prior rights to receive dividends to which
the holders of shares of any series of the Preferred Stock may be entitled, the
holders of shares of Common Stock shall be entitled to receive dividends, if
and when declared payable from time to time by the Board of Directors, from
funds legally available therefor.
(b) Liquidation. In the event of any dissolution, liquidation or winding
up of this Corporation, whether voluntary or involuntary, after there shall
have been paid to the holders of shares of Preferred Stock the full amounts to
which they shall be entitled, the holders of the then outstanding shares of
Common Stock shall be entitled to receive, pro rata, any remaining assets of
this Corporation available for distribution to its stockholders. The Board of
Directors may distribute in kind to the holders of the shares of Common Stock
such remaining assets of this Corporation or may sell, transfer or otherwise
dispose of all or any part of such remaining assets to any other corporation,
trust or entity and receive payment therefor in cash, stock or obligations of
such other corporation, trust or entity or any combination thereof, and may
sell all or any part of the consideration so received, and may distribute the
consideration received or any balance or proceeds thereof to holders of the
shares of Common Stock. The voluntary sale, conveyance, lease, exchange or
transfer of all or substantially all the property or assets of this Corporation
(unless in connection therewith the dissolution, liquidation or winding up of
this Corporation is specifically approved), or the merger or consolidation of
this Corporation into or with any other corporation, or the merger of any other
corporation into it, or any purchase or redemption of shares of stock of this
Corporation of any class, shall not be deemed to be a dissolution, liquidation
or winding up of this Corporation for the purpose of this paragraph (b).
(c) Voting. Except as provided by law or this Certificate of
Incorporation with respect to voting by class or series, each outstanding share
of Common Stock of this Corporation shall entitle the holder thereof to one
vote on each matter submitted to a vote at a meeting of stockholders.
(d) Reservation of Common Stock. Such numbers of shares of Common Stock
as may from time to time be required for such purpose shall be reserved for
issuance (i) upon conversion of any shares of Preferred Stock or any obligation
of this Corporation convertible into shares of Common Stock and (ii) upon
exercise of any options or warrants to purchase shares of Common Stock.
<PAGE> 4
-4-
(e) Preemptive Rights. No holder of shares of Common Stock of this
Corporation shall, by reason of such holding, have any preemptive right to
subscribe to any additional issue of stock of any class or series nor to any
security convertible into such stock.
PART III
VOTING NOTES
The holders of the Corporation's 10.23% Subordinated Voting Notes (the
"Exchange Notes"), which may be issued from time to time in exchange for the
Corporation's Series F Exchangeable Preferred Stock, shall be entitled to vote
on all matters submitted to a vote of the stockholders of the Corporation,
voting together with the holders of Common Stock (and of any other shares of
capital stock of the Corporation entitled to vote at a meeting of stockholders)
as one class. Each $1,000 aggregate principal amount of Exchange Notes shall
be entitled to a number of votes equal to the number of votes to which each
share of Series F Exchangeable Preferred Stock was entitled on the effective
date of the exchange of such share of Series F Exchangeable Preferred Stock for
an Exchange Note, subject to adjustment as provided in paragraph 3 of the
Exchange Notes. Holders of the Exchange Notes shall be deemed to be
stockholders of the Corporation, and the Exchange Notes shall be deemed to be
shares of stock for the purpose of any provision of the Delaware General
Corporation Law that requires the vote of stockholders as a prerequisite to any
corporate action.
Fifth: Any action required or permitted to be taken by the stockholders
of the Corporation, whether voting as a class or otherwise, must be taken at a
duly called annual or special meeting of the stockholders of the Corporation
and may not be taken by consent in writing of such stockholders, except that
the Board of Directors at any time may by resolution provide that the holders
of Preferred Stock, or any series thereof, may take any action required or
permitted to be taken by such holders by consent in writing without a meeting.
Sixth. The name and mailing address of the incorporator is as follows:
Mr. Clark L. Wagner
c/o Inland Steel Industries, Inc.
30 West Monroe Street
Chicago, Illinois 60603
Seventh: The Corporation is to have perpetual existence.
<PAGE> 5
-5-
Eighth: The Corporation may indemnify, in accordance with and to the full
extent now or hereafter permitted by law, any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (including, without limitation, an action by or in the right of
the Corporation), by reason of his acting as a director, officer, employee or
agent of, or his acting in any other capacity for, on behalf of, or at the
request of, the Corporation, against any liability or expense actually and
reasonably incurred by such person in respect thereof.
Ninth: No director of this Corporation shall be personally liable to this
Corporation or its stockholders for monetary damages for any breach of
fiduciary duty by such director as a director, except for liability (i) for any
breach of the director's duty of loyalty to this Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the Delaware General Corporation Law, or (iv) for any transaction from which
the director derived an improper personal benefit. No amendment to or repeal
of any of the provisions of this Article Ninth shall apply to or have any
effect on the liability or alleged liability of any director of this
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
Tenth: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter or
repeal the by-laws of the Corporation.
Eleventh: Meetings of stockholders may be held within or without the
State of Delaware, as the by-laws may provide. The books of the Corporation
may be kept (subject to any provision contained in the statutes) outside the
State of Delaware at such place or places as may be designated from time to
time by the Board of Directors or in the by-laws of the Corporation. Elections
of directors need not be by written ballot unless the by-laws of the
Corporation shall so provide.
Twelfth: The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
Thirteenth: The Board of Directors is authorized to sell, assign,
transfer, convey and otherwise dispose of a part of the property, assets and
effects of this Corporation, less than the whole or substantially the whole
thereof, on such terms and conditions as they shall
<PAGE> 6
-6-
deem advisable, without the assent of the stockholders in writing or otherwise;
and also to sell, assign, transfer, convey and otherwise dispose of the whole,
or substantially the whole, of the property, assets, effects, franchises and
good will of the Corporation on such terms and conditions as they shall deem
advisable but only with the assent in writing, or pursuant to the vote, of the
holders of not less than two-thirds in interest of all the stock of this
Corporation, but in any event not less than the amount required by law.
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 26th day of February, 1986.
/s/ Clark L. Wagner
----------------------------------
Clark L. Wagner
<PAGE> 1
EXHIBIT 10.M
INLAND STEEL INDUSTRIES, INC.
TERMINATED RETIREMENT PLAN
FOR NON-EMPLOYEE DIRECTORS
TERMINATED AS OF JANUARY 1, 1996
1. PURPOSE.
The purpose of the Director Retirement Plan (the "Plan") of Inland
Steel Industries, Inc. (the "Company") is to provide retirement income to
members of the Board of Directors of the Company who serve as non-employee
Directors for a specified number of years.
2. ELIGIBILITY.
Each present and future member of the Board of Directors of the
Company (other than any Director who was previously an officer or other
employee of the Company or any subsidiary of the Company and who is receiving
or has received or is eligible to receive any benefit or benefits under any
pension plan of the Company or any of its subsidiaries) who (a) completes at
least ten years of continuous service as a non-employee Director or (b)
completes at least five years of continuous service as a non-employee Director
and remains on the Board of Directors until age 70 shall be eligible to
participate in the Plan.
3. BENEFITS.
Benefits shall be paid to an eligible Director in quarterly
installments equal to one-fourth of the annual retainer for services as a
member of the Board of Directors in effect at the time of the last Board
meeting attended by such Director. The payment of benefits shall begin in the
calendar quarter following the date on which an eligible Director ceases to be
a member of the Board of Directors, provided, however, that if such Director
has not then attained the age of 65, the payment of benefits shall begin in the
calendar quarter following the attainment of age 65 by such Director. The
payment of benefits shall continue for the number of full years of non-employee
service by such eligible Director up to a maximum of ten years. Except as
otherwise provided in paragraph 4 hereof, such payments shall terminate on the
death of such Director.
4. SURVIVOR BENEFIT.
In the event of the death of a former Director who is receiving
benefits under the Plan or who would be entitled to receive benefits upon his
or her attainment of age 65 or in the event of the death of any Director who
would be entitled to receive benefits thereunder if he or she had ceased to be
a Director on or prior to the date of his or her death, any benefits that would
otherwise have been payable thereafter to such Director shall be paid to such
legal or natural person as is designated by the Director as his or her
beneficiary in a writing filed prior to the Director's death with the Secretary
of the Company. If a Director fails to so designate a beneficiary, the
Director's surviving spouse,
<PAGE> 2
- 2 -
if any, will be deemed to have been designated as the beneficiary. Any
beneficiary designation filed with the Secretary of the Company may provide
that, in lieu of the payments to which the beneficiary would otherwise be
entitled, the beneficiary shall be paid a lump sum amount which is equal to the
present value of such payments. In the event that any retirement benefits
otherwise payable to a Director are not paid prior to the last to die of the
Director and the Director's beneficiary, the present value of the remaining
payments shall be paid in a lump sum to the estate of the Director or the
Director's beneficiary, whichever is the last to die. For purposes of the
Plan, present value shall be determined by using a discount factor equal to the
interest rate applied by the Pension Benefit Guaranty Corporation for purposes
of valuing immediate annuities on the date of death of the Director or
beneficiary, as the case may be.
5. BENEFITS NOT TRANSFERABLE.
The interest of a Director or surviving spouse in benefits under the
Plan is personal to such Director or surviving spouse and may not be assigned
or otherwise transferred by him or her. Any payment to which a Director or
surviving spouse may be entitled under the Plan shall be free from the control
or interference of any creditor of such Director or surviving spouse and shall
not be subject to attachment or susceptible of anticipation or alienation.
6. FUNDING NOT REQUIRED.
The Company shall not be required to establish any fund or segregate
or set aside any moneys for the payment of benefits under the Plan.
7. PAST SERVICE.
Past service as a Director of the Company on the effective date of
the Plan and past service as a Director of Inland Steel Company prior to May 1,
1986 shall be considered service for purposes of the Plan.
8. EFFECTIVE DATE.
The effective date of the Plan is May 1, 1988.
<PAGE> 3
Appendix A to
Inland Steel Industries, Inc. Terminated Retirement Plan
for Non-Employee Directors
RESOLVED, that the Inland Steel Industries, Inc. Director Retirement Plan,
as amended and restated through and including January 26, 1994, is hereby
renamed to be the "Inland Steel Industries, Inc. Terminated Retirement Plan for
Non-Employee Directors" (the "Plan") and that the Plan is hereby terminated as
of January 1, 1996; PROVIDED, HOWEVER, that to fulfill outstanding contractual
obligations incurred by the Corporation under the Plan and to address certain
Plan termination issues:
(1) the benefits for which any Director was eligible under the Plan
immediately prior to the termination thereof and the benefits to
which any person was entitled under the Plan immediately prior to the
termination thereof or would become entitled under the Plan due to a
Director then being eligible to participate in the Plan shall not be
adversely affected by such termination; and
(2) every Director elected to the Board of Directors on or before October
1, 1995 who was not eligible to participate in the Plan before
January 1, 1996 pursuant to the requirements of Paragraph 2 of the
Plan and who thereafter satisfies either of the eligibility
requirements set forth in said Paragraph 2, shall then become
entitled to receive benefits in accordance with the same terms and
conditions as provided in the Plan, EXCEPT THAT, the number of
quarterly installments of benefit payments under the Plan shall
continue only for the number of calendar quarters, up to a maximum of
twenty (20) calendar quarters, during which such Director has
provided service as a non-employee Director prior to May 22, 1996.
<PAGE> 1
EXHIBIT 10.N
INLAND STEEL INDUSTRIES, INC.
DEFERRED PHANTOM STOCK UNIT PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSES.
The purposes of this compensation plan (the "Plan") are to attract and
retain as Directors of Inland Steel Industries, Inc. (the "Company") persons
whose abilities, experience and judgment can contribute to the continued
progress of the Company and to assure alignment of the economic interests of
the Company's Directors with stockholders by linking a portion of their
compensation to the value of the common stock of the Company (the "Common
Stock").
2. EFFECTIVE DATE AND DURATION.
The effective date of the Plan is January 1, 1996 (the "Effective
Date") and the Plan shall remain in effect until terminated by the Board of
Directors of the Company.
3. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Company. The Committee shall
have authority to interpret the Plan and to establish, amend, waive and rescind
rules and regulations for the administration of the Plan. All interpretations,
rules and regulations made or established by the Committee shall be conclusive
and binding on all persons.
4. ELIGIBILITY.
Each present and future member of the Board of Directors of the
Company (other than any Director who is or was previously an officer or other
employee of the Company or any subsidiary of the Company and who is receiving
or has received or is eligible to receive any benefit or benefits under any
pension plan for employees of the Company or any of its subsidiaries) who has
been a Director for less than ten years as of the Effective Date or who first
becomes a Director after the Effective Date (a "Participant") shall be eligible
to participate in the Plan.
5. CREDITING OF PHANTOM STOCK UNITS.
One thousand (1,000) Phantom Stock Units shall be credited to the
Phantom Stock Unit Account (the "Account") for each Participant as of the date
of each of the first ten annual meetings of stockholders of the Company at
which such Participant is elected as a Director, commencing with the first
annual meeting of stockholders after the Effective Date and continuing until,
and including, the tenth consecutive annual meeting of stockholders at which
such Participant is elected as a Director; provided, however, that each
Participant who was a Director on and before October 1, 1995 will be credited
with
<PAGE> 2
-2-
Phantom Stock Units ("Units") on annual meeting dates only until such
Participant reaches his or her ninth anniversary as a Director.
As of each date on which a dividend is paid on the Common Stock, there
shall be computed with respect to the Account of each Participant an amount of
Units equal to: (a) the number of Units then credited to such Account,
multiplied by (b) the dividend then paid per share of Common Stock, and divided
by (c) the Fair Market Value of a share of Common Stock on the dividend payment
date. The amount of Units so determined with respect to each Account shall be
credited to and become part of the balance of such Account as of the dividend
payment date. The "Fair Market Value" of a share of Common Stock on any day
shall be the average of the highest and lowest selling prices of such stock on
the New York Stock Exchange Composite Transactions on such day or, if such
stock is not traded on that day, then on the next preceding day on which such
stock was traded.
6. VESTING.
Subject to Section 9 of this Plan, all Units credited to the Account
of a Participant shall become fully vested on the earlier of: (a) the tenth
consecutive annual meeting of stockholders at which such Participant is elected
as a Director; or (b) the last date of such Participant's service as a
Director, PROVIDED such Participant remains on the Board of Directors (i) until
at least the fifth consecutive annual meeting of stockholders after which such
Participant is first elected as a Director and (ii) either until such
Participant attains age 70 or until his or her death at age 65 or older. All
Units credited to the Account of a Participant who ceases to be a Director
before such Units become vested shall be forfeited by the Participant. After
the Units in the Account of a Participant are vested, all Units credited to the
Account of such Participant with respect to any dividend on the Common Stock
shall be vested when credited.
7. DISTRIBUTION DATE, PAYOUT METHODS AND VALUE.
(a) Distribution Date. The value of all vested Units credited
to the Account of a Participant shall become payable on the date (the
"Distribution Date") which is the later to occur of: (a) the date the
Participant ceases to serve on the Board of Directors of the Company; or (b)
the date the Participant attains age 65.
(b) Primary Payout Method. Unless otherwise elected by a
Participant at least one year prior to the Distribution Date in accordance with
Section 7(c) below, the value of all vested Units credited to the Account of a
Participant shall be paid in cash in a lump sum as of the Distribution Date.
The Company will issue a check to the Participant promptly after the
Distribution Date in an amount equal to the number of vested Units then
credited to the Participant's Account multiplied by the Fair Market Value of a
share of Common Stock on the Distribution Date. The Company shall then reduce
the number of Units credited to the Account of the Participant to zero and have
no further obligation to the Participant with respect thereto.
<PAGE> 3
-3-
(c) Election of Alternative Payout Method. Any Participant may
elect, no later than one year prior to the Distribution Date, to have the value
of all vested Units credited to the Account of such Participant on the
Distribution Date paid in any number of successive quarterly installments over
a period not extending beyond the end of the fortieth (40th) calendar quarter
immediately following the Distribution Date. An installment shall be paid as
of the first day of each such calendar quarter. The amount of each quarterly
installment will be determined by dividing (a) the number of vested Units then
credited to the Account, by (b) the number of installments then remaining
unpaid, and multiplying by (c) the Fair Market Value of a share of Common Stock
on such payment date. The Company will issue a check to the Participant
promptly after the quarterly installment date and will reduce the number of
Units credited to the Account of the Participant by the number of Units with
respect to which payment is made.
Each election must be made on forms provided by the Secretary of the
Company for this purpose and shall specify the calendar quarter in which
payments under this Plan shall begin and the period over which such payments
shall be made, and the name, address and social security number of the person
to whom any unpaid balance in the Participant's Account shall be paid in the
event of the death of the Participant, in accordance with Section 8 below. An
election for payment by quarterly installments filed hereunder shall become
irrevocable one year prior to such Participant's Distribution Date.
8. SURVIVOR BENEFIT.
In the event of the death of any Participant whose Account is vested,
any payments that would otherwise have been payable thereafter to such
Participant shall be paid to such legal or natural person as is designated by
the Participant as his or her beneficiary in a writing filed prior to the
Participant's death with the Secretary of the Company. If a Participant fails
to so designate a beneficiary, the Participant's surviving spouse, if any, will
be deemed to have been designated as the beneficiary.
