<PAGE> 1
1995
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
TO ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
Commission file number 1-9117
INLAND STEEL INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3425828
(State of Incorporation) (I.R.S. Employer Identification No.)
30 West Monroe Street, 60603
Chicago, Illinois (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (312) 346-0300
================================================================================
<PAGE> 2
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items,
financial statements, exhibits and other portions of its Annual Report for 1995
on Form 10-K:
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.
- 1 -
<PAGE> 3
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. (Page A-6 to A-7)
Notes to Consolidated Financial Statements. (Pages A-8 to A-14,
inclusive)
4. EXHIBITS. The exhibits required to be filed by Item 601 of
Regulation S-K are listed under the caption "Exhibits" below.
(B) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed by the Company during the quarter ended
December 31, 1995.
(C) EXHIBITS.
See Index to Exhibits included herewith.
Pursuant to the requirements of the Securities Exchange Act or 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
INLAND STEEL INDUSTRIES, INC.
(Registrant)
By: /s/ Jay M. Gratz
-------------------------
Jay M. Gratz
Vice President and
Chief Financial Officer
Date: June 26, 1996
- 2 -
<PAGE> 4
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
------ ----------- ----------
<S> <C> <C>
3.(i) Copy of Certificate of Incorporation, as amended, of the Company **
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;
</TABLE>
- ---------------------
** Previously included in Registrant's Annual Report on Form 10-K for
1995, as originally filed.
- 3 -
<PAGE> 5
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
------ ----------- ----------
<S> <C> <C>
(iv) Exhibit B-1(i), filed with Steel Company's Current Report on Form 8-K,
dated February 8, 1937; (v) Exhibits B-1(j) and B-1(k), filed with Steel
Company's Current Report on Form 8-K for the month of April, 1940; (vi)
Exhibit B-2, filed with Steel Company's Registration Statement on Form A-2
(No. 2-4357); (vii) Exhibit B-1(l), filed with Steel Company's Current Report
on Form 8-K for the month of January, 1945; (viii) Exhibit 1, filed with
Steel Company's Current Report on Form 8-K for the month of November, 1946;
(ix) Exhibit 1, filed with Steel Company's Current Report on Form 8-K for the
months of July and August, 1948; (x) Exhibits B and C, filed with Steel
Company's Current Report on Form 8-K for the month of March, 1952; (xi)
Exhibit A, filed with Steel Company's Current Report on Form 8-K for the
month of July, 1956; (xii) Exhibit A, filed with Steel Company's Current
Report on Form 8-K for the month of July, 1957; (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.]
</TABLE>
- 4 -
<PAGE> 6
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
------ ----------- ----------
<S> <C> <C>
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.) --
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 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.) --
</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.
- 5 -
<PAGE> 7
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
------ ----------- ----------
<S> <C> <C>
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* 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.)
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.) --
</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.
** Previously included in Registrant's Annual Report on Form 10-K for
1995, as originally filed.
- 6 -
<PAGE> 8
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
------ ----------- ----------
<S> <C> <C>
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.
- 7 -
<PAGE> 9
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
------ ----------- ----------
<S> <C> <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.) --
</TABLE>
- 8 -
<PAGE> 10
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
------ ----------- ----------
<S> <C> <C>
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 28 of this Annual
Report on Form 10-K. --
23.A Consent of Independent Accountants. . . . . . . . . . . . . . . . . . . . . .
24 Powers of attorney. **
</TABLE>
______________________
** Previously included in Registrant's Annual Report on Form 10-K for
1995, as originally filed.
- 9 -
<PAGE> 11
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
------ ----------- ----------
<S> <C> <C>
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.) --
99.A Inland Steel Industries Thrift Plan Financial Statements and Supplemental
Schedules for the fiscal year ended December 31, 1995 . . . . . . . . . . . .
</TABLE>
----------------------
** Previously included in Registrant's Annual Report on Form 10-K for
1995, as originally filed.
- 10 -
<PAGE> 1
EXHIBIT 23.A
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No.33-32504) and Post-Effective Amendment No. 1 to
Form S-8 Registration Statement (No. 33-1329) of Inland Steel Industries, Inc.
of our report dated June 17, 1996 appearing on page 1 of Exhibit 99.A to the
1995 Annual Report on Form 10-K of Inland Steel Industries, Inc., filed with
this Form 10-K/A.
