<PAGE>
1997
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition period from to
COMMISSION FILE NO. 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
30 WEST MONROE STREET, CHICAGO, NO.)
ILLINOIS 60603
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (312) 346-0300
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE
ON WHICH REGISTERED
Common Stock ($1.00 par value), New York Stock Exchange, Inc.
including Preferred Stock Purchase Rights
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of February 2, 1998, the aggregate market value of the voting stock of
the registrant held by non-affiliates of the registrant was approximately
$977,000,000.(/1/)
The number of shares of Common Stock ($1.00 par value) of the registrant
outstanding as of February 2, 1998 was 49,016,795.
(1) Excluding stock held by directors and executive officers of registrant,
without admission of affiliate status of such individuals for any other
purpose; also, excluding Series E ESOP Convertible Preferred Stock of the
registrant, which Series is not publicly traded.
DOCUMENTS INCORPORATED BY REFERENCE
Parts I and II of this Report on Form 10-K incorporate by reference certain
information set forth in Exhibit 99, "Financial Information (to be included in
the Annual Report to Shareholders for 1997)," which is attached hereto, and is
incorporated by reference herein. Part III of this Report on Form 10-K
incorporates by reference certain information from the Company's definitive
Proxy Statement which will be furnished to stockholders in connection with the
Annual Meeting of Stockholders of the Company scheduled to be held on May 27,
1998.
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<PAGE>
PART I
ITEM 1. BUSINESS.
Inland Steel Industries, Inc. (the "Company"), a Delaware corporation, is
the sole stockholder of Inland Steel Company and the holder of stock
representing approximately 87% of the economic interest in Ryerson Tull, Inc.
("RT"). Inland Steel Company is an integrated domestic steel company that
produces and sells a wide range of steels, of which approximately 99% consists
of carbon and high-strength low-alloy steel grades. It is also a participant
in certain iron ore production and steel-finishing joint ventures. RT is the
sole stockholder of Joseph T. Ryerson & Son, Inc. ("Ryerson") and J. M. Tull
Metals Company, Inc. ("Tull"). Ryerson and Tull are leading steel service,
distribution and materials processing organizations.
BUSINESS SEGMENTS
The business segments of the Company and its subsidiaries are Steel
Manufacturing (including iron ore operations) and Materials Distribution. For
the three years ended December 31, 1997, information relating to net sales,
operating profit, identifiable assets, depreciation and capital expenditures
for both business segments of the Company appears in Note 19 of Notes to
Consolidated Financial Statements included in Exhibit 99, "Financial
Information, " which is attached hereto, and is incorporated by reference
herein.
STEEL MANUFACTURING OPERATIONS
General
Inland Steel Company, a wholly owned subsidiary of the Company, is directly
engaged in the production and sale of steel and related products and the
transportation of iron ore, limestone and certain other commodities (primarily
for its own use) on the Great Lakes. Certain subsidiaries and associated
companies of Inland Steel Company are engaged in the mining and pelletizing of
iron ore and in the operation of a cold-rolling mill and steel galvanizing
lines. All raw steel made by Inland Steel Company is produced at its Indiana
Harbor Works located in East Chicago, Indiana, which also has facilities for
converting the steel produced into semi-finished and finished steel products.
Inland Steel Company has two divisions--the Inland Steel Flat Products
Company division and the Inland Steel Bar Company division. The Flat Products
division manages the Inland Steel Company's iron ore operations, conducts its
ironmaking operations, and produces the major portion of its raw steel. This
division also manufactures and sells steel sheet, strip and certain related
semi-finished products for the automotive, appliance, office furniture, steel
service center and electrical motor markets. The Flat Products division closed
its plate operations at year-end 1995. The Bar division manufactures and sells
special quality bars and certain related semi-finished products for forgers,
steel service centers, heavy equipment manufacturers, cold finishers and the
transportation industry.
Inland Steel Company and Nippon Steel Corporation ("NSC") are participants,
through subsidiaries, in two joint ventures that operate steel-finishing
facilities near New Carlisle, Indiana. The total cost of these two facilities
was approximately $1.1 billion. I/N Tek, owned 60% by a wholly owned
subsidiary of Inland Steel Company and 40% by an indirect wholly owned
subsidiary of NSC, operates a cold-rolling mill. I/N Kote, owned equally by
wholly owned subsidiaries of Inland Steel Company and NSC (indirect in the
case of NSC), operates two galvanizing lines. Inland Steel Company is also a
participant, through a subsidiary, in another galvanizing joint venture
located near Walbridge, Ohio.
<PAGE>
Raw Steel Production and Mill Shipments
The following table shows, for the three years indicated, Inland Steel
Company's production of raw steel and, based upon American Iron and Steel
Institute data, its share by percentage of total domestic raw steel
production:
<TABLE>
<CAPTION>
RAW STEEL PRODUCTION
--------------------------------
INLAND STEEL INLAND STEEL
COMPANY COMPANY AS A % OF
(000 TONS*) U.S. STEEL INDUSTRY
------------ -------------------
<S> <C> <C>
1997..................................... 5,814 5.4%**
1996..................................... 5,519 5.3
1995..................................... 5,419 5.2
</TABLE>
- --------
*Net tons of 2,000 pounds.
**Based on preliminary data from the American Iron and Steel Institute.
The annual raw steelmaking capacity of Inland Steel Company is 6.0 million
net tons. The basic oxygen process accounted for 92% of raw steel production
of the Company in both 1997 and 1996. The remainder of such production was
accounted for by electric furnace.
The total tonnage of steel mill products shipped by Inland Steel Company for
each of the five years 1993 through 1997 was 5.3 million tons in 1997; 5.1
million tons in 1996; 5.1 million tons in 1995; 5.2 million tons in 1994 and
4.8 million tons in 1993. In 1997, sheet, strip and certain related semi-
finished products accounted for 82% of the total tonnage of steel mill
products shipped from the Indiana Harbor Works, and bar and certain related
semi-finished products accounted for 18%.
In each of 1997 and 1996, approximately 94% of the shipments of the Flat
Products division and 98% and 92%, respectively, of the shipments of the Bar
division were to customers in 20 mid-American states. Approximately 76% of the
shipments of the Flat Products division and 92% of the Bar division in 1997
were to customers in a five-state area comprised of Illinois, Indiana, Ohio,
Michigan and Wisconsin, compared to 74% and 82% in 1996. Both divisions
compete in these geographical areas, principally on the basis of price,
service and quality, with the nation's largest producers of raw steel as well
as with foreign producers and with many smaller domestic mills.
The steel market is highly competitive with major integrated producers,
including Inland Steel Company, facing competition from a variety of sources.
Many steel products compete with alternative materials such as plastics,
aluminum, ceramics, glass and concrete. Domestic steel producers have also
been adversely impacted by imports from foreign steel producers. Imports of
steel mill products accounted for 24.1% of the domestic market in 1997, up
from 23.3% in 1996 but below the 1984 peak of 26.4%. Many foreign producers
are owned, controlled, or subsidized by their governments, allowing them to
ship steel products into the domestic market despite decreased profit margins
or losses on such sales.
Mini-mills provide significant competition in various product lines. Mini-
mills are relatively efficient, low-cost producers that manufacture steel
principally from scrap in electric furnaces and, at this time, generally have
lower capital, overhead, employment and environmental costs than the
integrated steel producers, including Inland Steel Company. Mini-mills have
been adding capacity and expanding their product lines in recent years to
produce larger structural products and certain flat rolled products. Thin-slab
casting technologies have allowed mini-mills to enter certain sheet markets
traditionally supplied by integrated producers. Several mini-mills using this
advanced technology are in operation in the United States and a significant
increase in modern mini-mill capacity is anticipated within the next two
years.
Certain facilities at the Indiana Harbor Works have been permanently closed
and others have been shut down for temporary periods. All coke batteries were
closed by year-end 1993, a year earlier than previously
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anticipated. An additional provision was required with respect to those
closures. (See "Environment" below.) At year-end 1995 the plate mill was
closed. Provisions for such closure were taken prior to and in 1991.
For the three years indicated, shipments by market classification of steel
mill products produced by Inland Steel Company at its Indiana Harbor Works,
including shipments to affiliates of Inland Steel Company, are set forth
below. As shown in the table, a substantial portion of shipments by the Flat
Products division was to steel service centers and transportation-related
markets.
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL TONNAGE
OF STEEL SHIPMENTS
---------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Steel Service Centers:
Non-Affiliates......................... 25% 25% 25%
Affiliates............................. 9 10 9
--------- --------- ---------
34 35 34
Automotive............................... 29 27 28
Steel Converters/Processors.............. 17 14 15
Appliance................................ 9 9 8
Industrial, Electrical and Farm
Machinery............................... 7 8 8
Construction and Contractors' Products... 2 2 2
Other.................................... 2 5 5
--------- --------- ---------
100% 100% 100%
========= ========= =========
</TABLE>
Some value-added steel processing operations for which Inland Steel Company
does not have facilities are performed by outside processors, including joint
ventures, prior to shipment of certain products to Inland Steel Company's
customers. In 1997, approximately 43% of the products produced by Inland Steel
Company were processed further through value-added services such as
electrogalvanizing, painting and slitting.
Approximately 74% of the finished steel shipped to customers during 1997 was
transported by truck, with the remainder transported primarily by rail. A
wholly owned truck transport subsidiary of Inland Steel Company was
responsible for shipment of approximately 10% of the total tonnage of products
transported by truck in 1997.
Substantially all of the steel mill products produced by the Flat Products
division are marketed through its own selling organization, with offices
located in Chicago, Illinois; Southfield, Michigan; and Nashville, Tennessee.
Substantially all of the steel mill products produced by the Bar division are
marketed through its sales office in East Chicago, Indiana.
See "Product Classes" below for information relating to the percentage of
consolidated net sales accounted for by certain classes of similar products of
steel manufacturing operations.
Raw Materials
Inland Steel Company obtains iron ore pellets primarily from two iron ore
properties, located in the United States, in which subsidiaries of Inland
Steel Company have varying interests--the Empire Mine in Michigan and the
Minorca Mine in Minnesota.
During the second quarter of 1997, Inland Steel Company completed the sale
of its interest in the Wabush Mines located in Labrador and Quebec, Canada.
Inland Steel Company entered into a contract with the purchaser of such
interest, effective January 1, 1997 and expiring December 31, 2006, to sell to
Inland Steel Company, at prices approximating market, any of Inland Steel
Company's iron ore pellet requirements up to one million gross tons annually
not met by Inland Steel Company's equity sources. See "Properties Relating to
Steel Manufacturing Segment--Raw Materials Properties and Interests" in Item 2
below for further information relating to such iron ore properties.
3
<PAGE>
The following table shows (1) the iron ore pellets available to Inland Steel
Company, as of December 31, 1997, from properties of its subsidiaries, through
interests in raw materials ventures; (2) 1997 and 1996 iron ore pellet
production or purchases from such sources; and (3) the percentage of Inland
Steel Company's iron ore requirements represented by production or purchases
from such sources in 1997 and 1996.
<TABLE>
<CAPTION>
IRON ORE
TONNAGES IN THOUSANDS
(GROSS TONS OF PELLETS)
--------------------------- % OF
AVAILABLE AS OF PRODUCTION REQUIREMENTS (1)
DECEMBER 31, ----------- ----------------
1997(2) 1997 1996 1997 1996
--------------- ----- ----- -------- --------
<S> <C> <C> <C> <C> <C>
INLAND STEEL MINING COMPANY
PROPERTY
Minorca--Virginia, MN........ 57,000 2,583 2,735 35% 38%
IRON ORE VENTURES
Empire (40% owned)--Palmer,
MI; Wabush (15.09% owned in
1996)--Wabush, Labrador and
Point Noire, Quebec,
Canada(3)................... 68,000 3,389 4,034 45 55
------- ----- ----- -------- --------
Total Iron Ore............. 125,000 5,972 6,769 80% 93%
======= ===== ===== ======== ========
</TABLE>
- --------
(1) Requirements in excess of production are purchased or taken from
stockpile.
(2) Net interest in proven reserves.
(3) Wabush Mines interest was sold in the second quarter of 1997 and
production is not included in 1997 amounts shown above.
All of Inland Steel Company's coal requirements are satisfied from
independent sources. In April 1996, Inland Steel Company entered into a
contract to purchase one million tons of steam coal for the period of April 1,
1996 to December 31, 1997. Inland Steel Company purchased 39% of its 1997 coal
requirements under such contract, representing 74% of its steam coal
requirements. The balance of steam coal requirements have been met through a
short-term contract. In connection with commencement of operation of the heat
recovery coke battery and associated energy facility discussed below, Inland
Steel Company's coal fired generating station will be temporarily idled in the
second quarter of 1998, thereby eliminating steam coal requirements in the
interim.
Inland Steel Company's other coal requirements are for the PCI Associates
joint venture, in which a subsidiary of Inland Steel Company holds a 50%
interest. The PCI facility pulverizes coal for injection into Inland Steel
Company's blast furnaces. During 1997, the PCI facility's coal needs were
satisfied under a requirements contract subject to a force majeure provision.
This agreement continues in 1998.
In December 1993, the last of Inland Steel Company's cokemaking facilities
was permanently shut down. Inland Steel Company has entered into three long-
term purchase contracts, one of which requires the purchase of approximately
one million tons of coke between January 1, 1998 and December 31, 1999. The
second contract requires the purchase of 350,000 tons of coke annually for the
period January 1, 1996 through December 31, 2000 on a take-or-pay basis, with
a provision allowing Inland Steel Company to sell the coke to others. Both
contract terms require purchases on an annualized basis at prices negotiated
annually based on certain market determinants. During 1997, Inland Steel
Company satisfied 80% of its total coke needs under such arrangements. The
remainder of its purchased coke requirements was obtained through short-term
contracts. Under the third contract, Inland Steel Company has committed to
purchase, for approximately 15 years, beginning approximately June 1998 when
the heat recovery coke battery (discussed below) is expected to reach full
production, 1.2 million tons of coke annually on a take-or-pay basis at prices
determined by certain cost factors, as well as energy produced by the facility
through the tolling arrangement.
In the 1996 fourth quarter, Inland Steel Company reached an agreement with
Sun Coal and Coke Company and a unit of NIPSCO Industries for a heat recovery
coke battery and an associated energy recovery and flue-gas desulphurization
facility, to be located on land leased from Inland Steel Company at its
Indiana Harbor Works. Sun designed, built, financed, and will operate the
cokemaking portion of the project. A unit of NIPSCO Industries designed,
built, financed, and will operate the portion of the project which will clean
the coke plant's
4
<PAGE>
flue gas and convert the heat into steam and electricity. Sun, the NIPSCO unit
and other third parties will invest approximately $350 million in the project.
The facility is designed to be the primary coke source for the largest blast
furnace at the Indiana Harbor Works and is expected to commence operations in
the first quarter of 1998. Inland Steel Company also advanced $30 million
during construction of the project, which is recorded as a deferred asset on
the balance sheet and will be credited against required cash payments during
the second half of the energy tolling arrangement.
Inland Steel Company sold all of its limestone and dolomite properties in
September 1990 and entered into a long-term contract with the buyer of the
properties to purchase, subject to certain exceptions and at prices which
approximate market, the full amount of the annual limestone needs of the
Indiana Harbor Works through 2002.
Approximately 80% of the iron ore pellets and all of the limestone received
by Inland Steel Company at its Indiana Harbor Works in 1997 were transported
by its Great Lakes carriers. Contracts are in effect for the transportation on
the Great Lakes of the remainder of its iron ore pellet requirements.
Approximately 25% of Inland Steel Company's coal requirements were transported
in its hopper cars by unit train in 1997. The remainder of Inland Steel
Company's coal requirements was transported in independent carrier-owned
equipment or leased equipment. Approximately 25% of Inland Steel Company's
coke requirements in 1997 were transported in its own hopper cars, 47% in
leased hopper cars, 8% in independent carrier-owned hopper cars, and 20% in
independent carrier-owned river barges.
See "Energy" below for further information relating to the use of coal in
the operations of Inland Steel Company.
Product Classes
The following table sets forth the percentage of consolidated net sales of
Inland Steel Company, for the three years indicated, contributed by each class
of similar products of Inland Steel Company and accounted for 10% or more of
consolidated net sales in such time period. The data includes sales to
affiliates of Inland Steel Company.
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Sheet and Strip........................................... 81% 81% 82%
Bar....................................................... 19 19 18
--- --- ---
100% 100% 100%
=== === ===
</TABLE>
Sales to General Motors Corporation approximated less than 10% of
consolidated net sales in each of 1997 and 1996 and 10% in 1995. No other
customer accounted for more than 10% of the consolidated net sales of the
Company during any of these years.
Capital Expenditures and Investments in Joint Ventures
In recent years, Inland Steel Company and its subsidiaries have made
substantial capital expenditures, principally at the Indiana Harbor Works, to
improve quality and reduce costs, and for pollution control. Additions by
Inland Steel Company and its subsidiaries to property, plant and equipment,
together with retirements and adjustments, for the five years ended December
31, 1997, are set forth below. Net capital additions during such period
aggregated $417.9 million.
<TABLE>
<CAPTION>
DOLLARS IN MILLIONS
---------------------------------------------
RETIREMENTS NET CAPITAL
ADDITIONS OR SALES ADJUSTMENTS ADDITIONS
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1997........................ $ 98.4 $ 40.8 $ 6.1 $ 63.7
1996........................ 155.8 8.5 5.6 152.9
1995........................ 113.9 36.7 1.5 78.7
1994........................ 223.7 47.8 2.0 177.9
1993........................ 86.1 140.2 (1.2) (55.3)
</TABLE>
5
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In recent years, Inland Steel Company's largest capital improvement projects
at the Indiana Harbor Works have emphasized reducing costs and improving
quality in the steel-processing sequence of Inland Steel Company. Inland Steel
Company and its subsidiaries made capital expenditures of $98 million in 1997.
Such expenditures principally related to the purchase of new machinery and
equipment to maintain or improve operations at the Indiana Harbor Works.
In July 1987, a wholly owned subsidiary of Inland Steel Company formed a
partnership, I/N Tek, with an indirect wholly owned subsidiary of NSC to
construct, own, finance and operate a cold-rolling facility with an annual
capacity of 1,500,000 tons, of which approximately 40% is cold-rolled
substrate for I/N Kote (described below). The I/N Tek facility is located near
New Carlisle, Indiana. Inland Steel Company, which owns, through its
subsidiary, a 60% interest in the I/N Tek partnership is, with certain limited
exceptions, the sole supplier of hot band to be processed by the I/N Tek
facility and generally has exclusive rights to the production capacity of the
facility.
In September 1989, a wholly owned subsidiary of Inland Steel Company formed
a second partnership, I/N Kote, with an indirect wholly owned subsidiary of
NSC to construct, own, finance and operate two sheet steel galvanizing lines
adjacent to the I/N Tek facility. The subsidiary of Inland Steel Company owns
a 50% interest in I/N Kote. The I/N Kote facility consists of a hot-dip
galvanizing line and an electrogalvanizing line with a combined annual
capacity of 900,000 tons. Inland Steel Company has guaranteed 50% of I/N
Kote's permanent financing. I/N Kote has contracted to acquire its cold-rolled
steel substrate from Inland Steel Company, which supplies the substrate from
the I/N Tek facility and Inland Steel Company's Indiana Harbor Works.
Further information regarding the I/N Tek and I/N Kote joint venture
projects will be set forth under the caption "Certain Relationships and
Related Transactions--Joint Ventures" in the Company's definitive Proxy
Statement which will be furnished to stockholders of the Company in connection
with its Annual Meeting scheduled to be held on May 27, 1998, and is
incorporated by reference into Item 13 of this Report.
The amount budgeted for 1998 capital expenditures by Inland Steel Company
and its subsidiaries is approximately $110 million. It is anticipated that
capital expenditures will be funded from cash generated by operations and
advances from and capital contributions by the Company. (See "Environment"
below for a discussion of capital expenditures for pollution control
purposes.)
Employees
The monthly average number of active employees of Inland Steel Company and
its subsidiaries receiving pay during 1997 was approximately 8,900. At year-
end, approximately 6,900 employees were represented by the United Steelworkers
of America, of whom approximately 470 were on furlough or indefinite layoff.
Total employment costs decreased from $649 million in 1996 to $642 million in
1997, as lower employee benefit costs were in part offset by higher profit
sharing provisions.
Beginning in 1991, Inland Steel Company embarked upon a major turnaround
strategy, with the assistance of an outside consulting firm, to significantly
reduce costs, increase revenues and improve asset utilization at Inland Steel
Company. With the closure of the plate operations at year-end 1995, Inland
Steel Company completed the workforce reduction program which was part of the
turnaround strategy, reducing employment by 25%.
The current labor agreement between Inland Steel Company and the United
Steelworkers of America, effective August 1, 1993, covers wages and benefits
through July 31, 1999. Among other things, the agreement provided a wage
increase of $.50 per hour in 1995 and a $500 bonus in each of 1993 and 1994
(totalling in each case approximately $4 million). All active employees
received an additional week of vacation in 1994 and in 1996. The agreement
provided for a reopener on wages and certain benefits in 1996 with an
arbitration provision to resolve unsettled issues, thereby precluding a work
stoppage over the six-year term of the contract. On September 17, 1996 an
arbitrator issued a decision selecting Inland Steel Company's final offer of
terms covering
6
<PAGE>
the second half of the six year agreement. The terms provided a wage increase
of $.50 per hour retroactive to August 1, 1996 with increases of $.25 an hour
in 1997 and 1998. A $1,000 lump sum would be paid to active employees in each
of the three remaining years of the contract (totalling approximately $20
million). One additional holiday was provided and retirement benefits were
increased for active employees. The agreement also provided for election of a
union designee acceptable to the Company's Board of Directors (Dr. Robert B.
McKersie is such union designee), restrictions on the ability of Inland Steel
Company to reduce the union workforce (generally limited to attrition and
major facilities shutdowns) while allowing greater flexibility to institute
work rule changes, quarterly rather than annual payment of profit sharing
amounts, significant improvements in pension benefits for active employees,
and the securing of retiree health care obligations through certain trust and
second mortgage arrangements. "First dollar" health care coverage is
eliminated under the agreement through the institution of co-payments and
increased deductibles on medical benefits.
Environment
Inland Steel Company is subject to environmental laws and regulations
concerning emissions into the air, discharges into ground water and waterways,
and the generation, handling, labeling, storage, transportation, treatment and
disposal of waste material. These include various federal statutes regulating
the discharge or release of pollutants to the environment, including the Clean
Air Act, Clean Water Act, Resource Conservation and Recovery Act,
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA," also known as "Superfund"), Safe Drinking Water Act, and Toxic
Substances Control Act, as well as state and local requirements. Violations of
these laws and regulations can give rise to a variety of civil,
administrative, and, in some cases, criminal actions and could also result in
substantial liabilities or require substantial capital expenditures. In
addition, under CERCLA the United States Environmental Protection Agency (the
"EPA") has authority to impose liability for site remediation on waste
generators, past and present site owners and operators, and transporters,
regardless of fault or the legality of the original disposal activity.
Liability under CERCLA is strict, joint and several.
By year-end 1993, the last of Inland Steel Company's cokemaking facilities
was permanently shut down. Inland Steel Company has entered into three long-
term contracts to satisfy the majority of its coke needs. In November 1996,
Inland Steel Company reached an agreement with Sun Coal and Coke Company and a
unit of NIPSCO for a heat recovery coke battery. (See "Raw Materials" above.)
In addition, Inland Steel Company participates in a joint venture that has
constructed and is operating a pulverized coal injection facility for blast
furnace application, reducing Inland Steel Company's coke needs by
approximately 25%.
Capital spending for pollution control projects totaled $7 million in 1997
and $19 million in 1996. Another $46 million was spent in 1997 to operate and
maintain such equipment, versus $44 million a year earlier. During the five
years ended December 31, 1997, Inland Steel Company spent $279 million to
construct, operate and maintain environmental control equipment at its various
locations.
Environmental projects previously authorized and presently under
consideration, including those designed to comply with the 1990 Clean Air Act
Amendments, but excluding any amounts that would be required under the consent
decree settling the 1990 EPA lawsuit, will require capital expenditures of
approximately $4 million in 1998. It is anticipated that Inland Steel Company
will make annual capital expenditures of $2 million to $5 million in each of
the four years thereafter. In addition, Inland Steel Company will have ongoing
annual expenditures of $40 million to $50 million for the operation of air and
water pollution control facilities to comply with current federal, state and
local laws and regulations. Due to the inability to predict the costs of
corrective action that may be required under the Resource Conservation and
Recovery Act and the consent decree in the 1990 EPA lawsuit, Inland Steel
Company cannot predict the amount of additional environmental expenditures
that will be required. Such additional environmental expenditures, excluding
amounts that may be required in connection with the consent decree in the 1990
EPA lawsuit, however, are not expected to be material to the financial
position or results of operations of Inland Steel Company.
7
<PAGE>
See Item 3 below for information concerning certain proceedings pertaining
to environmental matters in which Inland Steel Company is involved.
Energy
Coal, together with coke, all of which are purchased from independent
sources, accounted for approximately 76% of the energy consumed by Inland
Steel Company at the Indiana Harbor Works in 1997.
Natural gas and fuel oil supplied approximately 22% of the energy
requirements of the Indiana Harbor Works in 1997 and are used extensively by
Inland Steel Company at other facilities that it owns or in which it has an
interest. Utilization of the pulverized coal injection facility (see
"Environment" above) has reduced natural gas and fuel oil consumption at the
Indiana Harbor Works.
Inland Steel Company both purchases and generates electricity to satisfy
electrical energy requirements at the Indiana Harbor Works. In 1997, Inland
Steel Company produced approximately 59% of its electrical energy requirements
at the Indiana Harbor Works. The purchase of electricity at the Indiana Harbor
Works is subject to curtailment under rules of the local utility when
necessary to maintain appropriate service for various classes of its
customers.
A subsidiary of NIPSCO has leased land at the Indiana Harbor Works and built
a 75 megawatt steam turbine on such land. Pursuant to a 15-year toll-charge
contract between Inland Steel Company and the NIPSCO subsidiary, the turbine
facility generates electricity for use by Inland Steel Company utilizing steam
produced by burning waste blast furnace gas. The facility became operational
in the first half of 1996. During 1997, this facility produced approximately
60% of the purchased electricity requirements of the Indiana Harbor Works.
MATERIALS DISTRIBUTION OPERATIONS
The Company's materials distribution operations in the United States are
conducted by its majority-owned materials distribution subsidiary, RT, through
its operating subsidiaries--Ryerson and Tull. RT has a single business
segment, which is comprised of Ryerson and Tull, leading steel service,
distribution and materials processing organizations. RT also owns 50% of
Ryerson de Mexico, a joint venture general line metals service center and
processor with facilities in Mexico.
On February 13, 1997, RT, through Ryerson, purchased all of the outstanding
stock of Thypin Steel Co., Inc. ("Thypin") for $120 million in cash plus the
assumption of $23 million of debt. Thypin was a privately held distributor of
carbon and stainless steel products with seven locations in the eastern United
States. On March 3, 1997, RT, through Tull, acquired substantially all the
assets of Cardinal Metals, Inc. ("Cardinal"), a privately held distributor and
processor of carbon steel products with a single facility located in Pounding
Mill, VA. On August 22, 1997, RT, through Ryerson, purchased all of the
outstanding stock of Omni Metals, Inc. ("Omni"), a privately held processor
and distributor of flat-rolled carbon steel products with a facility in
Knoxville, TN. Thypin and Omni have subsequently been merged into Ryerson.
Ryerson, Tull and Ryerson Coil Processing Company ("Ryerson Coil"), a
specialized processing unit of Ryerson, are organized into five business units
along regional and product lines. RT believes that it is the largest metals
service center in the United States based on sales revenue, with 1997 sales of
$2.8 billion and a current U.S. market share of approximately 10%, based on
RT's analysis of data prepared by the Steel Service Center Institute ("SSCI").
RT distributes and processes metals and other materials throughout the
continental United States, and is among the largest purchasers of steel in the
United States.
8
<PAGE>
Joseph T. Ryerson & Son, Inc.
Ryerson, with business unit headquarters in Philadelphia, PA (Ryerson East),
Chicago, IL (Ryerson Central), and Tukwila, WA (Ryerson West), is a leading
materials distribution organization. With full-line service centers in 35
major cities, Ryerson is engaged in the nationwide sale of its products
through its own sales organization. Ryerson maintains heavy-duty shears,
slitters, precision cut-to-length lines, high-speed saws, flame-cutting
machines and other processing equipment for use in furnishing custom cutting
and miscellaneous shapes in accordance with customer orders. The Ryerson Coil
unit, headquartered in Chicago, IL, performs processing through five
facilities for customers who traditionally buy large quantities of sheet steel
products. Ryerson also markets plant equipment products through a wholesale
industrial catalog.
J. M. Tull Metals Company, Inc.
Tull is one of the largest distributors of metals in the southeastern United
States. Tull and its wholly-owned subsidiary, AFCO Metals, Inc. ("AFCO"),
operate 20 service centers and two processing facilities located throughout
the southeastern and south-central United States. Tull produces a variety of
metals products with value-added processing, including welded steel tubing and
roll-formed shapes. Tull's products are sold principally through its own sales
staff.
Ryerson de Mexico
RT also owns, indirectly, a 50% interest in Ryerson de Mexico, a joint
venture with Altos Hornos de Mexico, S.A. de C.V., an integrated steel mill
operating in Mexico. Ryerson de Mexico, which was formed in 1994, is a general
line metals service center and processor with 12 facilities in Mexico. The
impact of Ryerson de Mexico on RT's results of operations has not been
material.
Industry Overview
Primary steel producers typically sell steel in the form of standard-sized
coils, sheets, plate, structurals, bars and tubes and generally sell in large
volumes with long lead times for production and delivery. Other primary metals
producers, such as producers of stainless steel and aluminum, also typically
sell their products in large volumes with long lead times for production and
delivery. However, many customers seek to purchase metals with customized
specifications, including value-added processing, in smaller volumes, on
shorter lead times and with more reliable delivery than primary metals
producers are able to provide. Metals service centers act as intermediaries
between primary metals producers and customers by purchasing metals in a
variety of shapes and sizes from primary metals producers in large volumes,
allowing metals service centers to take advantage of producer economies of
scale resulting in lower costs of materials purchased, and engaging in a
variety of distribution and value-added processing operations to meet the
demands of specific customers. Because metals service centers purchase metals
from a number of primary producers, they can maintain a consistent supply of
various types of metal used by their customers. Most importantly, however,
metals service centers generally have lower fixed costs than primary metals
producers. By purchasing products from metals service centers, customers may
be able to lower their inventory levels, decrease the time between the
placement of an order and receipt of materials and reduce internal expenses,
thereby lowering their total cost of raw materials. RT believes that the
increased prevalence of just-in-time inventory needs of manufacturers and
intermediate processors has made and will continue to make the value-added
inventory, processing and delivery functions performed by metals service
centers more important in the metals market.
The industry is cyclical (with periods of strong demand and higher prices
followed by periods of weaker demand and lower prices), principally due to the
cyclical nature of the industries in which the largest consumers of metals
operate. Any significant slowdown in one or more of those industries could
have a material adverse effect on the demand for metals, resulting in lower
prices for metals and reduced profitability for metals service centers,
including RT. Metals prices and metals service center profitability improve as
metal-consuming industries experience recoveries following economic downturns.
9
<PAGE>
The industry is comprised of many companies, the majority of which have
operations limited as to product line and size of inventory, with customers
located in a specific geographic area. Based on SSCI data, RT believes that
the industry is comprised of between 750 and 1,000 service centers, operating
out of approximately 2,000 locations and servicing approximately 300,000
customers. The industry is highly fragmented, consisting of a large number of
small companies and a few relatively large companies. Based on RT's analysis
of SSCI data, the industry handled approximately 29 million tons or
approximately 24.4% of the metals distributed in the United States in 1997.
The industry is divided into three major groups: general line service
centers, specialized service centers and processing centers, each of which
targets different market segments. General line service centers handle a broad
line of metals products and tend to concentrate on distribution rather than
processing. General line service centers range in size from one location to a
nationwide network of locations. For general line service centers, individual
order size in terms of dollars and tons tends to be small relative to
processing centers, while the total number of orders is typically very high.
Specialized service centers focus their activities on a narrower range of
product and service offerings than general line companies. Such service
centers provide a narrower range of services to their customers and emphasize
product expertise and lower operating costs, while maintaining a moderate
level of investment in processing equipment. Processing centers typically
process large quantities of steel purchased from primary producers for resale
to large industrial customers, such as the automotive industry. Because orders
are typically large, operation of a processing center requires a significant
investment in processing equipment.
Products and Services
RT carries a full line of carbon steel, stainless steel and aluminum, and a
limited line of alloy steel, nickel, red metals and plastics. These materials
are inventoried in a number of shapes, including coils, sheets, rounds,
hexagons, square and flat bars, plate, structurals and tubing.
The following table sets forth RT's shipments (by percentage of RT's sales
revenue) for 1995, 1996 and 1997 for each of RT's major product lines.
<TABLE>
<CAPTION>
PERCENTAGE OF
PRODUCT LINE SALES REVENUE
------------ ----------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Stainless and aluminum.................................. 27% 26% 27%
Carbon flat rolled...................................... 24 27 27
Bars, tubing and structurals............................ 22 22 20
Fabrication and carbon plate............................ 20 20 20
Other................................................... 7 5 6
--- --- ---
Total................................................. 100% 100% 100%
=== === ===
</TABLE>
More than one-half of the materials sold by RT is processed. RT uses
techniques such as sawing, slitting, blanking, pickling, cutting to length,
levelling, flame cutting, laser cutting, edge trimming, edge rolling,
fabricating and grinding to process materials to specified thickness, length,
width, shape and surface quality pursuant to specific customer orders. Among
the most common processing techniques used by RT are pickling, a chemical
process using an acidic solution to remove surface oxide, commonly called
"scale," from steel which develops after the steel is hot rolled; slitting,
which is cutting coiled metals to specified widths along the length of the
coil; levelling, which is flattening metals and cutting them to exact lengths;
and edge rolling, a process which imparts round or smooth edges. Although RT
often uses third-party fabricators to outsource certain limited processes that
RT is not able to perform internally, outsourcing these processes does not
affect a significant part of RT's operations or constitute a significant part
of RT's operating costs and expenses.
The plate burning and fabrication processes are particularly important to
RT. These processes require sophisticated and expensive processing equipment.
As a result, rather than making investments in such equipment, manufacturers
have increasingly outsourced these processes to metals service centers. RT has
flame or laser cutting capacity in 45 of its 63 facilities.
10
<PAGE>
RT also provides services and technical advice to its customers as an
integral part of providing products to its customers. RT does not charge
customers separately for such services or advice, but rather includes the
costs of such services and advice in the price of products sold to such
customers.
RT's services include: just-in-time delivery, production of kits containing
multiple products for ease of assembly by the customer, the provision of
company-owned materials to the customer and the placement of company employees
at the customer's site for inventory management, production and technical
assistance. RT also provides special stocking programs where products that
would not otherwise be stocked by RT are held in inventory to meet certain
customers' needs. The foregoing services are designed to reduce customers'
costs by minimizing their investment in inventory and improving their
production efficiency.
Customer Base
RT's customer base is diverse, numbering over 50,000. No customer accounted
for more than 2% of RT's sales in 1997 and the top ten customers accounted for
approximately 7% of RT's sales in 1997. RT's customer base includes most
metal-consuming industries, most of which are cyclical. RT's shipments (by
percentage of RT's sales revenue) for 1995, 1996 and 1997 for each class of
RT's customers were as set forth in the table below.
<TABLE>
<CAPTION>
PERCENTAGE
CLASS OF CUSTOMER OF SALES REVENUE
----------------- ---------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Machinery manufacturers........................... 38% 38% 37%
Fabricated metals producers....................... 25 26 26
Transportation equipment producers................ 10 10 9
Electrical machinery producers.................... 9 8 8
Wholesale distributors............................ 3 3 4
Construction-related purchasers................... 3 4 5
Metals mills and foundries........................ 3 3 3
Other............................................. 9 8 8
----- ----- -----
Total........................................... 100% 100% 100%
===== ===== =====
</TABLE>
RT's flat-rolled processing business unit, Ryerson Coil, generally serves a
customer base that differs from RT's general line service center business. A
large portion of Ryerson Coil's customers have long-term supply contracts.
These contracts are typically at fixed prices and are generally from three
months to one year in duration, although Ryerson Coil has a small number of
arrangements with large customers that extend beyond one year. Ryerson Coil
attempts to limit its financial exposure on these fixed-price sales
arrangements by entering into fixed-price supply arrangements with one or more
suppliers for comparable periods of time. Ryerson Coil's customers often seek
large quantities of carbon sheet product that have undergone one or more of
the following processes: pickling, cutting to length, slitting, tension
levelling, texturing or blanking. Many of Ryerson Coil's approximately 600
customers are in the transportation, appliance, office furniture or cabinetry
businesses.
Suppliers
In 1997, RT purchased in excess of 3.0 million tons of materials from many
suppliers, including approximately 500,000 tons (or approximately 10.5% of the
purchase dollars) from Inland Steel Company. RT expects to continue purchasing
significant amounts of steel from Inland Steel Company in the future, although
there can be no assurance that such purchases will continue. Excluding Inland
Steel Company, RT's top 25 suppliers accounted for approximately 38% of 1997
purchases in dollars.
