<PAGE>
1996
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from ________________to__________________
Commission File No. 33-32504 and 33-1329
INLAND STEEL INDUSTRIES THRIFT PLAN
(Full Title of the Plan)
INLAND STEEL INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State of Incorporation)
36-3425828
(I.R.S. Employer Identification No.)
30 West Monroe Street, Chicago, Illinois
(Address of principal executive offices)
60603
(Zip Code)
Registrant's telephone number, including area code: (312) 346-0300
================================================================================
<PAGE>
INLAND STEEL INDUSTRIES THRIFT PLAN
-----------------------------------
FINANCIAL STATEMENTS AND
SUPPLEMENTAL SCHEDULES
----------------------
DECEMBER 31, 1996 and 1995
--------------------------
<PAGE>
INLAND STEEL INDUSTRIES THRIFT PLAN
-----------------------------------
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
--------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of independent accountants 1
Financial statements:
Statements of net assets available
for plan benefits at December 31,
1996 and 1995 2
Statement of changes in net assets
available for plan benefits for the
year ended December 31, 1996 3
Statement of changes in net assets
available for plan benefits for the
year ended December 31, 1995 4
Notes to financial statements 5-13
Supplemental schedules:
Assets held for investment at
December 31, 1996 Schedule I
Aggregate transactions involving an amount
in excess of 5% of the current value of
plan assets for the year ended
December 31, 1996 Schedule II
</TABLE>
All other schedules of additional financial information required by Section
2520.103-10 of the Department of Labor's Rules and Regulations for Reporting
and Disclosure under ERISA have been omitted because they are not applicable.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
May 30, 1997
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,
1996 and 1995, 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 additional information
included in Schedules I and II is presented for purposes of additional
analysis and is not a required part of the basic financial statements but
is additional information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974. The Fund Information in the Statement of Net
Assets Available for Plan Benefits and the Statement of Changes in Net
Assets Available for Plan Benefits is presented for purposes of additional
analysis rather than to present the net assets available for plan benefits
and changes in net assets available for plan benefits of each fund.
Schedules I and II and the 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.
PRICE WATERHOUSE LLP
<PAGE>
INLAND STEEL INDUSTRIES THRIFT PLAN
-----------------------------------
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN
BENEFITS WITH FUND INFORMATION AT DECEMBER 31, 1996 AND 1995
------------------------------------------------------------
<TABLE>
<CAPTION>
Assets 1996 1995
------ ---- ----
<S> <C> <C>
Investments:
Inland Steel Industries Common Stock Fund:
Inland Steel Industries common stock
(829,710 shares and 673,315 shares at
December 31, 1996 and 1995, respectively) $ 16,594,200 $ 16,917,039
Cash 725,598 501,662
------------ ------------
17,319,798 17,418,701
------------ ------------
Inland Steel Industries Series E ESOP Preferred Stock Fund:
Shares allocated to participants
(1,447,642 shares and 1,268,126 shares
at December 31, 1996 and 1995, respectively) 70,346,715 61,623,327
Unallocated shares (1,633,148 shares
and 1,850,475 shares at December 31,
1996 and 1995, respectively) 79,361,194 89,921,990
------------ ------------
149,707,909 151,545,317
------------ ------------
Fidelity Stable Value Fixed Income Fund:
Unallocated investment contracts 239,868,519 255,059,484
Pooled investment funds 15,737,891 12,291,123
------------ ------------
255,606,410 267,350,607
------------ ------------
Mutual Benefit Fund (Note 3) 13,713,382 13,099,995
Fidelity U.S. Equity Index Portfolio 68,628,045 50,855,014
Fidelity Retirement Government Money Market Portfolio 6,597,214 7,172,392