PRICE WATERHOUSE LLP
Chicago, Illinois
June 24, 1996
<PAGE> 1
EXHIBIT 99.A
------------
INLAND STEEL INDUSTRIES THRIFT PLAN
FINANCIAL STATEMENTS AND
SUPPLEMENTAL SCHEDULES
DECEMBER 31, 1995 and 1994
<PAGE> 2
INLAND STEEL INDUSTRIES THRIFT PLAN
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of independent accountants 1
Financial statements:
Statements of net assets available
for plan benefits at December 31,
1995 and 1994 2
Statement of changes in net assets
available for plan benefits for the
year ended December 31, 1995 3
Statement of changes in net assets
available for plan benefits for the
year ended December 31, 1994 4
Notes to financial statements 5-12
<PAGE> 3
REPORT OF INDEPENDENT ACCOUNTANTS
June 17, 1996
To the Board of Directors of
Inland Steel Industries, Inc.
and the Participants in the
Inland Steel Industries
Thrift Plan
In our opinion, the financial statements listed in the accompanying
index present fairly, in all material respects, the net assets available for
plan benefits of the Inland Steel Industries Thrift Plan at December 31, 1995
and 1994, and the changes in net assets available for plan benefits for the
years then ended, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the plan'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.
Our audits were performed for the purpose of forming an opinion on the
basic financial statements taken as a whole. The Fund Information in the
statement of changes in net assets available for plan benefits is presented for
purposes of additional analysis rather than to present the changes in net
assets available for plan benefits of each fund. The supplemental schedules and
Fund Information have been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, are fairly stated
in all material respects in relation to the basic financial statements taken as
a whole.
<PAGE> 4
<TABLE>
<CAPTION>
INLAND STEEL INDUSTRIES THRIFT PLAN
-----------------------------------
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN
BENEFITS AT DECEMBER 31, 1995 AND 1994
--------------------------------------
ASSETS 1995 1994
- ------ ---- ----
<S> <C> <C>
Investments:
Inland Steel Industries Common Stock Fund:
Inland Steel Industries common stock
(673,315 shares and 635,609, respectively $ 16,917,039 $ 22,325,766
Cash 501,662 855,098
------------ ------------
17,418,701 23,180,864
------------ ------------
Inland Steel Industries Series E ESOP
Shares allocated to participants
(1,268,126 shares and 1,034,800 shares
at December 31, 1995 and 1994, respectively) 61,623,327 50,285,098
Unallocated shares (1,850,475 shares
and 2,067,753 shares at December 31, 89,921,990 100,480,381
1995 and 1994, respectively) ------------ ------------
151,545,317 150,765,479
------------ ------------
Stable Value Fixed Income Fund:
Unallocated investment contracts 255,059,484 251,542,074
Pooled investment funds 12,291,123 8,590,711
------------ ------------
267,350,607 260,132,785
------------ ------------
Mutual Benefit Fund (Note 3) 13,099,995 13,013,878
Fidelity U.S. Equity Index Portfolio 50,855,014 35,501,255
Fidelity Retirement Government Money Market 7,172,392 5,360,201
Fidelity Asset Manager 57,396,182 55,075,936
Fidelity Magellan Fund 63,560,163 46,305,051
------------ ------------
Total investments 628,398,371 589,335,449
------------ ------------
Loans receivable from participants 13,699,977 13,388,965
Employer contributions receivable 266,744 14,317
Cash held by ESOP Trust (Note 5) 5,740,183 5,942,839
------------ ------------
Total assets 648,105,275 608,681,570
------------ ------------
Liabilities
-----------
Notes Payable of ESOP Trust (Note 5) 115,246,188 123,563,123
Interest payable 4,928,793 5,260,614
Accrued administrative expenses 27,778 30,228
------------ ------------
Total Liabilities 120,202,759 128,853,965
------------ ------------
Net assets available for plan benefits $527,902,516 $479,827,605