RT purchases the majority of its inventories in the open market at
prevailing market prices. However, occasionally RT enters into long-term,
fixed-price supply contracts to offset its long-term, fixed-price sales
contracts in order to minimize its financial exposure.
11
<PAGE>
Because RT uses many suppliers and because there is a substantial overlap of
product offerings from these suppliers, RT believes it will be able to meet
its materials requirements for the foreseeable future. RT works with and
monitors its suppliers in order to obtain improvements in price, quality,
service, delivery and performance. RT believes it has good relationships with
most of its suppliers.
Sales and Marketing
Each of RT's business units maintains its own sales and marketing force. In
addition to its office sales staff, RT markets and sells its products through
the use of its field sales force that has extensive product and customer
knowledge and through a comprehensive catalog of RT's products. RT's office
and field sales staffs, which together consist of approximately 800 employees,
include technical and metallurgical personnel. In addition, RT's technically-
oriented marketing departments develop advertising materials and maintain
product expertise for each of the various types of materials sold and
industries serviced by RT.
Capital Expenditures
In recent years RT has made capital expenditures to maintain, improve and
expand processing capabilities. Additions by RT to property, plant and
equipment, together with retirements, for the five years ended December 31,
1997, excluding the initial purchase price of acquisitions, are set forth
below. Net capital additions during such period aggregated $85.2 million.
<TABLE>
<CAPTION>
DOLLARS IN MILLIONS
---------------------------------
RETIREMENTS NET CAPITAL
ADDITIONS OR SALES ADDITIONS
--------- ----------- -----------
<S> <C> <C> <C>
1997.................................... $40.3 $12.0 $28.3
1996.................................... 24.1 6.0 18.1
1995.................................... 19.3 4.7 14.6
1994.................................... 20.4 12.4 8.0
1993.................................... 19.3 3.1 16.2
</TABLE>
RT anticipates that capital expenditures and investments in joint ventures,
excluding acquisitions, will be in the range of $40 million to $50 million for
1998, which will be funded from cash generated by operations plus possible
borrowing under RT's credit facility.
Employees
As of December 31, 1997, RT employed approximately 5,400 persons, of which
approximately 2,550 were salaried employees and approximately 2,850 were
hourly employees. Approximately 40% of the hourly employees were members of
various unions, including the United Steelworkers and the Teamsters, and an
additional approximately 29% of the hourly employees have voted for union
certification in proceedings currently pending before the National Labor
Relations Board. RT's relationship with the various unions generally has been
good, but occasional work stoppages have occurred. Over the last five years,
work stoppages have occurred at two facilities (approximately 4% of the total
number of facilities), have involved an average of 43 employees and have
lasted an average of six days. During 1998, labor contracts covering
approximately 160 employees at five facilities will expire. During 1999,
contracts covering approximately 740 employees at 17 facilities will expire.
The current agreement with the United Steelworkers will expire on July 31,
1999, and agreements with the Teamsters expire on various dates during the
period March 31, 1998 through November 15, 2003. While management does not
expect any unresolvable issues to arise in connection with the renewal of any
of these contracts, no assurances can be given that any of these contracts
will be extended prior to their expiration.
Prior to April 30, 1996, certain of RT's employees were eligible to
participate in the Inland Steel Industries, Inc. Pension Plan, a
noncontributory defined benefit pension plan. Effective April 30, 1996, that
portion of the Inland Steel Industries, Inc. Pension Plan covering RT's
current and former employees was separated and became the Ryerson Tull Pension
Plan.
12
<PAGE>
Effective January 1, 1998, RT froze the benefits accrued under the Ryerson
Tull Pension Plan, a defined benefit pension plan for certain salaried
employees and instituted a defined contribution plan. Salaried employees
vested in their benefits accrued under the defined benefit plan at December
31, 1997 will be entitled to those benefits upon retirement. Certain
transition rules have been established for those salaried employees meeting
the specified age and service requirements.
Competition
RT is engaged in a highly fragmented and competitive industry. In general,
competition is based on quality, service, price and geographic proximity.
Based on SSCI data, RT believes that the industry is comprised of between 750
and 1,000 service centers, operating out of approximately 2,000 locations. RT
competes with many other general line service centers, specialized service
centers and processing centers on a regional and local basis, some of which
may have greater financial resources and flexibility than RT. RT also competes
to a lesser extent with primary steel producers. Primary steel producers
typically sell to very large customers that require regular shipments of large
volumes of steel. Although these large customers sometimes use metals service
centers to supply a portion of their metals needs, metals service center
customers typically are consumers of smaller volumes of metals than customers
of primary steel producers. To the extent that some of RT's competitors
purchase a higher percentage of metals than RT from foreign steelmakers, such
competitors may benefit from favorable exchange rates or other economic or
regulatory factors that may result in a competitive advantage. This
competitive advantage may be offset somewhat by higher transportation costs
associated with importing metals into the United States. Excess capacity of
metals relative to demand in the industry since mid-1995 led to a weakening in
prices. As a result, RT has been reducing its prices since mid-1995 to remain
competitive.
Environmental, Health and Safety Matters
RT's operations are subject to many federal, state and local regulations
relating to the protection of the environment and to workplace health and
safety. In particular, RT's operations are subject to extensive federal, state
and local laws and regulations governing waste disposal, air and water
emissions, the handling of hazardous substances, environmental protection,
remediation, workplace exposure and other matters. RT's management believes
that RT is presently in substantial compliance with all such laws and does not
currently anticipate that RT will be required to expend any substantial
amounts in the foreseeable future in order to meet current environmental,
workplace health or safety requirements. However, additional costs and
liabilities may be incurred to comply with current and future requirements,
which costs and liabilities could have a material adverse effect on RT's
results of operations or financial condition.
There are no known pending remedial actions or claims relating to
environmental matters that are expected to have a material effect on RT's
financial position or results of operations. Some of the properties owned or
leased by RT, however, are located in industrial areas or have a history of
heavy industrial use. These properties may potentially incur environmental
liabilities in the future that could have a material adverse effect on RT's
financial condition or results of operations.
Capital and operating expenses for pollution control projects were
significantly below $1 million per year for the past five years and are
expected to remain at similar levels.
Patents and Trademarks
RT owns several U.S. patents and U.S. and foreign trademarks, service marks
and copyrights. Certain of the trademarks are registered with the U.S. Patent
and Trademark Office and, in certain circumstances, with the trademark offices
of various foreign countries. The patents expire over various periods of time
beginning in 2011. RT believes that the expiration of its patents will not
materially adversely affect its business. RT considers certain other
information owned by it to be trade secrets. RT protects its trade secrets by,
among other things, entering into confidentiality agreements with its
employees regarding such matters and implementing measures to restrict access
to sensitive data and computer software source code on a need-to-know basis.
RT believes that these
13
<PAGE>
safeguards adequately protect its proprietary rights and vigorously defends
these rights. While RT considers all of its intellectual property rights as a
whole to be important, RT does not consider any single right to be essential
to its operations as a whole.
OTHER FOREIGN OPERATIONS
In 1994, the Company formed Inland International, Inc. to conduct the
Company's international operations, and it organized Inland International
Trading, Inc. to sell products and services of the Company and its affiliates
and purchase materials for them abroad. In 1995, Inland International Trading,
Inc. organized I.M.F. Steel International Limited, a Hong Kong company (in
which it and a subsidiary of MacSteel Holdings (Pte.), Ltd. (South Africa)
each holds a 50% interest), to engage in the world-wide purchase and sale of
steel and related products. In 1994, Inland Industries de Mexico, S.A. de C.V.
(a subsidiary of RT) and Altos Hornos de Mexico, S.A. de C.V., formed Ryerson
de Mexico, S.A. de C.V. to provide materials management services in Mexico. In
China, the Company has a joint venture with Baoshan Iron & Steel Corporation,
Shanghai Ryerson Limited, which was organized to conduct steel service center
operations. Such joint venture has begun construction of a steel service
center in Shanghai and is expected to commence operations in the first half of
1998. In 1997, the Company and The Tata Iron and Steel Co. Ltd. (India)
organized Tata Ryerson Limited to conduct steel service center operations in
India. Tata Ryerson Limited currently conducts operations organized in
Jamshedpur at an acquired facility and is developing another facility at Pune.
Substantially all of the Company's operations are located in the United
States. At year-end 1997, neither investments in foreign operations nor
foreign sales were material.
ITEM 2. PROPERTIES.
PROPERTIES RELATING TO STEEL MANUFACTURING SEGMENT
STEEL PRODUCTION
All raw steel made by Inland Steel Company is produced at its Indiana Harbor
Works located in East Chicago, Indiana. The property on which this plant is
located, consisting of approximately 1,900 acres, is held by Inland Steel
Company in fee. The basic production facilities of Inland Steel Company at its
Indiana Harbor Works consist of furnaces for making iron; basic oxygen and
electric furnaces for making steel; a continuous billet caster, a continuous
combination slab/bloom caster and two continuous slab casters; and a variety
of rolling mills and processing lines which turn out finished steel mill
products. Certain of these production facilities, including a continuous
anneal line, are held by Inland Steel Company under leasing arrangements.
Inland Steel Company purchased the equity interest of the lessor of the No. 2
BOF Shop Caster Facility in March 1994 and assumed caster-related debt, which
was repaid by year-end 1994. Substantially all of the remaining property,
plant and equipment at the Indiana Harbor Works, other than the Caster
Facility and leased equipment, is subject to the lien of the First Mortgage of
Inland Steel Company dated April 1, 1928, as amended and supplemented. See
"Steel Manufacturing Operations--Raw Steel Production and Mill Shipments" in
Item 1 above for further information relating to capacity and utilization of
Inland Steel Company's properties. Inland Steel Company's properties are
adequate to serve its present and anticipated needs, taking into account those
issues discussed in "Capital Expenditures and Investments in Joint Ventures"
in Item 1 above.
I/N Tek, a partnership in which a subsidiary of Inland Steel Company owns a
60% interest, has constructed a 1,500,000-ton annual capacity cold-rolling
mill on approximately 200 acres of land, which it owns in fee, located near
New Carlisle, Indiana. Substantially all the property, plant and equipment
owned by I/N Tek is subject to a lien securing related indebtedness. The I/N
Tek facility is adequate to serve the present and anticipated needs of Inland
Steel Company planned for such facility.
I/N Kote, a partnership in which a subsidiary of Inland Steel Company owns a
50% interest, has constructed a 900,000-ton annual capacity steel galvanizing
facility on approximately 25 acres of land, which it owns in fee, located
adjacent to the I/N Tek site. Substantially all the property, plant and
equipment owned by I/N Kote is subject to a lien securing related
indebtedness. The I/N Kote facility is adequate to serve the present and
anticipated needs of Inland Steel Company planned for such facility.
14
<PAGE>
PCI Associates, a partnership in which a subsidiary of Inland Steel Company
owns a 50% interest, has constructed a pulverized coal injection facility on
land located within the Indiana Harbor Works. Inland Steel Company leases PCI
Associates the land upon which the facility is located. Substantially all the
property, plant and equipment owned by PCI Associates is subject to a lien
securing related indebtedness. The PCI Associates facility is adequate to
serve the present and anticipated needs of Inland Steel Company planned for
such facility.
See "Steel Manufacturing Operations--Raw Materials" in Item 1 above for
information relating to the Sun and NIPSCO projects.
Inland Steel Company owns three vessels for the transportation of iron ore
and limestone on the Great Lakes, and a subsidiary of Inland Steel Company
owns a fleet of 404 coal hopper cars (100-ton capacity each) used in unit
trains to move coal and coke to the Indiana Harbor Works. See "Steel
Manufacturing Operations--Raw Materials" in Item 1 above for further
information relating to utilization of Inland Steel Company's transportation
equipment. Such equipment is adequate, when combined with purchases of
transportation services from independent sources, to meet Inland Steel
Company's present and anticipated transportation needs.
Inland Steel Company also owns and maintains research and development
laboratories in East Chicago, Indiana, which facilities are adequate to serve
its present and anticipated needs.
RAW MATERIALS PROPERTIES AND INTERESTS
Certain information relating to raw materials properties and interests of
Inland Steel Company and its subsidiaries is set forth below. See "Steel
Manufacturing Operations--Raw Materials" in Item 1 above for further
information relating to capacity and utilization of such properties and
interests.
Iron Ore
The operating iron ore properties of Inland Steel Company's subsidiaries and
of the iron ore ventures in which Inland Steel Company has an interest are as
follows:
<TABLE>
<CAPTION>
ANNUAL
PRODUCTION CAPACITY
(IN THOUSANDS OF
GROSS TONS OF
PROPERTY LOCATION PELLETS)
-------- ------------------- -------------------
<S> <C> <C>
Empire Mine....................... Palmer, Michigan 8,100
Minorca Mine...................... Virginia, Minnesota 2,700
</TABLE>
The Empire Mine is operated by the Empire Iron Mining Partnership, in which
Inland Steel Company has a 40% interest. Inland Steel Company, through a
subsidiary, is the sole owner and operator of the Minorca Mine. Inland Steel
Company also owns a 38% interest in the Butler Taconite project (permanently
closed in 1985) in Nashwauk, Minnesota. During the second quarter 1997, Inland
Steel Company completed the sale of its 15% interest in the Wabush Mines.
The reserves at the Empire Mine and Minorca Mine are held under leases
expiring, or expected at current production rates to expire, between 2012 and
2040. Substantially all of the reserves at Butler Taconite are held under
leases. Inland Steel Company's share of the production capacity of its
interests in such iron ore properties is sufficient to provide the majority of
its present and anticipated iron ore pellet requirements. Any remaining
requirements have been and are expected to continue to be readily available
from independent sources.
Coal
Inland Steel Company's sole remaining coal property, the Lancashire No. 25
Property, located near Barnesboro, Pennsylvania, is permanently closed. All
Inland Steel Company coal requirements for the past several years have been
and are expected to continue to be met through contract purchases and other
purchases from independent sources.
15
<PAGE>
PROPERTIES RELATING TO MATERIALS DISTRIBUTION SEGMENT
JOSEPH T. RYERSON & SON, INC.
Ryerson owns its regional business unit headquarters offices in Chicago (IL)
and leases regional headquarters offices in West Chester (PA) and Tukwila
(WA). Ryerson East's service centers are at Birmingham (AL), Buffalo (NY),
Cambridge (MA), Carnegie (PA), Charlotte (NC) (two facilities), Chattanooga
(TN), Cleveland (OH), Easton (PA), Fairless Hills (PA), Long Island City (NY),
Philadelphia (PA), and Wallingford (CT). Ryerson Central's service centers are
at Chicago (IL), Cincinnati (OH), Dallas (TX), Des Moines (IA), Detroit (MI),
Holland (MI), Houston (TX), Indianapolis (IN), Kansas City (MO), Milwaukee
(WI), Omaha (NE), Plymouth (MN), St. Louis (MO), Tulsa (OK), and Wausau (WI).
Ryerson West's service centers are at Commerce City (CO), Emeryville (CA),
Phoenix (AZ), Portland (OR), Renton (WA), Spokane (WA), Salt Lake City (UT)
and Vernon (CA). Ryerson Coil's processing facilities are located in Canton
(GA), Chicago (IL) (two facilities), Knoxville (TN), Marshalltown (IA),
Plymouth (MN) and New Hope (MN).
All of Ryerson's operating facilities are held in fee with the exception of
the facility at Birmingham (AL) (held under long-term lease), two at Cambridge
(MA) (both held under short-term lease), one at Charlotte (NC) (held under
long-term lease), one at Chicago (IL) (held under short-term lease), one at
Easton (PA) (held under long-term lease), one at Fairless Hills (PA) (held
under long-term lease), one at Holland (MI) (held under long-term lease), one
at Long Island City (NY) (held under short-term lease), one at New Hope (MN)
(held under short-term lease), a satellite facility at Omaha (NE) (held under
short-term lease), a portion of the property at Portland (OR) (held under
short-term lease), a portion of the property at St. Louis (MO) (held under
long-term lease), one facility at Salt Lake City (UT) (held under short-term
lease), and one at Wausau (WI) (held under short-term lease). In addition,
Ryerson holds under short-term lease a former operating facility at the
Village of Blasdell (NY). Ryerson's properties are adequate to serve its
present and anticipated needs.
J. M. TULL METALS COMPANY, INC.
Tull maintains service centers at Baton Rouge (LA), Birmingham (AL),
Charlotte (NC), Columbia (SC), Greensboro (NC), Greenville (SC), Jacksonville
(FL), Miami (FL), New Orleans (LA), Pounding Mill (VA), Richmond (VA), Tampa
(FL), and Norcross (GA), where its headquarters is located. All of these
facilities are owned by Tull in fee, except for the Columbia facility, which
is held under short-term lease. AFCO operates service centers at Fort Smith
(AR), Jackson (MS), Little Rock (AR), Oklahoma City (OK), Shreveport (LA),
West Memphis (AR) and Wichita (KA). AFCO's headquarters are located at
Norcross (GA), where it leases space owned in fee by Tull. Each of AFCO's
facilities is held in fee except the Wichita facility, which is held under a
short-term lease. Tull's properties are adequate to serve its present and
anticipated needs.
RYERSON DE MEXICO
Ryerson de Mexico, a joint venture in which RT owns, indirectly, a 50%
interest, owns twelve general line metals service centers and processing
centers in Mexico. Ryerson de Mexico's properties are adequate to serve its
present and anticipated needs.
OTHER PROPERTIES
The Company and certain of its subsidiaries lease, under a long-term
arrangement, approximately 66% of the space in the Inland Steel Building
located at 30 West Monroe Street, Chicago, Illinois (where the Company's
principal executive offices are located), which property interest is adequate
to serve the Company's present and anticipated needs. Approximately 37% of
such space is under sublease to other parties.
Inland Engineered Materials Corporation, a subsidiary of the Company, owns,
directly and indirectly, approximately 110 acres in northern Indiana and
approximately 90 acres in Brockway, PA. Certain subsidiaries of the Company
hold in fee at various locations an aggregate of approximately 355 acres of
land, all of which is for sale. Inland Steel Company also holds in fee
approximately 300 acres of land adjacent to the I/N
16
<PAGE>
Tek and I/N Kote sites, which land is available for future development.
Approximately 1,060 acres of rural land, which are held in fee at various
locations in the north-central United States by various raw materials
ventures, are also for sale.
ITEM 3. LEGAL PROCEEDINGS.
On June 10, 1993, the U.S. District Court for the Northern District of
Indiana entered a consent decree that resolved all matters raised by a lawsuit
filed by the EPA in 1990. The consent decree included a $3.5 million cash
fine, environmentally beneficial projects at the Indiana Harbor Works through
1997 costing approximately $7 million, and sediment remediation of portions of
the Indiana Harbor Ship Canal and Indiana Harbor Turning Basin estimated to
cost approximately $19 million over the next several years. The fine and
estimated remediation costs were provided for in 1991 and 1992. The Company's
reserve for environmental liabilities in connection with the consent decree
totaled $25 million at year-end 1997. The consent decree also defines
procedures for corrective action at Inland Steel Company's Indiana Harbor
Works. The procedures defined establish essentially a three-step process, each
step of which requires agreement of the EPA before progressing to the next
step in the process, consisting of: assessment of the site (including
stabilization measures), evaluation of corrective measures for remediating the
site, and implementation of the remediation plan according to the agreed-upon
procedures. Inland Steel Company is presently assessing the extent of
environmental contamination. Inland Steel Company anticipates that this
assessment will cost approximately $2 million to $4 million per year over the
next several years. Because neither the nature and extent of the contamination
nor the corrective actions can be determined until the assessment of
environmental contamination and evaluation of corrective measures is
completed, Inland Steel Company cannot presently reasonably estimate the costs
of or the time required to complete such corrective actions. Such corrective
actions may, however, require significant expenditures over the next several
years that may be material to the financial position and results of operations
of Inland Steel Company. Insurance coverage with respect to such corrective
actions is not significant.
On March 22, 1985, the EPA issued an administrative order to Inland Steel
Company's former Inland Steel Container Company Division ("Division") naming
the former Division and various other unrelated companies as responsible
parties under the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") in connection with the cleanup of a waste disposal
facility operated by Duane Marine Salvage Corporation at Perth Amboy, New
Jersey. The administrative order alleged that certain of the former Division's
wastes were transported to, and disposed of at, that facility and required
Inland Steel Company to join with other named parties in taking certain
actions relating to the facility. Inland Steel Company and the other
administrative order recipients have completed the work required by the order.
In unrelated matters, the EPA also advised the former Division and various
other unrelated parties of other sites located in New Jersey at which the EPA
expects to spend public funds on any investigative and corrective measures
that may be necessary to control any releases or threatened releases of
hazardous substances, pollutants and contaminants pursuant to the applicable
provisions of CERCLA. The notice also indicated that the EPA believes Inland
Steel Company may be a responsible party under CERCLA. The extent of Inland
Steel Company's involvement and participation in these matters has not yet
been determined. While it is not possible at this time to predict the amount
of Inland Steel Company's potential liability, none of these matters is
expected to materially affect Inland Steel Company's financial position.
Results of operations could be materially affected for the particular
reporting periods in which expenses are incurred.
On March 29, 1996, the EPA filed a lawsuit against Inland Steel Company in
the U.S. District Court for the Northern District of Indiana for alleged
violations of effluent limits contained in its National Pollution Discharge
Elimination System ("NPDES") permit and for the alleged discharge of
pollutants without the authorization of an NPDES permit. On December 17, 1997,
the Court entered a consent decree that resolved all matters raised by this
lawsuit. The consent decree includes a $150,000 cash fine and an
environmentally beneficial project at the Indiana Harbor Works costing
approximately $350,000.
The EPA has adopted a national policy of seeking substantial civil penalties
against owners and operators of sources for noncompliance with air and water
pollution control statutes and regulations under certain
17
<PAGE>
circumstances. It is not possible to predict whether further proceedings will
be instituted against Inland Steel Company or any of its subsidiaries pursuant
to such policy, nor is it possible to predict the amount of any such penalties
that might be assessed in any such proceeding.
Inland Steel Company received a Special Notice of Potential Liability
("Special Notice") from Indiana Department of Environmental Management
("IDEM") on February 18, 1992 relating to the Four County Landfill Site,
Fulton County, Indiana (the "Facility"). The Special Notice stated that IDEM
has documented the release of hazardous substances, pollutants and
contaminants at the Facility and was planning to spend public funds to
undertake an investigation and control the release or threatened release at
the Facility unless IDEM determined that a potentially responsible party
("PRP") will properly and promptly perform such action. The Special Notice
further stated that Inland Steel Company may be a PRP and that Inland Steel
Company, as a PRP, may have potential liability with respect to the Facility.
In August 1993, Inland Steel Company, along with other PRPs, entered into an
Agreed Order with IDEM pursuant to which the PRPs agreed to perform a Remedial
Investigation/Feasibility Study ("RI/FS") for the Facility and pay certain
past and future IDEM costs. In addition, the PRPs agreed to provide funds for
operation and maintenance necessary for stabilization of the Facility. The
costs which Inland Steel Company has agreed to assume under the Agreed Order
are not currently anticipated to exceed $300,000. The cost of the final
remedies which will be determined to be required with respect to the Facility
cannot be reasonably estimated until, at a minimum, the RI/FS is completed.
Inland Steel Company is therefore unable to determine the extent of its
potential liability, if any, relating to the Facility or whether this matter
could materially affect Inland Steel Company's financial position or results
of operations.
In October 1996, Inland Steel Company received a notification from IDEM, as
lead administrative trustee, that the natural resource trustees (which also
include the Indiana Department of Natural Resources, the U.S. Department of
the Interior, Fish and Wildlife Service and the National Park Service) intend
to perform a natural resource damage assessment on the Grand Calumet River and
Indiana Harbor Canal system. The notification further states that Inland Steel
Company has been identified as a PRP in connection with the release of
hazardous substances and oil and the subsequent damages resulting from natural
resource injury. Because of the preliminary nature of this matter, it is not
possible at this time to predict the amount of Inland Steel Company's
potential liability or whether such potential liability could materially
affect Inland Steel Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
Not applicable.
EXECUTIVE OFFICERS OF REGISTRANT.
Officers are elected by the Board of Directors of the Company to serve for a
period ending with the next succeeding annual meeting of the Board of
Directors held immediately after the annual meeting of stockholders. All
executive officers of the Company, with the exception of Neil S. Novich and
George A. Ranney, Jr., have been employed by the Company or a subsidiary of
the Company throughout the past five years.
Set forth below are the executive officers of the Company as of February 2,
1998 and the age of each as of such date. Their principal occupations at
present and during the past five years, including positions and offices held
with the Company or a significant subsidiary of the Company, are shown below.
NAME, AGE AND PRESENT POSITIONS AND OFFICES HELD DURING THE PAST FIVE
POSITION WITH REGISTRANT YEARS
Robert J. Darnall, 59........ Mr. Darnall has been Chairman, President and
Chairman, President, Chief Chief Executive Officer of the Company since
Executive Officer and September 1992. He was elected President, Chief
Director Operating Officer and a director of the Company
in April 1986. He has also been Chairman of
Inland Steel Company since September 1992, its
Chief Executive Officer from September 1992 to
January 1995 and since April 1996 and a
director since 1983. He also served as its
President for certain periods ending most
recently in May 1996. He joined Inland Steel
Company in 1962. He
18
<PAGE>
NAME, AGE AND PRESENT POSITIONS AND OFFICES HELD DURING THE PAST FIVE
POSITION WITH REGISTRANT YEARS
has been Chairman of RT since April 1995, a
position he also held from November 1990 to
June 1994.
Dale E. Wiersbe, 48.......... Mr. Wiersbe has been Senior Vice President of
Senior Vice President the Company and President and Chief Operating
Officer of Inland Steel Company since May 1996.
He was Senior Vice President of Operations of
Inland Steel Flat Products Company ("ISFPCO")
division of Inland Steel Company from December
1995 to May 1996. He was also Vice President--
Integrated Steelmaking and Hot Rolling of
ISFPCO from May 1995 to December 1995,
President of Inland Steel Bar Company division
of Inland Steel Company from November 1993 to
May 1995, Vice President--Planning of ISFPCO
from January 1993 to November 1993, Vice
President--Cold Rolling and Coating Operations
of ISFPCO from May 1991 to January 1993.
Neil S. Novich, 43........... Mr. Novich has been President, Chief Executive
President and Officer and Chief Operating Officer of RT,
Chief Executive Officer President of Ryerson and Chairman of Tull since
of Ryerson Tull, Inc. June 1994. Mr. Novich was also appointed a
Director of RT in June 1994. He served as
Chairman of Ryerson from June 1994 to April
1995 and since June 1996. He was a Senior Vice
President of the Company from January 1995 to
May 1996 and served as a Vice President of the
Company from June 1994 to January 1995. Prior
to joining the Company in 1994, he led the
Distribution and Logistics Practice at Bain &
Company ("Bain"), an international management
consulting firm.
Jay M. Gratz, 45............. Mr. Gratz has been Vice President of the
Vice President and Chief Company and of RT since May 1997; Chief
Financial Officer Financial Officer of the Company since May 1996
and of RT since April 1996. He was Vice
President--Finance of the Company from May 1996
to April 1997, and of RT from September 1994 to
April 1997. He was also Vice President and
Principal Financial Officer of Inland Steel
Company from March 1993 to January 1995 and
Vice President--Finance of Inland Steel Flat
Products Company division of Inland Steel
Company from December 1991 to February 1993.
H. William Howard, 63........ Mr. Howard has been Vice President--Information
Vice President--Information Technology of the Company since September 1990.
Technology He was Vice President--Automation and
Information Technology of Inland Steel Company
from May 1995 to December 1996. He was also
Vice President-- Automation and Information
Technology of Inland Steel Flat Products
Company division of Inland Steel Company from
January 1993 to May 1995.
George A. Ranney, Jr., 57.... Mr. Ranney has been Vice President and General
Vice President and General Counsel of the Company since July 1995. He is
Counsel also a partner of the law firm of Mayer, Brown
& Platt, counsel to the Company. He has been a
partner with such firm since 1986.
Vicki L. Avril, 43...........
Treasurer and Director-- Ms. Avril has been Treasurer of the Company and
Corporate Planning of Inland Steel Company since January 1994, and
Treasurer of RT, Ryerson and Tull since
February 1994. She also has been Director--
Corporate
19
<PAGE>
NAME, AGE AND PRESENT POSITIONS AND OFFICES HELD DURING THE PAST FIVE
POSITION WITH REGISTRANT YEARS
Planning since January 1995. In addition, she
was Director of Pension Investments and
Administration from June 1991 to January 1995,
and Assistant Treasurer of the Company from May
1993 to January 1994.
James M. Hemphill, 54........ Mr. Hemphill has been Controller of the Company
Controller since September 1994. He was Director of
Financial Management of the Company from August
1992 to September 1994 and was Director of
Taxes of the Company from March 1988 to August
1992.
Charles B. Salowitz, 49...... Mr. Salowitz has been Secretary of the Company
Secretary and Associate since September 1995 and Associate General
General Counsel Counsel since January 1995, Secretary of Inland
Steel Company since September 1995 and
Corporate Secretary of RT since April 1996. He
was an Assistant General Counsel of the Company
from July 1989 to January 1995 and was
Assistant Secretary from July 1989 to September
1995.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
The common stock of the Company is listed and traded on the New York Stock
Exchange. As of February 2, 1998, the number of holders of record of common
stock of the Company was 13,383.
The remaining information called for by this Item 5 is set forth under the
caption "Summary by Quarter" in Exhibit 99, "Financial Information," which is
attached hereto, and is incorporated by reference herein.
ITEM 6. SELECTED FINANCIAL DATA.
The information called for by this Item 6 with respect to each of the last
five years of the Company is set forth under the caption "Eleven-Year Summary
of Selected Financial Data and Operating Results" in Exhibit 99, "Financial
Information," which is attached hereto, and is incorporated by reference
herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information called for by this Item 7 is set forth under the caption
"Financial Review" in Exhibit 99, "Financial Information," which is attached
hereto, and is incorporated by reference herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of the Company called for by this Item
8, together with the report thereon of the independent accountants dated
February 18, 1998, are set forth under the captions "Report of Independent
Accountants" and "Statement of Accounting and Financial Policies" as well as
in all consolidated financial statements and schedules of the Company and the
"Notes to Consolidated Financial Statements" in Exhibit 99, "Financial
Information," which is attached hereto, and are incorporated by reference
herein. The financial statement schedules listed under Item 14(a)2 of this
Report on Form 10-K, together with the report thereon of the independent
accountants dated February 18, 1998, should be read in conjunction with the
consolidated financial statements. Financial statement schedules not included
in this Report on Form 10-K have been omitted because they are not applicable
or because the information called for is shown in the consolidated financial
statements or notes thereto.
20
<PAGE>
Consolidated quarterly sales, earnings and per share common stock
information for 1997 and 1996 are set forth under the caption "Summary by
Quarter" in Exhibit 99, "Financial Information," which is attached hereto, and
are incorporated by reference herein.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information called for by this Item 10 with respect to directors of the
Company will be set forth under the captions "Election of Directors" and
"Security Ownership of Directors and Management" in the Company's definitive
Proxy Statement which will be furnished to stockholders in connection with the
Annual Meeting of Stockholders to be held on May 27, 1998, and is hereby
incorporated by reference herein. The information called for with respect to
executive officers of the Company is included in Part I of this Report on Form
10-K under the caption "Executive Officers of Registrant."
ITEM 11. EXECUTIVE COMPENSATION.
The information called for by this Item 11 will be set forth under the
caption "Executive Compensation" in the Company's definitive Proxy Statement
which will be furnished to stockholders in connection with the Annual Meeting
of Stockholders to be held on May 27, 1998, and is hereby incorporated by
reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) The information called for by this Item 12 with respect to security
ownership of more than five percent of the Company's common stock. Series E
ESOP Convertible Preferred Stock and its 10.23% Subordinated Voting Notes will
be set forth under the caption "Additional Information Relating to Voting
Securities" in the Company's definitive Proxy Statement which will be
furnished to stockholders in connection with the Annual Meeting of
Stockholders scheduled to be held on May 27, 1998, and is hereby incorporated
by reference herein.
(b) The following beneficial owner of Series A $2.40 Cumulative Convertible
Preferred Stock, which owns shares of Series A Preferred Stock having less
than one percent of the combined voting power of the Company's outstanding
voting securities, is the only person known to the Company to be the
beneficial owner (as defined by the Securities and Exchange Commission), as of
February 17, 1998, of more than five percent of that class of the Company's
voting securities:
<TABLE>
<CAPTION>
NUMBER PERCENT
NAME AND ADDRESS OF SHARES OF CLASS
---------------- --------- --------
<S> <C> <C>
Forest Investment Management LLC
Founders Financial Group L.P.
Michael A. Boyd, Inc................................... 11,383 12.1%
Michael A. Boyd
53 Forest Avenue
Old Greenwich, CT 06870
</TABLE>
(c) The information called for by this Item 12 with respect to the security
ownership of directors and of management will be set forth under the caption
"Security Ownership of Directors and Management" in the Company's definitive
Proxy Statement which will be furnished to stockholders in connection with the
Annual Meeting of Stockholders to be held on May 27, 1998, and is hereby
incorporated by reference herein.
21
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information called for by this Item 13 will be set forth under the caption
"Certain Relationships and Related Transactions" in the Company's definitive
Proxy Statement which will be furnished to stockholders in connection with the
Annual Meeting of Stockholders to be held on May 27, 1998, and is hereby
incorporated by reference herein.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A)DOCUMENTS FILED AS A PART OF THIS REPORT.
1. CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY. The consolidated
financial statements listed below are set forth in Exhibit 99,
"Financial Information," which is attached hereto, and are
incorporated by reference in Item 8 of this Annual Report on Form 10-
K.
Report of Independent Accountants dated February 18, 1998.
Statement of Accounting and Financial Policies.
Consolidated Statements of Operations and Reinvested Earnings for
the three years ended December 31, 1997.
Consolidated Statement of Cash Flows for the three years ended
December 31, 1997.
Consolidated Balance Sheet at December 31, 1997 and 1996.
Schedules to Consolidated Financial Statements at December 31, 1997
and 1996, 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 18, 1998. (Included on page 23 of this Report)
Consent of Independent Accountants. (Included on page 23 of this
Report)
For the years ended December 31, 1997, 1996 and 1995:
Schedule I -- Condensed Financial Information (Parent Company
Only). (Included on pages 24 to 26, inclusive, of this Report)
Schedule II -- Reserves. (Included on page 27 of this Report)
3. EXHIBITS. The exhibits required to be filed by Item 601 of
Regulation S-K are listed in the "Exhibit Index," which is attached
hereto and incorporated by reference herein.
(B)REPORTS ON FORM 8-K.
On November 28, 1997, the Company filed a Current Report on Form 8-K,
reporting the adoption of the Stockholder Rights Plan by the Board of
Directors on November 25, 1997. No financial statements were filed with
that report.
22
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors
of Inland Steel Industries, Inc.
Our audits of the consolidated financial statements referred to in our
report dated February 18, 1998, except as to Note 20, which is as of March 17,
1998, appearing on page 11 of Exhibit 99, "Financial Information," (which
report and consolidated financial statements are incorporated by reference in
this Annual Report on Form 10-K) also included an audit of the Financial
Statement Schedules listed in Item 14(a)2 of this Annual Report on Form 10-K.
In our opinion, these Financial Statement Schedules present fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
Price Waterhouse LLP
Chicago, Illinois
February 18, 1998, except as to Note 20, which is as of March 17, 1998
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statement on Form S-8 (No. 33-59783),
Registration Statement on Form S-8 (No. 33-48770), Registration Statement on
Form S-8 (No. 33-22902), Post-Effective Amendment No. 1 on Form S-8 to
Registration Statement on Form S-4 (No. 33-4046), Post-Effective Amendment No.
1 to Form S-8 Registration Statement No. 33-1329, Registration Statement on
Form S-8 (No. 33-32504), Post-Effective Amendment No. 2 to Form S-8
Registration Statement (No. 33-6627), Registration Statement on Form S-3 (No.
33-59161) and Registration Statement on Form S-3 (No. 33-62897) of Inland
Steel Industries, Inc. (or, for registrations prior to 1986, Inland Steel
Company) of our report dated February 18, 1998, except as to Note 20, which is
as of March 17, 1998, appearing on page 11 of Exhibit 99, "Financial
Information," which is attached hereto, and is incorporated by reference
herein. We also consent to the incorporation by reference of our report on the
Financial Statement Schedules which appears above.
Price Waterhouse LLP
Chicago, Illinois
March 30, 1998
23
<PAGE>
INLAND STEEL INDUSTRIES, INC.
SCHEDULE I--CONDENSED FINANCIAL INFORMATION
(PARENT COMPANY ONLY)
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Income:
Intercompany interest income........................ $ 25.1 $ 18.5 $ 16.3
Equity in income of subsidiaries.................... 107.9 41.4 157.8
Interest income and other revenue................... 8.5 11.9 1.6
Gain on sale of subsidiary stock.................... -- 31.4 --
------ ------ ------
141.5 103.2 175.7
Expenses:
Interest and other expenses......................... 14.5 32.6 31.0
Intercompany interest expense....................... 3.6 2.4 5.7
------ ------ ------
18.1 35.0 36.7
Income before income taxes and extraordinary loss..... 123.4 68.2 139.0
Provision for income taxes............................ 4.1 8.0 7.8 Cr.