Fidelity Asset Manager 60,509,128 57,396,182
Fidelity Magellan Fund 59,120,615 63,560,163
Warburg Pincus Emerging Growth Fund 8,509,895 -
Warburg Pincus International Equity Fund 4,843,743 -
------------ ------------
Total investments 644,556,139 628,398,371
------------ ------------
Loans receivable from participants 13,691,128 13,699,977
Employer contributions receivable 262,894 266,744
Cash held by ESOP Trust (Note 5) 5,735,792 5,740,183
------------ ------------
Total assets 664,245,953 648,105,275
------------ ------------
Liabilities
-----------
Notes payable of ESOP Trust (Note 5) 106,248,011 115,246,188
Interest payable 4,570,768 4,928,793
Accrued administrative expenses 26,618 27,778
------------ ------------
Total liabilities 110,845,397 120,202,759
------------ ------------
Net assets available for plan benefits $553,400,556 $527,902,516
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
-2-
<PAGE>
INLAND STEEL INDUSTRIES THRIFT PLAN
-----------------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
WITH FUND INFORMATION FOR THE YEAR ENDED DECEMBER 31, 1996
----------------------------------------------------------
<TABLE>
<CAPTION>
Fidelity
Fidelity Retirement Fidelity
Mutual Stable Value Government Fidelity U.S. Equity Fidelity
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 - $ 5,794,112 $ 392,220 $2,841,348 $ 2,886,138 $ 3,664,413
Employer contributions - - - - - -
Interfund transfers - (5,781,698) (431,311) (3,827,421) 5,970,784 (10,418,135)
Loans repaid - principal - 3,030,226 132,665 1,087,342 1,069,236 1,309,761
interest - 475,400 18,807 156,060 150,429 187,657
Investment income:
Interest and dividend income $809,704 15,764,090 332,271 4,771,776 1,692,052 10,107,508
Realized gain (loss) - - - 379,731 1,162,577 (2,239,754)
Unrealized gain (loss) - - - 1,836,708 9,475,522 (1,425,862)
-------- ------------ ----------- ---------- ----------- -----------
Total investment income (loss) 809,704 15,764,090 332,271 6,988,215 12,330,151 6,441,892
-------- ------------ ----------- ---------- ----------- -----------
Total sources of net assets 809,704 19,282,130 444,652 7,245,544 22,406,738 1,185,588
-------- ------------ ----------- ---------- ----------- -----------
Applications of net assets:
Withdrawals 196,317 27,358,360 932,015 3,110,782 3,445,611 4,379,789
Loans issued - 3,583,462 86,316 1,014,194 1,184,274 1,243,283
Interest expense - notes payable - - - - - -
Management fees - 84,505 1,499 7,622 3,822 2,064
-------- ------------ ----------- ---------- ----------- -----------
Total applications of net assets 196,317 31,026,327 1,019,830 4,132,598 4,633,707 5,625,136
-------- ------------ ----------- ---------- ----------- -----------
Increase (decrease) in net assets $613,387 ($11,744,197) ($ 575,178) $3,112,946 $17,773,031 ($ 4,439,548)
======== ============ =========== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Inland Steel
Warburg Warburg Inland Steel Industries
Pincus Pincus Industries Series E ESOP
Emerging International Common Preferred
Growth Equity Stock Stock Loan
Fund Fund Fund Fund Fund Total
---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Sources of net assets:
Employee contributions $ 524,655 $ 258,216 $ 291,560 - - $ 16,652,662
Employer contributions - - 416,775 $11,358,904 - 11,775,679
Interfund transfers 8,351,776 4,558,419 2,727,895 (1,150,309) - -
Loans repaid - principal 122,576 56,346 179,416 - ($6,987,568) -
interest 17,427 8,915 29,439 - - 1,044,134
Investment income:
Interest and dividend income 17,939 193,653 142,468 10,898,273 - 44,729,734
Realized gain (loss) (76,454) (5,907) (841,839) - - (1,621,646)
Unrealized gain (loss) (45,654) (58,485) (1,968,897) - - 7,813,332
---------- ---------- ----------- ----------- ----------- ------------
Total investment income (loss) (104,169) 129,261 (2,668,268) 10,898,273 - 50,921,420
---------- ---------- ----------- ----------- ----------- ------------
Total sources of net assets 8,912,265 5,011,157 976,817 21,106,868 (6,987,568) 80,393,895
---------- ---------- ----------- ----------- ----------- ------------
Applications of net assets:
Withdrawals 327,931 138,738 836,059 4,258,278 475,500 45,459,380
Loans issued 74,373 28,656 239,661 - (7,454,219) -
Interest expense - notes payable - - - 9,324,071 - 9,324,071
Management fees 66 20 - 12,806 - 112,404
---------- ---------- ----------- ----------- ----------- ------------
Total applications of net assets 402,370 167,414 1,075,720 13,595,155 (6,978,719) 54,895,855
---------- ---------- ----------- ----------- ----------- ------------
Increase (decrease) in net assets $8,509,895 $4,843,743 ($ 98,903) $ 7,511,713 ($ 8,849) 25,498,040
========== ========== =========== =========== ===========
Net assets available for plan benefits:
Beginning of year 527,902,516
------------
End of year $553,400,556
============
</TABLE>
The accompanying notes are an integral part of these statements.
-3-
<PAGE>
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>
Fidelity
Fidelity Retirement Fidelity
Mutual Stable Value Government Fidelity U.S. Equity
Benefit Fixed Income Money Market Asset Index
Fund Fund Portfolio Manager Portfolio
------------ ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Sources of net assets:
Employee contributions - $ 7,051,355 $ 444,962 $ 3,202,981 $ 2,355,001
Employer contributions - - - - -
Interfund transfers - 4,882,770 1,355,471 (7,716,609) 1,292,247
Loans repaid - principal - 3,017,231 129,489 1,119,955 871,488
interest - 467,602 18,920 163,795 124,293
Investment income:
Interest and dividend income $ 507,044 16,872,718 365,914 1,673,745 1,230,691
Realized gain (loss) - - - 734,184 1,020,521
Unrealized gain (loss) - - - 6,676,297 11,034,660
------------ ------------ ------------- ----------- ------------
Total investment income 507,044 16,872,718 365,914 9,084,226 13,285,872
------------ ------------ ------------- ----------- ------------
Total sources of net assets 507,044 32,291,676 2,314,756 5,854,348 17,928,901
------------ ------------ ------------- ----------- ------------
Applications of net assets:
Withdrawals 420,927 21,108,054 351,046 2,477,055 1,747,965
Loans issued - 3,874,290 150,933 1,050,810 824,548
Interest expense - notes payable - - - - -
Management fees - 91,510 586 6,237 2,629
------------ ------------ ------------- ----------- ------------
Total applications of net assets 420,927 25,073,854 502,565 3,534,102 2,575,142
------------ ------------ ------------- ----------- ------------
Increase (decrease) in net assets $ 86,117 $ 7,217,822 $ 1,812,191 $ 2,320,246 $ 15,353,759
============ ============ ============= =========== ============
</TABLE>
<TABLE>
<CAPTION>
Inland Steel
Inland Steel Industries
Industries Series E ESOP
Fidelity Common Preferred
Magellan Stock Stock Loan
Fund Fund Fund Fund Total
------------ ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Sources of net assets:
Employee contributions $ 3,660,943 $ 324,753 - - $ 17,039,995
Employer contributions - 403,717 $ 10,467,486 - 10,871,203
Interfund transfers 398,371 101,636 (313,886) - -
Loans repaid - principal 1,229,419 195,728 - ($6,563,310) -
interest 172,875 23,296 - - 970,781
Investment income
Interest and dividend income 3,606,343 130,892 11,055,005 - 35,442,352
Realized gain (loss) 2,303,485 (1,720,657) - - 2,337,533
Unrealized gain (loss) 10,094,034 (4,119,270) - - 23,685,721
----------- ----------- ------------- ----------- ------------
Total investment income 16,003,862 (5,709,035) 11,055,005 - 61,465,606
----------- ----------- ------------- ----------- ------------
Total sources of net assets 21,465,470 (4,659,905) 21,208,605 (6,563,310) 90,347,585
----------- ----------- ------------- ----------- ------------
Applications of net assets:
Withdrawals 3,028,906 935,916 1,691,604 370,776 32,132,249
Loans issued 1,178,773 165,744 - (7,245,098) -
Interest expense - notes payable - - 10,027,237 - 10,027,237
Management fees 2,679 598 8,949 - 113,188
----------- ----------- ------------- ----------- ------------
Total applications of net assets 4,210,358 1,102,258 11,727,790 (6,874,322) 42,272,674
----------- ----------- ------------- ----------- ------------
Increase (decrease) in net assets $17,255,112 ($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.