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
-2-
<PAGE> 5
INLAND STEEL INDUSTRIES THRIFT PLAN
-----------------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
WITH FUND INFORMATION FOR THE YEAR ENDED DECEMBER 31, 1995
----------------------------------------------------------
<TABLE>
<CAPTION>
Retirement
Mutual Stable Value Government U.S. Equity
Benefit Fixed Income Money Market Asset Index Magellan
Fund Fund Portfolio Manager Portfolio Fund
---- ---- --------- ------- --------- ----
<S> <C> <C> <C> <C> <C> <C>
Sources of net assets:
Employee contributions - $ 7,051,355 $ 444,962 $ 3,202,981 $ 2,355,001 $ 3,660,943
Employer contributions - - - - - -
Interfund transfers - 4,882,770 1,355,471 (7,716,609) 1,292,247 398,371
Loans repaid - Principal - 3,017,231 129,489 1,119,955 871,488 1,229,419
Interest - 467,602 18,920 163,795 124,293 172,875
Investment income:
Interest and dividend income $507,044 16,872,718 365,914 1,673,745 1,230,691 3,606,343
Realized gain (loss) - - - 734,184 1,020,521 2,303,485
Unrealized gain (loss) - - - 6,676,297 11,034,660 10,094,034
-------- ----------- ---------- ----------- ----------- -----------
Total investment income 507,044 16,872,718 365,914 9,084,226 13,285,872 16,003,862
-------- ----------- ---------- ----------- ----------- -----------
Total sources of net assets 507,044 32,291,676 2,314,756 5,854,348 17,928,901 21,465,470
-------- ----------- ---------- ----------- ----------- -----------
Application of net assets:
Withdrawals 420,927 21,108,054 351,046 2,477,055 1,747,965 3,028,906
Loans issued - 3,874,290 150,933 1,050,810 824,548 1,178,773
Interest expense - Notes payable - - - - - -
Management fees - 91,510 586 6,237 2,629 2,679
-------- ----------- ---------- ----------- ----------- -----------
Total application of net assets 420,927 25,073,854 502,565 3,534,102 2,575,142 4,210,358
-------- ----------- ---------- ----------- ----------- -----------
Increase (decrease) in net assets $ 86,117 $ 7,217,822 $1,812,191 $ 2,320,246 $15,353,759 $17,255,112
======== =========== ========== =========== =========== ===========
Net assets available for plan
benefits:
Beginning of year
End of year
</TABLE>
INLAND STEEL INDUSTRIES THRIFT PLAN
-----------------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
WITH FUND INFORMATION FOR THE YEAR ENDED DECEMBER 31, 1995
----------------------------------------------------------
<TABLE>
<CAPTION>
ESOP
Common Preferred
Stock Stock Loan
Fund Fund Fund Total
---- ---- ---- -----
<S> <C> <C> <C> <C>
Sources of net assets:
Employee contributions $ 324,753 - - $ 17,039,995
Employer contributions 403,717 $10,467,486 - 10,871,203
Interfund transfers 101,636 (313,886) - -
Loans repaid - Principal 195,728 - ($6,563,310) -
Interest 23,296 - - 970,781
Investment income:
Interest and dividend income 130,892 11,055,005 - 35,442,352
Realized gain (loss) (1,720,657) - - 2,337,533
Unrealized gain (loss) (4,119,270) - - 23,685,721
----------- ----------- ----------- ------------
Total investment income (5,709,035) 11,055,005 - 61,465,606
----------- ----------- ----------- ------------
Total sources of net assets (4,659,905) 21,208,605 (6,563,310) 90,347,585
----------- ----------- ----------- ------------
Application of net assets:
Withdrawals 935,916 1,691,604 370,776 32,132,249
Loans issued 165,744 - (7,245,098) -
Interest expense - Notes payable - 10,027,237 - 10,027,237
Management fees 598 8,949 - 113,188
----------- ----------- ----------- ------------
Total application of net assets 1,102,258 11,727,790 (6,874,322) 42,272,674
----------- ----------- ----------- ------------
Increase (decrease) in net assets ($5,762,163) $ 9,480,815 $ 311,012 48,074,911
=========== =========== ===========
Net assets available for plan
benefits:
Beginning of year 479,827,605
------------
End of year $527,902,516
============
</TABLE>
The accompanying notes are an integral part of these statements.