------ ------ ------
Income before extraordinary loss...................... 119.3 60.2 146.8
Extraordinary loss on early retirement of debt........ -- (14.5) --
------ ------ ------
Net income............................................ $119.3 $ 45.7 $146.8
====== ====== ======
</TABLE>
- --------
Cr. = Credit
See Notes to Consolidated Financial Statements in Item 8.
24
<PAGE>
INLAND STEEL INDUSTRIES, INC.
SCHEDULE I--CONDENSED FINANCIAL INFORMATION
(PARENT COMPANY ONLY)
STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.......................................... $ 119.3 $ 45.7 $ 146.8
Adjustments to reconcile net income to net cash
provided from (used for) operating activities:
Equity in undistributed earnings of subsidiaries.. (107.9) (41.4) (157.8)
Depreciation...................................... .5 .5 .6
Deferred income taxes............................. 2.0 11.7 4.5
Deferred employee benefit cost.................... (.7) 2.3 .3
Gain from issuance of subsidiary stock............ -- (31.4) --
Stock issued for coverage of employee benefit
plans............................................ 21.8 22.6 23.9
Change in: Intercompany accounts.................. (85.3) (201.2) 16.0
Notes receivable.............................. (.6) (.1) (.3)
Accounts payable.............................. (.5) .9 (2.9)
Accrued liabilities........................... .7 (9.9) 4.9
Other deferred items.............................. (6.0) (5.4) 8.3
------- ------- -------
Net adjustments................................. (176.0) (251.4) (102.5)
------- ------- -------
Net cash provided from (used for) operating
activities..................................... (56.7) (205.7) 44.3
------- ------- -------
INVESTING ACTIVITIES
Net investments in subsidiaries..................... (4.9) (6.1) (10.2)
Dividends received from subsidiaries................ 25.9 471.7 25.9
------- ------- -------
Net cash provided from investing activities..... 21.0 465.6 15.7
------- ------- -------
FINANCING ACTIVITIES
Issuance of common stock............................ -- -- 99.1
Long-term debt retired.............................. (15.3) (238.4) (8.3)
Dividends paid...................................... (20.8) (21.0) (31.6)
Acquisition of treasury stock....................... (6.7) (3.7) (4.0)
------- ------- -------
Net cash provided from (used for) financing
activities..................................... (42.8) (263.1) 55.2
------- ------- -------
Net increase (decrease) in cash and cash equiva-
lents.............................................. (78.5) (3.2) 115.2
Cash and cash equivalents--beginning of year........ 202.3 205.5 90.3
------- ------- -------
Cash and cash equivalents--end of year.............. $ 123.8 $ 202.3 $ 205.5
======= ======= =======
</TABLE>
See Notes to Consolidated Financial Statements in Item 8.
25
<PAGE>
INLAND STEEL INDUSTRIES, INC.
SCHEDULE I--CONDENSED FINANCIAL INFORMATION
(PARENT COMPANY ONLY)
BALANCE SHEET
AT DECEMBER 31, 1997 AND 1996
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................ $ 123.8 $ 202.3
Receivables from subsidiary companies.................... 377.6 292.3
Deferred income taxes.................................... .3 .3
Notes receivable......................................... 1.3 .7
-------- --------
Total current assets................................... 503.0 495.6
Investment in subsidiary companies......................... 645.5 558.6
Intangible pension asset................................... -- 76.3
Investment in Nippon Steel Corporation, net of valuation
allowances of $7.1 and $4.8, respectively................. 7.5 9.8
Property, net of accumulated depreciation of $8.3 and $7.8,
respectively.............................................. .8 1.3
Deferred income taxes...................................... .2 .3
Deferred charges and other assets.......................... 1.3 2.4
-------- --------
Total assets........................................... $1,158.3 $1,144.3
======== ========
LIABILITIES
Current Liabilities:
Accounts payable......................................... $ 4.7 $ 5.2
Accrued liabilities...................................... 10.3 9.6
Long-term debt due within one year....................... 10.6 9.7
-------- --------
Total current liabilities.............................. 25.6 24.5
Long-term debt............................................. 185.9 202.1
Deferred employee benefits................................. 9.7 86.7
Deferred income and other deferred credits................. 8.9 9.9
-------- --------
Total liabilities...................................... 230.1 323.2
-------- --------
TEMPORARY EQUITY
Common stock repurchase commitment......................... 28.1 32.1
-------- --------
STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value, 15,000,000 shares
authorized for all series, aggregate liquidation value
$150.6 in 1997 and $153.9 in 1996......................... 3.1 3.2
Common stock, $1.00 par value; authorized--100,000,000
shares; issued--50,556,350 shares......................... 50.6 50.6
Capital in excess of par value............................. 1,032.5 1,040.2
Accumulated deficit........................................ (45.6) (146.0)
Unearned compensation--ESOP................................ (68.6) (79.4)
Common stock repurchase commitment......................... (28.1) (32.1)
Treasury stock at cost--common stock of 1,557,635 shares in
1997 and 1,647,954 shares in 1996......................... (40.5) (44.2)
Cumulative translation adjustment.......................... (3.3) (3.3)
-------- --------
Total stockholders' equity............................. 900.1 789.0
-------- --------
Total liabilities, temporary equity, and stockholders'
equity................................................ $1,158.3 $1,144.3
======== ========
</TABLE>
Maturities of Long-Term Debt due within five years are: $10.5 million in 1998,
$111.5 million in 1999, $12.5 million in 2000, $13.6 million in 2001, and
$14.8 million in 2002.
See Notes to Consolidated Financial Statements in Item 8.
26
<PAGE>
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
SCHEDULE II--RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PROVISIONS FOR ALLOWANCES,
CLAIMS AND DOUBTFUL ACCOUNTS
------------------------------------------
YEARS BALANCE AT ADDITIONS DEDUCTIONS BALANCE AT
ENDED BEGINNING CHARGED FROM END OF
DECEMBER 31 OF YEAR TO INCOME RESERVES YEAR
----------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
1997....................... $22.5 $ 7.1 $(1.3)(A) $23.5
(4.8)(B)
1996....................... $29.9 $ 1.7 $(2.5)(A) $22.5
(6.6)(B)
1995....................... $24.9 $11.8 $(1.1)(A) $29.9
(5.7)(B)
</TABLE>
NOTES:
(A) Bad debts written off during year.
(B) Allowances granted during year.
27
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE COMPANY HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Inland Steel Industries, Inc.
Date: March 30, 1998 Robert J. Darnall
By: _________________________________
Robert J. Darnall
Chairman, President and
Chief Executive Officer
(Principal Executive Officer)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE COMPANY
AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Robert J. Darnall Chairman, President and March 30, 1998
____________________________________ Chief Executive Officer and
Robert J. Darnall Director (Principal
Executive Officer)
Jay M. Gratz Vice President and March 30, 1998
____________________________________ Chief Financial Officer
Jay M. Gratz (Principal Financial
Officer)
James M. Hemphill Controller March 30, 1998
____________________________________ (Principal Accounting
James M. Hemphill Officer)
A. Robert Abboud Director
James A. Henderson Director
Robert B. McKersie Director
Jay M. Gratz
Leo F. Mullin Director By: ___________________
Jay M. Gratz
Attorney-in-fact
Jean-Pierre Rosso Director March 30, 1998
Joshua I. Smith Director
Nancy H. Teeters Director
Arnold R. Weber Director
</TABLE>
28
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DOCUMENT DESCRIPTION NUMBER
------- -------------------- ----------
<C> <S> <C>
3.(i) Copy of Certificate of Incorporation, as amended, of
the Company. (Filed as Exhibit 3.(i) to the Company's
Annual Report on Form 10-K for the year ended December
31, 1995, and incorporated by reference herein.)
3.(ii) Copy of By-laws, as amended, of the Company............
4.A Copy of Certificate of Designations, Preferences and
Rights of Series A $2.40 Cumulative Convertible Pre-
ferred 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 here-
in.)
4.C Copy of Rights Agreement, dated as of November 25,
1997, between the Company and Harris Trust and Savings
Bank, as Rights Agent. (Filed as Exhibit 4.1 to the
Company's Current Report on Form 8-A filed on November
28, 1997, 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 $100,000,000 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 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-Fifth 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 Janu-
ary 18, 1937; (iv) Exhibit B-1(i), filed with Steel
Company's Current Report on Form 8-K, dated February 8,
1937; (v) Exhibits B-1(j) and B-1(k), filed with Steel
Company's Current Report on Form 8-K for the month of
April, 1940; (vi) Exhibit B-2, filed with Steel
Company's Registration Statement on Form A-2 (No. 2-
4357); (vii) Exhibit B-1(l), filed with Steel Company's
Current report on Form 8-K for the month of January,
1945; (viii) Exhibit 1, filed with Steel Company's Cur-
rent Report on Form 8-K for the month of November,
1946; (ix) Exhibit 1, filed with Steel Company's Cur-
rent Report on Form 8-K for the months of July and Au-
gust, 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
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DOCUMENT DESCRIPTION NUMBER
------- -------------------- ----------
<C> <S> <C>
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 Ex-
hibit 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) Ex-
hibit B, filed with Steel Company's Current Report on
Form 8-K for the month of September, 1975; (xix) Ex-
hibit 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) Ex-
hibit 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.C filed with the Steel Company's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995; (xxix) Exhibit 4.C filed with the Steel
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995, and (xxx) Exhibit 4.C filed
with Steel Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996.
4.G Copy of consolidated reprint of First Mortgage Inden-
ture, 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 supple-
mental indentures thereto, to and including the Thir-
teenth Supplemental Indenture. (Filed as Exhibit 4-E to
Form S-1 Registration Statement No. 2-9443, and incor-
porated by reference herein.)
[The registrant hereby agrees to provide a copy of any
other agreement relating to long-term debt at the re-
quest of the Commission.]
10.A* Copy of Inland Steel Industries, Inc. Annual Incentive
Plan, as amended. (Filed as Exhibit 10.A to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995, and incorporated by reference
herein.)
10.B* Copy of Ryerson Tull Annual Performance Improvement In-
centive Plan. (Filed as Exhibit 10.2 to the Ryerson
Tull, Inc. Quarterly Report on Form 10-Q for the quar-
ter year ended September 30, 1997, and incorporated by
reference herein.)
10.C* Copy of Inland Steel Industries, Inc. Special Achieve-
ment 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 ref-
erence herein.)
10.D* Copy of Ryerson Tull 1996 Incentive Stock Plan, as
amended................................................
10.E* Copy of Inland 1995 Incentive Stock Plan, as amended...
</TABLE>
- --------
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit to the Company's Annual Report on Form 10-K.
ii
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DOCUMENT DESCRIPTION NUMBER
------- -------------------- ----------
<C> <S> <C>
10.F* Copy of Inland 1992 Incentive Stock Plan, as amended.
(Filed as Exhibit 10.C to the Company's Quarterly Re-
port on Form 10-Q for the quarter ended June 30, 1995,
and incorporated by reference herein.)
10.G* Copy of Inland 1988 Incentive Stock Plan, as amended.
(Filed as Exhibit 10.B to the Company's Quarterly Re-
port on Form 10-Q for the quarter ended June 30, 1995,
and incorporated by reference herein.)
10.H* Copy of Inland Steel Industries Non-Qualified Thrift
Plan, as amended. (Filed as Exhibit 10.A to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997, and incorporated by reference
herein.)
10.I* Copy of Inland 1992 Stock Plan for Non-Employee Direc-
tors, 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.J* Copy of Inland Steel Industries Supplemental Retirement
Benefit Plan for Covered Employees, as amended. (Filed
as Exhibit 10.B to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997, and
incorporated by reference herein.)
10.K* Copy of Inland Steel Industries Special Retirement Ben-
efit Plan for Covered Employees, as amended. (Filed as
Exhibit 10.C to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997, and in-
corporated by reference herein.)
10.L* Copy of Ryerson Tull, Inc. Supplemental Retirement Plan
for Covered Employees, as amended. (Filed as Exhibit
10.1 to the Ryerson Tull, Inc. Form 10-Q for the quar-
ter ended September 30, 1997, and incorporated by ref-
erence herein.)
10.M* Copy of the Inland Steel Industries Deferred Compensa-
tion 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 in-
corporated by reference herein.)
10.N* Copy of the Inland Steel Industries Deferred Compensa-
tion 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 incorpo-
rated by reference herein.)
10.O* Copy of Inland Steel Industries Terminated Retirement
Plan for Non-Employee Directors. (Filed as Exhibit 10.M
to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, and incorporated
by reference herein.)
10.P* Copy of Inland Steel Industries, Inc. Deferred Phantom
Stock Unit Plan for Non-Employee Directors. (Filed as
Exhibit 10.N to the Company's Annual Report on Form 10-
K for the fiscal year ended December 31, 1995, and in-
corporated by reference herein.)
10.Q* 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.R* Copy of form of Severance Agreement, dated January 28,
1998, between the Company and each of the four execu-
tive officers of the Company identified on the exhibit
relating to terms and conditions of termination of em-
ployment following a change in control of the Company..
10.S.(1)* Copy of Ryerson Tull Directors' Compensation Plan......
10.S.(2)* Copy of Ryerson Tull Nonqualified Savings Plan, effec-
tive January 1, 1998...................................
</TABLE>
- --------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to the Company's Annual Report on Form 10-K.
iii
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DOCUMENT DESCRIPTION NUMBER
------- -------------------- ----------
<C> <S> <C>
10.T.(1)* Amended listing of executive officers of the Company
who are parties to the form of Severance Agreement
dated January 28, 1998 referred to in Exhibit 10.R
above..................................................
10.T.(2)* Copy of form of Change in Control Agreements dated
March 27, 1996 between the Company and the parties
listed on the schedule thereto. (Filed as Exhibit 10.5
to the Ryerson Tull, Inc. Form S-1 Registration State-
ment No. 333-3235, and incorporated by reference here-
in.)
10.T.(3)* Amended Schedule to Change in Control Agreements re-
ferred to in Exhibit 10.T.(2) above....................
10.T.(4)* Copy of form of Change in Control Agreements dated as
of June 10, 1996 between Ryerson Tull, Inc. and the
parties listed on the Schedule thereto. (Filed as Ex-
hibit 10.10 to the Ryerson Tull, Inc. Annual Report on
Form 10-K for the fiscal year ended December 31, 1997,
and incorporated by reference herein.)
10.T.(5)* Amended Schedule to Change in Control Agreements re-
ferred to in Exhibit 10.T.(4) above (filed as Exhibit
10.11 to the Ryerson Tull Inc. Annual Report on Form
10-K for the fiscal year ended December 31, 1997, and
incorporated by reference herein).
10.T.(6)* Copy of Change in Control Agreement dated as of June
10, 1996 between Ryerson Tull, Inc. and Neil S. Novich.
(Filed as Exhibit 10.8 to the Ryerson Tull, Inc. Regis-
tration Statement on Form S-1 (File No. 333-3235), and
incorporated by reference herein.)
10.T.(7)* Copy of Change in Control Agreement dated as of March
27, 1996 between the Company and Neil S. Novich. (Filed
as Exhibit 10.6 to the Ryerson Tull, Inc. Form S-1 Reg-
istration Statement No. 333-3235, and incorporated by
reference herein.)
10.U.* Copy of Employment Agreement dated as of April 8, 1994
between the Company and Neil S. Novich. (Filed as Ex-
hibit 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.V.* Copy of Assumption and Amendment Agreement dated July
24, 1996 by and among Inland Steel Industries, Inc.,
Ryerson Tull, Inc. and Neil S. Novich. (Filed as Ex-
hibit 10.A to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1996, and in-
corporated by reference herein.)
10.W(1)* Copy of Employment Agreement between the Company and
Carl G. Lusted, dated June 27, 1990 (Filed as Exhibit
10.4 to Ryerson Tull's Registration Statement on Form
S-1 (File No. 333-3235), and incorporated by reference
herein.)
10.W(2)* Copy of Assumption and Amendment Agreement dated Janu-
ary 22, 1997 by and among the Company, Ryerson Tull,
Inc. and Carl G. Lusted. (Filed as Exhibit 10.6 to the
Ryerson Tull, Inc. Annual Report on Form 10-K for the
fiscal year ended December 31, 1996, and incorporated
by reference herein.)
10.X* Copy of Employment Agreement dated as of August 18,
1995 between the Company and George A. Ranney, Jr. ....
10.Y 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.)
</TABLE>
- --------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to the Company's Annual Report on Form 10-K.
iv
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DOCUMENT DESCRIPTION NUMBER
------- -------------------- ----------
<C> <S> <C>
10.Z.(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 Fi-
nance III, Inc. of 185,000 shares of Series F Exchange-
able Preferred Stock of the Company. (Filed as Exhibit
4(b) to the Company's Current Report on Form 8-K filed
on December 18, 1989, and incorporated by reference
herein.)
10.Z.(2) Copy of Basic Agreement dated as of July 21, 1987 be-
tween 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.Z.(3) Copy of Partnership Agreement dated as of July 21, 1987
between ISC Tek, Inc. (an indirectly wholly owned sub-
sidiary 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 Ex-
hibit 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.Z.(4) Copy of Basic Agreement dated as of September 12, 1989
between the Company and Nippon Steel Corporation relat-
ing 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 incor-
porated by reference herein.)
10.Z.(5) 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 indi-
rectly wholly owned subsidiary of Nippon Steel Corpora-
tion) 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.Z.(6) Copy of Substrate Supply Agreement dated as of Septem-
ber 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.Z.(7) Copy of 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 Re-
port on Form 10-K for the fiscal year ended December
31, 1990, and incorporated by reference herein.)
10.Z.(8) Copy of Letter Agreement dated as of May 1, 1990 among
I/N Kote, the Company and Nippon Steel Corporation re-
lating 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 ref-
erence herein.)
10.Z.(9) Copy of 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 ven-
ture. (Filed as Exhibit 10-R-(10) to the Company's An-
nual Report on Form 10-K for the fiscal year ended De-
cember 31, 1990, and incorporated by reference herein.)
10.Z.(10) Copy of Letter Agreement dated as of April 19, 1990 be-
tween the Company and Nippon Steel Corporation relating
to capital contributions to I/N Tek. (Filed as Exhibit
10-R-(11) to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1990, and incor-
porated by reference herein.)
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DOCUMENT DESCRIPTION NUMBER
------- -------------------- ----------
<C> <S> <C>
10.Z.(11) Copy of 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 Re-
port on Form 10-K for the fiscal year ended December
31, 1990, and incorporated by reference herein.)
10.Z.(12) Copy of CCM Override Amendment dated as of April 20,
1990 among the Company; Nippon Steel Corporation; In-
land 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.AA 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 Ex-
hibit 10-P to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1989, and incorpo-
rated by reference herein.)
10.BB Copy of First Amendment dated July 1, 1996 between the
Company and LaSalle National Trust, N.A. as Successor
ESOP Trustee, to the Inland Steel Industries Thrift
Plan ESOP Trust, dated July 7, 1989, between the Com-
pany and Harris Trust and Savings Bank, as ESOP Trust-
ee. (Filed as Exhibit 10.BB to the Company's Annual Re-
port on Form 10-K for the fiscal year ended December
31, 1996, and incorporated by reference herein.)
10.CC 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 ref-
erence herein.)
10.DD Letter Agreement dated May 10, 1991 by and between
Nippon Steel Corporation and the Company relating to
Letter Agreement dated December 18, 1989. (Filed as Ex-
hibit 10-V to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1991, and incorpo-
rated by reference herein.)
21 List of certain subsidiaries of the Company............
23 Consent of Independent Accountants, appearing on page
23 of this Annual Report on Form 10-K.
24 Powers of attorney.....................................
27 Financial Data Schedule.
99 Financial Information to be included in the Annual Re-
port to Shareholders for 1997..........................
</TABLE>
vi
<PAGE>
Exhibit 3.(ii)
BY-LAWS
OF
INLAND STEEL INDUSTRIES, INC.
(as Amended to and Including January 28, 1998)
ARTICLE I
OFFICES
Section 1. The registered office of the Corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The Corporation may also
have offices at such other places both within and without the State of Delaware
as the Board of Directors may from time to time determine or the business of the
Corporation may require.
ARTICLE II
STOCKHOLDERS
Section 1. Time and Place of Meetings. All meetings of the stockholders for
the election of directors or for any other purpose shall be held at such time
and place, within or without the State of Delaware, as shall be designated by
the Board of Directors.
Section 2. Annual Meetings; Nomination of Directors. An annual meeting of
stockholders shall be held for the purpose of electing Directors and for the
transaction of only such other business as is properly brought before the
meeting in accordance with these By-Laws. The date of the annual meeting shall
be the fourth Wednesday of May each year or such other date as may be determined
by the Board of Directors.
To be properly brought before the meeting, business must be either (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board, (b) otherwise properly brought before the meeting by
or at the direction of the Board or (c) otherwise properly brought before the
meeting by a stockholder. In addition to any other applicable requirements, for
business to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary of
the Corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation, not
less than ninety days nor more than one hundred fifteen days prior to the
meeting; provided, however, that in the event that less than one hundred five
days' notice or prior public disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be so received
not later than the close of business on the fifteenth day following the day on
which such notice of the date of the annual meeting was mailed or such
<PAGE>
- 2 -
public disclosure was made, whichever first occurs. A stockholder's notice to
the Secretary shall set forth as to each matter the stockholder proposes to
bring before the annual meeting (i) a brief description of the business desired
to be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and record address of the
stockholder proposing such business, (iii) the class and number of shares of the
Corporation which are beneficially owned by the stockholder and (iv) any
material interest of the stockholder in such business.
Notwithstanding anything in the By-Laws to the contrary, no business shall
be conducted at the annual meeting except in accordance with the procedures set
forth in this Article II, Section 2, provided, however, that nothing in this
Article II, Section 2 shall be deemed to preclude discussion by any stockholder
of any business properly brought before the annual meeting.
The Chairman of an annual meeting shall, if the facts warrant, determine
and declare to the meeting that business was not properly brought before the
meeting in accordance with the provisions of this Article II, Section 2, and if
he should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted.
Only persons who are nominated in accordance with the following procedures
shall be eligible for election as Directors. Nominations of persons for election
to the Board of the Corporation at the annual meeting may be made at a meeting
of stockholders by or at the direction of the Board of Directors by any
nominating committee or person appointed by the Board or by any stockholder of
the Corporation entitled to vote for the election of Directors at the meeting
who complies with the notice procedures set forth in this Article II, Section 2.
Such nominations, other than those made by or at the direction of the Board,
shall be made pursuant to timely notice in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice shall be delivered to or
mailed and received at the principal executive offices of the Corporation not
less than ninety days nor more than one hundred fifteen days prior to the
meeting; provided, however, that in the event that less than one hundred five
days' notice or prior public disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be so received
not later than the close of business on the fifteenth day following the day on
which such notice of the date of the meeting was mailed or such public
disclosure was made, whichever first occurs. Such stockholder's notice to the
Secretary shall set forth: (a) as to each person whom the stockholder proposes
to nominate for election or re-election as a Director, (i) the name, age,
business address and residence address of the person, (ii) the principal
occupation or employment of the person, (iii) the class and number of shares of
capital stock of the Corporation which are beneficially owned by the person and
(iv) any other information relating to the person
<PAGE>
- 3 -
that is required to be disclosed in solicitations for proxies for election of
Directors pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended; and (b) as to the stockholder giving the notice, (i) the name and
record address of such stockholder and (ii) the class and number of shares of
capital stock of the Corporation which are beneficially owned by such
stockholder. The Corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the Corporation to determine
the eligibility of such proposed nominee to serve as Director of the
Corporation. No person shall be eligible for election as a Director of the
Corporation unless nominated in accordance with the procedures set forth herein.
The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
Section 3. Special Meetings. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by law, may be called by the
Chairman of the Board, Vice Chairman of the Board, the President or the Board of
Directors and shall be called by the Secretary at the direction of the Chairman
of the Board, Vice Chairman of the Board, the President or the Board of
Directors.
Section 4. Notice of Meetings. Written notice of each meeting of the
stockholders stating the place, date and time of the meeting shall, unless
otherwise required by law, be given not less than ten nor more than sixty days
before the date of the meeting to each stockholder entitled to vote at such
meeting. The notice of any special meeting of stockholders shall state the
purpose or purposes for which the meeting is called. If mailed, such notice
shall be deemed to be delivered to a stockholder when deposited in the United
States mail in a sealed envelope addressed to the stockholder at his or her
address as it appears on the records of the Corporation with postage thereon
paid.
Section 5. Quorum. A majority of the votes of the voting securities
entitled to vote, present in person or represented by proxy, shall constitute a
quorum at a meeting of stockholders. If a quorum is not present or represented,
the holders of the voting securities present in person or represented by proxy
at the meeting and entitled to vote thereat shall have power, by the affirmative
vote of the holders of a majority of the votes of such voting securities, to
adjourn the meeting to another time and/or place, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting, at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the original
meeting. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each holder of record entitled to vote
at the meeting.
Section 6. Voting. At all meetings of the stockholders, each holder of
record on the record date for the meeting shall be entitled to vote as set forth
in the Corporation's Certificate of Incorporation (including any Certificates of
Designations) or as otherwise required by law, in person or by proxy, the voting
securities owned of record by such holder on the record date. In all matters
other than the election of directors, the affirmative vote of a majority of the
votes of the voting securities present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
holders, unless the question is one upon which, by express provision of law or
of the holders, unless the question is one upon which, by express provision of
law or of the Certificate of Incorporation, a different vote is required, in
which case such express provision shall govern and control the decision of such
question. Directors shall be elected by a plurality of the votes of the voting
securities present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
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ARTICLE III
DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed and controlled by or under the direction of a Board of
Directors, which may exercise all such powers of the Corporation and do all such
lawful acts and things as are not by law or by the Certificate of Incorporation
or by these By-Laws directed or required to be exercised or done by the
stockholders.
Section 2. Number, Qualification and Tenure. Prior to the first annual
meeting of stockholders, the Board of Directors shall consist of not fewer than
three (3) Directors nor more than eighteen (18) Directors. Thereafter, the Board
of Directors shall consist of not fewer than ten (10) Directors nor more than
eighteen (18) Directors. Within the limits above specified, the number of
Directors shall be determined from time to time by resolution of the Board of
Directors. The Directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 3 of this Article, and each Director
elected shall hold office until his or her successor is elected and qualified or
until his or her earlier resignation or removal. Directors need not be
stockholders. Except as provided in Article III, Section 3 of these By-laws, the
Directors shall designate from among their number a Chairman of the Board, who
shall preside at all meetings of the stockholders and of the Board of Directors
of the Corporation and who, if he or she is an employee of the
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Corporation, shall exercise all of the powers and duties conferred on the
Chairman of the Board by the provisions of these By-Laws. If the person selected
by the Directors as the Chairman of the Board is not, or ceases to be, an
employee of the Corporation, then, notwithstanding any other provision of these
By-Laws to the contrary, he or she shall exercise only such powers and duties
conferred on the Chairman of the Board by these By-Laws as the Directors shall
determine by resolution duly adopted and any other powers and duties, including
those of chief executive officer of the Corporation, shall be exercised by the
President of the Corporation.
Section 3. Vacancies. Vacancies and newly created directorships resulting
from any increase in the number of directors may be filled by a majority of the
Directors then in office (even if less than a quorum), and each Director so
chosen shall hold office until his or her successor is elected and qualified or
until his or her earlier resignation or removal. If there are no Directors in
office, then an election of Directors may be held in the manner provided by law.
Immediately upon the Chairman of the Board's death, physical or mental
incapacity, or other inability to act (other than due to absence for a brief and
identifiable period), the Chairman of the committee responsible for recommending
candidates to fill vacancies on the Board of Directors of the Corporation (the
"Nominating Committee Chairman") shall assume the position of Chairman of the
Board and responsibility for performing all functions, authorities and duties
thereof, and shall serve in such capacity until his or her successor is duly
elected and qualified pursuant to Article III, Section 2 and any other
applicable provision of these By-laws or until his or her earlier resignation or
removal. The Nominating Committee Chairman shall have sole discretion to
determine, at any time and from time to time, whether the Chairman of the Board
is physically or mentally incapacitated, otherwise unable to act, or absent for
other than a brief and identifiable period and shall, immediately upon making
such a determination or learning of the death of the Chairman of the Board,
notify each member of the Board of Directors and each officer of the Corporation
of the relevant facts and circumstances.
Section 4. Place of Meetings. The Board of Directors may hold meetings,
whether regular or special, within or without the State of Delaware.
Section 5. Regular Meetings. The Board of Directors shall hold a regular
meeting, to be known as the annual meeting, immediately following each annual
meeting of the stockholders. Other regular meetings of the Board of Directors
shall be held at such time and place as shall from time to time be determined by
the Board. No notice of regular meetings need be given.
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Section 6. Special Meetings. Special meetings of the Board may be called by
the Chairman of the Board, the Vice Chairman of the Board, any five Directors or
the President. Special meetings shall be called by the Secretary on the written
request of any Director. Notice of special meetings shall be given at least one
day before any such meeting.
Section 7. Quorum. At all meetings of the Board of Directors a majority of
the total number of Directors shall constitute a quorum for the transaction of
business and the act of a majority of the Directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by law. If a quorum shall not be present
at any meeting of the Board of Directors, the Directors present thereat may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
Section 8. Organization. The Chairman of the Board, if elected, shall act
as chairman at all meetings of the Board of Directors. If a Chairman of the
Board is not elected or, if elected, is not present, the Vice Chairman of the
Board, if any, or if the Vice Chairman of the Board is not present, the
President or, in the absence of the President, a Director chosen by a majority
of the Directors present, shall act as chairman at meetings of the Board of
Directors.
Section 9. Executive Committee. The Board of Directors, by resolution
adopted by a majority of the whole Board, may designate not fewer than four (4)
and not more than nine (9) Directors to constitute an Executive Committee, to
serve as such, unless the resolution designating the Executive Committee is
sooner amended or rescinded by the Board of Directors, until the next annual
meeting of the Board or until their respective successors are designated. The
Board of Directors, by resolution adopted by a majority of the whole Board, may
also designate additional Directors as alternate members of the Executive
Committee (so long as the aggregate number of members of the Executive Committee
does not exceed nine (9)) to serve as members of the Executive Committee in the
place and stead of any regular member or members thereof who may be unable to
attend a meeting or otherwise unavailable to act as a member of the Executive
Committee. In the absence or disqualification of a member and all alternate
members who may serve in the place and stead of such member, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not such member or members constitute a quorum, may unanimously appoint
another Director to act at the meeting in the place of any such absent or
disqualified member.
Except as expressly limited by the General Corporation Law of the State of
Delaware or the Certificate of Incorporation, the Executive Committee shall have
and may exercise all the powers and authority of the Board of Directors in the
management of the
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business and affairs of the Corporation between the meetings of the Board of
Directors, but subject always to the final control of the Board of Directors
except where rights of third parties have intervened. The Executive Committee
shall keep a record of its acts and proceedings, which shall form a part of the
records of the Corporation in the custody of the Secretary, and all actions of
the Executive Committee shall be reported to the Board of Directors at the next
meeting of the Board.
Meetings of the Executive Committee may be called at any time by the
Chairman of the Board, the Chairman of the Executive Committee or any two (2)
members of the Executive Committee. A majority of the members of the Executive
Committee shall constitute a quorum for the transaction of business and, except
as expressly limited by this Section, the act of a majority of the members
present at any meeting at which there is a quorum shall be the act of the
Executive Committee. Except as expressly provided in this Section, the Executive
Committee shall fix its own rules of procedure. Notice of Executive Committee
meetings shall be given at least one day before such meetings.
Section 10. Finance and Retirement Committee. The Board of Directors may,
annually, by resolution passed by a majority of the whole Board of Directors,
designate not fewer than four (4) and not more than eleven (11) Directors to
constitute a Finance and Retire-ment Committee. Such designation may be made
either at the first meeting of the Board of Directors held after each annual
meeting of the stockholders of the Corporation, or at any subsequent regular or
special meeting of the Board of Directors. Vacancies in the Finance and
Retirement Committee may be filled, or additional members of the Finance and
Retirement Committee (so long as the aggregate number of the Finance and
Retirement Committee does not exceed eleven (11)) may be designated, at any
meeting of the Board of Directors. Each member of the Finance and Retirement
Committee shall hold office until his or her successor shall have been duly
elected, or until his or her death, or until he or she shall resign or shall
have been removed. Any member of the Finance and Retire-ment Committee may be
removed by the Board of Directors whenever in its judgment the best interests of
the Corporation would be served thereby.
The Finance and Retirement Committee, from time to time, shall consider the
fiscal affairs of the Corporation and make recommendations with respect thereto
to the Board of Directors and the Execu tive Committee. The Finance and
Retirement Committee shall also administer and act with respect to pension or
retirement plans and trusts of the Corporation and such other matters as shall
from time to time be specified in resolutions passed by a majority of the whole
Board of Directors, subject, however, to any conditions and provisions set forth
in such resolutions. The Pension and Retirement Committee is designated as the
Pension Plan Retirement Committee.
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The Finance and Retirement Committee shall meet at the call of the Chairman
of the Board, the Vice Chairman of the Board, the Chairman of the Finance and
Retirement Committee, or any two (2) members of the Finance and Retirement
Committee. Three (3) members of the Finance Committee shall constitute a quorum.
The Finance and Retirement Committee shall keep a record of its acts and pro-
ceedings and all actions of the Finance Committee shall be reported to the Board
of Directors at its next regular meeting, and the minute books of the Finance
and Retirement Committee shall be open to the inspection of any Directors.
Section 11. Other Committees. The Board of Directors, by resolution adopted
by a majority of the whole Board, may designate one or more other committees,
each such committee to consist of one or more Directors. Except as expressly
limited by the General Corporation Law of the State of Delaware or the
Certificate of Incorporation, any such committee shall have and may exercise
such powers as the Board of Directors may determine and specify in the
resolution designating such committee. The Board of Directors, by resolution
adopted by a majority of the whole Board, also may designate one or more
additional Directors as alternate members of any such committee to replace any
absent or disqualified member at any meeting of the committee, and at any time
may change the membership of any committee or amend or rescind the resolution
designating the committee. In the absence or disqualification of a member or
alternate member of a committee, the member or members thereof present at any
meeting and not disqualified from voting, whether or not such member or members
constitute a quorum, may unanimously appoint another Director to act at the
meeting in the place of any such absent or disqualified member, provided that
the Director so appointed meets any qualifications stated in the resolution
designating the committee. Each committee shall keep a record of proceedings and
report the same to the Board of Directors to such extent and in such form as the
Board of Directors may require. Unless otherwise provided in the resolution
designating a committee, a majority of all of the members of any such committee
may select its Chairman, fix its rules or procedure, fix the time and place of
its meetings and specify what notice of meetings, if any, shall be given.
Section 12. Action without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
Section 13. Attendance by Telephone. Members of the Board of Directors, or
of any committee, may participate in a meeting of the Board of Directors, or of
such committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such
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participation in a meeting shall constitute presence in person at the meeting.
Section 14. Compensation. The Board of Directors shall have the authority
to fix the compensation of Directors, which may include reimbursement of their
expenses, if any, of attendance of each meeting of the Board of Directors or of
a committee.
Section 15. Honorary Directors. Any person who has at any time been chief
executive officer of the Corporation (or of Inland Steel Company prior to May 1,
1986), may, after retirement or resignation from the Board of Directors (or
having retired or resigned from the Board of Directors of Inland Steel Company),
be appointed by the Board of Directors as an Honorary Director for one or more
year terms. Honorary Directors shall serve in an advisory capacity to the Board
of Directors, shall have no vote and shall not be considered as Directors for
the purposes of determining a quorum. Honorary Directors shall be reimbursed for
their expenses in attending meetings of the Board of Directors. Any Honorary
Director who is not at the time otherwise regularly employed by the Corporation
or any subsidiary shall receive such fees (which may include reimbursement of
expenses, if any) for attendance at each meeting of the Board of Directors as
may be fixed from time to time by the Board of Directors, but shall not receive
any other director's fees or any other compensation for his or her services.
ARTICLE IV
OFFICERS
Section 1. Enumeration. The officers of the Corporation shall be chosen by
the Board of Directors and shall be a President, a Secretary, a Treasurer, a
General Counsel and a Controller. The Board of Directors may also elect a
Chairman of the Board, a Vice Chairman, one or more Assistants to the Chairman,
one or more Vice Presidents, one or more Assistant Secretaries and Assistant
Treasurers and such other officers and agents as it shall deem appropriate. Any
number of offices may be held by the same person.
Section 2. Term of Office. The officers of the Corporation shall be elected
at the annual meeting of the Board of Directors and shall hold office until
their successors are elected and qualified. Any officer elected or appointed by
the Board of Directors may be removed at any time by the Board of Directors. Any
vacancy occurring in any office of the Corporation required by this Article
shall be filled by the Board of Directors, and any vacancy in any other office
may be filled by the Board of Directors.