Any beneficiary designation filed with the Secretary of the Company
may provide that, in lieu of the payments to which the beneficiary would
otherwise be entitled, the beneficiary shall be paid in a lump sum amount. In
the event that any payments otherwise due to a Participant are not paid prior
to the later to die of the Participant and the Participant's beneficiary, the
balance of the Units credited to such Participant's Account shall be paid in a
lump sum to the estate of the Participant or the Participant's beneficiary,
whichever is the later to die. The Company shall issue a check for the
appropriate amount promptly after being notified of the event resulting in the
lump sum payment, reduce the number of Units credited to the Account of the
Participant to zero and have no further obligation with respect thereto. The
lump sum amount shall be equal to the number of Units then credited to such
Participant's Account multiplied by the Fair Market Value of one share of
Common Stock on the date of death of the person resulting in the payment of the
lump sum.
<PAGE> 4
-4-
9. EFFECT OF CHANGE IN CONTROL.
Notwithstanding any other provision in this Plan to the contrary, in
the event of a Change in Control of the Company as defined in this Section 9,
all Units then credited to the Account of each Participant shall become
immediately vested as of the date of the Change in Control. The value of each
Unit shall be equal to the value of a share of Common Stock on the date of the
Change in Control and the aggregate value of all vested Units in each
Participant's Account shall be paid to such Participant in cash promptly after,
but in no event later than thirty (30) days following, the date of the Change
in Control.
A "Change in Control" of the Company shall be deemed to occur on the
first of any of the following events: (i) the Company is merged into or
consolidated with another corporation, or the stockholders of the Company
approve a definitive agreement to sell or otherwise dispose of all or
substantially all of its assets or adopt a plan of liquidation, provided,
however, that a Change in Control shall not be deemed to have occurred by
reason of a transaction, or a substantially concurrent or otherwise related
series of transactions, upon the completion of which the beneficial ownership
of a majority of the voting power of the Company, the surviving corporation, or
a corporation directly or indirectly controlling the Company or the surviving
corporation, as the case may be, is held by the same persons (as defined below)
(in substantially the same proportion) as held the beneficial ownership of the
voting power of the Company immediately prior to the transaction or the
substantially concurrent or otherwise related series of transactions, except
that upon the completion thereof, employees or employee benefit plans of the
Company may be a new holder of such beneficial ownership; (ii) the "beneficial
ownership" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) of securities representing 40% or more of the
combined voting power of the Company is acquired by any "person" as defined in
Sections 13(d) and 14(d) of the Exchange Act (other than any trustee or other
fiduciary holding securities under an employee benefit or other similar stock
plan of the Company); or (iii) at any time during any period of two consecutive
years, individuals who at the beginning of such period were members of the
Board of Directors of the Company cease for any reason to constitute at least a
majority thereof (unless the election, or the nomination for election by the
Company's stockholders, of each new director was approved by a vote of at least
two-thirds of the directors still in office at the time of such election or
nomination who were directors at the beginning of such period).
However, in no event shall a Change in Control be deemed to have
occurred with respect to a Participant if such Participant is part of a
purchasing group which consummates the Change in Control transaction. A
Participant shall be deemed "part of a purchasing group" for purposes of the
preceding sentence if such Participant is an equity participant in the
purchasing company or group (except for: (i) passive ownership of less than
three percent (3%) of the stock of the purchasing company; or (ii) ownership of
equity participation in the purchasing company or group which is otherwise not
significant, as determined prior to the Change in Control by a majority of the
non-employee continuing Directors, not including the Participant).
<PAGE> 5
-5-
10. ANTI-DILUTION PROVISION.
The Committee shall adjust the number of Units credited to a
Participant's Account from time to time in the event of any change or changes
in the outstanding Common Stock by reason of any one or more stock dividends,
stock splits, spinoffs or other distributions of assets (other than a normal
cash dividend), recapitalizations, reorganizations, mergers, consolidations,
combinations, exchanges or other relevant changes in corporate structure or
capitalization, so as to prevent dilution or enlargement of rights and to
maintain the relationship of the value of each Unit to the value of a share of
Common Stock.
11. RESTRICTIONS ON TRANSFER.
The interest of a Participant, surviving spouse or beneficiary in
Units and amounts payable with respect thereto under this Plan is personal to
such Participant, surviving spouse or beneficiary and may not be voluntarily or
involuntarily sold, assigned or otherwise transferred or disposed of by him or
her, except pursuant to Section 8 above. Any payment to which a Participant,
surviving spouse or beneficiary may be entitled under the Plan shall be free
from the control or interference of any creditor of such Participant, surviving
spouse or beneficiary and shall not be subject to attachment, levy or
garnishment, or susceptible of anticipation or alienation.
12. AMENDMENT AND TERMINATION OF THE PLAN.
This Plan may be amended by the Board of Directors of the Company in
any and all respects at any time, or from time to time, and may be terminated
by the Board of Directors at any time; provided, however, that no such
amendment or termination may materially adversely affect the rights of any
Participant with respect to any Unit or Units previously credited to such
Participant's account without written consent of the Participant or his or her
duly appointed legal representative or, in the event of a Participant's death,
the rights of such Participant's surviving spouse or beneficiary with respect
thereto without written consent of such person or his or her duly appointed
legal representative.
To the extent necessary to qualify Units granted under the Plan as
"formula awards" under Rule 16b-3(c)(2)(ii)(A) or any successor thereto under
the Exchange Act, the provisions regarding the amount, price and timing of
Units to be credited to the Account of any Participant may not be amended more
than once within any six month period, other then to comport with changes in
the Internal Revenue Code of 1986, as amended from time to time, or the
Employee Retirement Income Security Act of 1974, as amended from time to time,
or the rules thereunder.
13. MISCELLANEOUS.
(a) No Rights as a Stockholder. The Units do not represent
ownership of any portion of the equity of the Company and no person shall have
any rights as a stockholder of the Company by virtue of his or her rights with
respect to any Units.
<PAGE> 6
-6-
(b) No Right to Continue as a Director. Nothing contained in
this Plan shall be deemed to confer upon any person any right to continue as a
Director of, to be nominated for re-election or re-elected to the Board of
Directors of, or to be associated in any other way with, the Company.
(c) Accounting; Funding Not Required. The Company shall
establish on its accounting books, in the name of each Participant, a Phantom
Stock Unit Account. The Company shall not be required to establish any fund or
segregate or set aside any moneys with respect to any such Account or for the
discharge or payment of its obligations hereunder.
(d) Severability. In the event that any provision of this Plan
shall be held illegal or invalid for any reason, the illegality or invalidity
shall not affect the remaining parts of the Plan, and the Plan shall be
construed and enforced as if the illegal or invalid provision had not been
included.
<PAGE> 1
Exhibit 11
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
Statement of Earnings Per Share of Common Stock
<TABLE>
<CAPTION>
Dollars and Shares in Millions
(except per share data)
-------------------------------------
Years Ended December 31,
-------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
PRIMARY EARNINGS PER SHARE OF COMMON STOCK
Shares of common stock
Average shares outstanding 47.3 43.1 35.5
Dilutive effect of stock options .1 .4 -
------- ------ -------
47.4 43.5 35.5
======= ====== =======
Net income (loss) $ 146.8 $ 107.4 $ (37.6)
Dividends on preferred stock, net of tax benefit
on dividends applicable to leveraged Series E
Preferred Stock held by the ESOP 19.0 28.4 32.0
------- ------ -------
Net income (loss) applicable $ 127.8 $ 79.0 $(69.6)
======== ======= ======
Net income (loss) per share of common stock $ 2.69 $ 1.81 $(1.96)
======== ======= ======
FULLY DILUTED EARNINGS PER SHARE OF COMMON STOCK
Shares of common stock
Average shares outstanding 47.3 43.1 35.5
Assumed conversion of Series A and leveraged
Series E Preferred Stock 3.1 3.0 -
Dilutive effect of stock options .1 .5 -
------- ------- ------
50.5 46.6 35.5
======= ======= ======
Net income (loss) $ 146.8 $ 107.4 $(37.6)
Dividends on antidilutive preferred stock 10.6 20.5 32.0
Additional ESOP funding required on
conversion of Series E Preferred Stock, net of tax 7.6 7.9 -
------- ------- ------
Net income (loss) applicable $ 128.6 $ 79.0 $(69.6)
======= ======= ======
Net income (loss) per share of common stock $ 2.55 $ 1.70 $(1.96)
======= ======= ======
</TABLE>
Note - Series G Exchangeable Preferred Stock was converted to common stock
in 1994.
The assumed conversion of non-leveraged Series E was antidilutive in
all three years. The assumed conversion of Series A and Series G
Preferred Stock was antidilutive in 1994 and 1993. The assumed
conversion of leveraged Series E Preferred Stock was antidilutive in
1993.
<PAGE> 1
EXHIBIT 13
FINANCIAL REVIEW
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Dollars and Shares in Millions
(except per share data) 1995 1994 1993
- --------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $4,781.5 $4,497.0 $3,888.2
Operating profit $ 328.5 $ 249.4 $ 26.6
Net income (loss) $ 146.8 $ 107.4 $ (37.6)
Net income (loss)
per common share $ 2.69 $ 1.81 $ (1.96)
Average shares outstanding 47.4 43.5 35.5
</TABLE>
In 1995, the Company achieved its second best year for operating profit
performance, second only to the Company's 1988 record year. Net income increased
to $146.8 million in 1995 compared with $107.4 million in 1994 and a net loss of
$37.6 million in 1993. Operating profit increased $79 million in 1995 compared
with 1994 following improvements of $200 million or more in each of the two
prior years.
Record net sales of $4.8 billion were 6 percent higher than 1994 due
primarily to higher average selling price. Each of the Company's business
segments was responsible for approximately half of the consolidated net sales.
Demand for Company products and services remained strong through the first
half of 1995. However, the second half was negatively impacted by lower sales to
automotive contract customers and increased spot market sales resulting in a
less profitable mix of products sold and lower prices. In 1994, net sales
increased 16 percent from 1993 due to a 9 percent increase in volume and a 7
percent increase in average selling price resulting from an improved mix of
products sold.
STEEL MANUFACTURING SEGMENT
<TABLE>
<CAPTION>
Dollars and Tons in Millions
1995 1994 1993
- --------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $2,513.3 $2,487.9 $2,174.9
Operating profit (loss) $ 181.7 $ 149.3 $ (28.2)
Net tons shipped 5.1 5.2 4.8
</TABLE>
Inland Steel Company reported $182 million of operating profit in 1995, its
best performance since its 1988 record year, compared with an operating profit
of $149 million in 1994 and an operating loss of $28 million in 1993. Net sales
increased 1 percent in 1995 as compared with 1994 due to a 2 percent increase in
average selling price which was offset in part by a 1 percent decrease in the
volume of steel mill products shipped. After a strong first half, average
realizing prices deteriorated due to softness in flat rolled contract business,
particularly automotive, and a subsequent shift of business to a weakening spot
market. Demand for bar products, however, continued strong.
Net sales increased 14 percent in 1994 from 1993, 7 percent due to an
increase in the volume of steel mill products shipped and 7 percent due to an
improved average selling price and mix. The recovering economy in 1994 provided
strong demand for products containing steel and this demand was the principal
factor leading to both increased volume and price. The 1993 financial results
were negatively affected by approximately $30 million due to the unfavorable
impact on steel operations of the scheduled outage of the largest blast furnace
at the Indiana Harbor Works for a mini-reline. In addition, there was a $22.3
million charge taken for the early closure of the Company's remaining cokemaking
facilities due to their inability to meet environmental regulations and
deteriorating operating performance. Partially offsetting these unfavorable
items was a $24 million LIFO profit recognition due to inventory reductions.
<PAGE> 2
During the 1995 third quarter, Inland Steel Company offered a voluntary
retirement package to approximately 1,000 salaried employees. Approximately 300
salaried employees accepted the package, resulting in a charge of $35 million
being recorded in the quarter for provisions related to pensions, health care,
and severance costs.
At the end of the third quarter, due to economic reasons, Inland Steel
Company announced the closure of its plate operation to take place at the end of
1995. Provisions for pensions and other employee benefits related to the
shutdown of this operation had been previously accrued. With the closure of the
plate operation at year-end 1995, the Company has completed the workforce
reduction program announced in 1991, reducing employment by 25 percent. A final
computation of the employee benefit costs required for the 1991 program resulted
in unused reserves due to differences between the actual makeup of the
population leaving the Company under this program and the projections used in
1991. As a result, Inland Steel Company reversed $65 million of unused reserves
from the balance sheet and recorded a corresponding credit to income.
Also in the 1995 third quarter, Inland Steel Company increased reserves by
$7 million for additional benefit costs at a closed iron ore mining facility and
by $2 million for a further writedown of non-operating assets of the former
construction business. Reserves relating to environmental matters were increased
by $7 million.
Inland Steel Company operated at 90 percent of its raw steelmaking
capability in 1995, compared with 89 percent in 1994 and 83 percent in 1993.
Inland Steel Company, under the I/N Kote partnership agreement, supplies
all of the steel for the joint venture and, with certain limited exceptions, is
required to set the price of that steel to assure that I/N Kote's expenditures
do not exceed its revenues. In 1995 and 1994, Inland Steel Company's sales
prices exceeded its costs of production but were less than the market prices for
cold rolled steel products. As I/N Kote expenditures include principal payments
and a provision for return on equity to the partners, Inland Steel Company's
ability to realize higher prices on its sales to I/N Kote depends on the
facility continuing near-capacity operations and obtaining appropriate pricing
for its products.
MATERIALS DISTRIBUTION SEGMENT
<TABLE>
<CAPTION>
Dollars and Tons in Millions 1995 1994 1993
- ----------------------------------------------------------------
<S> <C> <C> <C>
Net sales $2,450.1 $2,197.5 $1,893.3
Operating profit $ 148.7 $ 98.1 $ 56.4
Net tons shipped 2.35 2.33 2.08
</TABLE>
<PAGE> 3
Inland Materials Distribution Group ("IMDG"), consisting of Joseph T.
Ryerson & Son, Inc., including its Ryerson Coil Processing Company division, and
J. M. Tull Metals Company, Inc., reported record net sales, shipments and
operating profit in 1995, its fourth consecutive year of improved sales and
operating results. Through year-end 1995, IMDG's operating profit has increased
over the comparable year-earlier quarter for 18 consecutive quarters. Net sales
increased 11 percent to $2.5 billion in 1995 following double digit rates of
increase in each of the previous two years. The improved sales were due to a 10
percent increase in average selling price per ton sold as volume increased only
minimally.
In 1995, as in 1994, results in the Midwest and Southeast were the
strongest. All four regions of the general line business, which supply a wide
range of metals and industrial plastics, as well as the coil processing
business, continued to improve operating profits. Operating costs, excluding the
costs of materials sold, continued to be tightly controlled and in 1995 reached
their lowest level in recent history as a percent of sales.
In 1994, net sales increased 16 percent to $2.2 billion due to a 12 percent
increase in volume and a 4 percent increase in average selling price per ton
sold reflecting, in part, a better mix of products sold. Lower operating costs
as a percent of sales in addition to the higher sales resulted in IMDG recording
an operating profit of $98.1 million in 1994.
INTERNATIONAL ACTIVITIES
In an on-going effort to better support customers with foreign operations
and expand other off-shore opportunities, the Company, through its Inland
International subsidiary, continued to pursue joint-venture opportunities
world-wide. Previously formed joint ventures with international partners, as
well as other joint ventures being considered, offer prospects for increased
international sales for both Company segments.
International sales by the Steel Manufacturing Segment and Materials
Distribution Segment totaled $84 million in 1995 and $43 million in 1994. The
1995 amount includes sales to I.M.F. Steel International Ltd., a joint venture
in which the Company holds a 50 percent interest and which was formed to sell
the Company's products and services around the world.
Ryerson de Mexico, the joint venture materials distribution company formed
in 1994 by the Company and Altos Hornos de Mexico SA de CV ("AHMSA"), Mexico's
largest steel company, continues to expand and attract the interest of new
customers with its extensive variety of materials and services. The Company made
investments in this joint venture of $9 million in 1995 and $10 million in 1994.
Efforts to obtain approval to form a joint venture with Baoshan Iron and
Steel Corporation continue with the People's Republic of China. The Company is
also pursuing joint-venture opportunities in India.
In 1995 and 1994, international activities were not material to the
financial results of the Company.
LIQUIDITY AND FINANCING
The Company finished 1995 with cash and cash equivalents of $267 million
compared with $107 million at year-end 1994. There was no short-term bank
borrowing at either year-end.
In the first quarter of 1995 the Company declared a 5 cent per share
quarterly dividend on its common stock. This represented the first such
declaration since the payment of dividends was suspended in the 1991 second
quarter.