-3-
<PAGE> 6
INLAND STEEL INDUSTRIES THRIFT PLAN
-----------------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
WITH FUND INFORMATION FOR THE YEAR ENDED DECEMBER 31, 1994
----------------------------------------------------------
<TABLE>
<CAPTION>
Retirement
Mutual Stable Value Government U.S. Equity
Benefit Fixed Income Money Market Asset Index Magellan
Fund Fund Portfolio Manager Portfolio Fund
---- ---- --------- ------- --------- ----
<S> <C> <C> <C> <C> <C> <C>
Sources of net assets:
Employee contributions - $ 5,950,042 $ 266,681 $ 3,236,889 $ 2,146,698 $ 3,295,890
Employer contributions - - - - - -
Interfund transfers ($5,852,078) 8,405,693 (299,572) (2,792,430) (3,338,557) 3,464,099
Loans repaid - Principal - 3,101,227 121,787 1,279,185 876,053 1,291,355
Interest - 404,298 9,256 166,157 120,091 162,389
Investment income:
Interest and dividend income 501,776 16,706,303 213,253 2,263,509 1,121,264 1,804,977
Realized gain (loss) - - - (628,338) (73,883) (327,807)
Unrealized gain (loss) - - - (5,745,401) (668,582) (2,348,390)
----------- ----------- ---------- ----------- ----------- -----------
Total investment income 501,776 16,706,303 213,253 (4,110,230) 378,799 (871,220)
----------- ----------- ---------- ----------- ----------- -----------
Total sources of net assets (5,350,302) 34,567,563 311,405 (2,220,429) 183,084 7,342,513
----------- ----------- ---------- ----------- ----------- -----------
Application of net assets:
Withdrawals - 21,970,431 775,951 3,046,867 1,833,365 2,484,943
Loans issued - 3,399,117 80,392 1,126,249 866,575 1,159,560
Interest expense - Notes payable - - - - - -
Management fees - 102,297 161 1,300 949 8,909
----------- ----------- ---------- ----------- ----------- -----------
Total application of net assets - 25,471,845 856,504 4,174,416 2,700,889 3,653,412
----------- ----------- ---------- ----------- ----------- -----------
Increase (decrease) in net assets ($5,350,302) $ 9,095,718 ( $545,099) ($6,394,845) ($2,517,805) $ 3,689,101
=========== =========== ========== =========== =========== ===========
Net assets available for plan
benefits:
Beginning of year
End of year
</TABLE>
INLAND STEEL INDUSTRIES THRIFT PLAN
-----------------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
WITH FUND INFORMATION FOR THE YEAR ENDED DECEMBER 31, 1994
----------------------------------------------------------
<TABLE>
<CAPTION>
ESOP
Common Preferred
Stock Stock Loan
Fund Fund Fund Total
---- ---- ---- -----
<S> <C> <C> <C> <C>
Sources of net assets:
Employee contributions $ 261,880 - - $ 15,158,080
Employer contributions 374,422 $ 9,063,861 - 9,438,283
Interfund transfers 786,791 (373,946) - -
Loans repaid - Principal 120,637 - ($6,790,244) -
Interest 18,051 - - 880,242
Investment income:
Interest and dividend income - 11,104,569 - 33,715,651
Realized gain (loss) 587,463 - - (442,565)
Unrealized gain (loss) 966,953 - - (7,795,420)
----------- ----------- ----------- ------------
Total investment income 1,554,416 11,104,569 - 25,477,666
----------- ----------- ----------- ------------
Total sources of net assets 3,116,197 19,794,484 (6,790,244) 50,954,271
----------- ----------- ----------- ------------
Application of net assets:
Withdrawals 895,909 1,807,071 647,129 33,461,666
Loans issued 147,358 - (6,779,251) -
Interest expense - Notes payable - 10,678,869 - 10,678,869
Management fees 4,055 8,654 - 126,325
----------- ----------- ----------- ------------
Total application of net assets 1,047,322 12,494,594 (6,132,122) 44,266,860
----------- ----------- ----------- ------------
Increase (decrease) in net assets $ 2,068,875 $ 7,299,890 ($ 658,122) 6,687,411
=========== =========== ===========
Net assets available for plan
benefits:
Beginning of year 473,140,194
------------
End of year $479,827,605
============
</TABLE>
The accompanying notes are an integral part of these statements.
-4-
<PAGE> 7
INLAND STEEL INDUSTRIES THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1 - DESCRIPTION OF THE PLAN:
The Inland Steel Industries Thrift Plan ("Plan") is a defined
contribution profit sharing (thrift-savings) plan which is available to all
salaried, nonbargaining unit employees of Inland Steel Industries, Inc.
("Company") and certain of its subsidiaries and affiliates (the Company, the
subsidiaries, and its affiliates collectively referred to as "Employers"). The
Plan, which is subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), was adopted effective January 1,
1975. In 1989, the Company amended the Plan to include an Employee Stock
Ownership Plan ("ESOP"), effective January 1, 1990. As described below, the
Plan was amended and restated as of January 1, 1996.
Employees electing to participate in the Plan may contribute up to
fifteen percent of their base salary. Participants have the option of making
contributions on a before-tax (limited to ten percent of base salary) and/or
after-tax basis. The first five percent of participants' contributions (the
"basic contribution") are matched as follows by the Employers: A participant
that is an employee of the Company or its participating subsidiaries receives an
allocation to his ESOP account of shares of Company Series E ESOP Convertible
Preferred Stock ("Series E Preferred Stock") and, under certain circumstances,
Company common stock, with a fair market value equal to such participant's basic
contribution. Because employees of I/N Tek and I/N Kote (joint venture
partnerships owned by subsidiaries of the Company and Nippon Steel Corporation)
are not permitted by law to participate in the ESOP portion of the Plan,
employer matching contributions for these employees are made in cash, which is
then invested in Company common stock and credited to each participant's Inland
Steel Industries Stock Fund ("Common Stock Fund") account. For purposes of
determining the number of shares to be contributed to participant accounts,
Company common stock is valued at the closing price per share on the New York
Stock Exchange - Composite Transactions on the last day such stock was traded
prior to the date of contribution. The Series E Preferred Stock is currently
valued at $48.594 per share, as determined at least annually by an independent
appraiser, plus accrued dividends.