Section 3. Chairman of the Board. Subject to the provisions of Article III,
Section 2 of these By-Laws, the Chairman of the Board, when elected, shall be
the Chief Executive Officer of the Corporation and, as such, shall have general
supervision, direction
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and control of the business and affairs of the Corporation, subject to the
control of the Board of Directors, shall preside at meetings of stockholders and
shall have such other functions, authority and duties as customarily appertain
to the office of the chief executive of a business corporation or as may be
prescribed by the Board of Directors.
Section 4. Vice Chairman of the Board. The Vice Chairman of the Board
shall, in the case of absence of the Chairman of the Board for any brief and
identifiable period, have and exercise the powers and duties of the Chairman of
the Board. He or she shall have such other duties and powers as may be assigned
to him by the Board of Directors, the Executive Committee or the Chairman of the
Board.
Section 5. President. During any period when there shall be a Chairman of
the Board, the President shall be the Chief Operating Officer of the Corporation
and shall have such functions, authority and duties as may be prescribed by the
Board of Directors or the Chairman of the Board. During any period when there
shall not be a Chairman of the Board or Vice Chairman of the Board, the
President shall be the Chief Executive Officer of the Corporation and, as such,
shall have the functions, authority and duties provided for the office of
Chairman of the Board.
Section 6. Executive and Senior Vice Presidents. Each Executive Vice
President shall have such duties and powers as may be assigned to him or her by
the Board of Directors, the Executive Committee, the Chairman of the Board, the
Vice Chairman of the Board, or the President. An Executive Vice President,
designated by the Board of Directors, shall (in the event of absence, death or
other inability to act of the President) have and exercise the powers and duties
of the President.
Each Senior Vice President shall have such duties and powers as may be
assigned to him or her by the Board of Directors, the Executive Committee, the
Chairman of the Board, the Vice Chairman of the Board or the President.
Section 7. Vice Presidents. Each Vice President shall perform such duties
and have such other powers as may from time to time be prescribed by the Board
of Directors, the Chairman of the Board or the President or the Executive
Committee.
Section 8. Secretary. The Secretary shall keep a record of all proceedings
of the stockholders of the Corporation and of the Board of Directors, Finance
Committee and Executive Committee, and shall perform like duties for any other
standing committees when required. The Secretary shall give, or cause to be
given, notice, if any, of all meetings of the stockholders and shall perform
such other duties as may be prescribed by the Board of Directors, the Chairman
of the Board, the President, or the Executive Committee. The Secretary shall
have custody of the corporate seal of the
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Corporation and the Secretary, or in the absence of the Secretary any Assistant
Secretary, shall have authority to affix the same to any instrument requiring
it, and when so affixed it may be attested by the signature of the Secretary or
an Assistant Secretary. The Board of Directors may give general authority to any
other officer to affix the seal of the corporation and to attest such affixing
of the seal.
Section 9. Assistant Secretary. The Assistant Secretary, or if there be
more than one, the Assistant Secretaries in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the Secretary or in the event of the
Secretary's inability or failure to act, perform the duties and exercise the
powers of the Secretary and shall perform such other duties as may from time to
time be prescribed by the Board of Directors, the Chairman of the Board, the
President or the Secretary.
Section 10. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors or the Executive Committee. The Treasurer shall disburse the funds of
the Corporation as may be ordered by the Board of Directors, keeping proper
records of such disbursements, and shall render to the Chairman of the Board,
Vice Chairman of the Board, the Chairman of the Executive Committee, the
Chairman of the Finance Committee, the President, the officer designated by the
Board of Directors as Chief Financial Officer, if any, and the Board of
Directors, the Executive Committee and the Finance Committee at their regular
meetings or when the Board of Directors so requires, an account of all
transactions as Treasurer and of the financial condition of the Corporation. The
Treasurer shall perform such other duties as may from time to time be prescribed
by the Board of Directors, the Chairman of the Board, the President or the Chief
Financial Officer.
Section 11. Assistant Treasurer. The Assistant Treasurer, or if there shall
be more than one, the Assistant Treasurers in the order determined by the Board
of Directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the Treasurer or in the event of the
Treasurer's inability or refusal to act, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties and have such other
powers as may from time to time be prescribed by the Board of Directors, the
Chairman of the Board, the President or the Treasurer.
Section 12. Assistant to the Chairman. The Assistant to the Chairman of the
Board shall have and exercise such powers and
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duties as may be assigned to him or her by the Chairman of the Board.
Section 13. General Counsel. The General Counsel shall be responsible for
the legal affairs of the Corporation and shall have such other duties as from
time to time may be assigned to him or her by the Chairman of the Board, the
Vice Chairman of the Board, the President, the Board of Directors or the
Executive Committee.
Section 14. Controller. The Controller shall be the chief accounting
officer of the Corporation. He or she shall, when proper, approve all bills for
purchases, payrolls, and similar instruments providing for disbursement of money
by the Corporation, for payment by the Treasurer. He or she shall be in charge
of and maintain books of account and accounting records of the Corporation. He
or she shall perform such other acts as are usually performed by a Controller of
a corporation. He or she shall render to the Chairman of the Board, the Vice
Chairman of the Board, the Chairman of the Executive Committee, the Chairman of
the Finance Committee, the President, the Chief Financial Officer, the Board of
Directors, the Executive Committee and the Finance Committee, such reports as
any thereof may require.
Section 15. Other Officers. Any officer who is elected or appointed from
time to time by the Board of Directors and whose duties are not specified in
these By-Laws shall perform such duties and have such powers as may be
prescribed from time to time by the Board of Directors, the Chairman of the
Board, the Vice Chairman of the Board, the President or the Executive Committee.
Section 16. Surety Bonds. The Board of Directors or Executive Committee may
by resolution, require any officers of the Corporation to give bonds for the
faithful discharge of their duties in such sums and with such sureties as the
Board of Directors or Executive Committee shall determine, the expense of which
shall be paid by the Corporation.
ARTICLE V
CERTIFICATES OF STOCK
Section 1. Form. The shares of the Corporation shall be represented by
certificates; provided, however, that the Board of Directors may provide by
resolution or resolutions that some or all of any or all classes or series of
the Corporation's stock shall be uncertificated shares. Certificates of stock in
the Corporation, if any, shall be signed by or in the name of the Corporation by
the Chairman of the Board or the President or a Vice President and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary
of the Corporation. The signatures of the Chairman of the Board, the President
or a Vice President and the Treasurer or an Assistant Treasurer or the Secretary
or an
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Assistant Secretary may be facsimiles. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, the certificate may be issued by the
Corporation with the same effect as if such officer, transfer agent or registrar
were such officer, transfer agent or registrar at the date of its issue.
Section 2. Transfer. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction on its books.
Section 3. Replacement. In case of the loss, destruction or theft of a
certificate for any stock of the Corporation, a new certificate of stock or
uncertificated shares in place of any certificate therefor issued by the
Corporation may be issued upon satisfactory proof of such loss, destruction or
theft and upon such terms as the Board of Directors may prescribe. The Board of
Directors may in its discretion require the owner of the lost, destroyed or
stolen certificate, or his or her legal representative, to give the Corporation
a bond, in such sum and in such form and with such surety or sureties as it may
direct, to indemnify the Corporation against any claim that may be made against
it with respect to a certificate alleged to have been lost, destroyed or stolen.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. Each person who was or is made a party or is threatened to be
made a party to or is involved in or called as a witness in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, and any
appeal therefrom (hereinafter, collectively a "proceeding"), by reason of the
fact that he or she, or a person of whom he or she is the legal representative,
is, was or had agreed to become a director of the Corporation or is, was or had
agreed to become an officer of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, shall be indemnified
and held harmless by the Corporation to the fullest extent permitted under the
General Corporation Law of the State of Delaware (the "DGCL"), as the same now
exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent
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that such amendment permits the Corporation to provide broader indemnification
rights than the DGCL permitted the Corporation to provide prior to such
amendment), against all expenses, liabilities and losses (including attorneys'
fees, judgments, fines, excise taxes or penalties pursuant to the Employee
Retirement Income Security Act of 1974, as amended, and amounts paid or to be
paid in settlement) reasonably incurred or suffered by such person in connection
therewith; provided, that except as explicitly provided herein, prior to a
Change in Control, as defined herein, a person seeking indemnity in connection
with a proceeding (or part thereof) initiated by such person against the
Corporation or any director, officer, employee or agent of the Corporation shall
not be entitled thereto unless the Corporation has joined in or consented to
such proceeding (or part thereof). For purposes of this Article, a "Change in
Control of the Corporation" shall be deemed to have occurred if (i) any "Person"
(as is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended) is or becomes (except in a transaction approved in advance by the
Board of Directors of the Corporation) the beneficial owner (as defined in Rule
13d-3 under such Act), directly or indirectly, of securities of the Corporation
representing 20% or more of the combined voting power of the Corporation's then
outstanding securities or (ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the Corporation cease for any reason to constitute at least a
majority thereof unless the election of each director who was not a director at
the beginning of the period was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning of the
period.
Any indemnification under this Section 1 (unless ordered by a court) shall
be paid by the Corporation unless within 60 days of such request for
indemnification a determination is made (i) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
proceeding, (ii) if such quorum is not obtainable, or even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel (who
may be the regular counsel of the Corporation) in a written opinion or (iii) by
the stockholders, that indemnification of such person is not proper under the
circumstances because such person has not met the necessary standard of conduct
under Delaware law; provided, however, that following a Change in Control of the
Corporation, with respect to all matters thereafter arising out of acts,
omissions or events prior to the Change in Control of the Corporation concerning
the rights of any person seeking indemnification under this Section 1, such
determination shall be made by special independent counsel selected by such
person and approved by the Corporation (which approval shall not be unreasonably
withheld), which counsel has not otherwise performed services (other than in
connection with similar matters) within the five years preceding its engagement
to render such opinion for such
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person or for the Corporation or any affiliates (as such term is defined in Rule
405 under the Securities Act of 1933, as amended) of the Corporation (whether or
not they were affiliates when services were so performed) ("Independent
Counsel"). Unless such person has theretofore selected Independent Counsel
pursuant to this Section 1 and such Independent Counsel has been approved by the
Corporation, legal counsel approved by a resolution or resolutions of the Board
of Directors prior to a Change in Control of the Corporation shall be deemed to
have been approved by the Corporation as required. Such Independent Counsel
shall determine as promptly as practicable whether and to what extent such
person would be permitted to be indemnified under applicable law and shall
render its written opinion to the Corporation and such person to such effect.
The Corporation agrees to pay the reasonable fees of the Independent Counsel
referred to above and to fully indemnify such Independent Counsel against any
and all expenses, claims, liabilities and damages arising out of or relating to
this Article or its engagement pursuant hereto.
Section 2. Expenses. Expenses, including attorneys' fees, incurred by a
person referred to in Section 1 of this Article in defending or otherwise being
involved in a proceeding shall be paid by the Corporation in advance of the
final disposition of such proceeding, including any appeal therefrom, upon
receipt of an undertaking (the "Undertaking") by or on behalf of such person to
repay such amount if it shall ultimately be determined that he or she is not
entitled to be indemnified by the Corporation.
Section 3. Right of Claimant to Bring Suit. If a claim under Section 1
hereof is not paid in full by the Corporation within 60 days after a written
claim has been received by the Corporation or if expenses pursuant to Section 2
hereof have not been advanced within 10 days after a written request for such
advancement accompanied by the Undertaking has been received by the Corporation,
the claimant may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim or the advancement of expenses. (If the
claimant is successful, in whole or in part, in such suit or any other suit to
enforce a right for expenses or indemnification against the Corporation or any
other party under any other agreement, such claimant shall also be entitled to
be paid the reasonable expense of prosecuting such claim.) It shall be a defense
to any such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required Undertaking has been tendered to the Corporation) that the claimant
has not met the standards of conduct which make it permissible under the DGCL
for the Corporation to indemnify the claimant for the amount claimed. After a
Change in Control, the burden of proving such defense shall be on the
Corporation, and any determination by the Corporation (including its Board of
Directors, independent legal counsel or its stockholders) that the claimant
<PAGE>
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had not met the applicable standard of conduct required under the DGCL shall not
be a defense to the action nor create a presumption that claimant had not met
such applicable standard of conduct.
Section 4. Non-Exclusivity of Rights. The rights conferred on any person by
this Article shall not be exclusive of any other right which such person may
have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, By-Law, agreement, vote of stockholders or disinterested
directors or otherwise. The Board of Directors shall have the authority, by
resolution, to provide for such other indemnification of directors, officers,
employees or agents as it shall deem appropriate.
Section 5. Insurance. The Corporation may purchase and maintain insurance
to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expenses, liabilities or losses, whether or not the
Corporation would have the power to indemnify such person against such expenses,
liabilities or losses under the DGCL.
Section 6. Enforceability. The provisions of this Article shall be
applicable to all proceedings commenced after its adoption, whether such arise
out of events, acts, omissions or circumstances which occurred or existed prior
or subsequent to such adoption, and shall continue as to a person who has ceased
to be a director or officer and shall inure to the benefit of the heirs,
executors and administrators of such person. This Article shall be deemed to
grant each person who, at any time that this Article is in effect, serves or
agrees to serve in any capacity which entitles him to indemnification hereunder
rights against the Corporation to enforce the provisions of this Article, and
any repeal or other modification of this Article or any repeal or modification
of the DGCL or any other applicable law shall not limit any rights of
indemnification then existing or arising out of events, acts, omissions,
circumstances occurring or existing prior to such repeal or modification,
including, without limitation, the right to indemnification for proceedings
commenced after such repeal or modification to enforce this Article with regard
to acts, omissions, events or circumstances occurring or existing prior to such
repeal or modification.
Section 7. Severability. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director and officer of the
Corporation as to costs, charges and expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement with respect to any proceeding,
whether civil, criminal, administrative or investigative, including an action by
or in the right of the Corporation, to the full extent permitted by any
applicable portion of this Article that shall not
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have been invalidated and to the full extent permitted by applicable law.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Fiscal Year. The fiscal year of the Corporation shall be the
calendar year.
Section 2. Corporate Seal. The corporate seal shall be in such form as may
be approved from time to time by the Board of Directors. The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or in any other
manner reproduced.
Section 3. Waiver of Notice. Whenever any notice is required to be given
under law or the provisions of the Certificate of Incorporation or these By-
Laws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent to notice.
ARTICLE VIII
AMENDMENTS
These By-Laws may be altered, amended or repealed or new By-Laws may be
adopted by the Board of Directors. The fact that the power to amend, alter,
repeal or adopt the By-Laws has been conferred upon the Board of Directors shall
not divest the stockholders of the same powers.
<PAGE>
Exhibit 10.D
RYERSON TULL 1996 INCENTIVE STOCK PLAN
(As Amended through January 28, 1998)
1. Purpose.
The purpose of the Ryerson Tull 1996 Incentive Stock Plan (the "Plan") is
to attract and retain outstanding individuals as officers and key employees of
Ryerson Tull, Inc. (the "Company") and its subsidiaries, and to furnish
incentives to such individuals through rewards based upon the ownership and
performance of the Common Stock (as defined in Section 3). To this end, the
Committee hereinafter designated and, in certain circumstances, the Chairman of
the Board of the Company (the "Chairman") or the President of the Company, may
grant stock options, stock appreciation rights, restricted stock awards, and
performance awards, or combinations thereof, to officers and other key employees
of the Company and its subsidiaries, on the terms and subject to the conditions
set forth in this Plan.
2. Participants.
Participants in the Plan shall consist of: (i) such officers and other key
employees of the Company and its subsidiaries as the Committee in its sole
discretion may select from time to time to receive stock options, stock
appreciation rights, restricted stock awards or performance awards, either
singly or in combination, as the Committee may determine in its sole discretion;
and (ii) if the Committee authorizes the Chairman or the President to make
grants or awards of stock options, stock appreciation rights, restricted stock
or performance awards, such employees of the Company and its subsidiaries who
are not subject to section 16(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") as the Chairman or the President shall determine in
his or her sole discretion after consultation with the Vice President-Human
Resources of the Company. Individuals who receive awards of Substitute Options
and Substitute Restricted Stock pursuant to Section 14 shall also be
Participants in the Plan. Any director of the Company or any of its subsidiaries
who is not also an employee of the Company or any of its subsidiaries shall not
be eligible to receive stock options, stock appreciation rights, restricted
stock awards or performance awards under the Plan. As used in the Plan, the term
"subsidiary" means (a) any corporation of which the Company owns or controls,
directly or indirectly, 50% or more of the outstanding shares of capital stock
entitled to vote
<PAGE>
for the election of directors or (b) any partnership, joint venture, or other
business entity in respect of which the Company, directly or indirectly, has
comparable ownership or control.
3. Shares Reserved under the Plan.
Subject to adjustment pursuant to the provisions of Section 11 of the Plan,
the maximum number of shares of Class A Common Stock, $1.00 par value per share,
of the Company ("Common Stock") which may be issued pursuant to grants or awards
made under the Plan shall not exceed 2,300,000. No more than 800,000 shares of
Common Stock shall be issued pursuant to restricted stock awards and performance
awards under the Plan.
The following restrictions shall apply to all grants and awards under the
Plan other than grants and awards which by their terms are not intended to
comply with the "Performance-Based Exception" (defined below in this Section 3):
(a) the maximum aggregate number of shares of Common Stock that may be
granted or awarded under the Plan to any participant under the Plan during any
three year period shall be 1,500,000; and
(b) the maximum aggregate cash payout with respect to grants or awards
under the Plan in any fiscal year of the Company to any Named Executive Officer
(defined below in this Section 3) shall be $1,000,000.
For purposes of the Plan, "Named Executive Officer" shall mean a
participant who is one of the group of "covered employees" as defined in the
regulations promulgated under section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code") or any successor statute, and "Performance-Based
Exception" shall mean the performance-based exception from the deductibility
limitations as set forth in Section 162(m) of the Code.
Except to the extent otherwise determined by the Committee, any shares of
Common Stock subject to grants or awards under the Plan that terminate by
expiration, cancellation or otherwise without the issuance of such shares
(including shares underlying a stock appreciation right exercised for stock, to
the extent that such underlying shares are not issued), that are settled in cash
(to the extent so settled), or, in the case of restricted stock awards, that
terminate without vesting, shall become available for future grants and awards
under the Plan. Shares of Common Stock to be issued pursuant to grants or awards
under the Plan may be authorized and unissued shares of Common Stock, treasury
Common Stock, or any combination thereof.
4. Administration of the Plan.
The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Company (the "Board"). To the
extent necessary to comply
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with the exemption provided by rule 16b-3 under the Exchange Act or any
successor rule ("Rule 16b-3"), each member of the Committee shall be a "non-
employee director" within the meaning of Rule 16b-3. Subject to the provisions
of the Plan, the Committee shall have authority: (i) to determine which
employees of the Company and its subsidiaries shall be eligible for
participation in the Plan; (ii) to select employees to receive grants under the
Plan; (iii) to determine the form of grant, whether as a stock option, stock
appreciation right, restricted stock award, performance award or a combination
thereof, the number of shares of Common Stock or units subject to the grant, the
time and conditions of exercise or vesting, the fair market value of the Common
Stock for purposes of the Plan, and all other terms and conditions of any grant
and to amend such awards or accelerate the time of exercise or vesting thereof;
and (iv) to prescribe the form of agreement, certificate or other instrument
evidencing the grant. Notwithstanding the foregoing, the Committee, subject to
the terms and conditions of the Plan, may delegate to the Chairman or the
President of the Company, if such individual is then serving as a member of the
Board, the authority to act as a subcommittee of the Committee for purposes of
making grants or awards of stock options, stock appreciation rights, restricted
stock or performance awards, not to exceed such number of shares as the
Committee shall designate annually, to such employees of the Company and its
subsidiaries who are not subject to section 16(a) of the Exchange Act as the
Chairman or the President shall determine in his or her sole discretion after
consultation with the Vice President-Human Resources of the Company, and the
Chairman or the President, as applicable, shall have the authority and duties of
the Committee with respect to such grants.
The Committee shall also have authority to interpret the Plan and to
establish, amend and rescind rules and regulations for the administration of the
Plan, and all such interpretations, rules and regulations shall be conclusive
and binding on all persons.
5. Effective Date of Plan.
The Plan shall be effective upon approval by the stockholder(s) of the
Company.
6. Stock Options.
(a) Grants. Subject to the terms of the Plan, options to purchase shares of
Common Stock, including "incentive stock options" within the meaning of Section
422 of the Code, may be granted from time to time to such officers and other key
employees of the Company and its subsidiaries as may be selected by the
Committee. Each grant of an option under the Plan may designate whether the
option is intended to be an incentive stock option or a "nonqualified" stock
option. Any option not so designated shall be deemed to be a "nonqualified"
stock option.
(b) Terms of Options. An option shall be exercisable in whole or in such
installments and at such times as may be determined by the Committee in its sole
discretion, provided that no option shall be exercisable less than six months or
more than
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<PAGE>
ten years after the date of grant (except in the case of death or physical or
mental incapacity). The per share option price shall not be less than the
greater of par value or 100% of the fair market value of a share of Common Stock
on the date the option is granted. Upon exercise, the option price may be paid
in cash, in shares of Common Stock having a fair market value equal to the
option price which have been owned by the Participant for at least 6 months
prior thereto, or in a combination thereof. The Committee may also allow the
cashless exercise of options by holders thereof, as permitted under regulations
promulgated by the Board of Governors of the Federal Reserve System, subject to
any applicable restrictions necessary to comply with rules adopted by the
Securities and Exchange Commission, and the exercise of options by holders
thereof by any other means that the Committee determines to be consistent with
the Plan's purpose and applicable law, including loans, with or without
interest, made by the Company to the holder thereof.
(c) Restrictions Relating to Incentive Stock Options. To the extent
required by the Code, the aggregate fair market value (determined as of the time
the option is granted) of the Common Stock with respect to which incentive stock
options are exercisable for the first time by an employee during any calendar
year (under the Plan or any other plan of the Company or any of its
subsidiaries) shall not exceed $100,000.
(d) Termination of Employment. If an optionee ceases to be employed by the
Company or any of its subsidiaries by reason of (i) death, (ii) physical or
mental incapacity, (iii) retirement on or after the normal retirement date
provided for in and pursuant to any pension plan of the Company or any
subsidiary of the Company in effect at the time of such retirement, or (iv)
early retirement (with the consent of the Committee) provided for in and
pursuant to any such pension plan, any option held by such optionee may be
exercised, with respect to all or any part of the Common Stock as to which such
option was not theretofore exercised (whether or not such option was otherwise
then exercisable), for such period from and after the date of such cessation of
employment (not extending, however, beyond the date of expiration of such
option) as the Committee may determine at the time of the grant or at any time
thereafter. If an optionee ceases to be employed by the Company and any of its
subsidiaries for any reason other than a reason set forth in the immediately
preceding sentence, any option granted to such optionee may be exercised for a
period ending on the 30th day following the date of such cessation of employment
or the date of expiration of such option, whichever first occurs, but only with
respect to that number of shares of Common Stock for which such option was
exercisable immediately prior to the date of cessation of employment, except as
otherwise determined by the Committee at the time of grant or any time
thereafter.
(e) Additional Terms and Conditions. The agreement or instrument evidencing
the grant of a stock option may contain such other terms, provisions and
conditions not inconsistent with the Plan as may be determined by the Committee
in its sole discretion.
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<PAGE>
7. Stock Appreciation Rights.
(a) Grants. Subject to the terms of the Plan, rights entitling the grantee
to receive cash or shares of Common Stock having a fair market value equal to
the appreciation in market value of a stated number of shares of such Common
Stock from the date of the grant to the date of exercise, or, in the case of
rights granted in tandem with or by reference to a stock option granted prior to
the grant of such rights, from the date of grant of such related stock option to
the date of exercise, may be granted from time to time to such officers and
other key employees of the Company and its subsidiaries as may be selected by
the Committee.
(b) Terms of Grant. Such rights may be granted in tandem with or by
reference to a related stock option, in which event the grantee may elect to
exercise either the stock option or the right, but not both, as to the shares
subject to the stock option and the right, or the right may be granted
independently of a stock option. Rights granted in tandem with or by reference
to a related stock option shall, except as provided at the time of grant, be
exercisable to the extent, and only to the extent, that the related option is
exercisable, provided that no such right (except in the case of death or
physical or mental incapacity) shall be exercisable prior to the expiration of
six months following the date the right is granted. Rights granted independently
of a stock option shall be exercisable in whole or in such installments and at
such times as may be determined by the Committee, provided that no right (except
in the case of death or physical or mental incapacity) shall be exercisable less
than six months or more than ten years after the date of grant. Further, in the
event that any employee to whom rights are granted independently of a stock
option ceases to be an employee of the Company and its subsidiaries, such rights
shall be exercisable only to the extent and upon the conditions that stock
options are exercisable in accordance with the provisions of paragraph (d) of
Section 6 of the Plan. The Committee may at the time of the grant or at any time
thereafter impose such additional terms and conditions on the exercise of stock
appreciation rights as it deems necessary or desirable for any reason, including
for compliance with Section 16(a) or Section 16(b) of the Exchange Act and the
rules and regulations thereunder.
(c) Payment on Exercise. Upon exercise of a stock appreciation right, the
holder shall be paid the excess of the then fair market value of the number of
shares of Common Stock to which the right relates over the fair market value of
such number of shares at the date of grant of the right or of the related stock
option, as the case may be. Such excess shall be paid in cash or in shares of
Common Stock having a fair market value equal to such excess, or in such
combination thereof, as may be provided in the grant of such right (which may
permit the holder to elect between cash and Common Stock or to elect a
combination thereof), or, if no such provision is made in the grant, as the
Committee shall determine upon exercise of the right, provided, in any event,
that the holder shall be paid cash in lieu of any fractional share of Common
Stock to which such holder would otherwise be entitled.
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<PAGE>
(d) Additional Terms and Conditions. The agreement or instrument
evidencing the grant of stock appreciation rights may contain such other terms,
provisions and conditions not inconsistent with the Plan as may be determined by
the Committee in its sole discretion.
8. Restricted Stock Awards.
Subject to the terms of the Plan, restricted stock awards consisting of
shares of Common Stock may be made from time to time to such officers and other
key employees of the Company and its subsidiaries as may be selected by the
Committee, provided that any such employee (except an employee whose terms of
employment include the granting of a restricted stock award) shall have been
employed by the Company or any of its subsidiaries for at least six months. Such
awards shall be contingent on the employee's continuing employment with the
Company or its subsidiaries for a period to be specified in the award, which
(except in the case of death or physical or mental incapacity) shall not be less
than six months or more than ten years from the date of award, and shall be
subject to such additional terms and conditions as the Committee in its sole
discretion deems appropriate, including, but not by way of limitation,
restrictions on the sale or other disposition of such shares during the
restriction period. Except as otherwise determined by the Committee at the time
of the award, the holder of a restricted stock award shall have the right to
vote the restricted shares and to receive dividends thereon, unless and until
such shares are forfeited.
9. Performance Awards.
(a) Awards. Performance awards consisting of (i) shares of Common Stock, (ii)
monetary units or (iii) units which are expressed in terms of shares of Common
Stock may be made from time to time to such officers and other key employees of
the Company and its subsidiaries as may be selected by the Committee. Subject
to the provisions of Section 12 below, such awards shall be contingent on the
achievement over a period of not less than six months or more than ten years of
such corporate, division, subsidiary, group or other measures and goals as shall
be established by the Committee. Subject to the provisions of Section 12 below,
such measures and goals may be revised by the Committee at any time from time to
time during the performance period. Except as may otherwise be determined by
the Committee at the time of the award or at any time thereafter, a performance
award shall terminate if the grantee of the award does not remain continuously
in the employ of the Company or its subsidiaries at all times during the
applicable performance period.
(b) Rights with Respect to Shares and Share Units. If a performance award
consists of shares of Common Stock or units which are expressed in terms of
shares of such Common Stock, amounts equal to dividends otherwise payable on a
like number of shares may, if the award so provides, be converted into
additional such shares (to the extent that shares are then available for
issuance under the Plan) or credited as additional
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<PAGE>
units and paid to the participant if and when, and to the extent that, payment
is made pursuant to such award.
(c) Payment. Payment of a performance award following the end of the
performance period, if such award consists of monetary units or units expressed
in terms of shares of Common Stock, may be made in cash, shares of Common Stock,
or a combination thereof, as determined by the Committee. Any payment made in
Common Stock shall be based on the fair market value of such stock on the
payment date.
10. Performance Measures Applicable to Awards to Named Executive Officers.
Unless and until the Committee proposes for stockholder vote a change in
the general performance measures set forth in this Section 10, the attainment of
which may determine the degree of payout or vesting with respect to awards under
the Plan which are designed to qualify for the Performance-Based Exception, the
performance measure(s) to be used for purposes of such awards shall be chosen
from among the following alternatives: safety (including total injury frequency,
lost workday rates or cases, medical treatment cases and fatalities); quality
control (including critical product characteristics and defects); cost control
(including cost as a percentage of sales); capital structure (including debt and
equity levels, debt-to-equity ratios, and debt-to total-capitalization ratios);
inventory turnover; customer performance or satisfaction; revenue growth; net
income; conformity to cash flow plans; return on investment; and operating
profit to operating assets.
The Committee shall have the discretion to establish performance goals
based upon the foregoing performance measures and to adjust such goals and the
methodology used to measure the determination of the degree of attainment of
such goals; provided, however, that awards under the Plan that are intended to
qualify for the Performance-Based Exception and that are issued to or held by
Named Executive Officers may not be adjusted in a manner that increases such
award. The Committee shall retain the discretion to adjust such awards in a
manner that does not increase such awards. Furthermore, the Committee shall not
make any adjustment to awards under the Plan issued to or held by Named
Executive Officers that are intended to comply with the Performance-Based
Exception if the result of such adjustment would be the disqualification of such
award under the Performance-Based Exception.
In the event that applicable laws change to permit the Committee greater
discretion to amend or replace the foregoing performance measures applicable to
awards to Named Executive Officers without obtaining stockholder approval of
such changes, the Committee shall have sole discretion to make such changes
without obtaining such approval. In addition, in the event that the Committee
determines that it is advisable to grant awards under the Plan to Named
Executive Officers that may not qualify for the Performance-Based Exception, the
Committee may make such grants upon any performance measures it deems
appropriate with the understanding that they may not satisfy the requirements of
Section 162(m) of the Code.
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<PAGE>
11. Adjustments for Changes in Capitalization, Etc.
Subject to the provisions of Section 12 herein, in the event of any change
in corporate capitalization, such as a stock split, reverse stock split, stock
dividend, or a corporate transaction, such as a merger, consolidation, or
separation, including a spin-off, or other distribution of stock or property of
the Company or its subsidiaries (other than normal cash dividends), any
reorganization (whether or not such reorganization comes within the definition
of such term in Code Section 368) or any partial or complete liquidation of the
Company or its subsidiaries, such adjustment shall be made in the number and
class of shares which may be delivered under Section 3 (including the number of
shares referred to in the last sentence of the first paragraph of Section 3 and
in subparagraph (a) of the second paragraph of Section 3), and in the number and
class of and/or price of shares subject to outstanding grants or awards under
the Plan, as may be determined to be appropriate and equitable by the Committee,
in its sole discretion, to prevent dilution or enlargement of rights; provided,
however, that the number of shares subject to any grants or awards under the
Plan shall always be a whole number.
12. Effect of Change in Control.
(a) Acceleration of Benefits. Subject to the following sentence, in the
event of a "Change in Control" as defined in paragraph (b) of this Section 12,
(i) the value of all outstanding stock options, stock appreciation rights and
restricted stock awards (whether or not then fully exercisable or vested) shall
be cashed out on the basis of the "Change in Control Price" (as defined in
paragraph (c) of this Section 12) as of the date the Change in Control occurs,
provided, however, that any stock options or stock appreciation rights
outstanding for less than six months shall not be cashed out until six months
after the respective date of grant, and provided, further, that the Committee
may provide for the immediate vesting instead of the cashing out of restricted
stock awards in such circumstances as it deems appropriate; and (ii) all
outstanding performance awards shall be cashed out in such manner and in such
amount or amounts as determined by the Committee in its sole discretion. In the
event of a transaction which is intended to be accounted for through the
pooling-of-interest accounting method, (i) in lieu of cashing out all or any
portion of the outstanding stock options, stock appreciation rights, restricted
stock awards and performance awards, the Committee, in its discretion, may cause
such grants or awards to vest, and may limit payment to shares of Common Stock,
and (ii) the Committee, in its discretion, may extend the exercise period for
stock options and stock appreciation rights, but not beyond the earlier of (A)
30 days after the end of the pooling period or (B) the original term of the
stock option or stock appreciation right.
(b) Change in Control. For purposes of this Section 12, a Change in Control
means the happening of any of the following:
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than (w) the Company and its affiliates
(collectively referred to
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<PAGE>
herein as "RTI"), (x) a trustee or other fiduciary holding securities under
an employee benefit plan of RTI, (y) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (z) a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company (not including in the securities beneficially owned by such person
any securities acquired directly from the Company or its affiliates)
representing 40% or more of the combined voting power of the Company's then
outstanding securities;
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board and any new director
(other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in clauses
(i), (ii) or (iv) of this Subsection) whose election by the Board or
nomination for election by the Company's stockholders was approved by a
vote of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved cease for any reason to
constitute a majority thereof;
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity), in combination with the ownership of
any trustee or other fiduciary holding securities under an employee benefit
plan of RTI, at least 60% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation, or a merger or consolidation effected
to implement a recapitalization of the Company (or similar transaction) in
which no person acquires more than 50% of the combined voting power of the
Company's then outstanding securities; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets.
A Change in Control shall also be deemed to occur with respect to any
Participant for purposes of the Plan if there occurs:
(1) a sale or disposition, directly or indirectly, other than to a
person described in subclause (w), (x) or (z) of clause (i) next above, of
securities of the Participant's employer, any direct or indirect parent
company of the Participant's employer or any company that is a subsidiary
of the Participant's employer and is also a significant subsidiary (as
defined below) of the Company (the Participant's employer and such
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<PAGE>
a parent or subsidiary being a "Related Company"), representing 50% or more
of the combined voting power of the securities of such Related Company then
outstanding;
(2) a merger or consolidation of a Related Company with any other
corporation, other than a merger or consolidation which would result in 50%
or more of the combined voting power of the surviving company being
beneficially owned by a majority owned direct or indirect subsidiary of the
Company; or
(3) the sale or disposition of all or substantially all the assets of
a Related Company to a person other than a majority owned direct or
indirect subsidiary of the Company.
Notwithstanding the foregoing, no Change in Control shall be deemed to have
occurred with respect to a Participant for purposes of the Plan if (I) such
transaction includes or involves a sale to the public or a distribution to the
stockholders of the Company of more than 50% of the voting securities of the
Participant's employer or a direct or indirect parent of the Participant's
employer, and (II) the Participant's employer or a direct or indirect parent of
the Participant's employer agrees to become a successor to the Company under an
individual agreement between the Company and the Participant or the Participant
is covered by an agreement providing for benefits upon a change in control of
his or her employer following an event described in clauses (1), (2) or (3) next
above. For purposes of the Plan, the term "significant subsidiary" has the
meaning given to such term under Rule 405 of the Securities Act of 1933, as
amended.
(c) Change in Control Price. For purposes of this Section 12, Change in
Control Price means:
(i) with respect to a Change in Control by reason of a merger or
consolidation of the Company described in paragraph (b)(iii) of this
Section 12 in which the consideration per share of Common Stock to be paid
for the acquisition of shares of Common Stock specified in the agreement of
merger or consolidation is all in cash, the highest such consideration per
share;
(ii) with respect to a Change in Control by reason of an acquisition
of securities described in paragraph (b)(i) of this Section 12, the highest
price per share for any share of the Common Stock paid by any holder of any
of the securities representing 40% or more of the combined voting power of
the Company giving rise to the Change in Control; and
(iii) with respect to a Change in Control by reason of a merger or
consolidation of the Company (other than a merger or consolidation
described in paragraph (b)(iii) of this Section or a change in the
composition of the Board of Directors described in paragraph (b)(ii) of
this Section 12), the highest price per share of Common Stock reported on
the Composite Transactions (or, if such shares are not traded on the New
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York Stock Exchange, such other principal market on which such shares are
traded) during the sixty-day period ending on the date the Change in
Control occurs, except that, in the case of incentive stock options and
stock appreciation rights relating to incentive stock options, the holder
may not receive an amount in excess of the maximum amount that will enable
such option to continue to qualify as an incentive stock option.
13. Amendment and Termination of Plan.
The Plan may be amended by the Board in any respect, provided that, without
stockholder approval, no amendment (other than pursuant to Section 11 of the
Plan) shall increase the maximum number of shares available for issuance under
the Plan if such action would result in awards under the Plan no longer being
exempt under Rule 16b-3 as then in effect. In addition, no amendment may impair
the rights of a participant under any stock option, stock appreciation right,
restricted stock award or performance award previously granted under the Plan
without the consent of such participant, unless required by law. The Plan may
also be terminated at any time by the Board. No further grants may be made under
the Plan after termination, but termination shall not affect the rights of any
participant under, or the authority of the Committee with respect to, any grants
or awards made prior to termination.