During the third quarter of 1995, Inland Steel Company refinanced $17
million of 10.75 percent pollution control revenue bonds with bonds bearing an
interest rate of 6.85 percent. Also during the third quarter, the Company
exchanged its Series F Exchangeable Preferred Stock, held entirely by a
wholly-owned subsidiary of Nippon Steel Corporation, for a 10.23% Subordinated
Voting Note. The exchange, which will have a favorable impact on earnings per
share, increases tax-deductible interest expense recognized by the Company while
reducing preferred dividends. The Company remains obligated under the repurchase
agreement which was part of the sale of the Series F Preferred Stock to
repurchase $185 million of its common stock. By year-end 1995, $150 million had
been spent to purchase 4.8 million shares. The Company suspended open-market
stock purchases under this agreement at year-end 1990.
Cash availability, as well as various covenants in subsidiary borrowing
arrangements, limited the cash that subsidiaries could transfer to the Company
in the form of dividends and advances to approximately $350 million at year-end
1995. This amount is subject to change based on the financial performance of
each subsidiary.
The Company's subsidiary borrowing arrangements, as well as both the Inland
Steel Company Series T First Mortgage Indenture and the indenture under which
the Company's 12.75% Notes were issued, contain covenants limiting financial
flexibility and the Company's ability to issue additional debt. Certain
covenants in the indenture relating to the 12.75% Notes also limit the amount of
cash dividends the Company may declare or pay. At year-end 1995, up to $275
million of common dividends could have been paid under terms of the indenture.
The 12.75% Notes are not subject to redemption prior to December 15, 1997.
<PAGE> 4
During the year, the Company's subsidiaries increased total committed
credit facilities to $350 million. The $100 million Ryerson unsecured revolving
credit facility was increased to $200 million and the term was extended to March
31, 2000. Inland Steel Company's special-purpose subsidiary increased its $100
million revolving credit facility to $125 million and extended the term of the
agreement to November 30, 2000. The special-purpose subsidiary credit facility
is secured by receivables sold to this subsidiary by Inland Steel Company. The
$25 million Tull unsecured credit facility extends to December 15, 1997. The
interest rates on borrowing under such credit agreements are, at the Company's
option, based on Eurodollar, Certificate of Deposit, or the greater of federal
funds or prime rates. At year-end, the highest interest rate option for
borrowings under any of these credit agreements was the applicable prime rate.
The Company believes that its present cash position, augmented by its
subsidiaries' credit facilities and the cash flow anticipated from operations,
will provide sufficient liquidity to meet its scheduled debt retirements, pay
preferred dividends, fund its capital program and meet any operating cash
requirements that may arise for at least the next two years. The Company ended
1995 with long-term debt of $785 million, including $100 million of long-term
debt related to the Subordinated Voting Note, compared with $706 million at
year-end 1994. Long-term debt due within one year increased markedly at December
31, 1995 compared with year-end 1994 due to the $85 million principal payment
due December 1996 on the Subordinated Voting Note. The average interest rate on
long-term debt is approximately 10 percent.
The ratio of long-term debt (and redeemable preferred stock in 1994 and
1993) to total capitalization was 50 percent at December 31, 1995 compared with
62 percent and 69 percent at year-end 1994 and 1993, respectively.
In addition, Inland Steel Company guarantees its 50 percent share of I/N
Kote borrowings, a pulverized coal injection joint venture loan, and a portion
of the debt of the Empire Iron Mining partnership amounting to $226 million, $27
million, and $7 million, respectively, at year-end 1995. As none of these
guarantees have been invoked since their inception, the Company does not believe
these guarantees will be called upon.
The Company's debt ratings at year-end 1995 were unchanged from 1994 and
were:
<TABLE>
<CAPTION>
Ratings at Year End 1995
- --------------------------------------------------------------
<S> <C>
Inland Steel Industries Notes
Moody's Ba3
Standard & Poor's B+
- --------------------------------------------------------------
Inland Steel Company First Mortgage Bonds
Moody's Ba3
Standard & Poor's BB-
</TABLE>
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES
Dollars in Millions 1995 1994 1993
- -------------------------------------------------------------------
<S> <C> <C> <C>
Capital expenditures
Steel Manufacturing $113.9 $223.6 $ 86.1
Materials Distribution 19.3 20.4 19.3
General corporate and other 1.4 1.3 .2
- -------------------------------------------------------------------
Total capital expenditures $134.6 $245.3 $105.6
</TABLE>
Capital expenditures were $135 million in 1995. The majority of the capital
expenditures was for new machinery and equipment related to maintaining or
improving operations at the Steel Manufacturing Segment. Included in the $245
million of capital expenditures reported in 1994 was $146 million for the
purchase of a caster facility which had previously been leased. The Company
anticipates capital expenditures in 1996 will approximate $200 million.
Employment Matters
Inland Steel Company and the United Steelworkers of America entered into a
six-year labor agreement, effective August 1, 1993. The agreement expires on
July 31, 1999 but provides for a reopener in 1996 on wages and certain benefits
with an arbitration provision to resolve unsettled issues, thereby precluding a
work stoppage during the six-year contract term. The agreement also provides
for election
<PAGE> 5
to the Company's Board of Directors of a union designee acceptable to the Board
(such union designee was elected in 1994), restricts Inland Steel Company's
ability to reduce the union workforce (generally limited to attrition and major
facilities shutdowns), allows greater flexibility to institute work rule
changes, and requires quarterly payment of profit sharing amounts, significant
improvements in pension benefits for active employees, and the securing of
retiree health care obligations through certain trust and second mortgage
arrangements. "First dollar" health care coverage was eliminated under the
agreement through the institution of co-payments and increased deductibles for
medical benefits.
Average employment remained virtually unchanged during 1995 after declining
4 percent in 1994 and 6 percent in 1993. Total employment cost decreased 1
percent as lower costs for pensions and other postretirement benefits were
almost entirely offset by higher direct compensation expense, including profit
sharing provisions.
EMPLOYEES
<TABLE>
<CAPTION>
(monthly average receiving pay) 1995 1994 1993
- ----------------------------------------------------------------
<S> <C> <C> <C>
Steel Manufacturing 10,165 10,166 10,857
Materials Distribution 5,125 5,195 5,157
Headquarters and other 120 118 138
- ----------------------------------------------------------------
Total 15,410 15,479 16,152
</TABLE>
CONSOLIDATED EMPLOYMENT COSTS*
<TABLE>
<CAPTION>
Dollars in Millions (except averages) 1995 1994 1993
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Direct compensation $ 712.9 $ 681.1 $ 665.0
- -------------------------------------------------------------------------
Employee benefits
Group insurance costs 60.9 63.5 77.1
Postretirement benefits
other than pensions 64.5 79.5 95.7
Pension costs (credits) 7.5 28.2 (4.6)
Social security and unemploy-
ment compensation taxes 56.2 55.5 54.6
Workers' compensation
expense 11.3 12.7 10.8
Thrift Plan costs 9.1 9.2 9.7
Cost of supplemental unem-
ployment benefit plans 7.2 7.9 6.5
Industry welfare and
retirement funds 3.6 2.9 3.2
All other 8.2 9.0 6.9
- -------------------------------------------------------------------------
Total cost of employee benefits $ 228.5 $ 268.4 $ 259.9
- -------------------------------------------------------------------------
Total employment costs $ 941.4 $ 949.5 $ 924.9
- -------------------------------------------------------------------------
Average employment cost
per employee $61,092 $61,342 $57,265
</TABLE>
* This table does not include the effect of workforce reduction plans.
PENSIONS
In 1995, the Company elected to change the measurement date for pension plan
assets and liabilities from December 31 to September 30 in order to provide for
more timely information and to achieve administrative efficiencies in the
collection of data. The change in the measurement date had no effect on 1995
pension expense and had an immaterial impact on the 1995 funded status. At
September 30, 1995 the market value of the Inland Steel Industries Pension Plan
assets totaled $1.92 billion. For financial reporting purposes, the funded
status of the Pension Plan has appeared very volatile over the past few years
due to the significant changes in the interest rate on high-grade fixed-income
obligations that must be used for valuing pension liabilities. This rate moved
from 7.25 percent in 1993, a twenty year low, to 8.8 percent in 1994 and back
to 7.75 percent in 1995. The Company was required to record a $103 million
additional pension liability, offset by an intangible pension asset, on the
1995 balance sheet. However, under ERISA funding guidelines, which take a
longer term view in determining the interest rate to use in valuing
liabilities, the Pension Plan was adequately funded.
In May 1995, the Company contributed 3.9 million shares of its common stock
with an aggregate value of $100 million to the Company's Pension Trust. The
contribution, the Company's first contribution to the Trust since 1984,
strengthened the plan's funded status.
The Pension Plan's diversified portfolio of investments earned over 20
percent during 1995 compared to less than 1 percent in 1994. While individual
year returns are volatile, the annualized return earned by the plan for the past
ten years exceeds 11 percent. A total of $151 million in pension benefits was
paid in both 1995 and 1994. At year-end 1995, pension benefits were being paid
to 16,263 retirees and their beneficiaries compared with 16,235 at year-end
1994.
ACCOUNTING MATTERS
At December 31, 1995, the Company had a net deferred tax asset of $340 million,
which includes $440 million related to the temporary difference arising from the
adoption of Financial Accounting Standards Board ("FASB") Statement No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions." While
the Company believes it is more likely than not that it will generate sufficient
taxable income from operations to realize all deferred tax assets, a secondary
source of future taxable income could result from tax planning strategies.
Possible strategies include the Company's option of changing from the LIFO
method of accounting for inventories to the FIFO method (such change would have
resulted in approximately $410 million of additional taxable income as of
year-end 1995
<PAGE> 6
which would serve to offset approximately $140 million of deferred tax assets)
and selection of different tax depreciation methods. After assuming such change
in accounting for inventories, the Company would need to recognize approximately
$560 million of taxable income over the 15-year net operating loss carryforward
period and the period in which the temporary difference related to the FASB
Statement No. 106 obligation will reverse, in order to fully realize its net
deferred tax asset. The Company believes that it is more likely than not that it
will achieve such taxable income level. (See Note 12 to the consolidated
financial statements for further details regarding this net deferred tax asset.)
In 1995, the Company adopted FASB Statement No. 121, Accounting for the
Impairment of Long-Lived Assets. Adoption of this Statement did not have a
material effect on the financial position or results of operations of the
Company.
ENVIRONMENTAL ISSUES
Inland Steel Company has significantly reduced discharges of air and water
pollutants at its Indiana Harbor Works complex in East Chicago, Indiana in
recent years and is committed to operating its facilities in an environmentally
acceptable manner.
On June 10, 1993, the U.S. District Court for the Northern District of
Indiana entered a consent decree that resolved all matters raised by a lawsuit
filed by the United States Environmental Protection Agency ("EPA") in 1990. The
consent decree included a $3.5 million cash fine, environmentally beneficial
projects at the Indiana Harbor Works through 1997 costing approximately $7
million, and sediment remediation of portions of the Indiana Harbor Ship Canal
and Indiana Harbor Turning Basin estimated to cost approximately $19 million
over the next several years. The fine and estimated remediation costs were
provided for in earlier years. The consent decree also defines procedures for
remediation at Inland Steel Company's Indiana Harbor Works. The procedures
defined establish essentially a three-step process, each step of which requires
agreement of the EPA before progressing to the next step in the process,
consisting of: assessment of the site, evaluation of corrective measures for
remediating the site, and implementation of the remediation plan according to
the agreed-upon procedures. The Company continues to assess the extent of
environmental contamination and anticipates that this assessment will cost
approximately $1 million to $2 million per year and take another two to four
years to complete. The Company's reserve for environmental liabilities including
those in connection with the consent decree totaled $26 million at year-end
1995. Because neither the nature and extent of the contamination nor the
corrective actions can be determined until the assessment of environmental
contamination and evaluation of corrective measures is completed, the Company
cannot presently reasonably estimate the costs of or the time required to
complete such corrective actions. Such corrective actions may, however, require
significant expenditures over the next several years that may be material to the
results of operations or financial position of the Company. Insurance coverage
with respect to such corrective action is not significant.
Capital spending for pollution control projects totaled $19 million in
1995, up from $18 million in 1994. Another $39 million was spent in 1995 to
operate and maintain such equipment, versus $41 million a year earlier. During
the five years ended December 31, 1995, the Company has spent $274 million to
construct, operate and maintain environmental control equipment at its various
locations.
Environmental projects previously authorized and presently under
consideration, including those designed to comply with the 1990 Clean Air Act
Amendments, but excluding any amounts that would be required under the consent
decree settling the 1990 EPA lawsuit, will require capital expenditures of
approximately $23 million in 1996. It is anticipated that the Company will make
annual capital expenditures of $10 million to $15 million in each of the next
four years thereafter for the construction, and have ongoing annual expenditures
of $40 million to $50 million for the operation, of air and water pollution
control facilities to comply with current federal, state and local laws and
regulations. Due to the inability to predict the costs of corrective action that
may be required under the Resource Conservation and Recovery Act and the consent
decree in the 1990 EPA lawsuit, the Company cannot predict the amount of
additional environmental expenditures that will be required. Such additional
environmental expenditures, excluding amounts that may be required in connection
with the consent decree in the 1990 EPA lawsuit, however, are not expected to be
material to the results of operations or financial position of Inland Steel
Company.
COMPETITION
The steel market is highly competitive with major integrated producers,
including Inland Steel Company, facing competition from a variety of
<PAGE> 7
sources. Many steel products compete with alternative materials such as
plastics, aluminum, ceramics, glass and concrete. Domestic steel producers have
also been adversely impacted by imports from foreign steel producers.
Preliminary data indicate that imports of steel mill products accounted for
approximately 21 percent of the domestic market in 1995, below both the 1984
peak of 26.4 percent, and 24.7 percent in 1994. Many foreign producers are still
owned, controlled, or subsidized by their governments allowing them to ship
steel products into the domestic market despite decreased profit margins or
losses on such sales.
Minimills provide significant competition in various product lines.
Minimills are relatively efficient, low-cost producers that manufacture steel
principally from scrap in electric furnaces and, at this time, generally have
lower capital, overhead, employment and environmental costs than the integrated
steel producers, including Inland Steel Company. Minimills have been adding
capacity and expanding their product lines in recent years to produce larger
structural products and certain flat rolled products. Thin-slab casting
technologies have allowed minimills to enter certain sheet markets traditionally
supplied by integrated producers. Several minimills using this advanced
technology are in operation in the United States and a significant increase in
modern minimill capacity is anticipated within the next two years.
<TABLE>
<CAPTION>
SUMMARY BY QUARTER (Unaudited) Inland Steel Industries, Inc. and Subsidiary Companies
Dollars in Millions (except per share data)
Per Common Share
----------------------------------------------
Market Price
---------------------------------
Net Gross Income
Sales Profit Before Taxes Net Income Net Income High Low Close
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995
First Quarter $ 1,257.7 $ 144.9 $ 71.9 $ 44.0 $ .84 $36 3/4 $23 1/2 $27 1/2
Second Quarter 1,273.5 166.5 94.3 57.9 1.08 30 1/2 25 30 1/2
Third Quarter 1,128.6 120.7 32.9 20.0 .33 35 1/2 22 5/8 22 3/4
Fourth Quarter 1,121.7 111.5 38.0 24.9 .47 27 1/2 21 1/4 25 1/8
- ---------------------------------------------------------------------------------------------------------------------
YEAR $ 4,781.5 $ 543.6 $237.1 $146.8 $ 2.69* $36 3/4 $21 1/4 $25 1/8
=====================================================================================================================
- ---------------------------------------------------------------------------------------------------------------------
1994
First Quarter $ 1,075.7 $ 85.8 $ 14.6 $ 9.2 $ .03 $37 1/8 $29 7/8 $30 1/8
Second Quarter 1,135.6 123.5 50.2 31.6 .57 36 5/8 29 3/8 34 7/8
Third Quarter 1,129.5 120.3 47.5 30.7 .54 42 34 39 3/8
Fourth Quarter 1,156.2 126.9 57.2 35.9 .66 39 1/2 29 7/8 35 1/8
- ---------------------------------------------------------------------------------------------------------------------
YEAR $ 4,497.0 $ 456.5 $169.5 $107.4 $ 1.81* $42 $29 3/8 $35 1/8
=====================================================================================================================
</TABLE>
* Per share amounts for the quarters do not total to the amount reported
for the year, as per share amounts are computed independently for each
quarter and the year based on respective weighted average common shares
outstanding.
<PAGE> 8
ELEVEN-YEAR SUMMARY OF SELECTED FINANCIAL DATA AND OPERATING RESULTS
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dollars in Millions
RESULTS Net sales $4,781.5 $4,497.0 $3,888.2
OF OPERATIONS Depreciation 143.1 138.7 131.8
Interest expense 71.9 71.4 78.0
Rent expense 51.2 54.5 73.7
Continuing business segments
Income (loss) before income taxes 237.1 169.5 (73.6)
Income taxes 90.3 62.1 36.0Cr.