Participants can designate the investment of their contributions in
integral multiples of 1% in any of the Fidelity Retirement Government Money
Market Portfolio, Stable Value Fixed Income Fund, Fidelity U.S. Equity Index
Portfolio, Fidelity Asset Manager, Fidelity Magellan Fund or the Inland Steel
Industries Stock Fund. Effective May 6, 1996, participants may designate the
investment of their contribution in two additional investment options, the
Warburg Pincus Emerging Growth Fund and the Warburg Pincus International Equity
Fund. Individual participant accounts are maintained for each investment fund
as well as for individual ESOP accounts to record participant
-5-
<PAGE> 8
contributions, employer matching contributions, investment appreciation
or depreciation, dividends and interest income. Dividends on shares of Company
common stock and Series E Preferred Stock that have been allocated to
individual participant accounts are credited to participant accounts in the
form of additional shares of stock.
Participants vest immediately in their contributions and the earnings
thereon. Participants with less than five years of vesting service become
vested in the Company's matching contributions twenty-four months after the
contributions are made. Participants become immediately vested in all of the
Company's matching contributions upon the completion of five years of vesting
service or upon termination of employment due to a distributable event, such as
retirement, death, disability or other events as set forth in the Plan. Upon
termination of employment for reasons other than a distributable event,
nonvested matching contributions are forfeited. Nonvested Company contributed
Series E Preferred Stock and Company common stock shares that are forfeited are
used to reduce future contributions by the Company. At December 31, 1995, 2,517
forfeited shares of Series E Preferred Stock were held by the Plan for future
matching contributions.
After a participant's shares of common stock contributed by the Company
have been held for at least twenty-four months, the participant may elect to
reinvest these shares in the Fidelity Retirement Government Money Market
Portfolio, Stable Value Fixed Income Fund, Fidelity Asset Manager, Fidelity U.S.
Equity Index Portfolio, or Fidelity Magellan Fund, and effective May 6, 1996,
the Warburg Pincus Emerging Growth Fund and the Warburg Pincus International
Equity Fund. Participants who have reached the age of fifty-nine and one-half
years or who have become subject to certain distributable events may, at any
time, transfer amounts allocated to their individual ESOP accounts or shares of
common stock contributed by the Company to these other investment funds, subject
to certain restrictions.
Participants may withdraw their contributions and the earnings thereon,
subject to certain limitations set forth in the Plan. Certain withdrawals are
subject to federal and state income taxes and penalties as required by the
Internal Revenue Service ("IRS").
Participants may borrow up to fifty percent of or $50,000 of their
vested balance, whichever is less (subject to certain limitations set forth in
the Plan), excluding their investment in the Mutual Benefit Fund (see Note 3 -
Mutual Benefit Fund), for terms not exceeding five years, subject to
acceleration under certain circumstances. The interest rate charged on loans is
based upon a nationally published prime rate in effect at the beginning of the
month in which the loan application is accepted.
Participants are entitled to a distribution of all vested amounts upon
termination of employment with the Company. Participants may elect to receive a
lump sum payment or, under certain circumstances set forth in the Plan,
installment payments, starting no later than April 1 of the year following the
attainment of age seventy and one-half years. Participants receiving
distributions from the Common Stock Fund or from their ESOP accounts may elect
to receive such
-6-
<PAGE> 9
distributions in the form of whole shares of common stock, with fractional
shares distributed in cash, or entirely in cash. Amounts attributable to a
participant's interest in all other funds are distributed in cash.
Each participant has the right to confidentially direct the ESOP trustee
to vote the shares of the Company's common stock and Series E ESOP Preferred
Stock that have been allocated to the participant's accounts, whether or not
vested. All undirected and unallocated shares are voted by the ESOP trustee in
the same proportion as the shares actually directed by participants. All shares
of Company stock in the Plan which are not allocated to participants' accounts
will be tendered in proportion to the tender offer instructions made and deemed
to be made by participants.