14. Grant of Substitute Awards.
(a) Substitute Options. In lieu of outstanding options to purchase Inland
Steel Industries, Inc. ("ISI") common stock ("ISI Options") granted pursuant to
the Inland 1995 Incentive Stock Plan, the Inland 1992 Incentive Stock Plan, the
Inland 1988 Incentive Stock Plan or the Inland 1984 Incentive Stock Plan
(collectively, the "ISI Incentive Plans") to officers and employees of ISI and
its subsidiaries who are or who become officers or employees of the Company or
any of its subsidiaries on or after the closing date of the initial public
offering of Common Stock and prior to the date on which the Company and its
subsidiaries cease to be treated as a single employer with ISI under section
414(b) or (c) of the Code ("Transferred Employees"), such Transferred Employees
shall receive a grant of "Substitute Stock Options" under the Plan; provided
that the Committee, in its sole discretion, may award Substitute Stock Options
to any Transferred Employee with respect to less than all (including none) of
his or her outstanding options under the ISI Incentive Plans, in which case the
outstanding ISI Options for which no Substitute Stock Options have been granted
will remain outstanding. The number of shares of Common Stock subject to any
Substitute Stock Option shall bear the same ratio to the number of shares of ISI
common stock subject to the corresponding ISI Option as the Average Value (as
defined below) of a share of ISI common stock bears to the Average Value of a
share of Common Stock. The per share option price of Common Stock subject to
the Substitute Stock Option shall be equal to the amount which bears the same
ratio to the Average Value of a share of Common Stock as the per share option
price of ISI common stock under the ISI Option bears to the Average Value of a
share of ISI common stock. Other than the option price and
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number of shares, the Substitute Stock Options shall be subject to the same
terms and conditions as the ISI Options. The term "Average Value" means the
average closing price of Common Stock or ISI common stock, as applicable, as
reported, in the case of Common Stock, on the New York Stock Exchange Composite
Transactions (the "Composite Transactions") (or, if such shares are not traded
on the New York Stock Exchange, such other principal market on which such shares
are traded) for the first ten trading days after the date of the substitution.
(b) Substitute Restricted Stock. In lieu of outstanding shares of
restricted ISI common stock ("ISI Restricted Stock") granted pursuant to the ISI
Incentive Plans to Transferred Employees, such Transferred Employees shall
receive a grant of "Substitute Restricted Stock" under the Plan; provided that
the Committee, in its sole discretion, may award Substitute Restricted Stock to
any Transferred Employee with respect to less than all (including none) of his
or her outstanding restricted stock under the ISI Incentive Plans, in which case
the outstanding ISI Restricted Stock for which no Substitute Restricted Stock
has been granted will remain outstanding. The number of shares of Substitute
Restricted Stock shall bear the same ratio to the number of shares of ISI
Restricted Stock as the Average Value of a share of ISI common stock bears to
the Average Value of a share of Common Stock. Other than the number of shares,
the Substitute Restricted Stock shall be subject to the same terms and
conditions as the ISI Restricted Stock.
15. Miscellaneous.
(a) No Right to a Grant. Neither the adoption of the Plan nor any action
of the Board or of the Committee shall be deemed to give any employee any right
to be selected as a participant or to be granted a stock option, stock
appreciation right, restricted stock award or performance award.
(b) Rights as Stockholders. No person shall have any rights as a
stockholder of the Company with respect to any shares covered by a stock option,
stock appreciation right, or performance award until the date of the issuance of
a stock certificate to such person pursuant to such stock option, right or
award.
(c) Employment. Nothing contained in this Plan shall be deemed to confer
upon any employee any right of continued employment with the Company or any of
its subsidiaries or to limit or diminish in any way the right of the Company or
any such subsidiary to terminate his or her employment at any time with or
without cause.
(d) Taxes. The Company shall be entitled to deduct from any payment under
the Plan the amount of any tax required by law to be withheld with respect to
such payment or may require any participant to pay such amount to the Company
prior to and as a condition of making such payment. In addition, the Committee
may, in its discretion and subject to such rules as it may adopt from time to
time, permit a participant to elect to have the Company withhold from any
payment under the Plan (or to have the Company accept from
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the participant), for tax withholding purposes, shares of Common Stock, valued
at their fair market value, but in no event shall the fair market value of the
number of shares so withheld (or accepted) exceed the amount necessary to meet
the maximum Federal, state and local marginal tax rates then in effect that are
applicable to the participant and to the particular transaction.
(e) Nontransferability. Except as permitted by the Committee, no stock
option, stock appreciation right, restricted stock award or performance award
shall be transferable except by will or the laws of descent and distribution,
and, during the holder's lifetime, stock options and stock appreciation rights
shall be exercisable only by, and shares subject to restricted stock awards and
payments pursuant to performance awards shall be delivered or made only to, such
holder or such holder's duly appointed legal representative.
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the participant), for tax withholding purposes, shares of Common Stock, valued
at their fair market value, but in no event shall the fair market value of the
number of shares so withheld (or accepted) exceed the amount necessary to meet
the maximum Federal, state and local marginal tax rates then in effect that are
applicable to the participant and to the particular transaction.
(e) Nontransferability. Except as permitted by the Committee, no stock
option, stock appreciation right, restricted stock award or performance award
shall be transferable except by will or the laws of descent and distribution,
and, during the holder's lifetime, stock options and stock appreciation rights
shall be exercisable only by, and shares subject to restricted stock awards and
payments pursuant to performance awards shall be delivered or made only to, such
holder or such holder's duly appointed legal representative.
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Exhibit 10.E
INLAND 1995 INCENTIVE STOCK PLAN
(as amended through January 28, 1998)
1. Purpose.
The purpose of the Inland 1995 Incentive Stock Plan (the "Plan") is to
attract and retain outstanding individuals as officers and key employees of
Inland Steel Industries, Inc. (the "Company") and its subsidiaries, and to
furnish incentives to such individuals through rewards based upon the ownership
and performance of the common stock of the Company. To this end, the Committee
hereinafter designated and, in certain circumstances, the Chairman of the Board
of the Company (the "Chairman") may grant stock options, stock appreciation
rights, restricted stock awards, and performance awards, or combinations
thereof, to officers and other key employees of the Company and its
subsidiaries, on the terms and subject to the conditions set forth in this Plan.
2. Participants.
Participants in the Plan shall consist of: (i) such officers and other key
employees of the Company and its subsidiaries as the Committee in its sole
discretion may select from time to time to receive stock options, stock
appreciation rights, restricted stock awards or performance awards, either
singly or in combination, as the Committee may determine in its sole discretion;
and (ii) if the Committee authorizes the Chairman to make grants or awards of
stock options, stock appreciation rights, restricted stock or performance
awards, such employees of the Company and its subsidiaries as the Chairman shall
determine in his or her sole discretion. Any director of the Company or any of
its subsidiaries who is not also an employee of the Company or any of its
subsidiaries shall not be eligible to receive stock options, stock appreciation
rights, restricted stock awards or performance awards under the Plan. As used in
the Plan, the term "subsidiary" means (a) any corporation of which the Company
owns or controls, directly or indirectly, 50% or more of the outstanding shares
of capital stock entitled to vote for the election of directors or (b) any
partnership, joint venture, or other business entity in respect of which the
Company, directly or indirectly, has comparable ownership or control.
3. Shares Reserved under the Plan.
Subject to adjustment pursuant to the provisions of Section 11 of the Plan,
the maximum number of shares of common stock, $1.00 par value per share, of the
Company which may be issued pursuant to grants or awards made under the Plan
shall not exceed 2,000,000, plus such number of shares as shall have been
authorized for issuance pursuant to the Inland 1992 Incentive Stock Plan
(heretofore approved by stockholders) that shall not have been or be issued
pursuant to such plan. No more than 700,000 shares (including those which have
not been or are not issued pursuant to the Inland 1992 Incentive Stock Plan)
shall be issued pursuant to restricted stock awards and performance awards under
the Plan.
The following restrictions shall apply to all grants and awards under the
Plan other than grants and awards which by their terms are not intended to
comply with the "Performance Based Exception" (defined below in this Section 3):
(a) the maximum aggregate number of shares that may be granted or awarded
under the Plan in any fiscal year of the Company to any participant under the
Plan shall be three hundred thousand (300,000); and
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(b) the maximum aggregate cash payout with respect to grants or awards
under the Plan in any fiscal year of the Company to any Named Executive Officer
(defined below in this Section 3) shall be one million dollars ($1,000,000).
For purposes of the Plan, "Named Executive Officer" shall mean a
participant who is one of the group of "covered employees" as defined in the
regulations promulgated under Internal Revenue Code Section 162(m) or any
successor statute ("Section 162(m)"), and "Performance-Based Exception" shall
mean the performance-based exception from the deductibility limitations as each
is set forth in Section 162(m).
Except to the extent otherwise determined by the Committee, any shares
subject to grant or award under the Plan that terminate by expiration,
cancellation or otherwise without the issuance of such shares (including shares
underlying a stock appreciation right exercised for stock, to the extent that
such underlying shares are not issued), that are settled in cash (to the extent
so settled), or, in the case of restricted stock awards, that terminate without
vesting, shall become available for future grants and awards under the Plan.
Shares of common stock to be issued pursuant to grants or awards under the Plan
may be authorized and unissued shares of common stock, treasury common stock, or
any combination thereof.
4. Administration of the Plan.
The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Company (the "Board"). To the
extent necessary to comply with the exemption provided by rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or any
successor rule ("Rule 16b-3"), each member of the Committee shall be a "non-
employee director" within the meaning of rule 16b-3. Subject to the provisions
of the Plan, the Committee shall have authority (i) to determine which employees
of the Company and its subsidiaries shall be eligible for participation in the
Plan; (ii) to select employees to receive grants under the Plan; (iii) to
determine the form of grant, whether as a stock option, stock appreciation
right, restricted stock award, performance award or a combination thereof, the
number of shares of common stock or units subject to the grant, the time and
conditions of exercise or vesting, the fair market value of the common stock for
purposes of the Plan, and all other terms and conditions of any grant and to
amend such awards or accelerate the time of exercise or vesting thereof; and
(iv) to prescribe the form of agreement, certificate or other instrument
evidencing the grant. Notwithstanding the foregoing, the Committee, subject to
the terms and conditions of the Plan, may delegate to the Chairman of the
Company, if such individual is then serving as a member of the Board, the
authority to act as a subcommittee of the Committee for purposes of making
grants or awards of stock options, stock appreciation rights, restricted stock
or performance awards, not to exceed such number of shares as the Committee
shall designate periodically, to such employees of the Company and its
subsidiaries as the Chairman shall determine in his or her sole discretion and
the Chairman shall have the authority and duties of the Committee with respect
to such grants. The Committee shall also have authority to interpret the Plan
and to establish, amend and rescind rules and regulations for the administration
of the Plan, and all such interpretations, rules and regulations shall be
conclusive and binding on all persons.
5. Effective Date of Plan.
The Plan shall be submitted to the stockholders of the Company for approval
at the annual meeting to be held on May 24, 1995, or any adjournment thereof,
and, if approved by the stockholders, shall be deemed to have become effective
on the date of such approval.
6. Stock Options.
(a) Grants. Subject to the terms of the Plan, options to purchase shares
of common stock of the Company, including "incentive stock options" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), may be granted from time to time to such officers and other key
employees
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of the Company and its subsidiaries as may be selected by the Committee or the
Chairman. Each grant of an option under the Plan may designate whether the
option is intended to be an incentive stock option or a "nonqualified" stock
option. Any option not so designated shall be deemed to be a "nonqualified"
stock option.
(b) Terms of Options. An option shall be exercisable in whole or in such
installments and at such times as may be determined by the Committee in its sole
discretion, provided that no option shall be exercisable less than six months or
more than ten years after the date of grant. The per share option price shall
not be less than the greater of par value or 100% of the fair market value of a
share of common stock of the Company on the date the option is granted. Upon
exercise, the option price may be paid in cash, in shares of common stock of the
Company having a fair market value equal to the option price (provided that such
shares have been held for at least six months prior to their tender to pay the
option price), or in a combination thereof. The Committee may also allow the
cashless exercise of options by holders thereof, as permitted under regulations
promulgated by the Board of Governors of the Federal Reserve System, subject to
any applicable restrictions necessary to comply with rules adopted by the
Securities and Exchange Commission, and the exercise of options by holders
thereof by any other means that the Committee determines to be consistent with
the Plan's purpose and applicable law, including loans, with or without
interest, made by the Company to the holder thereof.
(c) Restrictions Relating to Incentive Stock Options. To the extent
required by the Code, the aggregate fair market value (determined as of the time
the option is granted) of the common stock of the Company with respect to which
incentive stock options are exercisable for the first time by an employee during
any calendar year (under the Plan or any other plan of the Company or any of its
subsidiaries) shall not exceed $100,000.
(d) Termination of Employment. If an optionee ceases to be employed by the
Company or any of its subsidiaries by reason of (i) death, (ii) physical or
mental incapacity, (iii) retirement on or after the normal retirement date
provided for in and pursuant to any pension plan of the Company or any
subsidiary of the Company in effect at the time of such retirement, or (iv)
early retirement (with the consent of the Committee) provided for in and
pursuant to any such pension plan, any option held by such optionee may be
exercised, with respect to all or any part of the common stock of the Company as
to which such option was not theretofore exercised (whether or not such option
was otherwise then exercisable), for such period from and after the date of such
cessation of employment (not extending, however, beyond the date of expiration
of such option) as the Committee may determine at the time of the grant or at
any time thereafter. If an optionee ceases to be employed by the Company and any
of its subsidiaries for any reason other than a reason set forth in the
immediately preceding sentence, any option granted to such optionee may be
exercised for a period ending on the 30th day following the date of such
cessation of employment or the date of expiration of such option, whichever
first occurs, but only with respect to that number of shares of common stock for
which such option was exercisable immediately prior to the date of cessation of
employment, except as otherwise determined by the Committee at the time of grant
or at any time thereafter.
(e) Additional Terms and Conditions. The agreement or instrument
evidencing the grant of a stock option may contain such other terms, provisions
and conditions not inconsistent with the Plan as may be determined by the
Committee in its sole discretion.
7. Stock Appreciation Rights.
(a) Grants. Subject to the terms of the Plan, rights entitling the grantee
to receive cash or shares of common stock of the Company having a fair market
value equal to the appreciation in market value of a stated number of shares of
such common stock from the date of the grant to the date of exercise, or, in the
case of rights granted in tandem with or by reference to a stock option granted
prior to the grant of such rights, from the date of grant of such related stock
option to the date of exercise, may be granted from time to time to such
officers and other key employees of the Company and its subsidiaries as may be
selected by the Committee
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or the Chairman.
(b) Terms of Grant. Such rights may be granted in tandem with or by
reference to a related stock option, in which event the grantee may elect to
exercise either the stock option or the right, but not both, as to the shares
subject to the stock option and the right, or the right may be granted
independently of a stock option. Rights granted in tandem with or by reference
to a related stock option shall be exercisable to the extent, and only to the
extent, that the related option is exercisable, provided that no such right
(except in the case of death or physical or mental incapacity) shall be
exercisable prior to the expiration of six months following the date the right
is granted. Rights granted independently of a stock option shall be exercisable
in whole or in such installments and at such times as may be determined by the
Committee, provided that no right shall be exercisable less than six months or
more than ten years after the date of grant. Further, in the event that any
employee to whom rights are granted independently of a stock option ceases to be
an employee of the Company and its subsidiaries, such rights shall be
exercisable only to the extent and upon the conditions that stock options are
exercisable in accordance with the provisions of paragraph (d) of Section 6 of
the Plan. The Committee may at the time of grant or at any time thereafter
impose such additional terms and conditions on the exercise of stock
appreciation rights as it deems necessary or desirable for any reason, including
for compliance with Section 16(a) or Section 16(b) of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder.
(c) Payment on Exercise. Upon exercise of a stock appreciation right, the
holder shall be paid the excess of the then fair market value of the number of
shares of common stock of the Company to which the right relates over the fair
market value of such number of shares at the date of grant of the right or of
the related stock option, as the case may be. Such excess shall be paid in cash
or in shares of common stock having a fair market value equal to such excess, or
in such combination thereof, as may be provided in the grant of such right
(which may permit the holder to elect between cash and common stock or to elect
a combination thereof), or, if no such provision is made in the grant, as the
Committee shall determine upon exercise of the right, provided, in any event,
that the holder shall be paid cash in lieu of any fractional share of common
stock to which such holder would otherwise be entitled.
(d) Additional Terms and Conditions. The agreement or instrument
evidencing the grant of stock appreciation rights may contain such other terms,
provisions and conditions not inconsistent with the Plan as may be determined by
the Committee in its sole discretion.
8. Restricted Stock Awards.
Subject to the terms of the Plan, restricted stock awards consisting of
shares of common stock of the Company may be made from time to time to such
officers and other key employees of the Company and its subsidiaries as may be
selected by the Committee or the Chairman. Such awards shall be contingent on
the employee's continuing employment with the Company or its subsidiaries for a
period to be specified in the award, which shall not be less than six months or
more than ten years from the date of award, and shall be subject to such
additional terms and conditions as the Committee in its sole discretion deems
appropriate, including, but not by way of limitation, restrictions on the sale
or other disposition of such shares during the restriction period. Except as
otherwise determined by the Committee at the time of the award, the holder of a
restricted stock award shall have the right to vote the restricted shares and to
receive dividends thereon, unless and until such shares are forfeited.
9. Performance Awards.
(a) Awards. Subject to the terms of the Plan, performance awards
consisting of (i) shares of common stock of the Company, (ii) monetary units or
(iii) units which are expressed in terms of shares of common stock of the
Company may be made from time to time to such officers and other key employees
of the Company and its subsidiaries as may be selected by the Committee or the
Chairman. Subject to the
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provisions of Section 10 below, such awards shall be contingent on the
achievement over a period of not less than six months or more than ten years of
such corporate, division, subsidiary, group or other measures and goals as shall
be established by the Committee. Subject to the provisions of Section 10 below,
such measures and goals may be revised by the Committee at any time and from
time to time during the performance period. Except as may otherwise be
determined by the Committee at the time of the award or at any time thereafter,
a performance award shall terminate if the grantee of the award does not remain
continuously in the employ of the Company or its subsidiaries at all times
during the applicable performance period.
(b) Rights with Respect to Shares and Share Units. If a performance award
consists of shares of common stock of the Company or units which are expressed
in terms of shares of such common stock, amounts equal to dividends otherwise
payable on a like number of shares may, if the award so provides, be converted
into additional such shares (to the extent that shares are then available for
issuance under the Plan) or credited as additional units and paid to the
participant if and when, and to the extent that, payment is made pursuant to
such award.
(c) Payment. Payment of a performance award following the end of the
performance period, if such award consists of monetary units or units expressed
in terms of shares of common stock of the Company, may be made in cash, shares
of common stock, or a combination thereof, as determined by the Committee. Any
payment made in common stock shall be based on the fair market value of such
stock on the payment date.
10. Performance Measures Applicable to Awards to Named Executive Officers
Unless and until the Committee proposes for stockholder vote a change in
the general performance measures set forth in this Section 10 the attainment of
which may determine the degree of payout or vesting with respect to awards under
the Plan which are designed to qualify for the Performance-Based Exception, the
performance measure(s) to be used for purposes of such awards shall be chosen
from among the following alternatives: safety (including total injury frequency,
lost workday rates or cases, medical treatment cases and fatalities); quality
control (including critical product characteristics, yield and defects); cost
control (including cost as a percentage of sales); capital structure (including
debt and equity levels, debt-to-equity ratios, and debt-to-total capitalization
ratios); inventory turnover; customer performance or satisfaction; revenue
growth; net income; conformity to cash flow plans; return on investment; and
operating profit to operating assets.
The Committee shall have the discretion to establish performance goals
based upon the foregoing performance measures and to adjust such goals and the
methodology used to measure the determination of the degree of attainment of
such goals; provided, however, that awards under the Plan that are intended to
qualify for the Performance-Based Exception and that are issued to or held by
Named Executive Officers may not be adjusted in a manner that increases such
award. The Committee shall retain the discretion to adjust such awards in a
manner that does not increase such awards. Furthermore, the Committee shall not
make any adjustment to awards under the Plan issued to or held by Named
Executive Officers that are intended to comply with the Performance-Based
Exception if the result of such adjustment would be the disqualification of such
award under the Performance-Based Exception.
In the event that applicable laws change to permit the Committee greater
discretion to amend or replace the foregoing performance measures applicable to
awards to Named Executive Officers without obtaining stockholder approval of
such changes, the Committee shall have sole discretion to make such changes
without obtaining such approval. In addition, in the event that the Committee
determines that it is advisable to grant awards under the Plan to Named
Executive Officers that may not qualify for the Performance-Based Exception, the
Committee may make such grants upon any performance measures it deems
appropriate with
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the understanding that they may not satisfy the requirements of Section 162(m).
11. Adjustments for Changes in Capitalization, Etc.
Subject to the provisions of Section 12 herein, in the event of any change
in corporate capitalization, such as stock split, or a corporate transaction,
such as a merger, consolidation, or separation, including a spin-off, or other
distribution of stock or property of the Company or its subsidiaries (other than
normal cash dividends), any reorganization (whether or not such reorganization
comes within the definition of such term in Code Section 368) or any partial or
complete liquidation of the Company or its subsidiaries, such adjustment shall
be made in the number and class of shares which may be delivered under Section
3, and in the number and class of and/or price of shares subject to outstanding
grants or awards under the Plan, as may be determined to be appropriate and
equitable by the Committee, in its sole discretion, to prevent dilution or
enlargement of rights; provided, however, that the number of shares subject to
any grants or awards under the Plan shall always be a whole number.
12. Effect of Change in Control.
(a) Acceleration of Benefits. Subject to the following sentence, in the
event of a "Change in Control" as defined in paragraph (b) of this Section 12,
(i) the value of all outstanding stock options, stock appreciation rights and
restricted stock awards (whether or not then fully exercisable or vested) shall
be cashed out on the basis of the "Change in Control Price" (as defined in
paragraph (c) of this Section 12) as of the date the Change in Control occurs,
provided, however, that any stock options or stock appreciation rights
outstanding for less than six months shall not be cashed out until six months
after the respective date of grant, and provided, further, that the Committee
may provide for the immediate vesting instead of the cashing out of restricted
stock awards in such circumstances as it deems appropriate; and (ii) all
outstanding performance awards shall be cashed out in such manner and in such
amount or amounts as determined by the Committee in its sole discretion. In the
event of a transaction which is intended to be accounted for through the
pooling-of-interest accounting method, (i) in lieu of cashing out all or any
portion of the outstanding stock options, stock appreciation rights, restricted
stock awards and performance awards, the Committee, in its discretion, may cause
such grants or awards to vest, and may limit payment to shares of common stock,
and (ii) the Committee, in its discretion, may extend the exercise period for
stock options and stock appreciation rights, but not beyond the earlier of 30
days after the end of the pooling period or the original term of the stock
option or stock appreciation right.
(b) Change in Control. For purposes of this Section 12, a Change in
Control means the happening of any of the following: (i) the Company is merged
into or consolidated with another corporation, or the stockholders of the
Company approve a definitive agreement to sell or otherwise dispose of all or
substantially all of its assets or adopt a plan of liquidation, provided,
however, that a Change in Control shall not be deemed to have occurred by reason
of a transaction, or a substantially concurrent or otherwise related series of
transactions, upon the completion of which the beneficial ownership of a
majority of the voting power of the Company, the surviving corporation, or a
corporation directly or indirectly controlling the Company or the surviving
corporation, as the case may be, is held by the same persons (as defined below)
(in substantially the same proportion) as held the beneficial ownership of the
voting power of the Company immediately prior to the transaction or the
substantially concurrent or otherwise related series of transactions, except
that upon the completion thereof, employees or employee benefit plans of the
Company may be a new holder of such beneficial ownership or (ii) the "beneficial
ownership" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) of securities representing 40% or more of the
combined voting power of the Company is acquired by any "person" as defined in
Sections 13(d) and 14(d) of the Exchange Act (other than any trustee or other
fiduciary holding securities under an employee benefit or other similar stock
plan of the Company); or (iii) at any time during any period of two consecutive
years, individuals who at the beginning of such period were members of the Board
of Directors of the Company cease for any reason to constitute at least a
majority thereof (unless the election, or the nomination for election by the
Company's
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<PAGE>
stockholders, of each new director was approved by a vote of at least two-thirds
of the directors still in office at the time of such election or nomination who
were directors at the beginning of such period).
(c) Change in Control Price. For purposes of this Section 12, Change in
Control Price means (i) with respect to a Change in Control by reason of a
merger or consolidation of the Company described in paragraph (b)(i) of this
Section 12 in which the consideration per share of the Company's common stock to
be paid for the acquisition of shares of common stock specified in the agreement
of merger or consolidation is all in cash, the highest such consideration per
share, (ii) with respect to a Change in Control by reason of an acquisition of
securities described in paragraph (b)(ii) of this Section 12, the highest price
per share for any share of the Company's common stock paid by any holder of any
of the securities representing 40% or more of the combined voting power of the
Company giving rise to the Change in Control, and (iii) with respect to a Change
in Control by reason of a merger or consolidation of the Company (other than a
merger or consolidation described in paragraph (c)(i) of this Section 12),
stockholder approval of an agreement or plan described in paragraph (b)(i) of
this Section 12 or a change in the composition of the Board of Directors
described in paragraph (b)(iii) of this Section 12, the highest price per share
of common stock reported on the New York Stock Exchange Composite Tape (or, if
such shares are not traded on the New York Stock Exchange, such other principal
market on which such shares are traded) during the sixty-day period ending on
the date the Change in Control occurs, except that, in the case of incentive
stock options and stock appreciation rights relating to incentive stock options,
the holder may not receive an amount in excess of the maximum amount that will
enable such option to continue to qualify as an incentive stock option.
13. Amendment and Termination of Plan.
The Plan may be amended by the Board of Directors of the Company in any
respect, provided that, without stockholder approval, no amendment (other than
pursuant to Section 11 of the Plan) shall increase the maximum number of shares
available for issuance under the Plan. In addition, no amendment may impair the
rights of a participant under any stock option, stock appreciation right,
restricted stock award or performance award previously granted under the Plan
without the consent of such participant, unless required by law. The Plan may
also be terminated at any time by the Board of Directors. No further grants may
be made under the Plan after termination, but termination shall not affect the
rights of any participant under, or the authority of the Committee with respect
to, any grants or awards made prior to termination.
14. Prior Plan.
Upon the effectiveness of this Plan, no further grants shall be made under
the Inland 1992 Incentive Stock Plan. The discontinuance of the Inland 1992
Incentive Stock Plan shall not affect the rights of any participant under, or
the authority of the Committee (therein referred to) with respect to, any grants
or awards made thereunder prior to such discontinuance.
15. Miscellaneous.
(a) No Right to a Grant. Neither the adoption of the Plan nor any action
of the Board of Directors or of the Committee shall be deemed to give any
employee any right to be selected as a participant or to be granted a stock
option, stock appreciation right, restricted stock award or performance award.
(b) Rights as Stockholders. No person shall have any rights as a
stockholder of the Company with respect to any shares covered by a stock option,
stock appreciation right, or performance award until the date of the issuance of
a stock certificate to such person pursuant to such stock option, right or
award.
(c) Employment. Nothing contained in this Plan shall be deemed to confer
upon any employee any right of continued employment with the Company or any of
its subsidiaries or to limit or diminish in any way the right of the Company or
any such subsidiary to terminate his or her employment at any time with or
without cause.
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<PAGE>
(d) Taxes. The Company shall be entitled to deduct from any payment under
the Plan the amount of any tax required by law to be withheld with respect to
such payment or may require any participant to pay such amount to the Company
prior to and as a condition of making such payment. In addition, the Committee
may, in its discretion and subject to such rules as it may adopt from time to
time, permit a participant to elect to have the Company withhold from any
payment under the Plan (or to have the Company accept from the participant), for
tax withholding purposes, shares of common stock of the Company, valued at their
fair market value, but in no event shall the fair market value of the number of
shares so withheld (or accepted) exceed the amount necessary to meet the maximum
Federal, state and local marginal tax rates then in effect that are applicable
to the participant and to the particular transaction.
(e) Nontransferability. Except as permitted by the Committee, no stock
option, stock appreciation right, restricted stock award or performance award
shall be transferable except by will or the laws of descent and distribution,
and, during the holder's lifetime, stock options and stock appreciation rights
shall be exercisable only by, and shares subject to restricted stock awards and
payments pursuant to performance awards shall be delivered or made only to, such
holder or such holder's duly appointed legal representative.
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<PAGE>
EXHIBIT 10.R
January 28, 1998
Dear:
Inland Steel Industries, Inc. ("ISI") considers it essential to the best
interests of its stockholders to foster the continuous employment of key
management personnel of ISI and its subsidiaries (collectively, the "Company").
In this connection, the Board of Directors of ISI (the "Board") recognizes that,
as is the case with many publicly held corporations, the possibility of a change
in control may exist and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of ISI and its
stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Company. In order to induce you to
remain in the employ of the Company and in consideration of your agreement set
forth in Subsection 2(ii) hereof, ISI agrees that you shall receive the
severance benefits set forth in this letter agreement ("Agreement") in the event
your employment with the Company is terminated subsequent to a "change in
control of the Company" (as defined in Section 2 hereof) or in connection with a
"potential change in control of the Company" (as defined in Section 2 hereof)
under the circumstances described below. This Agreement shall constitute an
amendment and restatement of and shall supersede any prior agreement entered
into between you and ISI with respect to these matters. In the event that you
receive severance benefits hereunder, such benefits shall be in lieu of, and you
shall not be entitled to receive, any benefits or payments under any other
severance plan, policy or agreement of or with the Company. In addition, if you
are or become entitled to benefits from the Company pursuant to another
agreement providing for benefits on account of a change in control or the law of
a jurisdiction other than the United States or any state or territory thereof as
a result of an event for which benefits are payable to you pursuant to this
Agreement, the benefits paid to you pursuant to this Agreement shall be reduced
by the amount paid to you pursuant to such other agreement or law.
1. Term of Agreement. This Agreement shall commence on the date hereof
and shall continue in effect through December 31, 1998; provided, however, that
commencing on January 1, 1999 and each January 1 thereafter, the term of this
Agreement shall automatically be extended for
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Page 2
one additional year unless, during the preceding year but not later than June 30
of such preceding year, ISI shall have given notice that it does not wish to
extend this Agreement. Notwithstanding the preceding sentence: (i) if your
employer is a direct or indirect subsidiary of ISI, this Agreement shall
terminate on the date on which ISI ceases to own, directly or indirectly, at
least 80 percent of your employer for any reason which does not constitute a
change in control of the Company, and (ii) if a change in control of the Company
or a potential change in control of the Company shall have occurred during the
original or extended term of this Agreement, this Agreement shall continue in
effect for a period of twenty-four (24) months beyond the month in which such
change in control or potential change in control of the Company occurred unless
earlier terminated under clause (i) next above.
2. Change in Control; Potential Change in Control. (i) No benefits shall
be payable hereunder unless there shall have been a potential change in control
or a change in control of the Company, as set forth below. For purposes of this
Agreement, a "change in control of the Company" shall be deemed to have occurred
if:
(A) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
other than (w) the Company, (x) a trustee or other fiduciary holding voting
securities under an employee benefit plan of the Company, (y) an
underwriter temporarily holding voting securities pursuant to an offering
of such securities, or (z) a corporation owned, directly or indirectly, by
the securityholders of ISI in substantially the same proportions as their
ownership of voting securities of ISI, is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of voting securities of ISI (not including in the voting securities
beneficially owned by such person any voting securities acquired directly
from ISI or its affiliates) representing 40% or more of the combined voting
power of ISI's then outstanding voting securities;
(B) during any period of two consecutive years (not including any
period prior to the execution of this Agreement), individuals who at the
beginning of such period constitute the Board and any new director (other
than a director designated by a person who has entered into an agreement
with ISI to effect a transaction described in clauses (A), (C) or (D) of
this Subsection 2(i)) whose election by the Board or nomination for
election by ISI's securityholders was approved by a vote of at least two-
thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination
for election was previously so approved ("Continuing Directors"), cease for
any reason to constitute a majority thereof;
(C) the holders of voting securities of ISI approve a merger or
consolidation of ISI with any other corporation, other than a merger or
consolidation which would result in the voting securities of ISI
outstanding immediately prior thereto continuing to represent (either
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Page 3
by remaining outstanding or by being converted into voting securities of
the surviving entity), in combination with the ownership of any trustee or
other fiduciary holding voting securities under an employee benefit plan of
the Company, at least 60% of the combined voting power of the voting
securities of ISI or such surviving entity outstanding immediately after
such merger or consolidation, or a merger or consolidation effected to
implement a recapitalization of ISI (or similar transaction) in which no
person acquires more than 50% of the combined voting power of ISI's then
outstanding voting securities;
(D) the holders of voting securities of ISI approve a plan of complete
liquidation of ISI or an agreement for the sale or disposition by ISI of
all or substantially all of ISI's assets; or
(E) there occurs:
(x) a sale or disposition, directly or indirectly, other than
to a person described in subclause (w), (x) or (z) of clause (A) of
this Subsection 2(i), of voting securities of your employer, any
direct or indirect parent company of your employer or any company that
is a subsidiary of your employer and is also a significant subsidiary
(as defined below) of ISI (your employer and such a parent or
subsidiary being a "Related Company"), representing 50% or more of the
combined voting power of the securities of such Related Company then
outstanding;
(y) a merger or consolidation of a Related Company with any
other corporation, other than:
(1) a merger or consolidation which would result in the
voting securities of the Related Company outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any
trustee or other fiduciary holding voting securities under an
employee benefit plan of the Company, at least 60% of the
combined voting power of the voting securities of the Related
Company or such surviving entity outstanding immediately after
such merger or consolidation;
(2) a merger or consolidation effected to implement a
recapitalization of the Related Company (or similar transaction)
in which no person acquires more than 50% of the combined voting
power of the Related Company's then outstanding voting
securities; or
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Page 4
(3) a merger or consolidation which would result in 50% or
more of the combined voting power of the surviving company being
beneficially owned by ISI or by a majority owned direct or
indirect subsidiary of ISI; or
(z) the sale or disposition of all or substantially all the
assets of a Related Company to a person other than ISI or a majority
owned direct or indirect subsidiary of ISI.
Notwithstanding any other provision of this Agreement, no change in control of
the Company shall be deemed to have occurred under this Subsection 2(i) if (I)
such transaction includes or involves a sale to the public or a distribution to
the stockholders of ISI of more than 50% of the voting securities of your
employer or a direct or indirect parent of your employer, and (II) your employer
or a direct or indirect parent of your employer agrees to become a successor to
ISI under this Agreement or you are covered by an agreement providing for
benefits upon a change in control of your employer following an event described
in clause (E). For purposes of this Agreement, the term "significant subsidiary"
has the meaning given to such term under Rule 405 of the Securities Act of 1933,
as amended.
(ii) For purposes of this Agreement, a "potential change in control of the
Company" shall be deemed to have occurred if:
(A) ISI enters into an agreement, the consummation of which would
result in the occurrence of a change in control of the Company;
(B) any person (including ISI) publicly announces an intention to
take or to consider taking actions which if consummated would constitute a
change in control of the Company;
(C) any person, other than (w) the Company, (x) a trustee or other
fiduciary holding voting securities under an employee benefit plan of the
Company, (y) an underwriter temporarily holding voting securities pursuant
to an offering of such securities, or (z) a corporation owned, directly or
indirectly, by the securityholders of ISI in substantially the same
proportions as their ownership of voting securities of ISI, who is or
becomes the beneficial owner, directly or indirectly, of voting securities
of ISI representing 9.5% or more of the combined voting power of ISI's then
outstanding voting securities, increases his beneficial ownership of such
securities by 5% or more over the percentage so owned by such person on the
date hereof; or
(D) the Board adopts a resolution to the effect that, for purposes of
this Agreement, a potential change in control of the Company has occurred.
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Page 5
You agree that, subject to the terms and conditions of this Agreement, in the
event of a potential change in control of the Company, you will remain in the
employ of the Company until the earliest of (i) a date which is six (6) months
from the occurrence of such potential change in control of the Company, (ii) the
termination by you of your employment by reason of Disability or Retirement, as
defined in Subsection 3(i), or (iii) the occurrence of a change in control of
the Company. If your employment is terminated by the Company without Cause (as
defined in Subsection 3(ii) below) coincident with or prior to a change in
control of the Company and within twelve (12) months after the occurrence of a
potential change in control of the Company and a change in control of the
Company occurs within six (6) months after such termination, you shall be
entitled to the compensation and benefits hereunder as if your termination of
employment without Cause followed a change in control of the Company; provided,
however, that no benefits shall be payable under this sentence if prior to the
change in control of the Company, ISI ceased to own, directly or indirectly, at
least 80% of the voting securities of your employer.