Income (loss) 146.8 107.4 (37.6)
Net income (loss) 146.8 107.4 (37.6)
- ------------------------------------------------------------------------------------------------------
Shares in Thousands
DATA APPLICABLE Average number of shares 47,419 43,545 35,540
TO COMMON STOCK Income (loss) per share
Continuing business segments $ 2.69 $ 1.81 $ (1.96)
Net income (loss) 2.69 1.81 (1.96)
Dividends per share .20 -- --
Stockholders' equity per share 14.72 11.06 7.79
Stockholders of record 15,000 16,000 16,000
Shares traded (average daily volume) 228.2 206.3 134.2
- ------------------------------------------------------------------------------------------------------
Dollars in Millions
CHANGES IN Cash provided from (used for) operations $ 330.2 $ 265.5 $ 112.0
FINANCIAL POSITION Capital expenditures 134.6 245.3 105.6
Investments in and advances to
joint ventures, net (16.4) (13.7) 1.9
Acquisitions -- -- --
Dividends declared on common stock 9.6 -- --
Dividends declared on preferred stock 17.6 27.9 32.0
Financing
Long-term debt (net of retirements) 78.6 (71.2) (96.6)
Preferred stock -- -- --
Common stock 100.0 -- 178.7
Net change in liquidity 160.3 (143.4) 112.8
- ------------------------------------------------------------------------------------------------------
Dollars in Millions
FINANCIAL POSITION Working capital $ 618.1 $ 516.7 $ 496.4
AT YEAR END Property (net) 1,600.4 1,610.3 1,507.7
Total assets 3,558.3 3,353.4 3,435.8
Long-term debt 784.5 705.9 777.1
Redeemable preferred stock -- 185.0 185.0
Other temporary equity 34.5 37.9 40.8
Stockholders' equity 748.6 509.2 397.6
Unused credit facilities 350 225 225
- ------------------------------------------------------------------------------------------------------
FINANCIAL RATIOS Net income (loss) as a percent of sales 3.1% 2.4% (1.0)%
Long-term debt to total capitalization 50.0% 49.1% 55.5%
Long-term debt and redeemable
preferred to total capitalization 50.0% 62.0% 68.7%
Return on stockholders' equity 19.6% 21.1% loss
- ------------------------------------------------------------------------------------------------------
Dollars and Tons in Millions
PRODUCTION Tons of raw steel produced 5.4 5.3 5.0
AND EMPLOYMENT Tons of steel mill shipments 5.1 5.2 4.8
STATISTICS Average number of employees 15,410 15,479 16,152
Total employment costs $ 941.4 $ 949.5 $ 924.9
---------------------------------------------------------------------------------
Cr. = Credit
</TABLE>
<PAGE> 9
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988 1987 1986 1985
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$3,494.3 $3,404.5 $3,870.4 $4,146.7 $4,068.0 $3,453.2 $3,173.2 $2,999.4
129.6 118.2 119.7 131.2 134.8 123.4 124.0 119.7
54.9 46.8 38.7 38.4 46.2 62.8 71.6 64.9
75.5 81.8 85.5 79.9 72.3 68.9 55.2 33.7
(258.6) (381.1) (36.7) 175.6 364.6 97.5 36.7 (147.5)
99.2Cr. 106.0Cr. 16.1Cr. 55.9 115.8 14.2Cr. 1.9 .1Cr.
(159.4) (275.1) (20.6) 119.7 248.8 111.7 34.8 (147.4)
(815.6) (275.1) (20.6) 119.7 262.1 145.0 19.3 (178.4)
- ---------------------------------------------------------------------------------------------------
32,828 30,943 32,195 35,581 33,623 31,854 28,479 25,266
$ (5.83) $ (9.88) $ (1.41) $ 3.15 $ 6.99 $ 3.09 $ .95 $ (6.14)
(25.82) (9.88) (1.41) 3.15 7.39 4.14 .40 (7.37)
-- .15 1.40 1.40 .75 -- -- .375
6.01 31.10 41.27 43.00 42.50 36.15 32.85 34.20
18,000 18,000 19,000 23,000 24,000 26,000 29,000 33,000
97.3 89.3 95.7 199.5 170.0 178.9 78.6 55.2
- ---------------------------------------------------------------------------------------------------
$ (21.4) $ 25.0 $ 189.1 $ 240.2 $ 531.8 $ 169.1 $ 129.1 N/A
64.4 140.2 268.1 197.2 136.5 128.0 124.8 $ 174.8
6.3 24.9 49.8 15.5 73.6 10.5 9.0 7.8
-- -- -- 28.2 50.2 -- 96.4 --
-- 4.6 45.3 50.1 25.2 -- -- 9.5
32.1 31.1 27.1 6.9 13.8 13.9 7.8 7.8
108.9 73.1 114.0 (17.8) (43.2) (160.9) (122.5) 87.8
-- 72.8 -- 185.0 -- 96.6 -- --
97.9 -- -- -- -- 83.7 85.2 --
90.6 (11.2) (179.1) (67.9) 124.2 71.7 157.2 (70.1)
- ---------------------------------------------------------------------------------------------------
$ 441.0 $ 322.8 $ 395.9 $ 703.0 $ 719.8 $ 625.0 $ 428.0 $ 268.0
1,548.8 1,635.0 1,708.3 1,569.8 1,493.9 1,488.1 1,552.4 1,745.2
3,146.5 2,697.8 2,934.8 3,008.5 2,925.0 2,651.4 2,526.6 2,631.5
873.7 764.8 691.7 577.7 595.5 638.7 799.6 922.1
185.0 185.0 185.0 185.0 -- -- -- --
49.9 53.0 54.9 181.3 -- -- -- --
271.4 1,009.4 1,234.0 1,313.8 1,559.4 1,391.5 1,067.7 958.4
225 225 325 325 225 225 150 135
- ---------------------------------------------------------------------------------------------------
(23.3)% (8.1)% (.5)% 2.9% 6.4% 4.2% .6% (5.9)%
63.3% 38.0% 31.9% 25.6% 27.6% 31.5% 42.8% 49.0%
76.7% 47.2% 40.5% 33.8% 27.6% 31.5% 42.8% 49.0%
loss loss loss 9.1% 16.8% 10.4% 1.8% loss
- ---------------------------------------------------------------------------------------------------
4.7 4.7 5.3 5.6 6.1 5.5 5.7 6.1
4.3 4.2 4.7 4.9 5.0 4.9 4.9 4.7
17,181 18,600 20,154 20,715 20,639 20,740 22,668 24,413
$ 940.7 $ 907.4 $ 979.0 $ 964.3 $ 945.8 $ 878.4 $ 918.6 $ 988.5
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 10
FINANCIAL RESPONSIBILITY
Senior management is responsible for the integrity and objectivity of the
financial data reported by Inland Steel Industries, Inc. and its subsidiaries.
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, and in management's judgment reflect
fairly the consolidated financial position, cash flows and results of
operations of Inland and its subsidiary companies.
The Company maintains systems of internal accounting controls and
procedures to provide reasonable assurance of the safeguarding and
accountability of Company assets, and to ensure that its financial records
provide a reliable basis for the preparation of financial statements and other
data.
Internal accounting control is maintained through:
- The on-going activities of corporate staff, line officers and
accounting management to monitor the adequacy of internal accounting
control systems throughout the Company
- The selection and proper training of qualified personnel
- The appropriate separation of duties in organizational
arrangements
- The establishment and communication of accounting and
business policies together with detailed procedures for their
implementation
- The use of an intensive ongoing program of internal auditing
- The use of a detailed budgeting system to assure that
expenditures are properly approved and charged.
Stockholders annually elect a firm of independent accountants to audit the
annual financial statements (their current report appears below). The principal
role of the Audit Committee of the Board of Directors (consisting entirely of
non-management Directors) is to review the conclusions reached by management in
its evaluation of internal accounting controls, approve the scope of audit
programs and evaluate audit results of both independent accountants and
internal auditors. Both groups have unrestricted access to the Audit Committee,
without the presence of management.
REPORT OF INDEPENDENT ACCOUNTANTS
[PRICE WATERHOUSE LLP LOGO]
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
INLAND STEEL INDUSTRIES, INC.
In our opinion, the consolidated financial statements on pages 33 through 47
present fairly, in all material respects, the financial position of Inland
Steel Industries, Inc. and Subsidiary Companies at December 31, 1995 and 1994,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
Chicago, Illinois
February 19, 1996
PRICE WATERHOUSE LLP
<PAGE> 11
STATEMENT OF ACCOUNTING AND FINANCIAL POLICIES
The following briefly describes the Company's principal accounting and
financial policies.
ACCOUNTING FOR EQUITY INVESTMENTS
The Company's investments in less than majority-owned companies, joint ventures
and partnerships, and the Company's majority interest in the I/N Tek
partnership, are accounted for under the equity method.
PER SHARE RESULTS
Primary per share results are based on the weighted average number of common
shares outstanding and take into account the dividend requirements of preferred
stock, net of tax benefits related to leveraged Employee Stock Ownership Plan
("ESOP") shares, and the dilutive effect of outstanding stock options.
Fully diluted earnings per common share reflect the further dilutive
effect of the assumed conversion into common stock of the outstanding shares of
convertible preferred stock, and the elimination of the related preferred stock
dividends. Also reflected in the fully diluted earnings per common share is an
adjustment for the additional ESOP contribution, net of tax benefits, that
would be necessary to meet debt service requirements that would arise upon
conversion of the leveraged Series E ESOP Convertible Preferred Stock ("Series
E Preferred Stock"), due to the current excess of the preferred dividend over
the common dividend.
INVENTORY VALUATION
Inventories are valued at cost which is not in excess of market. Cost is
determined by the last-in, first-out method except for supply inventories,
which are determined by the average cost or first-in, first-out methods.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is depreciated for financial reporting purposes
over the estimated useful lives of the assets. Steelmaking machinery and
equipment, a significant class of assets, is depreciated on a
production-variable method, which adjusts straight-line depreciation to reflect
production levels at the steel plant. The adjustment is limited to not more
than a 25 percent increase or decrease from straight-line depreciation. Blast
furnace relining expenditures are capitalized and amortized on a
unit-of-production method over the life of the lining. All other assets are
depreciated on a straight-line method.
Expenditures for normal repairs and maintenance are charged to income as
incurred.
Gains or losses from significant abnormal disposals or retirements of
properties are credited or charged to income. The cost of other retired assets
less any sales proceeds is charged to accumulated depreciation.
EXCESS OF COST OVER NET ASSETS ACQUIRED
The excess of cost over fair value of net assets of businesses acquired is
being amortized over 25-year periods.
BENEFITS FOR RETIRED EMPLOYEES
Pension benefits are provided by the Company to substantially all employees
under a trusteed non-contributory plan. Life insurance and certain medical
benefits are provided for substantially all retired employees.
The estimated costs of pension, medical, and life insurance benefits are
determined annually by consulting actuaries. The cost of these benefits for
retirees is being accrued during their term of employment. Pensions are funded
in accordance with ERISA requirements in a trust established under the plan.
Costs for retired employee medical benefits are funded when claims are
submitted.
CASH EQUIVALENTS
Cash equivalents reflected in the Statement of Cash Flows are highly liquid,
short-term investments with maturities of three months or less that are an
integral part of the Company's cash management portfolio.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the consolidated financial statements and
related notes to financial statements. Changes in such estimates may affect
amounts reported in future periods.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
In 1995, the Company adopted Financial Accounting Standards Board ("FASB")
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." Adoption of this Statement did not have a
material effect on results of operations or the financial position of the
Company.
<PAGE> 12
CONSOLIDATED STATEMENTS OF OPERATIONS AND REINVESTED EARNINGS
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Dollars in Millions (except per share data) Years Ended December 31 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONSOLIDATED NET SALES $4,781.5 $4,497.0 $3,888.2
STATEMENT OF ---------------------------------------------------------------------------------------------------------
OPERATIONS OPERATING COSTS AND EXPENSES:
Cost of goods sold (excluding depreciation) 4,043.2 3,853.1 3,457.8
Selling, general and administrative expenses 204.1 197.6 190.0
Depreciation 142.6 138.1 131.2
State, local and miscellaneous taxes 63.1 58.8 60.3
Facility shutdown provision (Note 10) -- -- 22.3
---------------------------------------------------------------------------------------------------------
Total 4,453.0 4,247.6 3,861.6
---------------------------------------------------------------------------------------------------------
OPERATING PROFIT 328.5 249.4 26.6
---------------------------------------------------------------------------------------------------------
OTHER EXPENSE:
General corporate expense, net of income items 19.5 8.5 22.2
Interest and other expense on debt 71.9 71.4 78.0
---------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES 237.1 169.5 (73.6)
---------------------------------------------------------------------------------------------------------
PROVISION FOR INCOME TAXES (Note 12):
Current taxes 11.1 9.2 2.8
Deferred taxes 79.2 52.9 38.8Cr.
---------------------------------------------------------------------------------------------------------
Total 90.3 62.1 36.0Cr.
---------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) 146.8 107.4 (37.6)
Dividend requirements for preferred stock (net of tax benefits
related to leveraged ESOP shares) 19.0 28.4 32.0
---------------------------------------------------------------------------------------------------------
Net income (loss) applicable to common stock $ 127.8 $ 79.0 $ (69.6)
=========================================================================================================
PER SHARE OF COMMON STOCK:
Primary $ 2.69 $ 1.81 $ (1.96)
=========================================================================================================
Fully Diluted $ 2.55 $ 1.70 $ (1.96)
=========================================================================================================
Cr.=Credit
- ---------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED Accumulated deficit at beginning of year $ (292.4) $(371.9) $(302.3)
STATEMENT Net income (loss) for the year 146.8 107.4 (37.6)
OF REINVESTED Dividends declared:
EARNINGS Common ($.20 per share in 1995) (9.6) -- --
Preferred (Notes 4 and 6) (17.6) (27.9) (32.0)
---------------------------------------------------------------------------------------------------------
Accumulated deficit at end of year $ (172.8) $ (292.4) $ (371.9)
=========================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements on pages 38-47.
<PAGE> 13
CONSOLIDATED STATEMENT OF CASH FLOWS
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
Increase (Decrease) in Cash
Dollars in Millions Years Ended December 31 1995 1994 1993
------------------- --------------------------- ---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES NET INCOME (LOSS) $ 146.8 $ 107.4 $ (37.6)
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH PROVIDED
FROM OPERATING ACTIVITIES:
Depreciation 143.1 138.7 131.8
Deferred income taxes 79.2 52.9 (36.8)
Deferred employee benefit cost (23.5) 52.2 38.1
Stock issued for coverage of employee benefit plans 23.9 35.0 19.1
Facility shutdown provision -- -- 18.9
Change in: Receivables 15.1 (76.3) (46.4)
Inventories (31.5) (52.6) (4.2)
Accounts payable (34.8) 52.0 34.0
Accrued salaries and wages (.4) 12.1 1.6
Other accrued liabilities 29.6 (20.8) 4.9
Other deferred items (17.3) (35.1) (11.4)
-------- -------- --------
NET ADJUSTMENTS 183.4 158.1 149.6
-------- -------- --------
NET CASH PROVIDED FROM OPERATING ACTIVITIES 330.2 265.5 112.0
-------- -------- --------
INVESTING ACTIVITIES Capital expenditures (134.6) (182.0) (105.6)
Investments in and advances to joint ventures, net 16.4 13.7 (1.9)
Proceeds from sales of assets 3.6 8.4 6.5
-------- -------- --------
NET CASH USED FOR INVESTING ACTIVITIES (114.6) (159.9) (101.0)
-------- -------- --------
FINANCING ACTIVITIES Sale of common stock -- -- 178.7
Long-term debt issued 16.8 19.7 46.8
Long-term debt retired (36.5) (232.5) (78.5)
Dividends paid (31.6) (32.2) (35.7)
Acquisition of treasury stock (4.0) (4.0) (9.5)
-------- -------- --------
NET CASH PROVIDED FROM (USED FOR) FINANCING ACTIVITIES (55.3) (249.0) 101.8
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 160.3 (143.4) 112.8
Cash and cash equivalents--beginning of year 107.1 250.5 137.7
-------- -------- --------
Cash and cash equivalents--end of year $ 267.4 $ 107.1 $ 250.5
======== ======== ========
SUPPLEMENTAL Cash paid during the year for:
DISCLOSURES Interest (net of amount capitalized) $ 65.4 $ 73.5 $ 76.0
Income taxes, net 9.4 8.3 1.9
Non-cash activities:
Reduction of deferred employee benefits resulting from
contribution of common stock to the Company's Pension Trust 100.0 -- --
Series F Preferred Stock exchanged for Subordinated
Voting Note 185.0 -- --
Long-term debt acquired in purchase of assets -- 63.3 --
</TABLE>
See Notes to Consolidated Financial Statements on pages 38-47.