Description of the Series E Preferred Stock
Shares of Series E Preferred Stock entitle holders to cumulative annual
dividends of $3.523 per share, payable semi-annually. The Series E shares are
convertible at the option of the holder into shares of the Company's common
stock on a one-for-one basis, subject to certain adjustments. The Company may,
at its option, redeem all or any portion of the Series E Preferred Stock at
specified prices, but not less than $48.594 per share, plus all accrued and
unpaid dividends to the redemption date. Holders of Series E Preferred Stock
would be entitled to preference on distribution of Company assets over holders
of Company common stock or any other class or series of stock junior to the
Series E Preferred Stock.
Administration
The Plan is administered by the Inland Steel Industries Thrift Plan
Committee ("Committee"), which consists of certain officers of the Company
appointed by the Company's Board of Directors. The Harris Trust and Savings
Bank ("Harris Bank") is the trustee of the Common Stock Fund and ESOP Preferred
Stock Fund.
Fidelity Management Trust Company ("Fidelity") is Trustee under the
Plan with responsibility for administering, holding and investing certain
assets of the Plan. The costs of certain administrative and investment
services provided by Fidelity are paid from participants' accounts or assets
within the appropriate investment option, as applicable.
This description summarizes major provisions of the Plan and is
provided for general information purposes only. It does not cover all
provisions, limitations and exclusions of the Plan. A full copy of the Plan
and additional information about the Plan may be requested from the Plan
Administrator.
-7-
<PAGE> 10
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of accounting
The Plan's financial statements have been prepared on the accrual basis
of accounting.
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.
Investments and investment income
Investments in Inland Steel Industries common stock are valued at the
last reported sales price on the last business day of the year. Inland Steel
Industries Series E Convertible Preferred Stock is currently valued at $48.594
per share, as determined at least annually by an independent appraiser, plus
accrued dividends.
The Stable Value Fixed Income Fund consists of unallocated investment
contracts with various insurance companies and pooled investment funds held by
Fidelity. The unallocated investment contracts earned a fixed rate of return
ranging from 2.00 percent to 8.49 percent in 1995 and are stated at contract
value plus interest earned to date. All unallocated investment contracts
individually represent less than five percent of the Plan's net assets at
December 31, 1995 and 1994. The pooled investment funds, which consist of
money market funds, are valued at cost plus interest earned to date, which
approximates market value.
See Note 3 and Note 4 for a description of the accounting treatment
with respect to the Mutual Benefit Fund and the Confederation Life contract,
respectively.
The Fidelity U.S. Equity Index Portfolio is a pooled investment fund
which invests in various common stocks. The net assets of this fund are valued
at the closing market price on the last business day of the year for the
individual securities held in the portfolio.
The Fidelity Retirement Government Money Market Portfolio consists of
short term obligations issued or guaranteed by the U.S. Government. The assets
in the fund are stated at cost plus interest, which approximates market value.
The Fidelity Asset Manager Fund is an asset-allocation fund which
consists of a mix of short-term instruments, bonds and equities. The net
assets of the fund are valued at the closing market price on the last business
day of the year for the individual assets held in the portfolio.
-8-
<PAGE> 11
The Fidelity Magellan Fund consists of common stock and securities that
are convertible into common stock. The net assets of the fund are valued at
the closing market price on the last business day of the year for the
individual assets held in the portfolio.
Realized gains and losses on investment transactions are calculated
using the current value method. Under the current value method, realized gains
and losses on investments sold are calculated as sales proceeds less an
adjusted cost representing current value at the beginning of the year or
acquisition cost if acquired during the year.
In accordance with the policy of stating investments at fair market
value, the net unrealized appreciation or depreciation of the market value of
investments for the year, if any, is reflected in the Statement of Changes in
Net Assets Available for Plan Benefits. Unrealized gains or losses are
calculated as the current value of investments held at the end of the year less
their current value at the beginning of the year or acquisition cost if
acquired during the year.
Interest income is accrued as earned, and dividend income is recorded
as of the record date.
Contributions and withdrawals
The Employers must contribute, at a minimum, an amount at least equal
to the principal and interest payments due on the Notes Payable of the ESOP
Trust less any preferred dividends (see Note 5 - Notes Payable). Since these
contributions are used for payments of principal and interest, they are not
allocated to participants' accounts. Contributions are recorded in the period
accrued by the Company.
Withdrawals and transfers are valued as of the close of the business
day in which they occur.
Administrative expenses
Certain trustee fees, certain recordkeeping fees and the investment
management fees of all funds except the ESOP Fund and the Common Stock Fund are
paid by the Plan. All other management fees and administrative expenses of the
Plan are paid by the Company.