-4-
<PAGE>
INLAND STEEL INDUSTRIES THRIFT PLAN
-----------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
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.
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") is matched as follows by the Employers. A participant who
is an employee of the Company or its participating subsidiaries receives an
allocation to his or her 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 annually by an
independent appraiser, plus accrued dividends.
Participants can designate the investment of their contributions in integral
multiples of one percent in any of the Fidelity Retirement Government Money
Market Portfolio, Fidelity Stable Value Fixed Income Fund, Fidelity U.S. Equity
Index Portfolio (during 1997, the name of this fund was changed to the Spartan
U.S. Equity Index Portfolio), Fidelity Asset Manager, Fidelity Magellan Fund,
Inland Steel Industries Common Stock Fund, Warburg Pincus Emerging Growth Fund
or the Warburg Pincus International Equity fund. The Warburg Pincus Emerging
Growth Fund and the Warburg Pincus International Equity became available as
investment options for Plan participants effective May 6, 1996. Individual
participant accounts are
-5-
<PAGE>
maintained for each investment fund as well as for individual ESOP accounts to
record participant 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 shares of Company common stock that are forfeited are used to reduce
future contributions by the Company. At December 31, 1996, 7,457 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 any of the Fidelity Retirement Government Money Market
Portfolio, Fidelity Stable Value Fixed Income Fund, Fidelity Asset Manager,
Fidelity U.S. Equity Index Portfolio, Fidelity Magellan Fund, Warburg Pincus
Emerging Growth Fund, or 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
-6-
<PAGE>
such 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 served as
the trustee of the Common Stock Fund and ESOP Preferred Stock Fund through June
30, 1996. Effective July 1, 1996, LaSalle National Trust N.A., now known as
LaSalle National Bank, was appointed 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>
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 8.55 percent in 1996 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, 1996
and 1995. 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>
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.
The Warburg Pincus Emerging Growth Fund invests in domestic common stocks of
small and medium-sized companies. 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.
The Warburg Pincus International Equity Fund invests in international equity
securities. 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.
-9-
<PAGE>
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.
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 November 1993, the Mutual Benefit rehabilitation plan was approved by the
courts and in January 1994, the rehabilitation 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-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, 3.55 percent for 1995 and 5.75 percent for 1996.
Interest rates for future years will be determined annually based on the
investment results of Mutual Benefit. At December 31, 1999, account balances
attributed to opt-in participants are to be paid out. 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
-10-
<PAGE>
participants has not been reduced for any potential loss relating to this
contract. At December 31, 1996, 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, 1996 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 challenged the rehabilitation plan
shortly after its approval. In 1996, a settlement agreement was reached with the
majority of these unsecured creditors, thereby reducing the possibility of the
rehabilitation plan being overturned and any resulting adverse affects on the
value of the Mutual Benefit Plan.
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.
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. In October 1996, the
Confederation Life rehabilitation plan was approved by the courts and in
November 1996, the rehabilitation plan was finalized.