<PAGE> 14
CONSOLIDATED BALANCE SHEET
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Dollars in Millions At December 31 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS CURRENT ASSETS:
Cash and cash equivalents $ 267.4 $ 107.1
Receivables less provision for allowances, claims and
doubtful accounts of $29.9 and $24.9, respectively 488.5 503.6
Inventories (Note 1) 461.0 429.5
Deferred income taxes (Note 12) 45.4 41.3
-------------------------------------------------------------------------------------------------
Total current assets 1,262.3 1,081.5
INVESTMENTS AND ADVANCES (SEE DETAILS PAGE 37) 241.0 225.1
PROPERTY, PLANT AND EQUIPMENT, AT COST, LESS ACCUMULATED
DEPRECIATION (SEE DETAILS PAGE 37) 1,600.4 1,610.3
DEFERRED INCOME TAXES (NOTE 12) 295.0 379.0
INTANGIBLE PENSION ASSET (NOTE 11) 102.6 --
EXCESS OF COST OVER NET ASSETS ACQUIRED 23.6 25.0
DEFERRED CHARGES AND OTHER ASSETS 33.4 32.5
-------------------------------------------------------------------------------------------------
Total assets $3,558.3 $3,353.4
=================================================================================================
- ----------------------------------------------------------------------------------------------------------------------
LIABILITIES CURRENT LIABILITIES:
Accounts payable $ 314.4 $ 351.2
Accrued liabilities:
Salaries, wages and commissions 87.4 87.8
Taxes 85.1 72.5
Interest on debt 10.8 7.9
Terminated facilities costs and other (Note 10) 40.0 25.9
Long-term debt due within one year (Note 3) 106.5 19.5
-------------------------------------------------------------------------------------------------
Total current liabilities 644.2 564.8
LONG-TERM DEBT (SEE DETAILS PAGE 37 AND NOTE 3) 784.5 705.9
ALLOWANCE FOR TERMINATED FACILITIES COSTS AND OTHER
(NOTE 10) 54.2 34.1
DEFERRED EMPLOYEE BENEFITS (NOTE 11) 1,280.3 1,301.2
DEFERRED INCOME 12.0 15.3
-------------------------------------------------------------------------------------------------
Total liabilities 2,775.2 2,621.3
- ----------------------------------------------------------------------------------------------------------------------
TEMPORARY EQUITY REDEEMABLE PREFERRED STOCK, Series F, $1.00 par value, 185,000 shares
issued and outstanding in 1994 (Note 4) -- 185.0
COMMON STOCK REPURCHASE COMMITMENT (Note 4) 34.5 37.9
- ----------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY PREFERRED STOCK, $1.00 par value, 15,000,000 shares authorized for all
series, aggregate liquidation value of $155.7 in 1995
and $154.9 in 1994 (Notes 5 and 6) 3.2 3.2
COMMON STOCK, $1.00 par value; authorized--100,000,000 shares;
issued--50,556,350 shares (Notes 6 through 8) 50.6 50.6
CAPITAL IN EXCESS OF PAR VALUE (Note 6) 1,045.7 1,088.0
ACCUMULATED DEFICIT (172.8) (292.4)
UNEARNED COMPENSATION--ESOP (Note 5) (89.9) (100.5)
COMMON STOCK REPURCHASE COMMITMENT (Note 4) (34.5) (37.9)
TREASURY STOCK AT COST--Common stock of 1,814,516 shares in 1995 and
6,006,122 shares in 1994 (51.1) (200.9)
CUMULATIVE TRANSLATION ADJUSTMENT (2.6) (.9)
-------------------------------------------------------------------------------------------------
Total stockholders' equity 748.6 509.2
-------------------------------------------------------------------------------------------------
Total liabilities, temporary equity, and stockholders' equity $ 3,558.3 $3,353.4
=================================================================================================
See Notes to Consolidated Financial Statements on pages 38-47.
</TABLE>
<PAGE> 15
SCHEDULES TO CONSOLIDATED FINANCIAL STATEMENTS
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
Dollars in Millions At December 31 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENTS Steel processing joint ventures $ 152.2 $ 154.9
AND ADVANCES Raw material joint ventures 48.4 41.8
Common stock of Nippon Steel Corporation held for investment,
net of valuation allowances of $4.0 and $3.5, respectively 10.6 11.1
Other investments and advances 29.8 17.3
---------------------------------------------------------------------------------------------------------------
Total $ 241.0 $ 225.1
===============================================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT Land, land improvements and mineral properties $ 155.7 $ 155.1
AND EQUIPMENT Buildings, machinery and equipment 4,033.5 3,936.7
Transportation equipment 137.8 134.4
Property under capital leases--primarily machinery and equipment 37.0 43.0
---------------------------------------------------------------------------------------------------------------
Total 4,364.0 4,269.2
Less--
Accumulated depreciation 2,629.3 2,520.6
Accumulated depreciation--capital leases 33.6 37.6
Allowance for retirements and terminated facilities (Note 10) 100.7 100.7
---------------------------------------------------------------------------------------------------------------
Net $1,600.4 $1,610.3
===============================================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT INLAND STEEL INDUSTRIES, INC.
Guaranteed ESOP notes, 7.96%, 8.43% and 8.80%,
due through July 2, 2004 $ 106.2 $ 115.2
Notes, 12 3/4% due December 15, 2002 150.0 150.0
Subordinated Voting Note, 10.23% due December 17, 1999 100.0 --
---------------------------------------------------------------------------------------------------------------
Total Inland Steel Industries, Inc. 356.2 265.2
INLAND STEEL COMPANY
First Mortgage Bonds:
Series R, 7.9% due January 15, 2007 72.5 72.5
Series T, 12% due December 1, 1998 125.0 125.0
Pollution Control Series 1977, 5 3/4% due February 1, 2007 26.5 26.5
Pollution Control Series 1978, 6 1/2% due May 15, 2008 52.0 52.0
Pollution Control Series 1982B, 10 3/4% -- 17.0
Pollution Control Series 1993, 6.8% due June 1, 2013 40.0 40.0
Pollution Control Series 1995, 6.85% due December 1, 2012 17.0 --
---------------------------------------------------------------------------------------------------------------
Total First Mortgage Bonds 333.0 333.0
Obligations for Industrial Development Revenue Bonds:
Pollution Control Project No. 3, 6 1/4% due April 1, 1999 8.0 10.0
Pollution Control Project No. 9, 10% due November 1, 2011 38.0 38.0
Pollution Control Project No.11, 7 1/8% due June 1, 2007 20.0 20.0
Obligations under capital leases including Pollution Control
Projects No. 1 and No. 2--primarily at rates ranging from
5.9% to 12.6%, due through August 1, 1998 10.4 16.1
---------------------------------------------------------------------------------------------------------------
Total Inland Steel Company 409.4 417.1
JOSEPH T. RYERSON & SON, INC.
Obligation for Industrial Revenue Bond with floating rate,
set weekly based on 13-week Treasury bills, due November 1, 2007 7.0 7.0
Other long-term debt, 10 1/4% due through November 30, 1997 1.4 1.6
J. M. TULL METALS COMPANY, INC.
Obligations for Industrial Revenue Bonds and other long-term debt with
variable rates and fixed rates to 9 7/8%, due through August 17, 1998 6.9 7.9
Senior Notes, 9.43% due through July 29, 1997 3.6 7.1
---------------------------------------------------------------------------------------------------------------
Total long-term debt $ 784.5 $ 705.9
===============================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements on pages 38-47.
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL
NOTE 1:INVENTORIES
Inventories were classified on December 31 as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
Dollars in Millions 1995 1994
- -------------------------------------------------------------------
<S> <C> <C>
In process and finished products:
Steel Manufacturing Operations $124.5 $ 92.1
Materials Distribution Operations 261.5 271.7
- -------------------------------------------------------------------
386.0 363.8
- -------------------------------------------------------------------
Raw materials and supplies:
Iron ore 39.7 34.7
Scrap and other raw materials 18.4 18.0
Supplies 16.9 13.0
- -------------------------------------------------------------------
75.0 65.7
- -------------------------------------------------------------------
Total $461.0 $429.5
===================================================================
</TABLE>
During 1993, various inventory quantities were reduced, resulting in
liquidations of LIFO inventory quantities carried at lower costs prevailing in
prior years as compared with the current year costs. The effect of these
liquidations on continuing operations was to decrease cost of goods sold by
$24.1 million in 1993. The effect on cost of goods sold of LIFO liquidations in
1995 and 1994 was not material.
Replacement costs for the LIFO inventories exceeded LIFO values by
approximately $406 million and $381 million on December 31, 1995 and 1994,
respectively.
NOTE 2:BORROWING ARRANGEMENTS
On December 31, 1995, the Company's subsidiaries had available unused credit
facilities totaling $350 million. Each facility requires compliance with
various financial covenants including minimum net worth and leverage ratios.
A $200 million unsecured credit agreement between Joseph T. Ryerson & Son,
Inc. and a group of banks provides a revolving credit facility to March 31,
2000.
A special-purpose subsidiary of Inland Steel Company has a $125 million
revolving credit facility, which extends to November 30, 2000. Inland Steel
Company has agreed to sell substantially all of its receivables to this
special-purpose subsidiary and these receivables are used to secure this
facility.
J. M. Tull Metals Company, Inc. has a $25 million unsecured revolving
credit agreement, which extends to December 15, 1997.
Cash availability, as well as various covenants in subsidiary borrowing
arrangements, limited the cash that subsidiaries could transfer to the Company
in the form of dividends and advances to $350 million at year-end 1995. This
amount is subject to change based on the financial performance of each
subsidiary.
NOTE 3:LONG-TERM DEBT
Each series of First Mortgage Bonds issued by Inland Steel Company is limited
to the principal amount outstanding, with the Pollution Control Series 1977
Bonds, the Pollution Control Series 1978 Bonds, and the Series R First Mortgage
Bonds subject to a sinking fund. A substantial portion of the property, plant
and equipment owned by Inland Steel Company at its Indiana Harbor Works is
subject to the lien of the First Mortgage. This property had a net book value
of approximately $1.0 billion on December 31, 1995.
In 1994, the Company, through its Inland Steel Company subsidiary,
redeemed all $75 million of its outstanding Series O, P and Q First Mortgage
Bonds. Inland Steel Company also acquired the equity interest in the operating
lease of the No. 2 Basic Oxygen Furnace Shop continuous casters, assuming $63
million of debt. By year-end 1994, the assumed debt and approximately $40
million of other caster-related debt was repaid by the Company.
During the third quarter of 1995, Inland Steel Company refinanced $17
million of 10.75 percent pollution control revenue bonds with bonds bearing an
interest rate of 6.85 percent. In addition, in the 1994 second quarter, Inland
Steel Company refinanced $20 million of pollution control revenue bonds at an
interest rate of 7.125 percent.
During the third quarter of 1995, the Company exchanged its Series F
Exchangeable Preferred Stock for a $185 million Subordinated Voting Note
bearing an interest rate of 10.23%. The Subordinated Voting Note is required to
be redeemed in two stages, consisting of $85 million on December 18, 1996, and
the remaining $100 million on December 17, 1999, plus, in each instance,
accrued and unpaid interest thereon. See Note 4 for additional information on
the Subordinated Voting Note.
Both the First Mortgage Indenture under which the Series T Bonds were
issued and the indenture under which the Industries 12 3/4% Notes were issued
contain covenants limiting, among other things, the creation of additional
indebtedness; the declaration and payment of dividends and distributions on the
Company's capital stock; as well as mergers, consolidations, retirement of
certain debt, and the sales or purchases of certain assets.
The outstanding borrowing of the Company's ESOP is recorded as a liability
of the Company because the Company has committed to make payments (dividends
and supplemental contributions) to the ESOP Trust sufficient to service the
ESOP debt. The ESOP notes are payable in semi-annual installments through July
2004 and are guaranteed by Joseph T. Ryerson & Son, Inc., a wholly owned
subsidiary of the Company. See Note 5 for additional information on the ESOP
debt.
Maturities of long-term debt and capitalized lease obligations due within
five years are: $106.5 million in 1996, $23.2 million in 1997, $156.1 million
in 1998, $122.3 million in 1999, and $20.3 million in 2000. See Note 15
regarding commitments and contingencies for other scheduled payments.
Interest cost incurred by the Company totaled $73.7 million in 1995, $72.5
million in 1994, and $80.9 million in 1993. Included in these totals is
capitalized interest of $1.8 million in 1995, $1.1 million in 1994, and $2.9
million in 1993.
<PAGE> 17
NOTE 4:SUBORDINATED VOTING NOTE
In December 1989, the Company sold 185,000 shares of the Company's Series F
Exchangeable Preferred Stock, $1.00 par value per share ("Series F Preferred
Stock"), for $185 million to NS Finance III, Inc., an indirect wholly owned
subsidiary of Nippon Steel Corporation ("NSC"). The preferred stock was
exchanged in the third quarter of 1995 for the Company's 10.23% Subordinated
Voting Note. The preferred stock entitled the holder to 30.604 votes per share
and the Subordinated Voting Note entitles the holder to 30.604 votes per $1,000
of principal amount outstanding, which number may be adjusted from time to time
upon the occurrence of certain events. The voting power was based on the
equivalent number of common shares represented by a market value of $185
million at the time the preferred stock was issued. In the event of a change in
control or certain other events, the holder may require the Company to redeem
the Subordinated Voting Note at a 10 percent premium. In the event of an early
redemption, the Company may be required to reimburse the holder for certain
costs incurred as a result of such redemption.
In connection with the sale of the Series F Preferred Stock, the Company
agreed to repurchase $185 million of the Company's common stock, of which $150
million (amounting to 4.8 million shares) has been repurchased. As of December
31, 1995, the amount representing the remaining repurchase commitment of $35
million has been classified as temporary equity with a corresponding reduction
of stockholders' equity. In December 1990, the Company suspended open-market
stock purchases and agreed to maintain cash, certain securities, a surety bond
or letter of credit, or some combination thereof, currently equal to $16
million to meet its obligation under the Series F Preferred Stock sale
agreement.
The terms of a letter agreement between the Company and NSC which provided
for the purchase of the Series F Preferred Stock generally restrict the
acquisition by NSC of additional securities of the Company and the disposition
of the Subordinated Voting Note. Under certain circumstances related to a
potential change in control of the Company, NSC may seek to acquire voting
securities of the Company on terms and conditions no less favorable to the
Company's stockholders than the terms and conditions offered in connection with
the potential change in control.
So long as the purchaser and permitted transferees beneficially own at
least $100 million aggregate principal amount of the Subordinated Voting Note,
the Company has agreed with NSC to nominate a mutually acceptable individual
for election to the Company's Board of Directors. No such individual has been
nominated.
See Note 13 regarding other related party transactions.
NOTE 5:EMPLOYEE STOCK OWNERSHIP PLAN
The Company sponsors a savings plan through which eligible salaried employees
may elect to save a portion of their salary, of which the Company matches the
first five percent of each participant's salary contributed, subject to certain
IRS limitations. In July 1989, the Board of Directors amended the savings plan
to include a leveraged ESOP. The ESOP Trust purchased 3.1 million newly issued
shares of Series E Preferred Stock from the Company with the proceeds of loans
totaling $150 million. As a result, effective January 1, 1990, the matching in
the savings plan is in shares of Series E Preferred Stock provided principally
by the Company's ESOP, supplemented as needed by newly issued shares. The
Company accounts for its ESOP in accordance with AICPA Statement of Position
76-3.
The Company makes annual contributions to the ESOP equal to the ESOP's
debt service less dividends on leveraged shares (shares purchased by the ESOP
Trust in July 1989) received by the ESOP Trust. All dividends received by the
ESOP are used to pay debt service. Dividends on Series E Preferred Stock are
recorded as declared as reductions to retained earnings, net of applicable tax
benefits on unallocated shares. Dividends on allocated leveraged shares are
replaced with additional ESOP shares. Dividends on unallocated leveraged shares
serve to reduce interest expense recognized by the Company.
In 1995, the ESOP Trust received $10.6 million in dividends and $8.1
million in contributions from the Company to make required principal and
interest payments. For 1994, the ESOP Trust received $10.6 million in dividends
and $8.0 million in contributions from the Company to make such required
payments. In 1993, the Company paid $10.6 million in dividends and provided
$8.1 million in contributions.
As principal and interest payments are made, ESOP shares are made
available for allocation based on the proportion of current payments to the
total of current plus future payments. As shares are allocated, the Company
records compensation expense equal to the original stated value of the shares
of Series E Preferred Stock allocated to the participants during the period.
Compensation expense related to the ESOP recognized by the Company totaled $8.9
million in 1995, $8.8 million in 1994, and $9.0 million in 1993. ESOP shares
remaining unallocated are reported as unearned compensation on the Company's
consolidated balance sheet.
Interest expense is recognized as it is incurred by the ESOP Trust.
Interest expense incurred by the ESOP Trust totaled $10.0 million, $10.7
million, and $11.3 million in 1995, 1994 and 1993, respectively.
The ESOP shares as of December 31 were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------
1995 1994
- ---------------------------------------
<S> <C> <C>
Allocated shares 1,268,126 1,034,800
Unreleased shares 1,850,475 2,067,753
- ---------------------------------------
Total ESOP shares 3,118,601 3,102,553
- ---------------------------------------
</TABLE>
NOTE 6:CAPITAL STOCK
On December 31, 1995, 9,125,200 shares of common stock remained reserved for
issuance under the Company's various employee stock plans and upon conversion
of shares of preferred stock.