NOTE 3 - MUTUAL BENEFIT FUND:
The Plan maintains an unallocated investment contract with Mutual
Benefit Life Insurance Company ("Mutual Benefit"). This contract was initially
purchased in January 1989 as an investment of the Fixed Income Investment Fund.
The stated terms of the contract include an interest rate of 8.75 percent per
annum, with interest paid annually each December 31, and scheduled maturities
of fifty percent of the contract value at September 30, 1991 and the remaining
balance of the contract value plus any unpaid interest at March 31, 1992.
-9-
<PAGE> 12
On July 16, 1991, Mutual Benefit was placed under rehabilitation
directed by New Jersey insurance regulators and policy withdrawals and
redemptions were suspended pending completion of this plan. Consequently, none
of the scheduled maturity payments of the Plan's contract with Mutual Benefit
have been received. Interest on the contract through December 31, 1990 has
been received.
In response to Mutual Benefit being placed under rehabilitation, the
Plan was amended, effective July 1, 1991, to segregate the carrying value of
the Mutual Benefit contract, including accrued interest determined in
accordance with the terms of the Mutual Benefit contract through June 30, 1991,
into a separate fund, called the Mutual Benefit Fund. The amount credited to
each participant's Mutual Benefit account was equal to the participant's
proportionate interest in the carrying value of the Mutual Benefit Fund at June
30, 1991. No contributions, withdrawals, loans or transfers to or from the
Mutual Benefit Fund are permitted, except in certain circumstances as described
below. Loans, withdrawals and transfers are limited to the participants'
vested balances in the Plan, as defined by the Plan, excluding the
participants' balances in the Mutual Benefit Fund.
In 1992, Mutual Benefit implemented an interim relief program to
provide for payments related to death benefits, disability benefits, normal
retirement benefits and hardship. Such payments are calculated based on
various percentages applied to the balance of the Mutual Benefit Fund at the
time such assets were frozen.
In November 1993, the Mutual Benefit rehabilitation plan was approved
by the courts and in January 1994, the Plan was finalized. In accordance with
the terms of the rehabilitation plan, during March 1994, Plan participants were
given the option of withdrawing their interests in the Mutual Benefit Fund at a
reduced value (the "opt-out election") or participating in the rehabilitation
plan (the "opt-in election"). Such withdrawal payments were made in September
1994 through a transfer to participants' Stable Value Fixed Income Fund
accounts.
Participants who chose the opt-out election were paid 55% of the value
of their interest at July 16, 1991, plus accrued interest on such amount to
April 29, 1994 at a rate of 3.5%, less any interim relief benefit payments.
Participants representing an aggregate amount of $10,218,715 (at July 16, 1991
contract value) elected to opt-out of the Mutual Benefit Fund. The resulting
loss of $4,598,422 (45 percent of contract value) was recorded in the 1993 Plan
financial statements and reduced the carrying value of the Mutual Benefit
contract as of December 31, 1993.
Participants who chose the opt-in election will be entitled to their
full principal balance plus accrued interest, but will not receive any cash
payments, except under certain circumstances, until after the end of the
Rehabilitation Period on December 31, 1999. Opt-in participants will be
credited with the contract interest rate of 8.75 percent for 1991, 4.0 percent
for 1992, 3.5 percent for both 1993 and 1994 and 3.55 percent for 1995.
Interest rates for future years will be determined annually based on the
investment results of Mutual Benefit. Commencing in the year 2000, account
balances attributed to opt-in participants are to be paid out in five equal
annual
-10-
<PAGE> 13
installments. However, one or more of the installments may be extended
up to an additional seven years if Mutual Benefit does not have sufficient
liquidity. Principal and interest on the Mutual Benefit contract is reinsured
by a group of insurance companies led by Metropolitan Life Insurance Company
and Prudential Life Insurance Company. The carrying value of the portion of
the Mutual Benefit contract related to the opt-in participants has not been
reduced for any potential loss relating to this contract. At December 31,
1995, the carrying value of the Mutual Benefit Fund in the accompanying
financial statements reflects the July 16, 1991 contract value, plus accrued
interest through December 31, 1995 under the terms of the rehabilitation plan.
It may be possible under the rehabilitation plan for the Plan to
withdraw its participation in the Mutual Benefit contract, however the amounts
to be received from such withdrawal would be based on the liquidation value of
Mutual Benefit assets at that time. Mutual Benefit may also permit individual
participant withdrawals for retired participants, certain hardships, death or
disability. However, the availability and amount of such withdrawals can only
be determined upon the submission of a request to Mutual Benefit and its
subsequent review of that request.