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 $296,018 for the year ended December 31, 1996, in
accordance with the terms stated above. The carrying value represented
Fidelity's best estimate of the fair market value of this contract based on the
financial information available as of December 31, 1996.
-11-
<PAGE>
In accordance with the rehabilitation plan, during March 1997, the Plan elected
to receive its contract payments including accrued interest in installments
commencing in April 1997. As of May 30, 1997, the Plan has received contract
payments totaling $5,908,981 from Confederation Life and state guaranty
associations, and additional payments are expected to be minor. The excess of
the contract payments received as compared to the carrying value of the
Confederation Life contract at December 31, 1996 is due to the rate at which
interest was accrued by the Plan and will be recognized as income over a twelve
month period extending into 1998.
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 majority 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, 1996 and 1995 of $5,333,574 and
$5,326,878, 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 $402,218 and $413,305 at December 31, 1996 and 1995, 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 March 18, 1997, the IRS issued a favorable determination letter conditioned
upon the adoption of a technical amendment with respect to the qualified tax
status of the Plan, as amended, as of September 9, 1996. Such technical
amendment was adopted by the Plan subsequent to March 18, 1997. 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>
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-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I
----------
(Page 1 of 4)
INLAND STEEL INDUSTRIES THRIFT PLAN
ASSETS HELD FOR INVESTMENT AT PLAN YEAR-END
DECEMBER 31, 1996
-----------------
Identity of issue, borrower, Description of investment including Current
lessor or similar party maturity date, rate of interest Cost Value
----------------------- ------------------------------- ---- -----
<S> <C> <C> <C>
Cash held by ESOP Trust $ 5,735,792 $ 5,735,792
------------ ------------
Cash held by Common Stock Fund 725,598 725,598
------------ ------------
Receivables
- -----------
Loans to participants* - 13,691,128
Contributions receivable 262,894 262,894
------------ ------------
Sub-total - Receivables 262,894 13,954,022
------------ ------------
Corporate Stocks - Common
- -------------------------
Inland Steel Industries, Inc.* 829,710 shares common stock 21,841,913 16,594,200
------------ -----------
Corporate Stocks - Convertible Preferred
- ----------------------------------------
Inland Steel Industries ESOP Series E*:
Shares allocated to participants 1,447,642 shares preferred stock 70,346,715 70,346,715
Unallocated shares 1,633,148 shares preferred stock 79,361,194 79,361,194
------------ -----------
Sub-total - Convertible Preferred Stock 149,707,909 149,707,909
------------ -----------
Interest in Pooled Investment Funds
- ------------------------------------
Fidelity Short-term Investment Fund* 15,737,891 15,737,891
Fidelity U.S. Equity Index Portfolio* 2,546,495 shares in pooled investment fund 49,285,995 68,628,045
Fidelity Retirement Government Money Market* 6,597,214 shares in pooled investment fund 6,597,214 6,597,214
Fidelity Asset Manager* 3,673,900 shares in pooled investment fund 55,898,942 60,509,128
Fidelity Magellan Fund* 733,052 shares in pooled investment fund 55,602,683 59,120,615
Warburg Pincus Emerging Growth Fund 256,168 shares in pooled investment fund 8,508,819 8,509,895
Warburg Pincus International Equity Fund 232,425 shares in pooled investment fund 4,892,216 4,843,743
------------ -----------
Sub-total - Interest in Pooled Investment
Funds 196,523,760 223,946,531
------------ -----------
Unallocated Investment Contracts
- --------------------------------
Bankers Trust Synthetic Contract, due on various maturity 4,810,441 4,810,441
dates through 10-15-97, 5.02%
Bankers Trust Synthetic Contract, due on various maturity 10,027,863 10,027,863
dates through 11-25-98, 6.07%
CDC Capital Inc Synthetic Contract, due on various maturity 10,188,028 10,188,028
dates through 1-1-00, 7.78%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 1
----------
(Page 2 of 4)
INLAND STEEL INDUSTRIES THRIFT PLAN
ASSETS HELD FOR INVESTMENT AT PLAN YEAR-END
DECEMBER 31, 1996
-----------------
Identity of issue, borrower, Description of investment including Current
lessor or similar party maturity date, rate of interest Cost Value
- ---------------------------- ----------------------------------- ---- -------
<S> <C> <C> <C>
Unallocated Investment Contracts (Cont.)