(iii) The foregoing to the contrary notwithstanding, a change in control
of the Company shall not be deemed to have occurred with respect to you if:
(A) the event first giving rise to the potential change in control of
the Company involves a publicly announced transaction or publicly announced
proposed transaction which at the time of the announcement has not been
previously approved by the Board and you are "part of a purchasing group"
(as defined below) proposing the transaction;
(B) you are part of a purchasing group which consummates the change
in control transaction; or
(C) the change in control of the Company would otherwise occur under
Subsection 2(i)(D) due to the sale of a significant subsidiary, which
significant subsidiary constitutes all or substantially all of the assets
of ISI and you are not employed by ISI or the significant subsidiary which
is the subject of the transaction.
For purposes of this Agreement, you shall be deemed "part of a purchasing group"
if you are an equity participant or have agreed to become an equity participant
in the purchasing company or group (except for (A) passive ownership of less
than 1% of the stock of the purchasing company or (B) ownership of equity
participation in the purchasing company or group which is otherwise not deemed
to be significant, as determined prior to the change in control of the Company
by a majority of the non-employee Continuing Directors).
3. Termination Following Change in Control. If a change in control of the
Company, as defined in Section 2 hereof, shall have occurred, you shall be
entitled to the benefits provided in Subsection 4(iii) hereof upon the
subsequent termination of your employment during the term of this
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Page 6
Agreement unless such termination is (A) because of your death, Disability or
Retirement, (B) by the Company for Cause, or (C) by you other than for Good
Reason.
(i) Disability; Retirement. If, as a result of your incapacity due to
physical or mental illness, you shall have been absent from the full-time
performance of your duties with the Company for six (6) consecutive months, and
within thirty (30) days after written notice of termination is given you shall
not have returned to the full-time performance of your duties, your employment
may be terminated for "Disability". Termination by the Company or you of your
employment based on "Retirement" shall mean termination on or after your normal
retirement age in accordance with the Company's retirement policy generally
applicable to its salaried employees or in accordance with any retirement
arrangement established with your consent with respect to you.
(ii) Cause. Termination by the Company of your employment for "Cause"
shall mean termination upon (A) the willful and continued failure by you to
substantially perform your duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental illness or any such
actual or anticipated failure after the issuance of a Notice of Termination by
you for Good Reason as defined in Subsections 3(iv) and 3(iii), respectively)
after a written demand for substantial performance is delivered to you by the
Board, which demand specifically identifies the manner in which the Board
believes that you have not substantially performed your duties, or (B) the
willful engaging by you in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise. For purposes of this
Subsection 3(ii), no act, or failure to act, on your part shall be deemed
"willful" unless done, or omitted to be done, by you not in good faith and
without reasonable belief that your action or omission was in the best interest
of the Company. Notwithstanding the foregoing, you shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
you a copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a meeting of the
Board called and held for such purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the Board),
finding that in the good faith opinion of the Board you were guilty of conduct
set forth above in clauses (A) or (B) of the first sentence of this Subsection
3(ii) and specifying the particulars thereof in detail.
(iii) Good Reason. You shall be entitled to terminate your employment for
Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without
your express written consent, the occurrence after a change in control of the
Company of any of the following circumstances unless, in the case of paragraphs
(A), (E), (F), (G) or (H), such circumstances are fully corrected prior to the
Date of Termination specified in the Notice of Termination, as defined in
Subsections 3(v) and 3(iv), respectively, given in respect thereof:
(A) the assignment to you of any duties inconsistent with your status
as an executive officer of the Company or a substantial adverse alteration
in the nature or status of your responsibilities from those in effect
immediately prior to the change in control of the Company
<PAGE>
Page 7
other than any such alteration primarily attributable to the fact that the
Company may no longer be a public company;
(B) a reduction by the Company in your annual base salary as in
effect on the date hereof or as the same may be increased from time to
time;
(C) the Company's requiring that your principal place of business be
at an office located more than 50 miles from where your principal place of
business is located immediately prior to the change in control of the
Company, except for required travel on the Company's business to an extent
substantially consistent with your business travel obligations immediately
prior to the change in control of the Company;
(D) the failure by the Company, without your consent, to pay to you
any portion of your current compensation, or to pay to you any portion of
an installment of deferred compensation under any deferred compensation
program of the Company, within seven (7) days of the date such compensation
is due;
(E) the failure by the Company to continue in effect any compensation
plan in which you participate immediately prior to the change in control of
the Company which is material to your total compensation, including but not
limited to the Inland Annual Incentive Plan (the "Annual Incentive Plan"),
Inland Special Achievement Award Plan, Inland 1986 Employee Stock Purchase
Plan, Inland 1995 Incentive Stock Plan, Inland Steel Industries
Supplemental Retirement Benefit Plan for Covered Employees (the
"Supplemental Plan"), Inland Steel Industries Special Retirement Benefit
Plan for Covered Employees (the "Special Benefit Plan"), Inland Steel
Industries Nonqualified Thrift Plan (the "Nonqualified Thrift Plan"),
Inland Steel Industries Pension Plan (the "Pension Plan") and Inland Steel
Industries Thrift Plan (the "Thrift Plan") or any substitute plans adopted
prior to the change in control, unless an equitable arrangement (embodied
in an ongoing substitute or alternative plan) has been made with respect to
such plan, or the failure by the Company to continue your participation
therein (or in such substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amount of benefits provided
and the level of your participation relative to other participants, as
existed at the time of the change in control;
(F) the failure by the Company to continue to provide you with
benefits substantially similar to those enjoyed by you under any of the
Company's pension, life insurance, medical, health and accident, flexible
spending or disability plans or programs in which you were participating at
the time of the change in control of the Company, the taking of any action
by the Company which would directly or indirectly materially reduce any of
such benefits or deprive you of any material fringe benefit enjoyed by you
at the time of the change in control of the Company, or the failure by the
Company to provide you with the number of paid vacation days to which you
are entitled on the basis of years of service with the Company in
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Page 8
accordance with the Company's normal vacation policy in effect at the time
of the change in control of the Company;
(G) the failure of ISI to obtain a satisfactory agreement from any
successor to assume and agree to perform this Agreement, as contemplated in
Section 5 hereof; or
(H) any purported termination of your employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of
Subsection 3(iv) below (and, if applicable, the requirements of Subsection
3(ii) above); for purposes of this Agreement, no such purported termination
shall be effective.
Your right to terminate your employment pursuant to this Section 3 shall not be
affected by your incapacity due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder.
(iv) Notice of Termination. Any purported termination of your employment
by the Company or by you shall be communicated by written Notice of Termination
to the other party hereto in accordance with Section 6 hereof. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the provision so
indicated.
(v) Date of Termination, Etc. "Date of Termination" shall mean (A) if
your employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the full-time
performance of your duties during such thirty (30) day period), and (B) if your
employment is terminated pursuant to Subsection 3(ii) or 3(iii) above or for any
other reason (other than Disability), the date specified in the Notice of
Termination (which, in the case of a termination pursuant to Subsection 3(ii)
above shall not be less than thirty (30) days, and in the case of a termination
pursuant to Subsection 3(iii) above shall not be less than fifteen (15) nor more
than sixty (60) days, respectively, from the date such Notice of Termination is
given); provided that if within fifteen (15) days after any Notice of
Termination is given, or, if later, prior to the Date of Termination (as
determined without regard to this proviso), the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, by a
binding arbitration award, or by a final judgment, order or decree of a court of
competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected) but
shall be deemed to be within the twenty-four (24) month period following a
change in control of the Company; provided further that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute,
the Company will continue to pay you your full
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Page 9
compensation in effect when the notice giving rise to the dispute was given
(including, but not limited to, base salary) and continue you as a participant
in all compensation, benefit and insurance plans and programs in which you were
participating when the notice giving rise to the dispute was given, until the
dispute is finally resolved in accordance with this Subsection 3(v). Amounts
paid under this Subsection 3(v) are in addition to all other amounts due under
this Agreement and shall not be offset against or reduce any other amounts due
under this Agreement.
4. Compensation Upon Termination or During Disability. Following a change
in control of the Company, as defined by Subsection 2(i), upon termination of
your employment or during a period of Disability you shall be entitled to the
following benefits:
(i) During any period that you fail to perform your full-time duties with
the Company as a result of incapacity due to physical or mental illness, you
shall continue to receive your base salary at the rate in effect at the
commencement of any such period, together with all compensation payable to you
under the Pension Plan, Supplemental Plan, Special Benefit Plan, Annual
Incentive Plan, Thrift Plan and Nonqualified Thrift Plan (or, if and to the
extent applicable, the Ryerson Tull Pension Plan (the "RT Pension Plan"), the
Ryerson Tull Inc. Supplemental Retirement Benefit Plan for Covered Employees
(the "RT Supplemental Plan") and the Ryerson Tull Nonqualified Savings Plan (the
"RT Nonqualified Plan")) during such period, until this Agreement is terminated
pursuant to Subsection 3(i) hereof. Thereafter, in the event your employment
shall be terminated, your benefits shall be determined under the Company's
retirement, insurance and other compensation plans and programs then in effect
in accordance with the terms of such plans and programs.
(ii) If your employment shall be terminated by the Company for Cause or by
you other than for Good Reason, Disability, death or Retirement, the Company
shall pay you your full base salary through the Date of Termination at the rate
in effect at the time Notice of Termination is given, plus all other amounts to
which you are entitled under any compensation plan of the Company at the time
such payments are due, and the Company shall have no further obligations to you
under this Agreement.
(iii) If your employment by the Company shall be terminated (a) by the
Company other than for Cause, Retirement or Disability, or (b) by you for Good
Reason, then you shall be entitled to the compensation and benefits provided
below:
(A) The Company shall pay you your full base salary through the Date
of Termination at the rate in effect at the time Notice of Termination is
given, plus all other amounts to which you are entitled under any
compensation plan or program of the Company, at the time such payments are
due, except as otherwise provided below.
(B) In lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as severance
pay to you a lump sum severance
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Page 10
payment (together with the payments provided in paragraphs C, D and E
below, the "Severance Payments") equal to three times the sum of (x) your
annual base salary in effect immediately prior to the occurrence of the
circumstance giving rise to the Notice of Termination given in respect
thereof, and (y) the average annual amount of the Award paid to you
pursuant to the Annual Incentive Plan or similar successor plan with
respect to the five years immediately preceding that in which the Date of
Termination occurs, such average annual amount being calculated by
aggregating all such Awards paid with respect to such five years and
dividing such aggregate amount by the number of years for which such an
Award was actually paid to you.
(C) Notwithstanding any provision of the Annual Incentive Plan and
the Inland Special Achievement Award Plan, the Company shall pay to you a
lump sum amount equal to the sum of (x) any incentive compensation which
has been allocated or awarded to you for a completed fiscal year or other
measuring period preceding the Date of Termination but has not yet been
paid, and (y) a pro rata portion to the Date of Termination for the current
fiscal year or other measuring period of the amount equal to the Target
Award percentage applicable to you under the Annual Incentive Plan or
similar successor plan on the Date of Termination times your annual base
salary then in effect.
(D) In lieu of shares of common stock of ISI ("ISI Shares") issuable
upon exercise of outstanding stock options ("Options") granted to you under
ISI's stock option plans (which Options shall be cancelled upon the making
of the payment referred to below), you shall receive an amount in cash
equal to the product of (i) the excess of (x) in the case of incentive
stock options (as defined in section 422A of the Internal Revenue Code of
1986, as amended (the "Code")) ("ISOs") granted after March 27, 1996, the
closing price of ISI's shares as reported on the New York Stock Exchange
Composite Transactions on or nearest the Date of Termination, or, in the
case of all other Options, the Change in Control Price (as defined below),
over (y) the per share exercise price of each Option then held by you
(whether or not then fully exercisable), times (ii) the number of ISI
Shares covered by each such Option. For purposes of this Agreement, the
"Change in Control Price" means: (1) with respect to a merger or
consolidation of ISI described in Subsection 2(i)(C) in which the
consideration per share of ISI's common stock to be paid for the
acquisition of shares of common stock specified in the agreement of merger
or consolidation is all in cash, the highest such consideration per share;
(2) with respect to a change in control of the Company by reason of an
acquisition of voting securities described in Subsection 2(i)(A), the
highest price per share for any share of ISI's common stock paid by any
holder of any of the securities representing 40% or more of the combined
voting power of ISI giving rise to the change in control of the Company;
and (3) with respect to a change in control of the Company by reason of a
merger or consolidation of ISI (other than a merger or consolidation
described in Clause (1) next above), stockholder approval of an agreement
or plan described in Subsection 2(i)(D), a change in the composition of the
Board described in Subsection 2(i)(B) or a change in control
<PAGE>
Page 11
of the Company pursuant to Subsection 2(i)(E) (relating to mergers,
consolidations and sales of securities or assets of a Related Company), the
highest price per share of common stock reported on the New York Stock
Exchange Composite Transactions (or, if such shares are not traded on the
New York Stock Exchange, such other principal market on which such shares
are traded) during the sixty (60) day period ending on the date the change
in control of the Company occurs.
(E) To the extent not otherwise vested in accordance with the terms
and conditions of the Inland 1995 Incentive Stock Plan, you shall be fully
vested in any restricted shares issued thereunder and be fully vested in
any performance shares that you would have earned under the 1995 Incentive
Stock Plan for the calendar year in which the change in control of the
Company occurs had the applicable performance targets for such calendar
year been satisfied with respect to such shares.
(F) The Company shall also pay to you all legal fees and expenses
incurred by you as a result of such termination (including all such fees
and expenses, if any, incurred in contesting or disputing any such
termination or in seeking to obtain or enforce any right or benefit
provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of Section 4999 of
the Code to any payment or benefit provided hereunder). Such payments
shall be made at the later of the times specified in paragraph (J) below,
or within five (5) days after your request for payment accompanied with
such evidence of fees and expenses incurred as the Company reasonably may
require.
(G) In the event that you become entitled to any payments provided
for hereinabove (the "Contract Payments"), if the Contract Payments or
other portion of the Total Payments (as defined below) will be subject to
the tax (the "Excise Tax") imposed by Section 4999 of the Code, the Company
shall pay to you, no later than the fifth day following the Date of
Termination, an additional amount (the "Gross-Up Payment") such that the
net amount retained by you, after deduction of any Excise Tax on the
Contract Payments and such other Total Payments and any federal and state
and local income and other payroll taxes and Excise Tax upon the payment
provided for by this paragraph (G), shall be equal to the Contract Payments
and such other Total Payments.
(H) For purposes of determining whether any of the payments will be
subject to the Excise Tax and the amount of such Excise Tax, (i) any other
payments or benefits received or to be received by you in connection with a
change in control of the Company or your termination of employment (whether
pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any person whose actions result in a change in
control or any person affiliated with the Company or such person) payable
pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any person whose actions result in a change in
control or any person affiliated with
<PAGE>
Page 12
the Company or such person (together with the Contract Payments, the "Total
Payments"), shall be treated as "parachute payments" within the meaning of
Section 280G(b)(2) of the Code and all "excess parachute payments" within
the meaning of Section 280G(b)(l) of the Code shall be treated as subject
to the Excise Tax unless in the opinion of tax counsel selected by ISI's
independent auditors and reasonably acceptable to you, such other payments
or benefits (in whole or in part) do not constitute parachute payments,
including by reason of Section 280G(b)(4)(A) of the Code or such excess
parachute payments (in whole or in part) represent reasonable compensation
for services actually rendered within the meaning of Section 280G(b)(4)(B)
of the Code in excess of the base amount allocable to such reasonable
compensation within the meaning of Section 280G(b)(3) of the Code, or are
otherwise not subject to the Excise Tax, (ii) the amount of the Total
Payments which shall be treated as subject to the Excise Tax shall be equal
to the lesser of (A) the amount of the Total Payments or (B) the amount of
excess parachute payments within the meaning of Section 280G(b)(l) of the
Code (after applying clause (i) above), and (iii) the value of any noncash
benefits or any deferred payment or benefit shall be determined by ISI's
independent auditors in accordance with the principles of Sections
280G(d)(3) and (4) of the Code. For purposes of determining the amount of
the Gross-Up Payment, you shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation in the calendar year
in which the Gross-Up Payment is to be made and state and local income
taxes at the highest marginal rate of taxation in the state and locality of
your residence on the Date of Termination, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state
and local taxes.
(I) In the event that the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder at the time of
termination of your employment, you shall repay to the Company at the time
that the amount of such reduction in Excise Tax is finally determined the
portion of the Gross-Up Payment attributable to such reduction (plus the
portion of the Gross-Up Payment attributable to the Excise Tax and federal
and state and local income tax imposed on the Gross-Up Payment being repaid
by you if such repayment results in a reduction in Excise Tax and/or a
federal and state and local income tax deduction) plus interest on the
amount of such repayment at the rate provided in Section 1274(b)(2)(B) of
the Code. In the event that the Excise Tax is determined to exceed the
amount taken into account hereunder at the time of the termination of your
employment (including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional gross-up payment in respect of such excess
(plus any interest payable with respect to such excess) at the time that
the amount of such excess is finally determined.
(J) The payments provided for in paragraphs (B), (C), (D) and (E)
above, shall be made not later than the fifth day following the Date of
Termination, provided, however, that if the amounts of such payments cannot
be finally determined on or before such day, the
<PAGE>
Page 13
Company shall pay to you on such day an estimate, as determined in good
faith by the Company, of the minimum amount of such payments and shall pay
the remainder of such payments (together with interest at the rate provided
in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth day after the Date of
Termination. In the event that the amount of the estimated payments exceeds
the amount subsequently determined to have been due, such excess shall
constitute a loan by the Company to you payable on the fifth day after
demand by the Company (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code).
(iv) If your employment shall be terminated (A) by the Company other than
for Cause, Retirement or Disability or (B) by you for Good Reason, then for a
thirty-six (36) month period after such termination, the Company shall arrange
to provide you with: (1) life, disability, accident and health insurance
benefits substantially similar to those which you are receiving immediately
prior to the Notice of Termination, (2) financial advisory services similar to
those provided currently to executives of the Company by Ayco Corporation, and
(3) outplacement services. Benefits otherwise receivable by you pursuant to
this Subsection 4(iv) shall be reduced to the extent comparable benefits are
actually received by you during the thirty-six (36) month period following your
termination, and any such benefits actually received by you shall be reported to
the Company. Any rights that you have to continuation of life, disability,
accident or health coverage under applicable state or federal law shall be in
addition to those provided under this Agreement.
(v) If your employment shall be terminated (A) by the Company other than
for Cause, Retirement or Disability or (B) by you for Good Reason, then in
addition to the retirement benefits to which you are entitled under the Pension
Plan, Supplemental Plan or Special Benefit Plan (and, if and to the extent
applicable, the RT Pension Plan and the RT Supplemental Plan) or any successor
plans thereto, the Company shall pay you in cash at the time and in the manner
provided in paragraph (J) of Subsection 4(iii), a lump sum equal to the excess
of (x) the actuarial equivalent of the retirement pension (taking into account
any early retirement subsidy associated therewith and determined as a straight
life annuity commencing at age sixty-five (65) or any earlier date, but in no
event earlier than the second anniversary of the Date of Termination whichever
annuity yields a greater benefit) which you would have accrued under the terms
of the Pension Plan, Supplemental Plan or Special Benefit Plan, without regard
to any amendments to any such plans made subsequent to a change in control of
the Company and on or prior to the Date of Termination, which amendment
adversely affects in any manner the computation of retirement benefits
thereunder), determined as if you were fully vested thereunder and had
accumulated (after the Date of Termination) thirty-six (36) additional months of
age and service credit thereunder at the higher of the rate of average
compensation during the twelve (12) months prior to the change in control of the
Company or the rate of average compensation used to calculate your benefits
under such plans immediately preceding the Date of Termination, over (y) the
actuarial equivalent of the retirement pension (taking into account any early
retirement subsidy associated therewith and determined as a straight life
annuity commencing at age sixty-five (65) or any earlier date, but in no event
earlier than the Date of Termination whichever annuity yields a
<PAGE>
Page 14
greater benefit) which you had then accrued pursuant to the provisions of the
Pension Plan, the Supplemental Plan and the Special Benefit Plan. For purposes
of this Subsection 4(v), "actuarial equivalent" shall be determined using the
same assumptions utilized under the Pension Plan for purposes of determining
alternative forms of benefits immediately prior to the change in control of the
Company.
(vi) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or otherwise, nor
shall the amount of any payment or benefit provided for in this Section 4 be
reduced by any compensation earned by you as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by you to the Company, or otherwise, except as provided in Subsection
4(iv).
(vii) In addition to all other amounts payable to you under this Section
4, you shall be entitled to receive all benefits payable to you under the
Pension Plan, the Thrift Plan, Supplemental Plan, Special Benefit Plan,
Nonqualified Thrift Plan and any other plan or agreement relating to retirement
benefits.
5. Successors; Binding Agreement. (i) ISI will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of ISI to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that ISI or the Company would be required to perform it if no such
succession had taken place. Failure of ISI to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach of
this Agreement and shall entitle you to compensation from the Company in the
same amount and on the same terms as you would be entitled to hereunder if you
terminate your employment for Good Reason following a change in control of the
Company, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. In the event a successor of ISI assumes and agrees to perform this
Agreement, by operation of law or otherwise, the term "ISI", as used in this
Agreement, shall mean such successor and the term "Company" shall mean,
collectively, such successor and the affiliates of such successor.
(ii) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or, if there
is no such designee, to your estate.
6. Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notice to the
<PAGE>
Page 15
Company shall be directed to the attention of the Board with a copy to the
Secretary of ISI, or to such other address as either party may have furnished to
the other in writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.
7. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by you and such officer as may be specifically designated by
the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Illinois. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder shall be paid
net of any applicable withholding required under federal, state or local law.
The obligations of ISI and the Company under Section 4 shall survive the
expiration of the term of this Agreement.
8. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
10. Settlement of Disputes; Arbitration. All claims by you for benefits
under this Agreement shall be directed to and determined by the Board and shall
be in writing. Any denial by the Board of a claim for benefits under this
Agreement shall be delivered to you in writing and shall set forth the specific
reasons for the denial and the specific provisions of this Agreement relied
upon. The Board shall afford a reasonable opportunity to you for a review of
the decision denying a claim and shall further allow you to appeal to the Board
a decision of the Board within sixty (60) days after notification by the Board
that your claim has been denied. Any further dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
arbitration in Chicago, Illinois, in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that you
shall be entitled to seek specific performance of your right to be paid until
the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
<PAGE>
Page 16
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to ISI the enclosed copy of this letter which will then
constitute our agreement on this subject.
Sincerely,
INLAND STEEL INDUSTRIES, INC.
By ____________________________________________
Vice President
Agreed to this ________ day
of ________________________, 1998.
________________________________________ (Signature)
<PAGE>
Exhibit 10.S.(1)
RYERSON TULL
DIRECTORS' COMPENSATION PLAN
----------------------------
SECTION 1
---------
General
-------
1.1 Purpose and Effective Date. The Ryerson Tull Directors' Compensation
Plan (the "Plan") has been established by Ryerson Tull, Inc. (the "Company") to
provide an alternative method of compensating those directors of the Company who
do not otherwise receive compensation as employees of the Company or its
affiliates in order to aid the Company in attracting and retaining as directors
persons whose abilities, experience and judgment can contribute to the continued
progress of the Company and to facilitate the directors' ability to acquire a
proprietary interest in the Company. The Plan shall be effective upon the
consummation of the initial public offering of Class A Common Stock, $1.00 par
value per share, of the Company ("Stock"), which date shall be the "Effective
Date" of the Plan as set forth herein.
1.2 Participation. Only Non-Employee Directors of the Company shall be
eligible to participate in the Plan. As of any applicable date, a "Non-Employee
Director" is a person who is serving as a director of the Company who is not an
employee of the Company or any affiliate of the Company as of that date.
1.3 Administration. The authority to manage and control the operation and
administration of the Plan shall be vested in a committee of the Board of
Directors of the Company (the "Board") which committee (the "Committee") shall
have such authorities as delegated to it from time to time by the Board. Subject
to the limitations of the Plan and any limitations on authorities imposed on the
Committee by the Board, the Committee shall have the sole and complete authority
to:
<PAGE>
(a) interpret the Plan and to adopt, amend and rescind administrative
guidelines and other rules and regulations relating to the Plan;
(b) correct any defect or omission and reconcile any inconsistency in the
Plan or in any payment made hereunder; and
(c) to make all other determinations and take all other actions necessary
or advisable for the implementation and administration of the Plan.
The Committee's determinations on matters within its control shall be conclusive
and binding on the Company and all other persons. Notwithstanding the
foregoing, no member of the Committee shall act with respect to the
administration of the Plan in a manner inconsistent with the exempt status of
the Plan under Rule 16b-3 promulgated under the Securities Exchange Act of 1934,
as amended ("Rule 16b-3") as then in effect.
1.4 Shares Subject to the Plan. The shares of Stock which shall be
available for distribution pursuant to the Plan shall be either authorized and
unissued shares or treasury shares (including, in the discretion of the Company,
shares purchased in the open market). The number of shares of Stock to be
distributed pursuant to Non-Employee Directors' elections to receive shares of
Stock in lieu of Cash Retainers (as described in subsection 2.1) shall be
determined in accordance with Section 2. The number of shares of Stock to be
distributed pursuant to Non-Employee Directors' Deferral Elections (as described
in Section 3) shall be determined in accordance with Section 3. The aggregate
number of shares of Stock which are available for issuance under the Plan shall
be 100,000; provided, however, that:
(a) in the event of any merger, consolidation, reorganization,
recapitalization, spinoff, stock dividend, stock split, reverse stock
split, rights offering, exchange or other change in the corporate
structure or capitalization of the Company affecting the Stock, the
number and kind of shares of Stock available for awards under the Plan
shall be equitably
-2-
<PAGE>
adjusted in such manner as the Committee shall determine in its sole
judgment;
(b) in determining what adjustment, if any, is appropriate pursuant to
paragraph (a), the Committee may rely on the advice of such experts as
it deems appropriate, including counsel, investment bankers and the
accountants of the Company; and
(c) no fractional shares shall be granted or authorized pursuant to any
adjustment pursuant to paragraph (a), although cash payments may be
authorized in lieu of fractional shares that may otherwise result from
such an equitable adjustment.
Except to the extent otherwise determined by the Committee, any shares of Stock
issued pursuant to subsection 2.1 that terminate without vesting, shall become
available for future awards of Stock under the Plan.
1.5 Compliance with Applicable Laws. Notwithstanding any other provision
of the Plan, the Company shall have no obligation to deliver any shares of Stock
under the Plan unless such delivery would comply with all applicable laws and
the applicable requirements of any securities exchange or similar entity. Prior
to the delivery of any shares of Stock under the Plan, the Company may require a
written statement that the recipient is acquiring the shares for investment and
not for the purpose or with the intention of distributing the shares. If the
redistribution of shares is restricted pursuant to this subsection 1.5, the
certificates representing such shares may bear a legend referring to such
restrictions.
1.6 Director and Shareholder Status. The Plan will not give any person
the right to continue as a director of the Company, or any right or claim to any
benefits under the Plan unless such right or claim to any benefits has
specifically accrued under the terms of the Plan. Participation in the Plan and
any right to accrued benefits shall not create any rights in a director (or any
other person) as a shareholder of the Company until shares of Stock are
registered in the name of the director (or such other person).
-3-
<PAGE>
1.7 Definition of Fair Market Value. The "Fair Market Value" of a share
of Stock on any date shall be equal to the average of the high and low prices of
a share of Stock reported on the New York Stock Exchange Composite Transactions
for the applicable date or, if there are no such reported trades for such date,
for the last previous date for which trades were reported.
1.8 Source of Payments. Except for Stock actually delivered pursuant to
the Plan, the Plan constitutes only an unfunded, unsecured promise of the
Company to make payments or awards to directors (or other persons) or deliver
Stock in the future in accordance with the terms of the Plan.
1.9 Nonassignment. Neither a director's nor any other person's rights to
payments or awards under the Plan are subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment or
garnishment by creditors of the director.
1.10. Elections. Any notice or document required to be filed with the
Committee under the Plan will be properly filed if delivered or mailed by
registered mail, postage prepaid, to the Committee, in care of the Company, at
the Company's principal executive offices. The Committee may, by advance
written notice to affected persons, revise such notice procedure from time to
time. Any notice required under the Plan may be waived by the person entitled
thereto.
SECTION 2
---------
Payment of Retainer; Election
to Receive Stock in Lieu of Retainer
------------------------------------
2.1 Payment of Retainer. Subject to the terms and conditions of the Plan,
for each Award Year (as defined below), each individual who is a Non-Employee
Director during such Award Year shall be paid a retainer in an amount determined
from time to time by the Board (the "Retainer") in accordance with and subject
to the following:
-4-
<PAGE>
(a) For each Award Year, a "Cash Retainer" shall be payable to each
individual who is a Non-Employee Director during such Award Year,
subject to the following:
(i) The amount of the Cash Retainer payable to a Non-Employee
Director for any Award Year shall be one-half of the Retainer for
the Award Year and shall be paid in quarterly installments on the
last day of each Fiscal Quarter (as defined below), beginning
with the last day of the Fiscal Quarter in which the first day of
the Award Year occurs and ending with the earlier of (A) the last
day of the Fiscal Quarter in which the Non-Employee Director's
service as a Non-Employee Director terminates for any reason, or
(B) the last day of the first Fiscal Quarter ending after the
last day of the Award Year.
(ii) The amount of each quarterly installment of the Cash Retainer for
an Award Year payable to a Non-Employee Director shall be equal
to the product of (A) the Cash Retainer, multiplied by (B) a
fraction, the numerator of which is the number of months, or any
portion thereof, during such Fiscal Quarter during which the
individual served as a Non-Employee Director, and the denominator
of which is twelve.
(b) For each Award Year, a "Stock Retainer" shall be payable to each
individual who is a Non-Employee Director during such Award Year,
subject to the following:
(i) The amount of the Stock Retainer payable to a Non-Employee
Director for an Award Year shall be equal to the product of (A)
one-half of the Retainer for the Award Year, multiplied by (B) a
fraction, the numerator of which is the number of months or any
portion thereof remaining in the Award Year as of the Issue
-5-
<PAGE>
Date (as defined below) and denominator of which is 12.
(ii) The Stock Retainer payable to a Non-Employee Director for any
Award Year shall be paid as of the Issue Date in the form of
shares of Class A Common Stock of the Company having a Fair
Market Value (determined as of the Issue Date) equal to the
amount of the Stock Retainer payable to the Non-Employee
Director for the Award Year, which shares shall be subject to
forfeiture and transfer restrictions until earned as described
in this paragraph (b) ("Restricted Stock").
(iii) The shares of Restricted Stock awarded to a Non-Employee
Director for an Award Year pursuant to this paragraph (b) shall
be earned by him or her and the restrictions on such shares
shall lapse in quarterly installments on the last day of each
Fiscal Quarter, beginning with the last day of the Fiscal
Quarter in which the first day of the Award Year occurs and
ending with the earlier of (A) the last day of the Fiscal
Quarter in which the Non-Employee Director's service as a Non-
Employee Director terminates for any reason, or (B) the last
day of the first Fiscal Quarter ending after the last day of
the Award Year. Any shares of Restricted Stock which are not
earned by a Non-Employee Director as of the last day of the
Fiscal Quarter in which his or her service as a Non-Employee
Director terminates shall be forfeited.
(iv) The number of shares of Restricted Stock for any Award Year
which are earned by a Non-Employee Director for any Fiscal
Quarter shall be equal to the product of (A) the total number
of shares of Restricted Stock awarded to him or her for the
Award Year, multiplied by (B) a fraction, the numerator of
which is the number
-6-
<PAGE>
of months, or any portion thereof, during such Fiscal Quarter
during which the individual served as a Non-Employee Director,
and the denominator of which is twelve. In the event that this
subparagraph (iv) results in a fractional share of Restricted
Stock being earned as of the last day of a Fiscal Quarter, the
Fair Market Value of any such fractional share shall be paid in
cash as soon as practicable after the last day of the Fiscal
Quarter.
For purposes of the Plan:
(1) The term "Fiscal Quarter" shall mean each calendar quarter ending
after the regular annual meeting of shareholders of the Company (an
"Annual Meeting") occurring in 1997.
(2) The term "Award Year" shall mean the 12-consecutive-month period
commencing as of the first day of the first calendar month following
the date of the Annual Meeting occurring in 1997 and each 12-
consecutive-month period commencing as of the first day of the first
calendar month following each Annual Meeting thereafter.
(3) The term "Issue Date" shall mean (A) in the case of an individual who
was a Non-Employee as of the first day of the Award Year, the first
day of the Award Year, or (B) in the case of an individual who becomes
a Non-Employee Director during the Award Year but after the first day
thereof, the first day of the month coincident with or next following
the date on which such individual first becomes a Non-Employee
Director.
Notwithstanding the foregoing, the Board, in its sole discretion, may determine
that an Award Year of less than 12 months is appropriate, in which case, the
amount of the Retainer for such Award Year and the period over which such
Retainer is paid or earned shall be equitably adjusted as determined by the
Board.
-7-
<PAGE>
2.2 Election to Receive Stock. Subject to the terms and conditions of the
Plan, each Non-Employee Director may elect to forego receipt of all or any
portion of the Cash Retainer otherwise payable to him or her following the
Effective Date and instead to receive whole shares of Stock of equivalent value
to the Retainer so foregone (determined in accordance with subsection 2.4). A
Non-Employee Director's election under this subsection 2.2 to have all or any
portion of his or her Cash Retainer paid in shares of Stock shall be valid only
if it is in writing, signed by the Non-Employee Director, and filed with the
Committee in accordance with uniform and nondiscriminatory rules adopted by the
Committee.
2.3 Revocation of Election to Receive Stock. Once effective, a Non-
Employee Director's election pursuant to subsection 2.2 to receive Stock in lieu
of his or her Cash Retainer shall remain in effect for successive calendar years
until it is revised or revoked. Any such revision or revocation shall be in
writing, signed by the Non-Employee Director and filed with the Committee and
shall be effective for the calendar year next following the date on which it is
received by the Committee, or such later date specified in such notice.
2.4 Equivalent Amount of Stock. The number of whole shares of Stock to be
distributed to any Non-Employee Director by reason of his or her election
pursuant to subsection 2.2 to receive Stock in lieu of his or her Cash Retainer
shall be equal to:
(a) the dollar amount of the Cash Retainer which the Non-Employee Director
has elected to have paid to him or her in shares of Stock;
DIVIDED BY
(b) the Fair Market Value of a share of Stock as of the date on which such
Cash Retainer (or portion thereof) would otherwise have been payable
to the Non-Employee Director. The Fair Market Value of any fractional
share shall be paid to the Non-Employee Director in cash.
-8-
<PAGE>
SECTION 3
---------
Deferral Elections
------------------
3.1 Deferrals. Subject to the terms and conditions of the Plan, each Non-
Employee Director may elect to defer the receipt of all or any portion of the
Retainer and Eligible Fees (as defined below) otherwise payable to or, in the
case of the Stock Retainer, earned by him or her, for periods on or after the
Effective Date. A Non-Employee Director may elect the deferral described in the
preceding sentence by filing a written "Deferral Election" with the Committee in
accordance with uniform and nondiscriminatory rules adopted by the Committee. A
Non-Employee Director's Deferral Election shall specify the portion of his or
her Retainer and Eligible Fees (including any portion of his or her Stock
Retainer or any portion of his or her Cash Retainer that he or she has elected
to receive in Stock pursuant to subsection 2.2) to be deferred and the future
date as of which distribution of the deferred amounts is to be made in
accordance with the terms and conditions of the Plan (the "Distribution Date").
If no Distribution Date is specified in a Non-Employee Director's Deferral
Election, the Distribution Date shall be deemed to be the first business day in
January of the year following the date on which the Non-Employee Director ceases
to be a director of the Company for any reason. A Non-Employee Director's
Deferral Election shall be effective with respect to the portion of his or her
Retainer and Eligible Fees otherwise payable to or, in the case of the Stock
Retainer, earned by him or her for services rendered after the last day of the
calendar year in which such election is filed with the Committee; provided,
however, that:
(a) a Deferral Election which is filed within 30 days of the date on which
a director first becomes a Non-Employee Director shall be effective
with respect to all Eligible Fees and Retainer otherwise payable to
or, in the case of the Stock Retainer, earned by him or her after the
date of the Deferral Election; and
(b) by notice filed with the Committee in accordance with uniform and
nondiscriminatory rules established by it,
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<PAGE>
a Non-Employee Director may terminate or modify any Deferral Election
as to his or her Retainer and Eligible Fees payable to or, with
respect to the Stock Retainer, earned by him or her for services
rendered after the last day of the calendar year in which such notice
is filed with the Committee; provided, however, that no modification
may be made to the Distribution Date unless the Non-Employee Director
shall file such notice with the Committee at least one year prior to
the Distribution Date.
Notwithstanding the provisions of paragraph (b) next above, the Committee may,
in its sole discretion, after considering all of the pertinent facts and
circumstances, approve a change to the Distribution Date which is requested by a
Non-Employee Director less than one year prior thereto. For purposes of the
Plan, the term "Eligible Fees" means the meeting fees, committee fees and
committee chair fees (and does not include any portion of the Retainer) that
would otherwise be payable to the Non-Employee Director by the Company as
established, from time to time, by the Board or any committee thereof.