<PAGE> 18
The following table details changes in capital accounts:
<TABLE>
<CAPTION>
Common Stock Treasury Stock
------------ --------------
Shares in Thousands and Dollars in Millions Shares Dollars Shares Dollars
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at January 1, 1993 42,104 $42.1 (6,857) $(246.0)
Acquisition of treasury stock -- -- (341) (9.5)
Issued under employee benefit plans -- -- 440 19.3
Redemption of Series E Preferred Stock -- -- -- --
Issuance of Common Stock 5,750 5.8 -- --
Other changes -- -- (9) (.3)
- -------------------------------------------------------------------------------------------------
Balance at December 31, 1993 47,854 47.9 (6,767) (236.5)
Acquisition of treasury stock -- -- (106) (4.0)
Issued under employee benefit plans -- -- 879 39.9
Redemption of Series E Preferred Stock -- -- -- --
Conversion of Series G Preferred Stock 2,702 2.7 -- --
Conversion of Series A Preferred Stock -- -- 2 .1
Other changes -- -- (14) (.4)
- -------------------------------------------------------------------------------------------------
Balance at December 31, 1994 50,556 50.6 (6,006) (200.9)
Acquisition of treasury stock -- -- (138) (4.0)
Issued under employee benefit plans -- -- 415 15.6
Redemption of Series E Preferred Stock -- -- -- --
Conversion of Series A Preferred Stock -- -- 1 --
Issuance of Common Stock to Pension Trust -- -- 3,946 139.0
Other changes -- -- (33) (.8)
- -------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995 50,556 $50.6 (1,815) $ (51.1)
- -------------------------------------------------------------------------------------------------
<CAPTION>
Preferred Stock Capital in
------------------------------------------------------ Excess of
Series A Series E Series G Par Value
-------- -------- -------- ---------
Shares in Thousands and Dollars in Millions Shares Dollars Shares Dollars Shares Dollars Dollars
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993 97 $ .1 3,135 $3.1 1,500 $ 1.5 $ 945.0
Acquisition of treasury stock -- -- -- -- -- -- --
Issued under employee benefit plans -- -- 39 -- -- -- (7.5)
Redemption of Series E Preferred Stock -- -- (59) -- -- -- (2.8)
Issuance of Common Stock -- -- -- -- -- -- 172.9
Other changes -- -- -- -- -- -- (1.2)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 97 .1 3,115 3.1 1,500 1.5 1,106.4
Acquisition of treasury stock -- -- -- -- -- -- --
Issued under employee benefit plans -- -- 27 -- -- -- (14.0)
Redemption of Series E Preferred Stock -- -- (39) -- -- -- (1.9)
Conversion of Series G Preferred Stock -- -- -- -- (1,500) (1.5) (2.2)
Conversion of Series A Preferred Stock (2) -- -- -- -- -- --
Other changes -- -- -- -- -- -- (.3)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 95 .1 3,103 3.1 -- -- 1,088.0
Acquisition of treasury stock -- -- -- -- -- -- --
Issued under employee benefit plans -- -- 44 -- -- -- (3.1)
Redemption of Series E Preferred Stock -- -- (28) -- -- -- (1.3)
Conversion of Series A Preferred Stock (1) -- -- -- -- -- --
Issuance of Common Stock to Pension Trust -- -- -- -- -- -- (39.0)
Other changes -- -- -- -- -- -- 1.1
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995 94 $.1 3,119 $3.1 -- $ -- $1,045.7
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
In the second quarter of 1995, the Company contributed 3.9 million shares
of its common stock with an aggregate value of $100 million to the Company's
Pension Trust.
In the second quarter of 1994, as a result of the Company's call for
redemption, 1.5 million shares of Series G $4.625 Cumulative Convertible
Exchangeable Preferred Stock, $1.00 par value per share, were converted into
2.7 million new-issue shares of the Company's common stock, $1.00 par value per
share.
In the fourth quarter of 1993, the Company sold 5.75 million shares of
new-issue common stock in a public offering. The net proceeds of the offering
totaled approximately $179 million.
The indenture relating to the Industries 12 3/4% Notes prohibits the
Company from declaring or paying cash dividends on Company common stock under
certain conditions. At year-end 1995, up to $275 million of common dividends
could have been paid under terms of the indenture.
The Series A $2.40 Cumulative Convertible Preferred Stock, $1.00 par value
per share ("Series A Preferred Stock"), is convertible into common stock at the
rate of one share of common stock for each share of Series A Preferred Stock
and is redeemable, at the Company's option, at $44 per share plus any accrued
and unpaid dividends. Each such share is entitled to one vote and generally
votes together with holders of common stock as one class.
Shares of Series E Preferred Stock, $1.00 par value per share, entitle the
holder to cumulative annual dividends of $3.523 per share, payable
semi-annually, and to 1.25 votes per share. Shares of Series E Preferred Stock
are convertible into the Company's common stock on a one-for-one basis. From
time to time, the Company elects to provide additional shares of Series E
Preferred Stock to the ESOP Trust to cover employee matching requirements not
covered by the release of shares through scheduled principal and interest
payments by the ESOP Trust on its outstanding notes (see Note 5).
NOTE 7:STOCK OPTION PLANS
The Inland 1995 Incentive Stock Plan, approved by stockholders on May 24, 1995,
provides for the issuance, pursuant to options and other awards, of 2.0 million
shares of common stock to officers and other key employees. Options remain
outstanding and exercisable under the Inland 1992, 1988 and 1984 Incentive
Stock Plans; however, no further options may be granted under these plans.
Under the various plans, the per share option exercise price may not be less
than 100 percent of the fair market value per share on the date of grant.
During 1995, options were granted to 257 executives under the 1995 Plan and a
total of 1,861,369 shares was available for future grants
<PAGE> 19
under that Plan as of December 31, 1995. The following summarizes the status
of options under the plans for the periods indicated:
<TABLE>
<CAPTION>
Option Exercise
Number of Price or Range
Shares Per Share
- --------------------------------------------------------------------
<S> <C> <C> <C>
Options (granted and unexercised)
at December 31, 1992 2,345,495 $15.31-$39.75
Granted 575,200 26.13
Exercised (231,953) 21.38- 33.75
Cancelled or expired (198,911) 21.38- 39.75
Surrendered (SAR Exercise) (20,675) 15.31- 25.38
- -------------------------------------------------------------------
Options (granted and unexercised)
at December 31, 1993
(1,425,909 exercisable) 2,469,156 15.31- 39.75
Granted 463,800 30.88- 36.00
Exercised (598,799) 15.31- 39.75
Cancelled or expired (68,000) 15.31- 39.75
Surrendered (SAR Exercise) (22,150) 25.38- 33.75
- -------------------------------------------------------------------
Options (granted and unexercised)
at December 31, 1994
(1,286,980 exercisable) 2,244,007 15.31- 39.75
Granted 469,600 23.19- 28.50
Exercised (138,117) 15.31- 31.06
Cancelled or expired (200,900) 21.38- 39.75
- -------------------------------------------------------------------
Options (granted and unexercised)
at December 31, 1995
(1,615,826 exercisable) 2,374,590 $15.31-$39.75
</TABLE>
Options outstanding on December 31, 1995, under the 1984 Plan have
expiration dates ranging from July 22, 1996 to September 22, 1997, with a
weighted average exercise price per share of $30.79. Options outstanding under
the 1988 Plan have expiration dates ranging from July 26, 1998 to June 25,
2001, with a weighted average exercise price per share of $33.99. Options
outstanding under the 1992 Plan have expiration dates ranging from June 23,
2002 to June 14, 2004, with a weighted average exercise price per share of
$27.75. Options outstanding under the 1995 Plan have expiration dates ranging
from May 23, 2005 to September 26, 2005, with a weighted average exercise price
per share of $28.36. On December 31, 1995, there were 42 holders of options
granted under the 1984 Plan, 164 holders of options granted under the
1988 Plan, 254 holders of options granted under the 1992 Plan, and 256 holders
of options granted under the 1995 Plan.
Stock appreciation rights have also been granted with respect to 67,500
shares subject to outstanding options under the plans at the rate of one stock
appreciation right ("SAR") for each share subject to option. Upon exercise of
an SAR, the holder is entitled to receive the excess of the fair market value
of the shares for which the SAR is exercised over the related option exercise
price. The holder may elect to receive payment in stock, or in a combination of
stock and cash. An SAR is exercisable only upon surrender of the related option
and only to the extent that the related option is exercisable. No SAR has been
granted since 1990. SAR compensation expense recorded by the Company was not
material for any of the three years.
The 1995 Plan also provides, as did the 1992, 1988 and 1984 Plans, for the
granting of restricted stock and performance awards to officers and other key
employees. During 1995, restricted stock awards totaling 28,524 shares were
granted to 17 executives and one performance award totaling 2,000 shares was
granted. Also during 1995, 16,105 shares of previously granted restricted stock
awards vested while 18,405 shares of restricted stock were forfeited, and
16,841 shares (including dividend-equivalent shares) were issued to recipients
of performance awards previously granted while 19,532 shares (including
dividend-equivalent shares) subject to performance awards were forfeited.
During 1994, restricted stock awards totaling 106,100 shares were granted to 47
executives, and 14 performance awards totaling 73,500 shares were granted. Also
during 1994, 11,433 shares of previously granted restricted stock awards
vested, while no shares were forfeited. During 1993, restricted stock awards
totaling 122,000 shares were granted to 33 executives, and no performance
awards were granted. Also during 1993, 7,052 shares of previously granted
restricted stock awards vested, while 4,000 shares were forfeited.
NOTE 8:STOCKHOLDER RIGHTS PLAN
Pursuant to a stockholder rights plan, on November 25, 1987, the Board of
Directors declared a dividend distribution, payable to stockholders of record
on December 18, 1987, of one preferred stock purchase right (a "Right") for
each outstanding share of the Company's common stock. The rights plan was
amended by the Board on May 24, 1989. The Rights will expire 10 years after
issuance, and will become exercisable only if a person or group becomes the
beneficial owner of 20 percent or more of the common stock (a "20 percent
holder"), commences a tender or exchange offer which would result in the
offeror beneficially owning 20 percent or more of the common stock, or is
determined by the Board to beneficially own at least 10 percent of the common
stock and either intends to cause the Company to take certain actions not in
the best long-term interests of the Company and its stockholders or is
reasonably likely, through such beneficial ownership, to cause a material
adverse impact on the business or prospects of the Company and its stockholders
(an "Adverse Person"). Each Right will entitle stockholders to buy one newly
issued unit of one one-hundredth of a share of Series D Junior Participating
Preferred Stock at an exercise price of $90, subject to certain antidilution
adjustments. The Company will generally be entitled to redeem the Rights at
$.05 per Right at any time prior to 15 days after a public announcement of the
existence of a 20 percent holder.
If a person or group accumulates 20 percent or more of the common stock
(except pursuant to an offer for all outstanding shares of common stock which
the independent Continuing Directors determine to be fair to and otherwise in
the best interests of the Company and its stockholders), or a merger takes
place with a 20 percent holder where the Company is the surviving corporation
and its common
<PAGE> 20
stock is unchanged, or a 20 percent holder engages in certain
self-dealing transactions, or the Board determines that a person or group is an
Adverse Person, each Right (other than Rights held by such 20 percent holder
and certain related parties which become void) will represent the right to
purchase, at the exercise price, common stock (or, in certain circumstances, a
combination of securities and/or assets) having a value of twice the exercise
price. In addition, if, following the public announcement of the existence of a
20 percent holder, the Company is acquired in a merger or other business
combination transaction, except a merger or other business combination
transaction that takes place after the consummation of an offer for all
outstanding shares of common stock that the independent Continuing Directors
have determined to be fair, or a sale of 50 percent or more of the Company's
assets or earning power is made to a third party, each Right (unless previously
voided) will represent the right to purchase, at the exercise price, common
stock of the acquiring entity having a value of twice the exercise price at the
time.
NOTE 9:DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value.
DERIVATIVES
The Company has only limited involvement with derivative financial instruments,
none of which are used for trading purposes. Derivatives are used to hedge
exposure to fluctuations in costs caused by the price volatility of certain
metal commodities and natural gas supplies, and in foreign currency exchange
rates related to firm commitments regarding a Canadian raw material joint
venture. Gains and losses associated with these hedging transactions become
part of the cost of the item being hedged. At no time during 1995, 1994 or 1993
were such hedging transactions material.
CASH AND CASH EQUIVALENTS
The carrying amount of cash equivalents approximates fair value because of the
short maturity of those instruments.
LONG-TERM INVESTMENT
In 1989, the Company and NSC, through a subsidiary, each purchased in the open
market approximately $15 million of the other company's common stock. The
estimated fair value of the NSC common stock at year-end 1995 and 1994, based
on the quoted market price and exchange rate at each year end, was $8.4 million
and $9.2 million, respectively, as compared with the carrying value of $10.6
million and $11.1 million included in the balance sheet at December 31, 1995
and 1994, respectively.
LONG-TERM DEBT
The estimated fair value of the Company's long-term debt and the current
portions thereof (excluding the Subordinated Voting Note), using quoted market
prices of Company debt securities recently traded and market-based prices of
similar securities for those securities not recently traded, was $753 million
at December 31, 1995 and $733 million at December 31, 1994 as compared with the
carrying value of $706 million and $725 million included in the balance sheet
at year-end 1995 and 1994, respectively.
SUBORDINATED VOTING NOTE
The Company believes that it is not practical to estimate a fair market value
different from this security's carrying value of $185 million as the security
was sold to a joint venture partner and has numerous features unique to this
security including, but not limited to, the right to appoint a director, the
right of first refusal in change in control situations, a limitation on the
acquisition of additional Company stock, and the agreement by the Company to
buy back $185 million of the Company's common stock.
NOTE 10:PROVISIONS FOR RESTRUCTURING
In the 1995 third quarter, the Company recorded a charge of $35 million for
provisions related to pensions, health care, and severance costs resulting from
the acceptance by approximately 300 salaried Inland Steel Company employees of
a voluntary retirement package offered during the quarter. In addition, Inland
Steel Company announced the closure of its plate operation. Provisions for
pensions and other employee benefits related to the shutdown of this operation
had been previously accrued.
With the closure of the plate operation, the Company completed the
workforce reduction program announced in 1991. A final computation of the
employee benefit costs required for the 1991 program resulted in unused
reserves due to differences between the actual makeup of the population leaving
the Company under this program and the projections used in 1991. The Company,
therefore, reversed $65 million of unused reserves from the balance sheet and
recorded a corresponding credit to income.
During the 1995 third quarter, the Company also increased reserves for
previously discontinued or reduced operations related to the Company's
restructuring efforts by $18 million, approximately half of which related to
benefit costs, primarily at a closed iron ore mining facility, and half related
to impairment of assets beyond amounts previously recognized. In addition, the
Company increased its environmental reserves by $7 million.
In 1993, the Company recorded a facility shutdown provision of $22.3
million which covered costs associated with the earlier than planned closure of
Inland Steel Company's cokemaking facilities. Of the amount provided, $7.7
million related to the write-off of assets with the remainder provided for
various expenditures associated with the shutdown of the facility, including
personnel costs.
Inland Steel Company has taken initiatives to reduce its production costs
by the shutdown of certain Indiana Harbor Works facilities and raw materials
operations. Reserve balances related to provisions recorded for these
shutdowns, which include long-term
<PAGE> 21
liabilities for mine reclamation costs and employee benefits, totaled $135.9
million, $133.8 million and $149.7 million at December 31, 1995, 1994 and 1993,
respectively.
NOTE 11:RETIREMENT BENEFITS
In 1995, the Company elected to change the measurement date for pensions and
benefits other than pensions from December 31 to September 30 in order to
provide for more timely information and to achieve administrative efficiencies
in the collection of data. The change in the measurement date had no effect on
1995 expense and had an immaterial impact on the 1995 funded status of the
pension plan.
PENSIONS
The Company has a non-contributory defined benefit pension plan which covers
substantially all Company employees, retirees and their beneficiaries. Benefits
provided participants of the plan are based on final pay and years of service
for all salaried employees and certain wage employees, and years of service and
a fixed rate for all other wage employees, including members of the United
Steelworkers union.
While funding was not required under ERISA funding standards, the Company
elected to fund its Pension Trust in the 1995 second quarter, its first funding
since 1984, with 3.9 million shares of Company common stock with an aggregate
value of $100 million.
The assumptions used to determine the plan's funded status are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
Discount (settlement) rate 7.75% 8.8%
Rate of compensation increase 4.0% 5.0%
Rate of return on plan assets 9.5% 9.5%
- ---------------------------------------------------------------------------
</TABLE>
The funded status of the plan as of September 30, 1995 and December 31,
1994 was as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
September 30 December 31
---------------------------
Dollars in Millions 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
Fair value of plan assets
Equities $1,151 $ 909
Bonds 17 506
Real estate 122 136
Cash equivalents and accrued interest 629 101
- ----------------------------------------------------------------------------
1,919 1,652
- ----------------------------------------------------------------------------
Actuarial present value of benefits for
service rendered to date:
Accumulated Benefit Obligation based on
compensation to date, including vested
benefits of $1,822 and $1,529 for
1995 and 1994, respectively 1,956 1,641
Additional benefits based on estimated
future compensation levels 90 98
- ----------------------------------------------------------------------------
Projected Benefit Obligation 2,046 1,739
- ----------------------------------------------------------------------------
Plan asset shortfall to Projected
Benefit Obligation $(127) $ (87)
- ----------------------------------------------------------------------------
</TABLE>
The Projected Benefit Obligation is the full measure of the Company's
"going concern" liability for pensions accrued to date based on current
interest rates. It includes the effect of future compensation increases for
benefits based on final pay. It does not, however, take into consideration
contingent benefits that are not expected to be paid but that would require
funding in any plan termination.