- --------------------------------
Confederation Life Guaranteed Investment Contract, original $ 5,296,018 $ 5,296,018
maturity due on 1-1-98, 2.00%
Combined Insurance Guaranteed Investment Contract, due 5,372,907 5,372,907
on 3-31-99, 6.12%
Deutsche Bank Synthetic Contract, due on various maturity 5,017,747 5,017,747
dates through 12-15-99, 6.06%
Deutsche Bank Synthetic Contract, due on various maturity 5,984,414 5,984,414
dates through 1-15-99, 5.54%
Hartford Guaranteed Investment Contract, due in three 18,095,321 18,095,321
installments on 1-1-97, 4-1-97,
7-1-97, 5.25%
J.P. Morgan Synthetic Contract, due on various maturity 9,707,725 9,707,725
dates through 1-15-01, 7.90%
J.P. Morgan Synthetic Contract, due on various maturity 9,847,408 9,847,408
dates through 8-15-00, 7.85%
J.P. Morgan Synthetic Contract, due on various maturity 10,083,689 10,083,689
dates through 12-15-97, 6.19%
J.P. Morgan Synthetic Contract, due on various maturity 9,106,547 9,106,547
dates through 2-4-98, 7.02%
Lincoln National Guaranteed Investment Contract, due 6,679,163 6,679,163
on 4-1-97, 5.20%
Lincoln National Guaranteed Investment Contract, due 11,163,271 11,163,271
on 1-4-00, 5.85%
Metropolitan Life Guaranteed Investment Contract, due on 4,056,308 4,056,308
on 6-1-99, 6.42%
Mutual Benefit Life Insurance Company Group Annuity Contract GA-5016-002, 13,713,382 13,713,382
original maturity schedule for two
installments due on 9-30-91 and 3-31-92,
original interest 8.75%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 1
----------
(Page 3 of 4)
INLAND STEEL INDUSTRIES THRIFT PLAN
ASSETS HELD FOR INVESTMENT AT PLAN YEAR-END
DECEMBER 31, 1996
-----------------
Identity of issue, borrower, Description of investment including Current
lessor or similar party maturity date, rate of interest Cost Value
- ---------------------------- ---------------------------------- ---- -------
<S> <C> <C> <C>
Unallocated Investment Contracts (Cont.)