3.2 Crediting and Adjustment of Deferred Amounts. The amount of any
Retainer and Eligible Fees deferred pursuant to subsection 3.1 ("Deferred
Compensation") shall be credited to a bookkeeping account maintained by the
Company in the name of the Non-Employee Director (the "Deferred Compensation
Account"), which account shall consist of two subaccounts, the "Company Stock
Subaccount" and the "Cash Subaccount." The amount, if any, of the Stock
Retainer or the Cash Retainer that the Non-Employee Director has elected to
receive in Stock pursuant to subsection 2.2 and with respect to which he or she
has filed a Deferral Election pursuant to subsection 3.1 shall be credited to
his or her Company Stock Subaccount. Any other Deferred Compensation shall be
credited to his or her Cash Subaccount. A Non-Employee Director's Deferred
Compensation Account shall be adjusted as follows:
(a) As of the first day of each calendar quarter (which dates are referred
to herein as "Accounting Dates"), the Non-Employee Director's Cash
Subaccount shall be adjusted as follows:
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<PAGE>
(i) first, the amount of any distributions made since the last
preceding Accounting Date and attributable to the Cash
Subaccount shall be charged to the Cash Subaccount;
(ii) next, the balance of the Cash Subaccount after adjustment in
accordance with subparagraph (i) next above shall be credited
with interest since the last preceding Accounting Date computed
at the prime rate as reported by The First National Bank of
Chicago (or its successor) for such date or, if such date is
not a business day, for the next preceding business day;
(iii) finally, after adjustment in accordance with the foregoing
provisions of this paragraph (a), the Cash Subaccount shall be
credited with the portion of the Deferred Compensation
otherwise payable to the Non-Employee Director since the last
preceding Accounting Date which is to be credited to the Cash
Subaccount.
(b) The Non-Employee Director's Company Stock Subaccount shall be adjusted
as follows:
(i) as of any date on or after the Effective Date on which any
portion of a Non-Employee Director's Retainer would have been
payable to the Non-Employee Director in Stock but for his or
her Deferral Election, the Company Stock Subaccount shall be
credited with a number of "Stock Units" equal to the number of
shares of Stock (including any fractional shares) to which he
or she would have been entitled pursuant to Section 2;
(ii) as of the date on which shares of Stock are distributed to the
Non-Employee Director in accordance with subsection 3.3 below,
an equal number of Stock Units will be subtracted from the
Company Stock Subaccount; and
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<PAGE>
(iii) as of the record date for any dividend paid on Stock, the
Company Stock Subaccount shall be credited with that number of
additional Stock Units which is equal to the number obtained by
multiplying the number of Stock Units then credited to the
Company Stock Subaccount by the amount of the cash dividend or
the fair market value (as determined by the Board) of any
dividend in kind payable on a share of Stock, and dividing that
product by the then Fair Market Value of a share of Stock.
In the event of any merger, consolidation, reorganization,
recapitalization, spinoff, stock split, reverse stock split, rights
offering, exchange or other change in the corporate structure or
capitalization of the Company affecting the Stock, each Non-Employee
Director's Company Stock Subaccount shall be equitably adjusted in
such manner as the Committee shall determine in its sole judgment.
3.3 Payment of Deferred Compensation Account. Except as otherwise
provided in this subsection 3.3 or subsection 3.4, the balances credited to the
Cash Subaccount and Company Stock Subaccount of a Non-Employee Director's
Deferred Compensation Account shall each be payable to the Non-Employee Director
in a lump sum or quarterly installments (over a period not exceeding ten years)
as elected by the Non-Employee Director in his or her Deferral Election;
provided, however, that if no distribution form was elected by the Non-Employee
Director in his or her Deferral Election, payment shall be made in a lump sum.
Installment distributions shall commence as of the first day of the first
calendar quarter after the Distribution Date and shall continue as of the first
day of each calendar quarter thereafter for the applicable period.
Notwithstanding the foregoing, a Non-Employee Director, by filing a notice with
the Committee at least one year prior to the Distribution Date, may elect to
change the number of payments to a single payment or to any number of quarterly
payments not in excess of forty. Each installment payment shall include a cash
portion, if applicable, and a Stock portion, if applicable, as follows:
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<PAGE>
(a) The cash portion to be paid as of any date determined under the
foregoing provisions of this Section 3.3 and charged to the Cash
Subaccount shall be equal to the balance of the Cash Subaccount
multiplied by a fraction, the numerator of which is one and the
denominator of which is the number of remaining payments to be made,
including such payment.
(b) The Stock portion to be paid as of any date determined under the
foregoing provisions of this Section 3.3 and charged to the Company
Stock Subaccount shall be distributed in whole shares of Stock, the
number of shares of which shall be determined by rounding to the next
lower integer the product obtained by multiplying the number of Stock
Units then credited to the Non-Employee Director's Company Stock
Subaccount by a fraction, the numerator of which is one and the
denominator of which is the number of remaining payments to be made,
including such payment. The Fair Market Value of any fractional share
of Stock remaining after all installment Stock distributions have been
made to the Non-Employee Director pursuant to this paragraph (b) shall
be paid to the Non-Employee Director in cash.
Notwithstanding the foregoing, the Committee, in its sole discretion, may
distribute all balances in any Deferred Compensation Account to a Non-Employee
Director (or former Non-Employee Director) in a lump sum as of any date.
3.4 Payments in the Event of Death. If a Non-Employee Director dies
before payment of his or her Deferred Compensation Account commences, all
amounts then credited to his or her Deferred Compensation Account shall be
distributed to his or her Beneficiary (as described below), as soon as
practicable after his or her death, in a lump sum. If a Non-Employee Director
dies after payment of his or her Deferred Compensation Account has commenced but
before the entire balance of such account has been distributed, the remaining
balance thereof shall be distributed to his or her Beneficiary, as soon as
practicable after his or her death, in a lump sum. Any amounts in the Cash
Subaccount shall be distributed in cash and any amounts in the Stock
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<PAGE>
Subaccount shall be distributed in whole shares of Stock determined in
accordance with paragraph 3.3(b), and the Fair Market Value of any fractional
share of Stock shall be distributed in cash. For purposes of the Plan, the Non-
Employee Director's "Beneficiary" is the person or persons the Non-Employee
Director designates, which designation shall be in writing, signed by the Non-
Employee Director and filed with the Committee prior to the Non-Employee
Director's death. A Beneficiary designation shall be effective when filed with
the Committee in accordance with the preceding sentence. If more than one
Beneficiary has been designated, the balance in the Non-Employee Director's
Deferred Compensation Account shall be distributed to each such Beneficiary per
capita (with cash distributed in lieu of any fractional share of Stock). In the
absence of a Beneficiary designation or if no Beneficiary survives the Non-
Employee Director, the Beneficiary shall be the Non-Employee Director's estate.
SECTION 4
---------
Amendment and Termination
-------------------------
While the Company expects and intends to continue the Plan, the Board
reserves the right to, at any time and in any way, amend, suspend or terminate
the Plan; provided, however, that no amendment, suspension or termination shall:
(a) be made without shareholder approval to the extent such approval is
required by law, agreement or the rules of any exchange or automated
quotation system upon which the Stock is listed or quoted;
(b) except as provided in subsection 3.3 (relating to lump sum payments of
amounts held in a Non-Employee Director's Deferred Compensation
Account) or this Section 4, materially alter or impair the rights of a
Non-Employee Director under the Plan without the consent of the Non-
Employee Director with respect to rights already accrued hereunder; or
(c) make any change that would disqualify the Plan or any other plan of
the Company intended to be so qualified
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<PAGE>
from the exemption provided by Rule 16b-3 under the Securities
Exchange Act of 1934, as amended.
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<PAGE>
Exhibit
-------
10.S.(2)
RYERSON TULL
NONQUALIFIED SAVINGS PLAN
-------------------------
(Effective January 1, 1998)
Ryerson Tull, Inc. hereby establishes this Ryerson Tull Nonqualified
Savings Plan, effective as of January 1, 1998, in order to continue to enable
employees of the Company and the other Employers to obtain the same level of
benefits they would have been able to receive under the Ryerson Tull Savings
Plan but for the limits imposed by Sections 401(a)(17) or 415 of the Internal
Revenue Code of 1986, as amended, on the amounts that can be contributed to the
Savings Plan. The Plan is intended to be an "excess benefit plan" described in
Section 3(36) of the Employee Retirement Income Security Act of 1974, as
amended; provided, however, that, to the extent, if any, that the Plan provides
benefits which cannot be provided by an excess benefit plan, the Plan shall
constitute an unfunded plan maintained primarily for the purpose of providing
deferred compensation for a select group of management or highly compensated
employees.
ARTICLE I
DEFINITIONS
-----------
1.01 "Account" means the record of a Participant's interest in the Plan
attributable to Company Contributions and Participant Contributions made on
behalf of such Participant.
1.02 "Base Compensation" means Base Compensation as defined in the Savings
Plan.
<PAGE>
1.03 "Beneficiary" means, with respect to a Participant, the Participant's
Beneficiary under the Savings Plan.
1.04 "Board" means the Board of Directors of the Company.
1.05 "Code" means the Internal Revenue Code of 1986, as from time to time
amended.
1.06 "Company" means Ryerson Tull, Inc.
1.07 "Distributable Event" means a Distributable Event as defined in the
Savings Plan.
1.08 "Effective Date" means January 1, 1998.
1.09 "Eligible Employee" means an employee of an Employer who is eligible
to participate in the Savings Plan and whose Base Compensation exceeds the
limits set forth in Section 401(a)(17) of the Code or whose contributions under
the Savings Plan are limited by Section 415 of the Code.
1.10 "Employer" means an Employer as defined in the Savings Plan.
1.11 "Employer Contributions" means the contributions to the Plan by the
Employers pursuant to Section 3.03.
1.12 "Enrollment Date" means the Effective Date and the first day of each
month thereafter.
1.13 "ERISA" means the Employee Retirement Income Security Act of 1974, as
from time to time amended.
1.14 "Nonqualified Thrift Plan" means the Inland Steel Industries, Inc.
Nonqualified Thrift Plan.
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<PAGE>
1.15 "Participant" means each Eligible Employee who has met the
requirements of Article II for participation in the Plan.
1.16 "Participant Contributions" means the contributions to the Plan by the
Employers on behalf of a Participant pursuant to Section 3.01.
1.17 "Permanent Incapacity" means Permanent Incapacity as defined in the
Savings Plan.
1.18 "Plan" means the Ryerson Tull Inc. Nonqualified Savings Plan, as from
time to time amended.
1.19 "Plan Administrator" means the Plan Administrator appointed under the
Savings Plan or any other individual as may be appointed by the Chairman of the
Board, the President, the Vice President-Human Resources or the Treasurer of the
Company to administer the Plan. To the extent consistent with the purposes of
the Plan and the authority delegated to the Assistant Plan Administrator
pursuant to Section 6.03(h), the term Plan Administrator shall include the
Assistant Plan Administrator.
1.20 "Plan Year" means the calendar year.
1.21 "Related Company" means a Related Company as defined in the Savings
Plan.
1.22 "Retirement" means Retirement as defined in the Savings Plan.
1.23 "Savings Plan" means the Ryerson Tull Savings Plan, as from time to
time amended.
1.24 "Valuation Date" means the last day of each month.
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<PAGE>
1.25 "Years of Vesting Service" means Years of Vesting Service as defined
in the Savings Plan.
ARTICLE II
PARTICIPATION
-------------
2.01 Eligibility. An Eligible Employee shall become a Participant on the
Enrollment Date next following the filing with the Plan Administrator of an
instrument in a form prescribed by the Plan Administrator evidencing his or her
acceptance of the provisions of the Plan. Notwithstanding the foregoing, any
person who is an Eligible Employee and who, immediately prior to becoming an
Eligible Employee, was a participant in the Nonqualified Thrift Plan shall
automatically become a Participant in the Plan as of the date on which he or she
becomes an Eligible Employee.
2.02 Restricted Participation. Notwithstanding any other provision of the
Plan to the contrary, if the Plan Administrator determines that participation by
one or more Participants or Beneficiaries shall cause the Plan as applied to any
Employer to be subject to Part 2, 3 or 4 of Title I of ERISA, the entire
interest of such Participant or Beneficiary under the Plan shall, in the
discretion of the Plan Administrator, be immediately paid to such Participant or
Beneficiary, as applicable, by the applicable Employer or Employers, or shall
otherwise be segregated from the Plan, and such Participant(s) or
Beneficiary(ies) shall cease to have any interest under the Plan.
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<PAGE>
ARTICLE III
CONTRIBUTIONS
-------------
3.01 Participant Contributions. For any payroll period, each Participant
who is an Eligible Employee for such payroll period may elect for his or her
Employer to make contributions ("Participant Contributions") under the Plan
equal to not less than one (1) percent (1%) and not more than ten percent (10%)
of the Participant's Base Compensation. Contributions made to the Plan on a
Participant's behalf for any payroll period shall be treated as a salary
reduction and shall reduce the amount of current cash compensation otherwise
payable to such Participant for such payroll period.
3.02 Designation of Participant Contributions. Each Participant shall
designate the percentage of his or her Base Compensation to be deferred as a
contribution under the Plan in the same instrument by which he or she evidences
his or her acceptance of the provisions of the Plan pursuant to Article II.
Thereafter (but not retroactively), a Participant may, on a form prescribed by
the Plan Administrator, change the percentage of his or her Base Compensation to
be deferred as a contribution under the Plan, subject to the limitations of this
Article III. Notwithstanding the foregoing, in the case of any person who
becomes a Participant and who immediately prior thereto was a participant in the
Nonqualified Thrift Plan, any election made by such individual under the
Nonqualified Thrift Plan that was effective immediately prior to the date on
which he or she becomes a Participant shall be considered an election under the
foregoing provisions of this Article III effective as of the date on which he or
she becomes a Participant without any other action being required on the part of
the individual.
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<PAGE>
3.03 Employer Contributions. For each payroll period, each Employer shall
make a contribution to the Plan ("Employer Contributions") in respect of each
Participant who is employed by such Employer as of the last day of the payroll
period in an amount equal to 100% of the amount of the Participant Contributions
made on behalf of such Participant during such payroll period pursuant to
Section 3.01 that do not exceed four percent (4%) of the Participant's Base
Compensation for such payroll period.
3.04 Nature of Contributions. Any amounts contributed to the Plan pursuant
to this Article III shall be retained by the Employers as general assets of the
Employers, and contributions shall be reflected on the books of the Employers
solely for the purpose of computing Participants' benefits from the Plan.
ARTICLE IV
ACCOUNTS
--------
4.01 Maintenance of Accounts. The Plan Administrator shall establish and
maintain in the records of the Plan an Account for each Participant reflecting
each Participant's interest in the Plan attributable to Participant
Contributions and Employer Contributions made on his or her behalf, increased by
earnings attributable thereto.
4.02 Valuation of Accounts. As of each Valuation Date, the Account of each
Participant shall be (a) credited with earnings for the period since the next
preceding Valuation Date as set forth in Section 4.03, and (b) increased by
Participant Contributions and Employer Contributions to the Plan with respect to
such Participant relating to payroll periods since the next preceding Valuation
Date.
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<PAGE>
4.03 Earnings. During a Plan Year, Participants' Accounts shall be credited
with earnings at a rate of interest earned by assets in the Stable Value Fixed
Income Fund established under the Savings Plan for the relevant period.
ARTICLE V
DISTRIBUTION OF BENEFITS
------------------------
5.01 Distribution Upon Termination of Employment. (a) Upon termination of a
Participant's employment with the Employers and Related Companies other than by
reason of a Distributable Event and prior to (i) the completion of 5 Years of
Vesting Service, (ii) the date on which he or she has a fully vested and
nonforfeitable interest in his or her account balance under the Savings Plan, or
(iii) the date on which his or her benefits under the Plan would otherwise be
fully vested and nonforfeitable, the Participant shall be entitled to
distribution of his or her entire vested Account balance, payable to the
Participant in a single lump sum payment no later than 60 days after the first
anniversary of the Participant's termination of employment.
(b) Upon termination of a Participant's employment with the Employers and
Related Companies by reason of a Distributable Event or after (i) the completion
of 5 Years of Vesting Service, (ii) the date on which he or she has a fully
vested and nonforfeitable interest in his or her account balance under the
Savings Plan, or (iii) the date on which his or her benefits under the Plan
would otherwise be fully vested and nonforfeitable, the Participant shall be
entitled to distribution of his or her entire Account balance, payable to the
Participant in a single lump sum
-7-
<PAGE>
payment no later than 60 days after the first anniversary of the Participant's
termination of employment.
(c) Upon termination of a Participant's employment with the Employers and
Related Companies by reason of Permanent Incapacity or Retirement, and where the
amount payable to the Participant is at least $10,000, the Participant shall be
entitled to a distribution of his or her entire Account balance, payable to the
Participant in either of the following ways, as irrevocably elected by the
Participant in accordance with rules established by the Plan Administrator:
(1) In a single lump sum payment representing the full amount
distributable to the Participant, payable on a date elected by
the Participant which is not later than the end of the calendar
year in which the Participant attains age 75; or
(2) In substantially equal installments, payable annually, over a
period not extending beyond the end of the calendar year in which
the Participant attains age 75. Each installment payment shall be
equal to that amount determined by multiplying the then remaining
balance in the Participant's Account as of the Valuation Date
used for purposes of calculating the payment by a fraction having
a numerator of one and a denominator equal to the number of
installments remaining to be paid.
5.02 Distribution Upon Death. Upon the death of a Participant, the total
value of the Participant's Account as of the Valuation Date preceding the date
of death shall be distributed to the Participant's Beneficiary in a single lump
sum payment as soon as practicable after satisfactory proof of death shall have
been submitted to the Plan Administrator.
5.03 Hardship Distributions. Upon a showing of hardship by a Participant,
such Participant shall be entitled to a distribution of such portion (or all) of
his or her Account balance as shall be necessary to meet such hardship. This
Section 5.03 shall be administered in a manner
-8-
<PAGE>
consistent with the hardship withdrawal provisions of the Savings Plan. The Plan
Administrator's determination of a Participant's hardship hereunder shall be
final.
5.04 Liability for Benefit Payments. The amount of any benefit payable
under the Plan shall be paid from the general revenues of the Employer that last
employs the Participant. An Employer's obligation under the Plan shall be
reduced to the extent that any amounts due under the Plan are paid from one or
more trusts, the assets of which are subject to the claims of general creditors
of the Employer or any affiliate thereof; provided, however, that nothing in the
Plan shall require the Company or any Employer to establish any trust to provide
benefits under the Plan.
ARTICLE VI
PLAN ADMINISTRATION
-------------------
6.01 Administration of Plan. The Employers shall have the sole
responsibility for making salary reductions and contributions hereunder as
provided under Article III and the Company shall have the sole authority to
amend or terminate, in whole or in part, this Plan at any time. The Plan
Administrator shall have the sole responsibility for the administration of the
Plan. The Employers do not guarantee to any Participant in any manner the effect
under any tax law or Federal or state statute of the Participant's participation
in this Plan.
6.02 Claims Procedure. The Plan Administrator shall make all determinations
as to the right of any person to a benefit under this Plan. Any denial by the
Plan Administrator of a claim for benefits under the Plan by a Participant shall
be stated in writing by the Plan Administrator and shall set forth the specific
reasons for the denial. In addition, the Plan Administrator shall
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<PAGE>
afford a reasonable opportunity to any Participant whose claim for benefits has
been denied for a review of the decision denying the claim.
6.03 Powers and Duties of Plan Administrator. The Plan Administrator
shall have such duties and powers as may be necessary to discharge its duties
hereunder, including, but not by way of limitation, the following:
(a) to conclusively construe and interpret the Plan, decide all questions
of eligibility and determine the amount, manner and time of payment of
any benefits hereunder;
(b) to prescribe procedures to be followed by Participants in filing
elections or revocations thereof;
(c) to prepare and distribute, in such manner as the Plan Administrator
determines to be appropriate, information explaining the Plan;
(d) to receive from the Employers and from Participants such information
as shall be necessary for the proper administration of the Plan;
(e) to furnish the Employers, upon request, such reports with respect to
the administration of the Plan as are reasonable and appropriate;
(f) to receive, review and keep on file (as it deems convenient and
proper) reports of benefit payments by the Employers and reports of
disbursements for expenses directed by the Plan Administrator;
(g) to appoint individuals to assist in the administration of the Plan and
any other agents it deems advisable, including legal counsel; and
(h) to name as an Assistant Plan Administrator any individual or
individuals and to delegate such authority and duties to such
individual as the Plan Administrator in its discretion deems
advisable. Each Assistant Plan Administrator, if any, named pursuant
to this paragraph shall have such authority to act with respect to the
administration of the Plan as the Plan Administrator may prescribe.
The incumbency of any Assistant Plan Administrator may be terminated
by action of the Plan Administrator at any time, with or without
cause. Notwithstanding the foregoing, in the absence of a formal
designation of any Assistant Plan Administrator by the Plan
Administrator, no provision of this paragraph shall
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<PAGE>
prevent the Plan Administrator from delegating authority to employees
or other agents of the Employers in executing the duties of
administering the Plan.
The Plan Administrator shall have no power to add to, subtract from or
modify any of the terms of the Plan, or to change or add to any benefits
provided by the Plan, or to waive or fail to apply any requirements of
eligibility for a benefit under the Plan.
6.04 Rules and Decisions. The Plan Administrator may adopt such rules as
it deems necessary, desirable or appropriate. All rules and decisions of the
Plan Administrator shall be uniformly and consistently applied to all
Participants in similar circumstances. When making a determination or
calculation, the Plan Administrator shall be entitled to rely upon information
furnished by a Participant, the Employers or the legal counsel of the Employers.
6.05 Authorization of Benefit Payments. The Plan Administrator shall issue
directions to the Employers concerning all benefits which are to be paid from
the Company's general assets pursuant to the provisions of the Plan.
6.06 Indemnification of Plan Administrator. The Plan Administrator shall
be indemnified by the Employers against any and all liabilities arising by
reason of any act or failure to act made in good faith pursuant to the
provisions of the Plan, including expenses reasonably incurred in the defense of
any claim relating thereto.
ARTICLE VII
MISCELLANEOUS
-------------
7.01 No Right to Employment, etc. Neither the creation of this Plan nor
anything contained herein shall be construed as giving any Participant hereunder
or other employees of the
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<PAGE>
Employers or any Related Company any right to remain in the employ of the
Employers or any Related Company.
7.02 Successors and Assigns. All rights and obligations of this Plan shall
inure to, and be binding upon the successors and assigns of the Employers.
7.03 Inalienability. Except so far as may be contrary to the laws of any
state having jurisdiction in the premises, a Participant or Beneficiary shall
have no right to assign, transfer, hypothecate, encumber, commute or anticipate
his or her interest in any payments under this Plan and such payments shall not
in any way be subject to any legal process to levy upon or attach the same for
payment of any claim against any Participant or Beneficiary.
7.04 Incompetency. If any Participant or Beneficiary is, in the opinion of
the Plan Administrator, legally incapable of giving a valid receipt and
discharge for any payment, the Plan Administrator may, at its option, direct
that such payment or any part thereof be made to such person or persons who in
the opinion of the Plan Administrator are caring for and supporting such
Participant or Beneficiary, unless it has received due notice of claim from a
duly appointed guardian or conservator of the estate of the Participant or
Beneficiary. A payment so made will be a complete discharge of the obligations
under this Plan to the extent of and as to that payment, and neither the Plan
Administrator nor the Employers will have any obligation regarding the
application of payment.
7.05 Controlling Law. To the extent not preempted by the laws of the
United States of America, the laws of the State of Illinois shall be the
controlling state law in all matters relating to this Plan.
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<PAGE>
7.06 Severability. If any provisions of this Plan shall be held illegal or
invalid for any reason, the illegality or invalidity shall not affect the
remaining parts of this Plan, but this Plan shall be construed and enforced as
if the illegal and invalid provisions never had been included herein.
7.07 Limitations on Provisions. The provisions of this Plan and any
benefits hereunder shall be limited as described herein. Any benefit payable
under the Savings Plan shall be paid solely in accordance with the terms and
provisions of the Savings Plan, as appropriate, and nothing in this Plan shall
operate or be construed in any way to modify, amend, or affect the terms and
provisions of the Savings Plan.
7.08 Gender and Number. Whenever the context requires or permits, the
gender and number of words shall be interchangeable.
ARTICLE VIII
AMENDMENT AND TERMINATION
-------------------------
8.01 Amendment to Conform with Law. The Plan may be amended to take effect
retroactively or otherwise, as deemed necessary or advisable for the purpose of
conforming the Plan to any present or future law relating to plans of this or a
similar nature, and to the administrative regulations and rulings promulgated
thereunder.
8.02 Other Amendments and Termination. The Plan may be amended at any
time, without the consent of any Participant or Beneficiary. Notwithstanding the
foregoing, the Plan shall not be amended or terminated so as to reduce or cancel
the benefits which have accrued to a Participant or Beneficiary prior to the
later of the date of adoption of the amendment or
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<PAGE>
termination or the effective date thereof, and in the event of such amendment or
termination, any such accrued benefit hereunder shall not be reduced or
canceled.
8.03 Effect of Change in Control.
(a) In the event of a Change in Control (as defined below), all
benefits accrued as of the date of such Change in Control hereunder shall become
fully (i.e., 100%) and irrevocably vested, and shall become distributable to
Participants (and Beneficiaries) at such time and in such manner provided herein
pursuant to the provisions of the Plan as in effect on the day immediately
preceding the date of such Change in Control. The Plan Administrator shall, in
its sole discretion, determine whether assets equal in value to the aggregate of
all accrued benefits under the Plan as of the date of such Change in Control
shall be deposited by the Employers with a bank trustee pursuant to one or more
"rabbi trusts".
(b) For purposes of this Section 8.03, a "Change in Control" means the
happening of any of the following:
(1) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), other than (w) the Company and its
affiliates (collectively referred to herein as "RTI"), (x) a
trustee or other fiduciary holding security under an
employee benefit plan of RTI, (y) an underwriter temporarily
holding security pursuant to an offering of such securities,
or (z) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, is
or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of security
of the Company (not including in the securities beneficially
owned by such person any security acquired directly from the
Company or its affiliates) representing 40% or more of the
combined voting power of the Company's then outstanding
securities;
-14-
<PAGE>
(2) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board and any
new director (other than a director designated by a person
who has entered into an agreement with the Company to effect
a transaction described in clauses (1), (3) or (4) of this
paragraph) whose election by the Board or nomination for
election by the Company's stockholders was approved by a
vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at the beginning
of the period or whose election or nomination for election
was previously so approved, cease for any reason to
constitute a majority thereof;
(3) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in
the voting security of the Company outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity), in combination with the ownership of
any trustee or other fiduciary holding securities under an
employee benefit plan of RTI, at least 60% of the combined
voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger
or consolidation, or a merger or consolidation effected to
implement a recapitalization of the Company (or similar
transaction) in which no person acquires more than 50% of
the combined voting power of the Company's then outstanding
securities; or
(4) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of
the Company's assets.
A Change in Control shall also be deemed to occur with respect to any
Participant for purposes of the Plan if there occurs:
(I) a sale or disposition, directly or indirectly, other than to
a person described in subclause (w), (x) or (z) of clause
(b) (1) above, of securities of the Participant's employer,
any direct or indirect parent company of the Participant's
employer or any company that is a subsidiary of the
Participant's employer and is also a
-15-
<PAGE>
significant subsidiary (as defined below) of the Company
(the Participant's employer and such a parent or subsidiary
being an "Affiliated Company"), representing 50% or more of
the combined voting power of the securities of such
Affiliated Company then outstanding;
(II) a merger or consolidation of an Affiliated Company with any
other corporation, other than a merger or consolidation
which would result in 50% or more of the combined voting
power of the surviving company being beneficially owned by
the Company or by majority owned direct or indirect
subsidiary of the Company; or
(III) the sale or disposition of all or substantially all the
assets of an Affiliated Company to a person other than the
Company or a majority owned direct or indirect subsidiary
of the Company.
(c) The provisions of this Section 8.03 may not be amended after the
date of a Change in Control without the written consent of a majority in both
number and interest of the Participants in this Plan, other than those
Participants who are both (i) not employed by the Company or a subsidiary as of
the date of the Change in Control, and (ii) not receiving nor could have
commenced receiving benefits under the Plan as of the date of the Change in
Control, both immediately prior to the Change in Control and at the date of such
amendment.
8.04 Manner and Form of Amendment or Termination. Any amendment or
termination of this Plan shall be made by action of the Board; provided,
however, that the Vice President-Human Resources of the Company and the
Treasurer of the Company (or such other person as designated by the Chairman of
the Board) are jointly authorized, by written action signed by both such
individuals:
(a) to adopt and place in effect such amendments to the Plan and any
related documents as they jointly deem necessary or advisable;
-16-
<PAGE>
(a) to maintain the Plan and any related documents in compliance with
applicable law;
(b) to relieve administrative burdens with respect to those documents; or
(c) to provide for other changes in the best interests of Plan
Participants and Beneficiaries
without the necessity for further action by the Board or subsequent
ratification; provided, however, that any action or amendment that would have
the effect of:
(i) terminating the Plan;
(ii) materially changing the benefits under the Plan; or
(iii) increasing anticipated costs associated with the Plan by more
than $5 million, except for changes to comply with applicable
law;
may not be made without approval or ratification by the Board.
8.05 Notice of Amendment or Termination. The Plan Administrator shall
notify Participants or Beneficiaries who are affected by any amendment or
termination of this Plan within a reasonable time thereof.
By
----------------------------------
William C. Korda
Vice President-Human Resources
By
----------------------------------
Vicki L. Avril
Treasurer
-17-
<PAGE>
Exhibit 10.T.(1)
AMENDED LISTING ONLY TO
-----------------------
Copy of Form of Severance Agreement
dated January 28, 1998
between
Inland Steel Industries, Inc.
and each of:
Robert J. Darnall
Jay M. Gratz
George A. Ranney, Jr.
Dale E. Wiersbe
<PAGE>
EXHIBIT 10.T.(3)
Amended Schedule to Form of Change in Control Agreement, dated as of March 27,
1996, by and among Inland Steel Industries,Inc. and the parties listed on the
Schedule thereto.
Carl G. Lusted
Stephen E. Makarewicz
Gary J. Niederpruem
<PAGE>
EXHIBIT 10.X
[LETTERHEAD OF INLAND STEEL INDUSTRIES APPEARS HERE]
- --------------------------------------------------------------------------------
August 18, 1995
Mr. George A. Ranney, Jr.
4915 South Woodlawn
Chicago, Illinois 60615
Dear George,
This will confirm our discussions regarding the terms of your compensation
package with Inland Steel Industries, Inc.
(1) Your title will be Vice President and General Counsel, Inland Steel
Industries, Inc.
(2) Your employment date will be July 23, 1995.
(3) Your base annualized salary for calendar year 1995 will be $300,000. You
will be entitled to participate in the Company's Annual Incentive Plan on the
same basis as other participants in the Plan, with your Target Award for
purposes of the Plan for 1995 being 40%.
(4) You will be granted a three-year restricted stock award of 2,400 shares of
common stock of the Company, subject to the usual conditions regarding your
continued employment with the Company. In addition, you will be granted a stock
option grant of 12,000 shares under the Inland Steel Industries Stock Option
Program. Both of these grants will be made after you join the Company at the
date determined by the Compensation Committee.
(5) The Company will, in the absence of any malfeasance on your part, guarantee
you three (3) years of salary and benefits. You will also be entitled to the
standard change of control agreement the Company has entered into with its
principal officers, on terms and conditions consistent with those incorporated
in existing agreements (but reduced by any payments under its three-year
guarantee). In addition, you will be entitled to participate in the Company's
medical, life insurance, pension, thrift and other benefit plans and programs in
accordance with the terms and conditions of such plans and
<PAGE>
Mr. George A. Ranney, Jr.
August 18, 1995
Page 2
programs and will also be entitled to such additional benefits as are normally
provided to officers of the Company.
(6) The aggregate pension benefits to which you are entitled shall be calculated
as if you had been continuously employed by Inland since February 26, 1973, but
shall be reduced by the actuarial equivalent of the pension benefit, if any,
payable to you for such period by Mayer, Brown and Platt; these additional
benefits will not by payable if you choose to leave Inland or are discharged for
cause within five years of your rehiring date of July 23, 1995. The amount
payable pursuant to this letter agreement will be paid in the same form as
benefits payable under the Inland Steel Industries Supplemental Retirement
Benefit Plan for Covered Employees.
(7) You will retain your partnership at the Mayer, Brown & Platt law firm, with
the understanding that you will receive no financial benefit from the firm for
your work with Inland and that the appropriate information to confirm this
understanding will be made available to Inland upon request.
If the foregoing accurately states our understanding and agreement with
respect to the matters covered by this letter, would you kindly sign and return
to me the enclosed copy of this letter.
Sincerely,
INLAND STEEL INDUSTRIES, INC.
By /s/ R.J. Darnell
---------------------------
Chairman, President and
Chief Executive Officer
Agreed to this 30 day of
September, 1995
/s/ George A. Ranney, Jr.
- ----------------------------
George A. Ranney, Jr.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF INLAND STEEL INDUSTRIES, INC.
---------------------------------------------
The subsidiaries of Inland Steel Industries, Inc. (other than certain
subsidiaries which, considered in the aggregate as a single subsidiary, do not
constitute a significant subsidiary), each of which is incorporated in the State
of Delaware (except as noted below) and each of which is wholly owned (except as
noted below), either by Inland Steel Industries, Inc. or by one of its wholly
owned subsidiaries, are as follows:
Inland Steel Company
Inland Steel Mining Company
Inland Steel Administrative Service Company (formerly known
as Inland Steel Finance Company)
Ryerson Tull, Inc. (majority owned by Inland Steel Industries, Inc.)
(formerly known as Inland Materials Distribution Group, Inc.)
Joseph T. Ryerson & Son, Inc.
J. M. Tull Metals Company, Inc.
(a Georgia corporation)
<PAGE>
Exhibit 24
INLAND STEEL INDUSTRIES, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do
hereby nominate, constitute and appoint Robert J. Darnall, Jay M. Gratz, Vicki
L. Avril and Charles B. Salowitz, or any one or more of them, my true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which said attorneys and agents, or any of them, may deem necessary
or advisable to enable said Inland Steel Industries, Inc. to comply with the
Securities Exchange Act of 1934, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
preparation and filing of the Annual Report on Form 10-K of said Inland Steel
Industries, Inc. for the fiscal year ended December 31, 1997, including
specifically, but without limitation thereof, full power and authority to sign
my name as a director and(or) officer of said Inland Steel Industries, Inc. to
said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and
confirming all that said attorneys and agents, or any of them, shall do or cause
to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of
January, 1998.
------------------------------
A. Robert Abboud
<PAGE>
INLAND STEEL INDUSTRIES, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do
hereby nominate, constitute and appoint Robert J. Darnall, Jay M. Gratz, Vicki
L. Avril and Charles B. Salowitz, or any one or more of them, my true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which said attorneys and agents, or any of them, may deem necessary
or advisable to enable said Inland Steel Industries, Inc. to comply with the
Securities Exchange Act of 1934, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
preparation and filing of the Annual Report on Form 10-K of said Inland Steel
Industries, Inc. for the fiscal year ended December 31, 1997, including
specifically, but without limitation thereof, full power and authority to sign
my name as a director and(or) officer of said Inland Steel Industries, Inc. to
said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and
confirming all that said attorneys and agents, or any of them, shall do or cause
to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 22nd day of
January, 1998.
------------------------------
James A. Henderson
<PAGE>
INLAND STEEL INDUSTRIES, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do
hereby nominate, constitute and appoint Robert J. Darnall, Jay M. Gratz, Vicki
L. Avril and Charles B. Salowitz, or any one or more of them, my true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which said attorneys and agents, or any of them, may deem necessary
or advisable to enable said Inland Steel Industries, Inc. to comply with the
Securities Exchange Act of 1934, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
preparation and filing of the Annual Report on Form 10-K of said Inland Steel
Industries, Inc. for the fiscal year ended December 31, 1997, including
specifically, but without limitation thereof, full power and authority to sign
my name as a director and(or) officer of said Inland Steel Industries, Inc. to
said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and
confirming all that said attorneys and agents, or any of them, shall do or cause
to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of
January, 1998.
------------------------------
Robert B. McKersie
<PAGE>
INLAND STEEL INDUSTRIES, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do
hereby nominate, constitute and appoint Robert J. Darnall, Jay M. Gratz, Vicki
L. Avril and Charles B. Salowitz, or any one or more of them, my true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which said attorneys and agents, or any of them, may deem necessary
or advisable to enable said Inland Steel Industries, Inc. to comply with the
Securities Exchange Act of 1934, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
preparation and filing of the Annual Report on Form 10-K of said Inland Steel
Industries, Inc. for the fiscal year ended December 31, 1997, including
specifically, but without limitation thereof, full power and authority to sign
my name as a director and(or) officer of said Inland Steel Industries, Inc. to
said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and
confirming all that said attorneys and agents, or any of them, shall do or cause
to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 23rd day of
January, 1998.