The accrued pension cost reflected in the Company's balance sheet can be
reconciled to the shortfall of plan assets as shown below:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
September 30 December 31
---------------------------
Dollars in Millions 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
Plan asset shortfall to Projected
Benefit Obligation $ (127) $ (87)
Unrecognized transition asset (98) (115)
Unrecognized net loss 172 1
Unrecognized prior service cost 120 129
Adjustment required to recognize
additional minimum liability (103) -
- ----------------------------------------------------------------------------
Accrued pension cost (36) $ (72)
Expense, October through December 1995 (2) ----------
- ---------------------------------------------------------------
Accrued pension cost at December 31, 1995 $ (38)
- ---------------------------------------------------------------
</TABLE>
The additional minimum pension liability in 1995 represented the excess of
the unfunded Accumulated Benefit Obligation over previously accrued pension
costs. A corresponding intangible asset was recorded as an offset to this
additional liability as prescribed.
The unrecognized transition asset is being recognized in income by
reducing pension expense in equal annual installments of $23.1 million through
1999. Any subsequent unrecognized net gain or loss in excess of 10 percent of
the greater of the Projected Benefit Obligation or the fair value of plan
assets will be amortized over the remaining service period of active employees.
Pension cost or credit for 1995, 1994 and 1993 is composed of the
components set forth in the table below:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
Dollars in Millions 1995 1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-present value of
benefits earned during year $ 28 $ 34 $ 27
Interest on service cost and
Projected Benefit Obligation 153 147 139
Actual return on plan assets (290) (9) (256)
Net amortization and deferral 117 (144) 85
- ----------------------------------------------------------------------------
Total pension cost (credit) $ 8 $ 28 $ (5)
- ----------------------------------------------------------------------------
</TABLE>
BENEFITS OTHER THAN PENSIONS
Substantially all of the Company's employees are covered under postretirement
life insurance and medical benefit plans that involve deductible and
co-insurance requirements. The postretirement life insurance benefit formula
used in the determination of postretirement benefit cost is primarily based on
applicable annual earnings at retirement for salaried employees and specific
amounts for
<PAGE> 22
hourly employees. The Company does not prefund any of these
postretirement benefits. Effective January 1, 1994, a Voluntary Employee
Benefit Association Trust was established for payment of health care benefits
made to Inland Steel Company United Steelworkers of America ("USWA") retirees.
Funding of the Trust is made as claims are submitted for payment.
The amount of net periodic postretirement benefit cost for 1995, 1994 and
1993 is composed of the following:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Dollars in Millions 1995 1994 1993
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 12 $ 15 $ 15
Interest cost 74 72 85
Net amortization and deferral (21) (8) (4)
- ----------------------------------------------------------------------
Total net periodic postretirement
benefit cost $ 65 $ 79 $ 96
- ----------------------------------------------------------------------
</TABLE>
The following table sets forth components of the accumulated
postretirement benefit obligation:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
September 30 December 31
Dollars in Millions 1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation
attributable to:
Retirees $ 532 $ 469
Fully eligible plan participants 172 152
Other active plan participants 259 228
- ----------------------------------------------------------------------------------
Accumulated postretirement benefit obligation 963 849
Unrecognized net gain 198 298
Unrecognized prior service credit 66 70
- ----------------------------------------------------------------------------------
Accrued postretirement benefit obligation 1,227 $1,217
---------
Expense, net of benefits provided, October
through December 1995 2
- -----------------------------------------------------------------
Accrued postretirement benefit obligation
at December 31, 1995 $1,229
- -----------------------------------------------------------------
</TABLE>
Any net gain or loss in excess of 10 percent of the accumulated
postretirement benefit obligation is amortized over the remaining service
period of active plan participants.
The assumptions used to determine the plan's accumulated postretirement
benefit obligation are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
September 30 December 31
1995 1994
- -------------------------------------------------------------------------
<S> <C> <C>
Discount rate 7.75% 8.8%
Rate of compensation increase 4.0% 5.0%
Medical cost trend rate 4.5% 6%-5%
Year ultimate rate reached 1996 1996
- -------------------------------------------------------------------------
</TABLE>
A one percentage point increase in the assumed health care cost trend
rates for each future year increases annual net periodic postretirement benefit
cost and the accumulated postretirement benefit obligation as of September 30,
1995 by $20 million and $112 million, respectively.
Note 12:Income Taxes
The elements of the provisions for income taxes for each of the three years
indicated below were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
Dollars in Millions
Years Ended December 31 1995 1994 1993
- ----------------------------------------------------------------
<S> <C> <C> <C>
Current income taxes:
Federal $ 4.8 $ 4.9 $ --
State and foreign 6.3 4.3 2.8
- ----------------------------------------------------------------
11.1 9.2 2.8
Deferred income taxes 79.2 52.9 38.8Cr.
- ----------------------------------------------------------------
Total tax expense or benefit $90.3 $62.1 $36.0Cr.
- ----------------------------------------------------------------
</TABLE>
Cr.=Credit
In accordance with FASB Statement No. 109, "Accounting for Income Taxes,"
the Company adjusted its deferred tax assets and liabilities for the effect of
the change in the corporate federal income tax rate from 34 percent to 35
percent, effective January 1, 1993. A credit to income of $11 million, which
includes the effect of the rate change on deferred tax asset and liability
balances as of January 1, 1993 as well as the effect on 1993 tax benefits
recorded by the Company prior to the enactment date of August 10, 1993, was
recorded in the third quarter of 1993.
The components of the deferred income tax assets and liabilities arising
under FASB Statement No. 109 were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
December 31
Dollars in Millions 1995 1994
- ----------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets (excluding postretirement
benefits other than pensions):
Net operating loss and tax credit
carryforwards $310 $309
Restructuring and termination reserves 92 87
Other deductible temporary differences 92 118
Less valuation allowances (2) (5)
- ----------------------------------------------------------------------
492 509
- ----------------------------------------------------------------------
Deferred tax liabilities:
Fixed asset basis difference 478 443
Other taxable temporary differences 114 84
- ----------------------------------------------------------------------
592 527
- ----------------------------------------------------------------------
Net deferred liability (excluding post-
retirement benefits other than pensions) (100) (18)
FASB Statement No. 106 impact (postretirement
benefits other than pensions) 440 438
- ----------------------------------------------------------------------
Net deferred asset $340 $420
- ----------------------------------------------------------------------
</TABLE>
For tax purposes, the Company had available, at December 31, 1995, net
operating loss ("NOL") carryforwards for regular federal income tax purposes of
approximately $800 million which will expire as follows: $67 million in the
year 2005, $313 million in the year 2006, $280 million in the year 2007, $132
million in the year
<PAGE> 23
2008, and $8 million in the year 2009. The Company also had
investment tax credit and other general business credit carryforwards for tax
purposes of approximately $11 million, which expire during the years 1996
through 2006. A valuation allowance has been established for those tax credits
which are not expected to be realized. Additionally, in conjunction with the
Alternative Minimum Tax ("AMT") rules, the Company had available AMT credit
carryforwards for tax purposes of approximately $19 million, which may be used
indefinitely to reduce regular federal income taxes.
The Company believes that it is more likely than not that all of the NOL
carryforwards will be utilized prior to their expiration. This belief is based
upon the factors discussed below.
The NOL carryforwards and existing deductible temporary differences
(excluding those relating to FASB Statement No. 106) are substantially offset
by existing taxable temporary differences reversing within the carryforward
period. Furthermore, any such recorded tax benefits which would not be so
offset are expected to be realized by continuing to achieve future profitable
operations.
Subsequent to the adoption of FASB Statement No. 109, the Company adopted
FASB Statement No. 106 and recognized the entire transition obligation at
January 1, 1992, as a cumulative effect charge in 1992. At December 31, 1995,
the deferred tax asset related to the Company's FASB Statement No. 106
obligation was $440 million. To the extent that future annual charges under
FASB Statement No. 106 continue to exceed deductible amounts, this deferred tax
asset will continue to grow. Thereafter, even if the Company should have a tax
loss in any year in which the deductible amount would exceed the financial
statement expense, the tax law provides for a 15-year carryforward period of
that loss. Because of the extremely long period that is available to realize
these future tax benefits, a valuation allowance for this deferred tax asset is
not necessary.
The Company operates in a highly cyclical industry and consequently has
had a history of generating and then fully utilizing significant amounts of NOL
carryforwards. During the years 1986 through 1989, the Company utilized
approximately $600 million of NOL carryforwards and in 1995 utilized $135
million of NOL carryforwards.
While not affecting the determination of deferred income taxes for
financial reporting purposes, at December 31, 1995, the Company had available
for AMT purposes approximately $53 million of NOL carryforwards which will
expire as follows: $9 million in 2007 and $44 million in 2008.
Total income taxes reflected in the Consolidated Statement of Operations
differ from the amounts computed by applying the federal corporate rate as
follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Dollars in Millions
Years Ended December 31 1995 1994 1993
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income tax expense or benefit
computed at statutory tax rate of 35% $83.0 $59.3 $25.8Cr.
Additional taxes or credits from:
State and local income taxes, net
of federal income tax effect 9.4 7.2 3.6
Percentage depletion 2.9Cr. 2.8Cr. 2.2Cr.
Adjustment of taxes of prior years -- 2.0Cr. --
Change in federal statutory rate -- -- 10.6Cr.
All other, net .8 .4 1.0Cr.
- -----------------------------------------------------------------------------
Total income tax expense or benefit $90.3 $62.1 $36.0Cr.
- -----------------------------------------------------------------------------
</TABLE>
Cr.=Credit
NOTE 13:RELATED PARTY TRANSACTIONS - NIPPON STEEL CORPORATION
Following is a summary of the Company's relationships ith NSC, whose indirect
wholly owned subsidiary is the holder of the Company's Subordinated Voting Note
(see Note 4).
I/N Tek, a general partnership formed for a joint venture between the
Company and NSC, owns and operates a cold-rolling facility. I/N Tek is 60
percent owned by a wholly owned subsidiary of Inland Steel Company and 40
percent owned by an indirect wholly owned subsidiary of NSC. Inland Steel
Company has exclusive rights to the productive capacity of the facility, except
in certain limited circumstances, and, under a tolling arrangement with I/N
Tek, has an obligation to use the facility for the production of cold rolled
steel. Under the tolling arrangement, Inland Steel Company was charged $147.5
million, $131.1 million and $141.2 million in 1995, 1994 and 1993,
respectively, for such tolling services. NSC has the right to purchase up to
400,000 tons of cold rolled steel from Inland Steel Company in each year at
market-based negotiated prices, up to half of which may be steel processed by
I/N Tek. Purchases of Inland Steel Company products by a subsidiary of NSC
aggregated $132.8 million, $172.8 million and $157.8 million during 1995, 1994
and 1993, respectively. At year-end 1995 and 1994, a subsidiary of NSC owed the
Company $6.1 million and $10.6 million, respectively, related to these
purchases.
The Company and NSC also own and operate another joint venture which
consists of a 400,000 ton electrogalvanizing line and a 500,000 ton hot-dip
galvanizing line adjacent to the I/N Tek facility. I/N Kote, the general
partnership formed for this joint venture, is owned 50 percent by a wholly
owned subsidiary of Inland Steel Company and 50 percent by an indirect wholly
owned subsidiary of NSC. Inland Steel Company and NSC each have guaranteed the
share of long-term financing attributable to their respective subsidiary's
interest in the partnership. I/N Kote had $452 million out-
<PAGE> 24
standing under its long-term financing agreement at December 31, 1995. I/N Kote
is required to buy all of its cold rolled steel from Inland Steel Company,
which is required to furnish such cold rolled steel at a price that results
in an annual return on equity to the partners of I/N Kote, depending upon
operating levels, of up to 10 percent after operating and financing costs; this
price is subject to an adjustment if Inland Steel Company's return on sales
differs from I/N Kote's return on sales. Purchases of Inland Steel Company cold
rolled steel by I/N Kote aggregated $303.7 million in 1995, $275.6 million in
1994 and $191.7 million in 1993. At year-end 1995 and 1994, I/N Kote owed the
Company $4.8 million and $26.0 million, respectively, related to these
purchases. Prices of cold rolled steel sold by Inland Steel Company to I/N Kote
are determined pursuant to the terms of the joint venture agreement and are
based, in part, on operating costs of the partnership. In 1995 and 1994, Inland
Steel Company sold cold rolled steel to I/N Kote at prices that exceeded
production costs but were less than the market prices for cold rolled steel
products. I/N Kote also provides tolling services to Inland Steel Company for
which it was charged $32.6 million in 1995, $36.0 million in 1994 and $29.1
million in 1993. Inland Steel Company sells all I/N Kote products that are
distributed in North America.
The Company and NSC have entered into various agreements pursuant to which
NSC has provided technical services and licenses of proprietary steel
technology with respect to specific Company research and engineering projects.
Pursuant to such agreements, Inland Steel Company incurred costs of $1.9
million, $1.6 million and $3.7 million for technical services and related
administrative costs for services provided during 1995, 1994 and 1993,
respectively.
NOTE 14:INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
The Company's investments in unconsolidated joint ventures accounted for by the
equity method consist primarily of its 60 percent interest in I/N Tek, 50
percent interest in I/N Kote, 50 percent interest in PCI Associates, 50 percent
interest in Ryerson de Mexico, 50 percent interest in I.M.F. Steel
International Ltd., 40 percent interest in the Empire Iron Mining Partnership,
15 percent interest (13 3/4 percent interest in 1994 and 1993) in Wabush Mines
and 12 1/2 percent interest in Walbridge Electrogalvanizing Company. I/N Tek and
I/N Kote are joint ventures with NSC (see Note 13). The Company does not
exercise control over I/N Tek, as all significant management decisions of the
joint venture require agreement by both of the partners. Due to this lack of
control by the Company, the Company accounts for its investment in I/N Tek
under the equity method. PCI Associates is a joint venture which operates a
pulverized coal injection facility at the Indiana Harbor Works. Ryerson de
Mexico is a materials distribution joint venture operated in Mexico. The I.M.F.
joint venture was formed to market Company products and services abroad. Empire
and Wabush are iron ore mining and pelletizing ventures owned in various
percentages primarily by U.S. and Canadian steel companies. Walbridge is a
venture that coats cold rolled steel in which Inland has the has the right to
25 percent of the productive capacity. Following is a summary of combined
financial information of the Company's unconsolidated joint ventures:
<TABLE>
<CAPTION>
Dollars in Millions 1995 1994 1993
<S> <C> <C> <C>
Results of Operations for the
years ended December 31:
Gross revenue $1,282.2 $1,121.0 $956.7
Costs and expenses 1,203.2 1,092.9 945.1
----------------------------------------
Net income $ 79.0 $ 28.1 $ 11.6
========================================
Financial Position at December 31:
Current assets $ 313.6 $ 316.2 $279.7
Total assets 1,897.3 1,931.8 1,925.9
Current liabilities 282.2 282.1 241.6
Total liabilities 1,487.8 1,537.6 1,545.5
Net assets 409.5 394.2 380.4
</TABLE>
NOTE 15:COMMITMENTS AND CONTINGENCIES
Inland Steel Company guarantees payment of principal and interest on its 40
percent share of the long-term debt of Empire Iron Mining Partnership requiring
a principal payment of $7.0 million in 1996. At year-end 1995, Inland Steel
Company also guaranteed $27.4 million of long-term debt attributable to a
subsidiary's interest in PCI Associates.
As part of the agreement covering the 1990 sale of the Inland Lime & Stone
Company division assets, Inland Steel Company agreed, subject to certain
exceptions, to purchase, at prices which approximate market, the full amount of
its annual limestone needs or one million gross tons, whichever is greater,
through 1996, and the annual limestone needs of the Indiana Harbor Works from
1997 through 2002.
The Company and its subsidiaries have various operating leases for which
future minimum lease payments are estimated to total $181.7 million through
2020, including approximately $36.3 million in 1996, $31.5 million in 1997,
$26.4 million in 1998, $22.3 million in 1999, and $19.7 million in 2000.
It is anticipated that the Company will make capital expenditures of $23
million in 1996 and $10 million to $15 million annually in each of the four
years thereafter for the construction, and have ongoing annual expenditures of
$40 million to $50 million for the operation, of air and water pollution
control facilities to comply with current federal, state and local laws and
regulations. The Company is involved in various environmental and other
administrative or judicial actions initiated by governmental agencies. While it
is not possible to predict the results of these matters, the Company does not
expect
<PAGE> 25
environmental expenditures, excluding amounts that may be required in
connection with the consent decree in the 1990 EPA lawsuit, to materially
affect the Company's results of operations or financial position. Corrective
actions relating to the EPA consent decree may require significant expenditures
over the next several years that may be material to the results of operations
or financial position of the Company. At December 31, 1995, the Company's
reserves for environmental liabilities totaled $26 million, $19 million of
which related to the sediment remediation under the 1993 EPA consent decree.