- --------------------------------
Pacific Mutual Life Insurance Guaranteed Investment Contract, due in three $12,424,153 $12,424,153
installments on 3-31-98, 6-30-98,
12-30-98, 7.00%
Peoples Security Life Synthetic Contract, due on various maturity 5,080,428 5,080,428
dates through 9-28-00, 6.77%
Peoples Security Life Synthetic Contract, due on various maturity 4,058,386 4,058,386
dates through 7-31-00, 6.67%
Peoples Security Life Synthetic Contract, due on various maturity 9,415,264 9,415,264
dates through 7-25-01, 7.68%
Peoples Security Life Synthetic Contract, due on various maturity 11,589,751 11,589,751
dates through 9-25-98, 8.19%
Peoples Security Life Synthetic Contract, due on various maturity 3,813,020 3,813,020
dates through 6-16-97, 8.55%
Peoples Security Life Synthetic Contract, due on various maturity 7,952,985 7,952,985
dates through 3-15-01, 5.81%
Peoples Security Life Synthetic Contract, due on various maturity 2,394,814 2,394,814
dates through 3-15-01, 5.81%
Peoples Security Life Synthetic Contract, due on various maturity 2,456,151 2,456,151
dates through 6-25-98, 7.58%
Principal Mutual Guaranteed Investment Contract, due on 4,136,159 4,136,159
7-02-01, 7.15%
Principal Mutual Guaranteed Investment Contract, due on 2,269,133 2,269,133
12-31-00, 7.00%
Principal Mutual Synthetic Contract, due on various 5,107,194 5,107,194
maturity dates through 8-30-01, 7.23%
Protective Life Guaranteed Investment Contract, due 11,252,714 11,252,714
on 10-1-97, 6.99%
Provident Life Guaranteed Investment Contract, due 14,143,659 14,143,659
on 4-1-98, 6.10%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I
----------
(Page 4 of 4)
INLAND STEEL INDUSTRIES THRIFT PLAN
ASSETS HELD FOR INVESTMENT AT PLAN YEAR-END
DECEMBER 31, 1996
-----------------
Identity of issue, borrower, Description of investment including Current
Lessor or similar party maturity date, rate of interest Cost Value
- ---------------------------- ----------------------------------- ---- -----
Unallocated Investment Contracts (Cont.)
- --------------------------------
<S> <C> <C> <C>
Safeco Life Synthetic Contract, due on various $ 5,106,835 $ 5,106,835
maturity dates through 8-31-00, 7.09%
Security Life of Denver Guaranteed Investment Contract, due 3,017,901 3,017,901
on 8-31-99, 6.22%
Union Bank of Switzerland Synthetic Contract, due on various 10,213,122 10,213,122
maturity dates through 11-8-98, 7.88% ------------ ------------
Sub-total - Unallocated Investment Contracts 253,581,901 253,581,901
------------ ------------
Total Assets $628,379,767 $664,245,953
============ ============
</TABLE>
*Permitted party in interest transaction.
<PAGE>
SCHEDULE II
-----------
INLAND STEEL INDUSTRIES THRIFT PLAN
-----------------------------------
AGGREGATE TRANSACTIONS INVOLVING AN AMOUNT
IN EXCESS OF 5% OF THE CURRENT VALUE OF
PLAN ASSETS FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------------------
<TABLE>
<CAPTION>
Expense Current value
incurred of asset on
Identity of party Description of Purchase Selling Lease with Cost of transaction Net gain
involved asset price price rental transaction asset date or (loss)
- --------------------------- -------------- ----------- ----------- ------ ----------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Series of Transactions
- ---------------------------
with the Same Party
- ---------------------------
Fidelity Management Stable Value $41,414,639 - - $41,414,639 $41,414,639 -
Trust Company Fixed Income $71,892,607 - - 71,892,607 71,892,607 -
Fund
Fidelity Management Magellan Fund 23,125,266 - - 23,125,266 23,125,266 -
Trust Company 23,899,198 - - 23,586,656 26,138,952 $312,542
</TABLE>
<PAGE>
SIGNATURES
Inland Steel Industries Thrift Plan. Pursuant to the requirements of the
Securities Exchange Act of 1934, the trustees (or other persons who administer
the employee benefit plan) have duly caused this annual report to be signed on
its behalf by the undersigned hereunto duly authorized.
INLAND STEEL INDUSTRIES THRIFT PLAN
------------------------------------
(Name of Plan)
Date: June 26, 1997 By: VICKI L. AVRIL
-------------------------------------
Vicki L. Avril
Treasurer
and
Member of Inland Steel
Industries Thrift
Plan Committee
<PAGE>
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page No.
------- ---------------------------------- ----------
<S> <C> <C>
1 Consent of Independent Accountants --
</TABLE>
<PAGE>
EXHIBIT 1
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 May 30, 1997 appearing on page 1 of Exhibit 1 to this Form 11-K.
PRICE WATERHOUSE LLP
Chicago, Illinois
June 26, 1997