Certain unsecured creditors of Mutual Benefit have challenged the
rehabilitation plan. In the event the courts uphold these challenges, the
rehabilitation plan could be amended and any such amendments could adversely
affect the value of the Mutual Benefit Fund.
NOTE 4 - CONFEDERATION LIFE:
The Plan maintains an unallocated insurance contract with Confederation
Life Insurance Company ("Confederation Life"). This contract was initially
purchased as an investment of the Stable Value Fixed Income Fund in February
1993. The stated terms of the contract include an interest rate of 6.08
percent per annum, with interest paid annually each February, and a scheduled
maturity of January 1, 1998.
In August 1994, following the placement of Confederation Life's
Canadian operations under the regulatory control of the Canadian government,
Michigan insurance regulators filed an order of rehabilitation against the U.S.
Branch of Confederation Life Insurance Company. Michigan insurance regulators
are working with Canadian authorities in supervising the rehabilitation,
however, a plan has not been finalized.
In response to the seizure of Confederation Life, the trustee and
investment manager of the Stable Value Fixed Income Fund (Fidelity) suspended
the accrual of interest for the period August 12, 1994 to August 31, 1994 and,
effective September 1, 1994, resumed interest accruals at an annual effective
rate of 2.00 percent. The contract was not segregated from the Stable Value
Fixed Income Fund and participants continue to have the right to make
contributions, loans, transfers, and withdrawals to and from this fund.
The carrying value of the Confederation Life contract in the accompanying
financial statements reflects the principal amount of the contract of
$5,000,000 plus accrued interest of $233,461 for
-11-
<PAGE> 14
the year ended December 31, 1995, in accordance with the terms stated
above. The carrying value represents Fidelity's best estimate of the fair
market value of this contract based on the financial information available,
historical precedents and discussions of likely outcomes with regulators and
industry representatives.
Confederation Life's final rehabilitation plan may result in a
reduction in the principal amount of the contract and/or a reduction in the
related interest accrual. However, pending completion of the rehabilitation
plan and a full appraisal of the fair value of Confederation Life's assets and
liabilities, the amount of any potential loss on this contract cannot be
reasonably estimated.
NOTE 5 - NOTES PAYABLE:
In July 1989, the Company and Inland Steel Company ("ISC"), a wholly
owned subsidiary of the Company, provided loans to the ESOP Trust of
$146,913,160 and $3,086,800, respectively. The ESOP Trust used the proceeds of
these loans to purchase 3,086,800 leveraged shares of Series E Preferred Stock
from the Company. In September 1990, the ESOP Trust refinanced its loan from
the Company through the private placement of notes totaling $146,913,160 with
eighteen lenders. The notes are payable in semi-annual installments through
July 2004, with an initial average interest rate of 8.65 percent per annum, and
are guaranteed by Joseph T. Ryerson & Son, Inc., a wholly owned subsidiary of
the Company. The note due to ISC was repaid in installments during 1990 and
1991.
Interest and principal payments made by the ESOP Trust are funded by
dividends paid by the Company on leveraged shares of the Series E Preferred
Stock and additional contributions made by the Company. From time to time, the
Company elects to provide additional shares of nonleveraged 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.
Cash held by the ESOP Trust at December 31, 1995 and 1994 of $5,326,878
and $5,316,152, respectively, was used for payment of principal and interest
due on the Notes Payable of the ESOP Trust. The remaining cash held by the
ESOP Trust of $413,305 and $626,687 at December 31, 1995 and 1994,
respectively, was used to purchase additional shares of nonleveraged Series E
Preferred Stock that were allocated to participants' accounts.
NOTE 6 - TAX STATUS OF THE PLAN:
On April 26, 1996, the IRS issued a favorable determination letter with
respect to the qualified tax status of the Plan, as amended, as of March 23,
1993. The Plan has been amended since March 23, 1993. However, the Plan
administrator and the Plan's tax counsel believe that the Plan is designed and
is currently being operated in compliance with the applicable requirements of
the Internal Revenue Code.
-12-
<PAGE> 15
NOTE 7 - PLAN TERMINATION:
The Company anticipates that the Plan will continue, but reserves the
right to terminate the Plan at any time. Upon termination of the Plan, all
amounts allocated to the participants' accounts, including all employer
matching contributions, shall vest immediately. If the ESOP loans are
outstanding at the time of termination, they shall be repaid in full through
sale of all unallocated shares of the Series E Preferred Stock and any
remaining proceeds of such sale shall be allocated to participants' individual
ESOP accounts in proportion to shares credited to their ESOP accounts. The
Trustees shall then direct the method and manner of distribution of the Plan's
assets to participants or their beneficiaries.
-13-