The total amount of firm commitments of the Company and its subsidiaries
to contractors and suppliers, primarily in connection with additions to
property, plant and equipment, approximated $61 million at year-end 1995.
NOTE 16:BUSINESS SEGMENTS AND CONCENTRATION OF CREDIT RISK
The Company operates in two business segments, Steel Manufacturing and
Materials Distribution.
Steel Manufacturing operations include the manufacture of steel mill
products and the mining and processing of iron ore. Steel Manufacturing
produces and sells a wide range of steels, of which approximately 99 percent
consists of carbon and high-strength low-alloy steel grades. Approximately 77
percent of this segment's sales were to customers in five mid-American states,
and 93 percent were to customers in 20 mid-American states. Over half the sales
are to the steel service center and transportation (including automotive)
markets.
The Materials Distribution business segment processes and distributes a
broad line of steel products, non-ferrous metals and industrial plastics to a
wide range of industrial users on a nation-wide basis. This segment includes
Joseph T. Ryerson & Son, Inc. and J. M. Tull Metals Company, Inc.
Substantially all sales between segments are recorded at current market
prices. Operating profit consists of total sales less operating expenses.
Operating expenses of segments do not include any allocation of general
corporate income and expense, other non-operating income or expense, interest
income or expense, or income taxes.
Identifiable assets are those that are associated with each business
segment. Corporate assets are principally investments in cash equivalents, the
intangible pension asset in 1995 and 1993, and the assets of discontinued
segments.
Substantially all of the Company's operations are located in the United
States, and foreign sales are not material. During 1994, the Company formed a
subsidiary to expand the Company's foreign presence. At year-end 1995,
investments in foreign operations were not material.
<TABLE>
<CAPTION>
INFORMATION ABOUT BUSINESS SEGMENTS
- ---------------------------------------------------------------------------------------------------------------
Dollars in Millions
Years Ended December 31 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES
Steel Manufacturing Operations:
Sales to unaffiliated customers $2,337.4 $2,304.5 $2,001.3
Intersegment sales 175.9 183.4 173.6
- ---------------------------------------------------------------------------------------------------------------
2,513.3 2,487.9 2,174.9
- ---------------------------------------------------------------------------------------------------------------
Materials Distribution Operations:
Sales to unaffiliated customers 2,437.8 2,186.6 1,882.5
Intersegment sales 12.3 10.9 10.8
- ---------------------------------------------------------------------------------------------------------------
2,450.1 2,197.5 1,893.3
- ---------------------------------------------------------------------------------------------------------------
Eliminations and adjustments (181.9) (188.4) (180.0)
- ---------------------------------------------------------------------------------------------------------------
Total net sales $4,781.5 $4,497.0 $3,888.2
- ---------------------------------------------------------------------------------------------------------------
OPERATING PROFIT (LOSS)
Steel Manufacturing Operations $ 181.7 $ 149.3 $ (28.2)
Materials Distribution Operations 148.7 98.1 56.4
Eliminations and adjustments (1.9) 2.0 (1.6)
- ---------------------------------------------------------------------------------------------------------------
Total operating profit $ 328.5 $ 249.4 $ 26.6
- ---------------------------------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS
Steel Manufacturing Operations $2,291.5 $2,352.8 $2,201.2
Materials Distribution Operations 821.2 819.0 788.3
- ---------------------------------------------------------------------------------------------------------------
3,112.7 3,171.8 2,989.5
General corporate and other 445.6 181.6 446.3
- ---------------------------------------------------------------------------------------------------------------
Total assets on December 31 $3,558.3 $3,353.4 $3,435.8
- ---------------------------------------------------------------------------------------------------------------
DEPRECIATION
Steel Manufacturing Operations $ 121.2 $ 117.4 $ 111.1
Materials Distribution Operations 20.4 19.8 19.2
- ---------------------------------------------------------------------------------------------------------------
141.6 137.2 130.3
General corporate and other 1.5 1.5 1.5
- ---------------------------------------------------------------------------------------------------------------
Total depreciation $ 143.1 $ 138.7 $ 131.8
- ---------------------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES
Steel Manufacturing Operations $ 113.9 $ 223.6 $ 86.1
Materials Distribution Operations 19.3 20.4 19.3
- ---------------------------------------------------------------------------------------------------------------
133.2 244.0 105.4
General corporate and other 1.4 1.3 .2
- ---------------------------------------------------------------------------------------------------------------
Total capital expenditures $ 134.6 $ 245.3 $ 105.6
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF INLAND STEEL INDUSTRIES, INC.
The subsidiaries of Inland Steel Industries, Inc. (other than certain
subsidiaries which, considered in the aggregate as a single subsidiary, do not
constitute a significant subsidiary), each of which is incorporated in the
State of Delaware (except as noted below) and each of which is wholly owned,
either by Inland Steel Industries, Inc. or by one of its wholly owned
subsidiaries, are as follows:
Inland Steel Company
Inland Steel Mining Company
Inland Steel Administrative Service Company
(formerly known as Inland Steel Finance Company)
Inland Materials Distribution Group, Inc.
(formerly known as Inland Steel Services Holding, Inc.)
Joseph T. Ryerson & Son, Inc.
J. M. Tull Metals Company, Inc.
(a Georgia corporation)
<PAGE> 1
Exhibit 24
INLAND STEEL INDUSTRIES, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do
hereby nominate, constitute and appoint Robert J. Darnall, Earl L. Mason, Vicki
L. Avril and George A. Ranney, Jr., or any one or more of them, my true and
lawful attorneys and agents to do any and all acts and things and execute any
and all instruments which said attorneys and agents, or any of them, may deem
necessary or advisable to enable said Inland Steel Industries, Inc. to comply
with the Securities Exchange Act of 1934, as amended, and any requirements of
the Securities and Exchange Commission in respect thereof, in connection with
the preparation and filing of the Annual Report on Form 10-K of said Inland
Steel Industries, Inc. for the fiscal year ended December 31, 1995, including
specifically, but without limitation thereof, full power and authority to sign
my name as a director and (or) officer of said Inland Steel Industries, Inc. to
said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and
confirming all that said attorneys and agents, or any of them, shall do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 26th day of
January, 1996.
/s/ A. Robert Abboud
---------------------
<PAGE> 2
INLAND STEEL INDUSTRIES, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do
hereby nominate, constitute and appoint Robert J. Darnall, Earl L. Mason, Vicki
L. Avril and George A. Ranney, Jr., or any one or more of them, my true and
lawful attorneys and agents to do any and all acts and things and execute any
and all instruments which said attorneys and agents, or any of them, may deem
necessary or advisable to enable said Inland Steel Industries, Inc. to comply
with the Securities Exchange Act of 1934, as amended, and any requirements of
the Securities and Exchange Commission in respect thereof, in connection with
the preparation and filing of the Annual Report on Form 10-K of said Inland
Steel Industries, Inc. for the fiscal year ended December 31, 1995, including
specifically, but without limitation thereof, full power and authority to sign
my name as a director and (or) officer of said Inland Steel Industries, Inc. to
said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and
confirming all that said attorneys and agents, or any of them, shall do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 27th day of
January, 1996.
/s/ James W. Cozad
--------------------
<PAGE> 3
INLAND STEEL INDUSTRIES, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do
hereby nominate, constitute and appoint Robert J. Darnall, Earl L. Mason, Vicki
L. Avril and George A. Ranney, Jr., or any one or more of them, my true and
lawful attorneys and agents to do any and all acts and things and execute any
and all instruments which said attorneys and agents, or any of them, may deem
necessary or advisable to enable said Inland Steel Industries, Inc. to comply
with the Securities Exchange Act of 1934, as amended, and any requirements of
the Securities and Exchange Commission in respect thereof, in connection with
the preparation and filing of the Annual Report on Form 10-K of said Inland
Steel Industries, Inc. for the fiscal year ended December 31, 1995, including
specifically, but without limitation thereof, full power and authority to sign
my name as a director and (or) officer of said Inland Steel Industries, Inc. to
said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and
confirming all that said attorneys and agents, or any of them, shall do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 26th day of
January, 1996.
/s/ Robert J. Darnall
----------------------
<PAGE> 4
INLAND STEEL INDUSTRIES, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do
hereby nominate, constitute and appoint Robert J. Darnall, Earl L. Mason, Vicki
L. Avril and George A. Ranney, Jr., or any one or more of them, my true and
lawful attorneys and agents to do any and all acts and things and execute any
and all instruments which said attorneys and agents, or any of them, may deem
necessary or advisable to enable said Inland Steel Industries, Inc. to comply
with the Securities Exchange Act of 1934, as amended, and any requirements of
the Securities and Exchange Commission in respect thereof, in connection with
the preparation and filing of the Annual Report on Form 10-K of said Inland
Steel Industries, Inc. for the fiscal year ended December 31, 1995, including
specifically, but without limitation thereof, full power and authority to sign
my name as a director and (or) officer of said Inland Steel Industries, Inc. to
said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and
confirming all that said attorneys and agents, or any of them, shall do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 26th day of
January, 1996.
/s/ James A. Henderson
-----------------------
<PAGE> 5
INLAND STEEL INDUSTRIES, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do
hereby nominate, constitute and appoint Robert J. Darnall, Earl L. Mason, Vicki
L. Avril and George A. Ranney, Jr., or any one or more of them, my true and
lawful attorneys and agents to do any and all acts and things and execute any
and all instruments which said attorneys and agents, or any of them, may deem
necessary or advisable to enable said Inland Steel Industries, Inc. to comply
with the Securities Exchange Act of 1934, as amended, and any requirements of
the Securities and Exchange Commission in respect thereof, in connection with
the preparation and filing of the Annual Report on Form 10-K of said Inland
Steel Industries, Inc. for the fiscal year ended December 31, 1995, including
specifically, but without limitation thereof, full power and authority to sign
my name as a director and (or) officer of said Inland Steel Industries, Inc. to
said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and
confirming all that said attorneys and agents, or any of them, shall do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 27th day of
January, 1996.
/s/ Robert B. McKersie
-----------------------
<PAGE> 6
INLAND STEEL INDUSTRIES, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do
hereby nominate, constitute and appoint Robert J. Darnall, Earl L. Mason, Vicki
L. Avril and George A. Ranney, Jr., or any one or more of them, my true and
lawful attorneys and agents to do any and all acts and things and execute any
and all instruments which said attorneys and agents, or any of them, may deem
necessary or advisable to enable said Inland Steel Industries, Inc. to comply
with the Securities Exchange Act of 1934, as amended, and any requirements of
the Securities and Exchange Commission in respect thereof, in connection with
the preparation and filing of the Annual Report on Form 10-K of said Inland
Steel Industries, Inc. for the fiscal year ended December 31, 1995, including
specifically, but without limitation thereof, full power and authority to sign
my name as a director and (or) officer of said Inland Steel Industries, Inc. to
said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and
confirming all that said attorneys and agents, or any of them, shall do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 25th day of
January, 1996.
/s/ Maurice S. Nelson
----------------------
<PAGE> 7
INLAND STEEL INDUSTRIES, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do
hereby nominate, constitute and appoint Robert J. Darnall, Earl L. Mason, Vicki
L. Avril and George A. Ranney, Jr., or any one or more of them, my true and
lawful attorneys and agents to do any and all acts and things and execute any
and all instruments which said attorneys and agents, or any of them, may deem
necessary or advisable to enable said Inland Steel Industries, Inc. to comply
with the Securities Exchange Act of 1934, as amended, and any requirements of
the Securities and Exchange Commission in respect thereof, in connection with
the preparation and filing of the Annual Report on Form 10-K of said Inland
Steel Industries, Inc. for the fiscal year ended December 31, 1995, including
specifically, but without limitation thereof, full power and authority to sign
my name as a director and (or) officer of said Inland Steel Industries, Inc. to
said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and
confirming all that said attorneys and agents, or any of them, shall do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 26th day of
January, 1996.
/s/ Donald S. Perkins
----------------------
<PAGE> 8
INLAND STEEL INDUSTRIES, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do
hereby nominate, constitute and appoint Robert J. Darnall, Earl L. Mason, Vicki
L. Avril and George A. Ranney, Jr., or any one or more of them, my true and
lawful attorneys and agents to do any and all acts and things and execute any
and all instruments which said attorneys and agents, or any of them, may deem
necessary or advisable to enable said Inland Steel Industries, Inc. to comply
with the Securities Exchange Act of 1934, as amended, and any requirements of
the Securities and Exchange Commission in respect thereof, in connection with
the preparation and filing of the Annual Report on Form 10-K of said Inland
Steel Industries, Inc. for the fiscal year ended December 31, 1995, including
specifically, but without limitation thereof, full power and authority to sign
my name as a director and (or) officer of said Inland Steel Industries, Inc. to
said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and
confirming all that said attorneys and agents, or any of them, shall do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 26th day of
January, 1996.
/s/ Jean-Pierre Rosso
----------------------
<PAGE> 9
INLAND STEEL INDUSTRIES, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do
hereby nominate, constitute and appoint Robert J. Darnall, Earl L. Mason, Vicki
L. Avril and George A. Ranney, Jr., or any one or more of them, my true and
lawful attorneys and agents to do any and all acts and things and execute any
and all instruments which said attorneys and agents, or any of them, may deem
necessary or advisable to enable said Inland Steel Industries, Inc. to comply
with the Securities Exchange Act of 1934, as amended, and any requirements of
the Securities and Exchange Commission in respect thereof, in connection with
the preparation and filing of the Annual Report on Form 10-K of said Inland
Steel Industries, Inc. for the fiscal year ended December 31, 1995, including
specifically, but without limitation thereof, full power and authority to sign
my name as a director and (or) officer of said Inland Steel Industries, Inc. to
said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and
confirming all that said attorneys and agents, or any of them, shall do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 30th day of
January, 1996.
/s/ Joshua I. Smith
--------------------
<PAGE> 10
INLAND STEEL INDUSTRIES, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do
hereby nominate, constitute and appoint Robert J. Darnall, Earl L. Mason, Vicki
L. Avril and George A. Ranney, Jr., or any one or more of them, my true and
lawful attorneys and agents to do any and all acts and things and execute any
and all instruments which said attorneys and agents, or any of them, may deem
necessary or advisable to enable said Inland Steel Industries, Inc. to comply
with the Securities Exchange Act of 1934, as amended, and any requirements of
the Securities and Exchange Commission in respect thereof, in connection with
the preparation and filing of the Annual Report on Form 10-K of said Inland
Steel Industries, Inc. for the fiscal year ended December 31, 1995, including
specifically, but without limitation thereof, full power and authority to sign
my name as a director and (or) officer of said Inland Steel Industries, Inc. to
said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and
confirming all that said attorneys and agents, or any of them, shall do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 25th day of
January, 1996.
/s/ Nancy H. Teeters
---------------------
<PAGE> 11
INLAND STEEL INDUSTRIES, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do
hereby nominate, constitute and appoint Robert J. Darnall, Earl L. Mason, Vicki
L. Avril and George A. Ranney, Jr., or any one or more of them, my true and
lawful attorneys and agents to do any and all acts and things and execute any
and all instruments which said attorneys and agents, or any of them, may deem
necessary or advisable to enable said Inland Steel Industries, Inc. to comply
with the Securities Exchange Act of 1934, as amended, and any requirements of
the Securities and Exchange Commission in respect thereof, in connection with
the preparation and filing of the Annual Report on Form 10-K of said Inland
Steel Industries, Inc. for the fiscal year ended December 31, 1995, including
specifically, but without limitation thereof, full power and authority to sign
my name as a director and (or) officer of said Inland Steel Industries, Inc. to
said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and
confirming all that said attorneys and agents, or any of them, shall do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 26th day of
January, 1996.
/s/ Arnold R. Weber
--------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF OPERATIONS, THE CONSOLIDATED BALANCE SHEET, AND THE
SUMMARY OF STOCKHOLDERS' EQUITY CONTAINED IN THE ANNUAL REPORT ON FORM 10-K TO
WHICH THIS EXHIBIT IS ATTACHED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL SCHEDULES.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 267,400
<SECURITIES> 0
<RECEIVABLES> 518,400
<ALLOWANCES> 29,900
<INVENTORY> 461,000
<CURRENT-ASSETS> 1,262,300
<PP&E> 4,364,000
<DEPRECIATION> 2,763,600
<TOTAL-ASSETS> 3,558,300
<CURRENT-LIABILITIES> 644,200
<BONDS> 784,500
0
3,200
<COMMON> 50,600
<OTHER-SE> 694,800
<TOTAL-LIABILITY-AND-EQUITY> 3,558,300
<SALES> 4,778,900
<TOTAL-REVENUES> 4,781,500
<CGS> 4,241,600
<TOTAL-COSTS> 4,243,900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 71,900
<INCOME-PRETAX> 237,100
<INCOME-TAX> 90,300
<INCOME-CONTINUING> 146,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 146,800
<EPS-PRIMARY> 2.69
<EPS-DILUTED> 2.55
</TABLE>