------------------------------
Leo F. Mullin
<PAGE>
INLAND STEEL INDUSTRIES, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do
hereby nominate, constitute and appoint Robert J. Darnall, Jay M. Gratz, Vicki
L. Avril and Charles B. Salowitz, or any one or more of them, my true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which said attorneys and agents, or any of them, may deem necessary
or advisable to enable said Inland Steel Industries, Inc. to comply with the
Securities Exchange Act of 1934, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
preparation and filing of the Annual Report on Form 10-K of said Inland Steel
Industries, Inc. for the fiscal year ended December 31, 1997, including
specifically, but without limitation thereof, full power and authority to sign
my name as a director and(or) officer of said Inland Steel Industries, Inc. to
said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and
confirming all that said attorneys and agents, or any of them, shall do or cause
to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of
January, 1998.
------------------------------
Jean-Pierre Rosso
<PAGE>
INLAND STEEL INDUSTRIES, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do
hereby nominate, constitute and appoint Robert J. Darnall, Jay M. Gratz, Vicki
L. Avril and Charles B. Salowitz, or any one or more of them, my true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which said attorneys and agents, or any of them, may deem necessary
or advisable to enable said Inland Steel Industries, Inc. to comply with the
Securities Exchange Act of 1934, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
preparation and filing of the Annual Report on Form 10-K of said Inland Steel
Industries, Inc. for the fiscal year ended December 31, 1997, including
specifically, but without limitation thereof, full power and authority to sign
my name as a director and(or) officer of said Inland Steel Industries, Inc. to
said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and
confirming all that said attorneys and agents, or any of them, shall do or cause
to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of
January, 1998.
------------------------------
Joshua I. Smith
<PAGE>
INLAND STEEL INDUSTRIES, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do
hereby nominate, constitute and appoint Robert J. Darnall, Jay M. Gratz, Vicki
L. Avril and Charles B. Salowitz, or any one or more of them, my true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which said attorneys and agents, or any of them, may deem necessary
or advisable to enable said Inland Steel Industries, Inc. to comply with the
Securities Exchange Act of 1934, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
preparation and filing of the Annual Report on Form 10-K of said Inland Steel
Industries, Inc. for the fiscal year ended December 31, 1997, including
specifically, but without limitation thereof, full power and authority to sign
my name as a director and(or) officer of said Inland Steel Industries, Inc. to
said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and
confirming all that said attorneys and agents, or any of them, shall do or cause
to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of
January, 1998.
------------------------------
Nancy H. Teeters
<PAGE>
INLAND STEEL INDUSTRIES, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do
hereby nominate, constitute and appoint Robert J. Darnall, Jay M. Gratz, Vicki
L. Avril and Charles B. Salowitz, or any one or more of them, my true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which said attorneys and agents, or any of them, may deem necessary
or advisable to enable said Inland Steel Industries, Inc. to comply with the
Securities Exchange Act of 1934, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
preparation and filing of the Annual Report on Form 10-K of said Inland Steel
Industries, Inc. for the fiscal year ended December 31, 1997, including
specifically, but without limitation thereof, full power and authority to sign
my name as a director and(or) officer of said Inland Steel Industries, Inc. to
said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and
confirming all that said attorneys and agents, or any of them, shall do or cause
to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of
January, 1998.
------------------------------
Arnold R. Weber
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED STATEMENT OF OPERATIONS, THE CONSOLIDATED BALANCE SHEET, AND
THE SUMMARY OF STOCKHOLDERS' EQUITY CONTAINED IN THE QUARTERLY REPORT ON FORM
10-Q TO WHICH THIS EXHIBIT IS ATTACHED AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 97,000
<SECURITIES> 0
<RECEIVABLES> 546,800
<ALLOWANCES> 23,500
<INVENTORY> 624,100
<CURRENT-ASSETS> 1,275,100
<PP&E> 4,649,700
<DEPRECIATION> 3,007,900
<TOTAL-ASSETS> 3,646,500
<CURRENT-LIABILITIES> 614,900
<BONDS> 704,900
0
3,100
<COMMON> 50,600
<OTHER-SE> 846,400
<TOTAL-LIABILITY-AND-EQUITY> 3,646,500
<SALES> 5,045,100
<TOTAL-REVENUES> 5,046,800
<CGS> 4,554,100
<TOTAL-COSTS> 4,555,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62,600
<INCOME-PRETAX> 208,000
<INCOME-TAX> 80,300
<INCOME-CONTINUING> 127,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 119,300
<EPS-PRIMARY> 2.25
<EPS-DILUTED> 2.13
</TABLE>
<PAGE>
EXHIBIT 99
FINANCIAL INFORMATION
(TO BE INCLUDED IN THE ANNUAL REPORT TO SHAREHOLDERS FOR 1997)
FINANCIAL REVIEW
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
DOLLARS AND SHARES IN
MILLIONS
(EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net sales........................................... $5,046.8 $4,584.1 $4,781.5
Operating profit.................................... $ 285.8 $ 165.7 $ 328.5
Net income.......................................... $ 119.3 $ 45.7 $ 146.8
Net income per common share......................... $ 2.25 $ .75 $ 2.70
Average shares outstanding.......................... 48.9 48.8 47.3
</TABLE>
The Company reported consolidated net income of $119.3 million, or $2.25 per
share, in 1997, a substantial improvement over the $45.7 million net income,
or $.75 per share, earned in 1996. The major factors in this improved
performance were higher operating profit at the Steel Manufacturing Segment
and lower interest expense resulting from the Company's recapitalization
program. The 1997 consolidated net income includes net income of $8.4 million,
or $.17 per share, related to unusual items, which consisted of gains from
asset sales, a pension curtailment gain at the Materials Distribution Segment,
and a partial offset from additional restructuring provisions at the Steel
Manufacturing Segment.
Net income for 1996 included a net loss of $20.9 million, or $.43 per share,
related to unusual items, which consisted of losses on the early
extinguishment of debt and a salaried workforce reduction provision, offset in
part by a gain from the issuance of subsidiary stock. In 1995, the Company
experienced its second-best year for operating profit performance, reporting
net income of $146.8 million, or $2.70 per share, second only to the Company's
1988 record year.
Net sales increased 10 percent in 1997 to $5.0 billion. The major factor in
this improvement was increased sales in the Materials Distribution Segment
reflecting primarily the impact of acquisitions completed during 1997. In
1996, net sales decreased 4 percent from 1995 due primarily to lower average
selling price.
The Company undertook a recapitalization program in 1996 which included an
initial public offering for approximately 13 percent of the interest in
Ryerson Tull, Inc. ("RT"). The issuance of RT Class A common stock to
unaffiliated third parties resulted in the creation of a minority interest in
the materials distribution part of the business and the recognition of a $31.4
million pretax gain by the Company. Also included in the 1996 recapitalization
program was a $250 million public issuance of debt at RT and the subsequent
tender for the Company's 12 3/4% Notes and Inland Steel Company's Series T 12%
First Mortgage Bonds. As a result of the early redemption of a majority of the
Industries Notes and Series T Bonds, as well as the early redemption of
Pollution Control Project No. 9 Bonds associated with their refinancing, the
Company recognized an extraordinary after-tax loss of $23.3 million, $36.9
million before tax, in 1996.
On the international front, the Company formed a joint venture in 1997 with
The Tata Iron and Steel Company, Ltd. to operate steel service centers in
India. The joint venture commenced operations in the fourth quarter of 1997 at
an acquired facility. The Company has a similar joint venture in China with
Baoshan Iron and Steel Corporation, with construction currently under way for
a steel service center facility in Shanghai. International activities were not
material to the financial results of the Company in any of the years
presented.
STEEL MANUFACTURING SEGMENT
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
DOLLARS AND TONS IN
MILLIONS
<S> <C> <C> <C>
Net sales............................................ $2,467.5 $2,397.3 $2,513.3
Operating profit..................................... $ 143.8 $ 48.0 $ 181.7
Net tons shipped..................................... 5.3 5.1 5.1
</TABLE>
<PAGE>
Inland Steel Company reported markedly improved operating profit of $143.8
million in 1997 as compared with $48 million in 1996. The major factors in the
year-to-year improvement were an improved cost structure and higher volume.
Net sales increased 3 percent due entirely to an increase in the volume of
steel mill products shipped as average selling price remained virtually
unchanged. Operating profit was negatively impacted in 1997 by $1 million,
representing the net effect of a $10 million adjustment to provisions for
previously discontinued raw material operations primarily related to retiree
health care and other benefit costs, which was offset in part by a $9 million
gain on the sale of Inland Steel Company's interest in the Wabush iron ore
property.
Inland Steel Company continued to effect improvements in operations during
1997 as it did during 1996. Raw steel tons produced increased to 5.8 million
tons in 1997 from 5.5 million tons in 1996 reflecting the 4.9 percentage point
year-over-year improvement in capability utilization. Inland Steel Company
operated at 97 percent of its raw steelmaking capability in 1997, compared
with 92 percent in 1996 and 90 percent in 1995. Increases were also achieved
in both the percentage of raw steel that was produced into prime product and
in prime product shipments. The combined effect of these improvements, as well
as productivity and other cost improvements, resulted in the enhanced
operating performance compared with 1996.
In 1996, Inland Steel Company reported $48 million of operating profit
compared with an operating profit of $182 million in 1995. Net sales decreased
5 percent in 1996 as compared with 1995, due primarily to a 5 percent decrease
in average selling price. This decline in average selling price was the
primary factor in the fall-off of operating profit in 1996. The volume of
steel mill products shipped was unchanged from 1995 to 1996. Also contributing
to the operating profit decline in 1996 was a $26.3 million workforce
reduction provision related to a downsizing of the salaried workforce.
In 1995, Inland Steel Company offered a voluntary retirement package which
was accepted by approximately 300 salaried employees resulting in a charge of
$35 million. Also in 1995, Inland Steel Company reversed $65 million of unused
reserves from the balance sheet and recorded a corresponding credit to income.
This reversal resulted from the completion of a workforce reduction program
announced in 1991. The final computation of the employee benefit costs
required for the 1991 program resulted in unused reserves, due to differences
between the 1991 projections and the actual makeup of the population leaving
the Company. Inland Steel Company also increased other reserves by $16 million
in 1995, primarily related to employee benefits at previously discontinued raw
material operations and environmental matters.
Inland Steel Company, under the I/N Kote partnership agreement, supplies all
of the steel for the joint venture and, with certain limited exceptions, is
required to set the price of that steel to assure that I/N Kote's expenditures
do not exceed its revenues. Since 1993, Inland Steel Company's sales prices
exceeded its costs of production but were less than the market prices for cold
rolled steel products. Because I/N Kote expenditures include principal
payments and a provision for return on equity to the partners, Inland Steel
Company's ability to realize higher prices on its sales to I/N Kote depends on
the facility continuing near-capacity operations and obtaining appropriate
pricing for its products.
In the 1996 fourth quarter, Inland Steel Company reached an agreement with
Sun Coal and Coke Company and a unit of NIPSCO Industries for a heat recovery
coke battery and an associated energy recovery and flue-gas- desulphurization
facility, to be located on land leased from Inland Steel Company at its
Indiana Harbor Works. Sun designed, built, financed and will operate the
cokemaking portion of the project. A unit of NIPSCO Industries designed,
built, financed and will operate the portion of the project which will clean
the coke plant's flue gas and convert the heat into steam and electricity.
Sun, the NIPSCO unit and other third parties will invest approximately $350
million in the project. Inland Steel Company has committed to purchase, for
approximately 15 years, 1.2 million tons of coke annually from the facility on
a take-or-pay basis, as well as energy produced by the facility through a
tolling arrangement. The facility is designed to be the primary coke source
for the largest blast furnace at the Indiana Harbor Works and is expected to
commence operations in the first quarter of 1998. Inland Steel Company also
advanced $30 million during construction of the project, which is recorded as
a deferred asset on the balance sheet and will be credited against required
cash payments during the second half of the energy tolling arrangement.
2
<PAGE>
MATERIALS DISTRIBUTION SEGMENT
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
DOLLARS AND TONS IN
MILLIONS
<S> <C> <C> <C>
Net sales............................................ $2,789.4 $2,394.0 $2,450.1
Operating profit..................................... $ 144.2 $ 120.0 $ 148.7
Net tons shipped..................................... 3.02 2.51 2.35
</TABLE>
RT, consisting of Joseph T. Ryerson & Son, Inc., including its Ryerson Coil
Processing Company division, J. M. Tull Metals Company, Inc., and a 50 percent
interest in the Ryerson de Mexico joint venture, reported 1997 net sales of
$2.8 billion, a 17 percent increase from 1996. Included in 1997 results are
sales from facilities acquired during the year and discussed below. Sales from
these facilities since their acquisitions accounted for approximately three-
fourths of the sales increase over the prior year. Also contributing to higher
sales were increases in sales volumes at facilities owned prior to the
acquisitions, partially offset by lower average selling prices. Volumes at
facilities owned prior to the acquisitions increased 9 percent from the prior
year while average selling prices declined 4 percent.
During 1997, RT acquired Thypin Steel Co. ("Thypin"), Inc., Omni Metals,
Inc. ("Omni") and the assets of Cardinal Metals, Inc. ("Cardinal") for an
aggregate of $139.9 million in cash and the assumption of existing debt. RT
acquired Thypin and Cardinal during the first quarter and Omni in the third
quarter.
During 1997, RT continued its strong focus on cost control, lowering
operating costs, excluding the costs of materials sold, to $163 per ton from
$174 per ton in 1996. Year-to-year productivity improvements were realized as
tons shipped per employee increased 11 percent. Benefits derived from these
and other cost improvements, along with an $8.9 million gain from the sale of
plant facilities in Boston and Jersey City and an $8.9 million pension
curtailment gain, served to more than offset lower selling prices and resulted
in RT reporting operating profit of $144.2 million in 1997 compared with
$120.0 million in 1996.
Effective January 1, 1998, RT froze its defined benefit pension plan for
certain salaried employees and instituted a defined contribution plan. The
change to the plan resulted in the pension curtailment gain of $8.9 million
recorded by RT in 1997.
In 1996, net sales decreased 2 percent compared with 1995 to $2.4 billion. A
9 percent decline in average selling price was, in large part, offset by a 7
percent increase in volume. While total operating costs, excluding the costs
of materials sold, increased in 1996 from 1995, such costs on a per ton basis
declined to $174 in 1996 from $182 in 1995. The impact of lower selling prices
was the major factor in the $28.7 million decrease in operating profit from
1995 to 1996.
LIQUIDITY AND FINANCING
The Company finished 1997 with cash and cash equivalents of $97 million
compared with $238 million at year-end 1996. The decrease in cash was
primarily due to the acquisitions at the Materials Distribution Segment and
the repayment of debt assumed in the acquisitions. There was no short-term
bank borrowing at either year end.
During the third quarter of 1997, the Company elected to fund its pension
plans with $36.9 million in cash, $30.0 million for the Industries pension
plan and $6.9 million for the RT pension plan. Also during that quarter, RT
extended the term of its $250 million bank credit facility to September 2002
while reducing both the commitment fee and interest rates related to the
facility.
During the fourth quarter of 1997, Inland Steel Company refinanced $52
million of 6 1/2 percent pollution control revenue bonds with 5 3/4 percent
tax-exempt refunding revenue bonds. In addition to the lower interest rate,
the term of the new bonds was extended more than three years. Also during the
fourth quarter, the Company redeemed the remaining $5.6 million principal
amount outstanding of the Company's 12 3/4% Notes.
3
<PAGE>
The Company's subsidiaries ended the year with committed credit facilities
of $375 million. In addition to the $250 million RT facility discussed above,
Inland Steel Company's special-purpose subsidiary maintained its $125 million
revolving credit facility which extends through November 2000. The credit
facility is secured by receivables sold to the special-purpose subsidiary by
Inland Steel Company. The interest rates on borrowing under such credit
agreements are, at each company's option, based on Eurodollar, Certificate of
Deposit, or the greater of federal funds plus 1/2 percent or prime rates. At
year-end, the highest interest rate option for borrowings under any of these
credit agreements was the applicable prime rate.
Covenants in the RT credit facility limited the amount of cash that RT could
transfer to the Company in the form of dividends and advances to approximately
$76 million at year-end 1997. This amount is subject to change based on the
financial performance of RT. Additionally, there are certain other limitations
on advances.
The ratio of the Company's long-term debt to total capitalization was 42
percent at December 31, 1997, compared with 47 percent and 50 percent at year-
end 1996 and 1995, respectively.
Inland Steel Company guarantees a pulverized coal injection joint venture
loan and its 50 percent share of I/N Kote borrowings amounting to $18 million
and $188 million, respectively, at year-end 1997. The Company guaranteed $116
million of the long-term financing of I/N Tek at December 31, 1997. As none of
these guarantees has been invoked since inception, the Company does not
believe these guarantees will be called upon.
At year-end 1997, the Company had substantial tax carryforwards available
which will serve to reduce federal income tax payments in future years. The
Company had net operating loss carryforwards for regular federal income tax
purposes of $745 million which expire during the years 2006 through 2011. The
Company also had Alternative Minimum Tax credit carryforwards of $48 million
which can be carried forward indefinitely.
The Company believes that its present cash position, augmented by its
subsidiaries' credit facilities and the cash flow anticipated from operations,
will provide sufficient liquidity to meet its scheduled debt retirements, pay
preferred dividends, fund its capital program and meet any operating cash
requirements that may arise for at least the next two years.
The Company's debt ratings at year-end 1997 and 1996 were:
<TABLE>
<CAPTION>
RATINGS AT YEAR END 1997 1996
- ------------------- ---- ----
<S> <C> <C>
Inland Steel Company First Mortgage Bonds
Moody's............................................................. Ba3 Ba3
Standard & Poor's................................................... BB- BB-
Ryerson Tull Notes
Moody's............................................................. Ba1 Ba1
Standard & Poor's................................................... BB BB
</TABLE>
CAPITAL EXPENDITURES
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
DOLLARS IN MILLIONS
<S> <C> <C> <C>
Capital expenditures
Steel Manufacturing..................................... $ 98.4 $155.8 $113.9
Materials Distribution.................................. 40.4 24.1 19.3
General corporate and other............................. .9 1.0 1.4
------ ------ ------
Total capital expenditures................................ $139.7 $180.9 $134.6
====== ====== ======
</TABLE>
Capital expenditures were $140 million in 1997. The majority of the capital
expenditures was for new machinery and equipment related to maintaining or
improving operations at the Steel Manufacturing Segment. The Company
anticipates capital expenditures in 1998 will approximate $150 million.
4
<PAGE>
EMPLOYMENT MATTERS
Inland Steel Company and the United Steelworkers of America entered into a
six-year labor agreement, effective August 1, 1993. The 1993 agreement
restricts Inland Steel Company's ability to reduce the union workforce
(generally limited to attrition and major facilities shutdowns), allows
greater flexibility to institute work rule changes, and required significant
improvements in pension benefits for active employees. The agreement also
provided for a reopener in 1996 which resulted in a $.50 per hour wage
increase effective in August 1996 with $.25 per hour increases in both August
1997 and 1998; a $1,000 bonus per employee in each of 1996, 1997 and 1998
(totaling in each case approximately $7 million); one additional holiday per
year; and an increase in pension benefits.
Average employment declined 3 percent during 1997 in spite of personnel
increases related to the RT acquisitions. Total employment cost increased 2
percent from 1996 as higher direct compensation, including higher profit
sharing provisions, was in part offset by lower employee benefit costs.
The table below summarizes categories of costs incurred by the Company over
the last three years. Not included in the table is the $8.9 million pension
curtailment gain at RT in 1997 and the effects of workforce reduction plans in
1996 and 1995 at Inland Steel Company. In 1996, a $26 million charge for the
provision to reduce salaried employment was excluded from the table. In 1995,
the table excluded both the reversal of $65 million of unused provision booked
in 1991 and the $35 million provision related to a voluntary retirement
package which affected approximately 300 salaried employees.
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
EMPLOYEES (monthly average receiving pay)
Steel Manufacturing................................... 8,876 9,657 10,165
Materials Distribution................................ 5,314 4,904 5,125
Headquarters and other................................ 128 134 120
------- ------- -------
Total................................................... 14,318 14,695 15,410
======= ======= =======
CONSOLIDATED EMPLOYMENT COSTS
<CAPTION>
DOLLARS IN MILLIONS
(EXCEPT AVERAGES)
<S> <C> <C> <C>
Direct compensation..................................... $707.3 $678.7 $712.9
------- ------- -------
Employee benefits
Group insurance costs................................. 62.3 65.3 60.9
Postretirement benefits other than pensions........... 65.4 72.6 64.5
Pension costs......................................... 9.5 5.9 7.5
Social security and unemployment compensation taxes... 55.8 54.9 56.2
Workers' compensation expense......................... 11.8 9.3 11.3
Thrift Plan costs..................................... 8.9 9.1 9.1
Cost of supplemental unemployment benefit plans....... 5.1 6.6 7.2
Industry welfare and retirement funds................. 3.2 3.6 3.6
All other............................................. 6.6 11.3 8.2
------- ------- -------
Total cost of employee benefits......................... $ 228.6 $ 238.6 $ 228.5
------- ------- -------
Total employment costs.................................. $ 935.9 $ 917.3 $ 941.4
======= ======= =======
Average employment cost per employee.................... $65,363 $62,424 $61,092
======= ======= =======
</TABLE>
ENVIRONMENTAL ISSUES
Inland Steel Company has significantly reduced discharges of air and water
pollutants at its Indiana Harbor Works complex in East Chicago, Indiana, in
recent years and is committed to operating its facilities in an
environmentally acceptable manner.
5
<PAGE>
On June 10, 1993, the U.S. District Court for the Northern District of
Indiana entered a consent decree that resolved all matters raised by a lawsuit
filed by the United States Environmental Protection Agency ("EPA") in 1990.
The consent decree included a $3.5 million cash fine, environmentally
beneficial projects at the Indiana Harbor Works through 1997 costing
approximately $7 million, and sediment remediation of portions of the Indiana
Harbor Ship Canal and Indiana Harbor Turning Basin estimated to cost
approximately $19 million over the next several years. The fine and estimated
remediation costs were provided for in earlier years. The consent decree also
defines procedures for remediation at Inland Steel Company's Indiana Harbor
Works. The procedures defined establish essentially a three-step process, each
step of which requires agreement of the EPA before progressing to the next
step in the process, consisting of: assessment of the site (including
stabilization measures), evaluation of corrective measures for remediating the
site, and implementation of the remediation plan according to the agreed-upon
procedures. The Company continues to assess the extent of environmental
contamination and anticipates that this assessment will cost approximately $2
million to $4 million per year for the next several years. The Company's
reserve for environmental liabilities in connection with the consent decree
totaled $25 million at year-end 1997. Because neither the nature and extent of
the contamination nor the corrective actions that may be required can be
determined until the assessment of environmental contamination and evaluation
of corrective measures is completed, the Company cannot presently reasonably
estimate the eventual costs or time required to complete such corrective
actions. Such corrective actions may, however, require significant
expenditures over the next several years that may be material to the results
of operations or financial position of the Company. Insurance coverage with
respect to such corrective action is not significant.
Capital spending for pollution control projects totaled $7 million in 1997,
down from $19 million in 1996. Another $47 million was spent in 1997 to
operate and maintain such equipment, versus $45 million a year earlier. During
the five years ended December 31, 1997, the Company has spent $282 million to
construct, operate and maintain environmental control equipment at its various
locations.
Environmental projects previously authorized and presently under
consideration, including those designed to comply with the 1990 Clean Air Act
Amendments, but excluding any amounts that would be required under the consent
decree settling the 1990 EPA lawsuit, will require capital expenditures of
approximately $4 million in 1998. It is anticipated that the Company will make
annual capital expenditures of $2 million to $5 million in each of the next
four years thereafter for the construction, and have ongoing annual
expenditures of $40 million to $50 million for the operation, of air and water
pollution control facilities to comply with current federal, state and local
laws and regulations. Due to the inability to predict the costs of corrective
action that may be required under the Resource Conservation and Recovery Act
and the consent decree in the 1990 EPA lawsuit, the Company cannot predict the
amount of additional environmental expenditures that will be required. Such
additional environmental expenditures, excluding amounts that may be required
in connection with the consent decree in the 1990 EPA lawsuit, however, are
not expected to be material to the results of operations or financial position
of Inland Steel Company.
COMPETITION
The steel market is highly competitive, with major integrated producers,
including Inland Steel Company, facing competition from a variety of sources.
Many steel products compete with alternative materials such as plastics,
aluminum, ceramics, glass and concrete. Domestic steel producers have also
been adversely impacted by imports from foreign steel producers. Preliminary
data indicate that imports of steel mill products accounted for approximately
24.1 percent of the domestic market in 1997, up from 23.3 percent in 1996.
Many foreign producers are still owned, controlled, or subsidized by their
governments, allowing them to ship steel products into the domestic market
despite decreased profit margins or losses on such sales.
Mini-mills provide significant competition in various product lines. Mini-
mills are relatively efficient, low-cost producers that manufacture steel
principally from scrap in electric furnaces and, at this time, generally have
lower capital, overhead, employment and environmental costs than the
integrated steel producers, including Inland Steel Company. Mini-mills have
been adding capacity and expanding their product lines in recent years to
produce larger structural products and certain flat rolled products. Thin-slab
casting technologies have allowed
6
<PAGE>
mini-mills to enter certain sheet markets traditionally supplied by integrated
producers. Several mini-mills using this advanced technology are in operation
in the United States and a significant increase in modern mini-mill capacity
is anticipated within the next two years.
YEAR 2000 COMPLIANCE PROGRAMS
The Company's subsidiaries rely to a significant degree on computer-
supported procedures in various operations, including order processing,
manufacturing, delivery, distribution and accounting. Company personnel from
Information Technology and other departments have been identifying and
correcting, for several years, and continue to identify and correct, date-
sensitive hardware, software and procedures that could disrupt operations
approaching and after the start of the next millennium ("Year 2000 issues").
Inland Steel Company's recently-completed Order Fulfillment System presented a
significant opportunity to resolve several major Year 2000 issues. The
Company's operating subsidiaries are continuing to dedicate significant
internal resources in a range of disciplines to address Year 2000 issues, as
well as to receive assistance from several consulting groups. It is expected
that the Company's operating subsidiaries will expend approximately $12
million (excluding internal personnel costs) in bringing the Company's
subsidiaries into Year 2000 compliance. A substantial percentage of the effort
has already been undertaken and it is anticipated that needed modifications to
the Company's systems will be completed well in advance of year-end 1999.
During the process of addressing Year 2000 issues, Company personnel have
been issuing, and continue to issue, surveys and questionnaires to significant
customers and suppliers inquiring regarding the extent of the Year 2000
compliance programs of such customers and suppliers. The Company's
subsidiaries also have received similar inquiries from many of their customers
and suppliers. In addition, Company personnel are working with many customers
and suppliers to assure that potential Year 2000 issues are remedied in
systems interfaces with customers and suppliers. Those customers and suppliers
that have shared the results of their Year 2000 compliance surveys have ranked
highly the progress, aggressiveness and thoroughness of the Company's Year
2000 compliance efforts. The Company generally perceives similar levels of
resource dedication by its subsidiaries' major customers and suppliers. The
Company, however, cannot be assured that all entities with which it transacts
significant business will finalize their Year 2000 system upgrades in a timely
or complete manner. Although unlikely, it is possible that, as a result of
such a potential failure by major customers or suppliers, or a delay or
oversight in the Company's efforts to address Year 2000 issues, the Company
could experience an adverse impact, which could be material, on the results of
operations or financial position of one or more of the Company's subsidiaries.
RECENT DEVELOPMENTS
On March 17, 1998, the Company announced it had signed a binding letter
agreement with Ispat International N.V. ("Ispat") whereby Ispat will acquire
Inland Steel Company ("ISC") for a total transaction value of approximately
$1.43 billion. The agreement has been approved by the Boards of Directors of
both companies. As part of the $1.43 billion transaction, Ispat will: i) pay
$650 million in cash for the common stock of ISC held by the Company; ii) pay
$238.2 million for the preferred stock of ISC held by the Company; iii) repay
the intercompany debt of ISC owed to the Company, which at December 31, 1997,
was $230.7 million; and iv) assume debt owed to third parties of approximately
$307.9 million. The Company intends to distribute a significant portion of the
net proceeds from the sale to its stockholders through stock repurchases,
dividends or a combination thereof. The sale is subject to a definitive
agreement, antitrust clearance, other closing conditions, and the need to give
the United Steelworkers of America the opportunity to make an offer to
purchase ISC. It is anticipated that the transaction will close in the third
quarter of 1998. Following the sale, the Company's primary business will be
metals distribution, presently conducted by RT. The Company is currently
considering a plan to combine with RT into one entity subsequent to the
closing of the sale.
7
<PAGE>
SUMMARY BY QUARTER (UNAUDITED)
<TABLE>
<CAPTION>
PER COMMON SHARE
------------------------------------------
NET INCOME MARKET PRICE
NET GROSS INCOME ----------------- ----------------------
SALES PROFIT BEFORE TAXES NET INCOME BASIC DILUTED HIGH LOW CLOSE
-------- ------ ------------ ---------- ------ ------- ---- ---- -----
DOLLARS IN MILLIONS (EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997
First Quarter........... $1,207.3 $128.3 $ 55.1 $ 31.2 $ .59 $ .56 $ 21 $18 1/8 $19 1/2
Second Quarter.......... 1,321.2 134.7 70.4 40.1 .77 .73 27 1/2 18 1/8 26 1/8
Third Quarter........... 1,285.1 128.5 50.2 30.3 .57 .54 27 3/8 20 21 7/8
Fourth Quarter.......... 1,233.2 107.0 32.2 17.7 .31 .30 22 1/16 15 7/8 17 1/8
-------- ------ ------ ------ ------ ----- ---- ---- ----
Year.................... $5,046.8 $498.5 $208.0* $119.3 $ 2.25* $2.13 $27 1/2 $15 7/8 $17 1/8
======== ====== ====== ====== ====== ===== ==== ==== ====
1996
First Quarter........... $1,180.9 $103.7 $ 28.0 $ 17.2 $ .31 $ .29 $ 29 $23 7/8 $24 3/4
Second Quarter.......... 1,163.0 98.0 54.0 19.2 .35 .33 27 19 1/8 19 5/8
Third Quarter........... 1,118.0 105.5 30.7 8.5 .13 .12 19 7/8 16 3/4 17 7/8
Fourth Quarter.......... 1,122.2 76.1** 3.1** .8** (.03)** (.03)** 20 1/4 16 20
-------- ------ ------ ------ ------ ----- ---- ---- ----
Year.................... $4,584.1 $383.3 $115.8 $ 45.7 $ .75* $ .72* $ 29 $ 16 $ 20
======== ====== ====== ====== ====== ===== ==== ==== ====
</TABLE>
- --------
* Amounts for the quarters do not total to the amount reported for the year
due to rounding.
** Includes $26.3 million workforce reduction provision, $17.1 million after
tax or $.35 per common share.
8
<PAGE>
ELEVEN-YEAR SUMMARY OF SELECTED FINANCIAL DATA AND OPERATING RESULTS INLAND
STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
DOLLARS AND TONS IN MILLIONS, SHARES IN THOUSANDS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF
OPERATIONS
Net sales........ $5,046.8 $4,584.1 $4,781.5 $4,497.0 $3,888.2 $3,494.3 $3,404.5 $3,870.4 $4,146.7 $4,068.0
Depreciation..... 157.9 147.0 143.1 138.7 131.8 129.6 118.2 119.7 131.2 134.8
Interest expense. 62.6 77.1 71.9 71.4 78.0 54.9 46.8 38.7 38.4 46.2
Rent expense..... 57.4 50.6 51.2 54.5 73.7 75.5 81.8 85.5 79.9 72.3
Continuing
business
segments:
Income (loss)
before income
taxes.......... 208.0 115.8 237.1 169.5 (73.6) (258.6) (381.1) (36.7) 175.6 364.6
Income taxes.... 80.3 43.8 90.3 62.1 36.0Cr. 99.2Cr. 106.0Cr. 16.1Cr. 55.9 115.8
Income (loss)... 119.3 69.0 146.8 107.4 (37.6) (159.4) (275.1) (20.6) 119.7 248.8
Net income
(loss).......... 119.3 45.7 146.8 107.4 (37.6) (815.6) (275.1) (20.6) 119.7 262.1
-----------------------------------------------------------------------------------------------------------
DATA APPLICABLE
TO COMMON STOCK
Average number of
shares.......... 48,887 48,816 47,333 43,107 35,540 32,828 30,941 32,179 35,491 33,571
Income (loss) per
share--basic
Continuing
business
segments....... $ 2.25 $ 1.23 $ 2.70 $ 1.83 $ (1.96) $ (5.83) $ (9.88) $ (1.41) $ 3.16 $ 7.00
Net income
(loss)......... 2.25 .75 2.70 1.83 (1.96) (25.82) (9.88) (1.41) 3.16 7.40
Income (loss) per
share--diluted
Continuing
business
segments....... 2.13 1.17 2.55 1.70 (1.96) (5.83) (9.88) (1.41) 3.06 6.37
Net income
(loss)......... 2.13 .72 2.55 1.70 (1.96) (25.82) (9.88) (1.41) 3.06 6.71
Dividends per
share........... .20 .20 .20 -- -- -- .15 1.40 1.40 .75
Stockholders'
equity per
share........... 17.27 15.27 14.72 11.06 7.79 6.01 31.10 41.27 43.00 42.50
Stockholders of
record.......... 13,000 14,000 15,000 16,000 16,000 18,000 18,000 19,000 23,000 24,000
Shares traded
(average daily
volume)......... 249.6 189.1 228.2 206.3 134.2 97.3 89.3 95.7 199.5 170.0
-----------------------------------------------------------------------------------------------------------
CHANGES IN
FINANCIAL
POSITION
Cash provided
from (used for)
operations...... $ 167.6 $ 181.3 $ 330.2 $ 265.5 $ 112.0 $ (21.4) $ 25.0 $ 189.1 $ 240.2 $ 531.8
Capital
expenditures.... 139.7 180.9 134.6 245.3 105.6 64.4 140.2 268.1 197.2 136.5
Investments in
and advances to
joint ventures,
net............. (15.3) (18.2) (16.4) (13.7) 1.9 6.3 24.9 49.8 15.5 73.6
Acquisitions..... 139.9 -- -- -- -- -- -- -- 28.2 50.2
Dividends
declared on
common stock.... 9.8 9.8 9.6 -- -- -- 4.6 45.3 50.1 25.2
Dividends
declared on
preferred stock. 9.1 9.1 17.6 27.9 32.0 32.1 31.1 27.1 6.9 13.8
Financing
Long-term debt
(net of
retirements)... (68.3) (11.3) 78.6 (71.2) (96.6) 108.9 73.1 114.0 (17.8) (43.2)
Preferred stock. -- -- -- -- -- -- 72.8 -- 185.0 --
Common stock.... -- -- 100.0 -- 178.7 97.9 -- -- -- --
Net change in
liquidity....... (141.0) (29.4) 160.3 (143.4) 112.8 90.6 (11.2) (179.1) (67.9) 124.2
-----------------------------------------------------------------------------------------------------------
FINANCIAL
POSITION AT YEAR
END
Working capital.. $ 660.2 $ 691.0 $ 618.1 $ 516.7 $ 496.4 $ 441.0 $ 322.8 $ 395.9 $ 703.0 $ 719.8
Property (net)... 1,641.8 1,637.0 1,600.4 1,610.3 1,507.7 1,548.8 1,635.0 1,708.3 1,569.8 1,493.9
Total assets..... 3,646.5 3,541.6 3,558.3 3,353.4 3,435.8 3,146.5 2,697.8 2,934.8 3,008.5 2,925.0
Long-term debt... 704.9 773.2 784.5 705.9 777.1 873.7 764.8 691.7 577.7 595.5
Redeemable
preferred stock. -- -- -- 185.0 185.0 185.0 185.0 185.0 185.0 --
Minority
interest........ 57.5 49.0 -- -- -- -- -- -- -- --
Temporary equity. 28.1 32.1 34.5 37.9 40.8 49.9 53.0 54.9 181.3 --
Stockholders'
equity.......... 900.1 789.0 748.6 509.2 397.6 271.4 1,009.4 1,234.0 1,313.8 1,559.4
Unused credit
facilities...... 375 375 350 225 225 225 225 325 325 225
-----------------------------------------------------------------------------------------------------------
FINANCIAL RATIOS
Net income (loss)
as a percent of
sales........... 2.4% 1.0% 3.1% 2.4% (1.0)% (23.3)% (8.1)% (.5)% 2.9% 6.4%
Long-term debt to
total
capitalization.. 41.7% 47.1% 50.0% 49.1% 55.5% 63.3% 38.0% 31.9% 25.6% 27.6%
Long-term debt
and redeemable
preferred to
total
capitalization.. 41.7% 47.1% 50.0% 62.0% 68.7% 76.7% 47.2% 40.5% 33.8% 27.6%
Return on
stockholders'
equity.......... 13.3% 5.8% 19.6% 21.1% loss loss loss loss 9.1% 16.8%
-----------------------------------------------------------------------------------------------------------
PRODUCTION AND
EMPLOYMENT
STATISTICS
Tons of raw steel
produced........ 5.8 5.5 5.4 5.3 5.0 4.7 4.7 5.3 5.6 6.1
Tons of steel
mill shipments.. 5.3 5.1 5.1 5.2 4.8 4.3 4.2 4.7 4.9 5.0
Average number of
employees....... 14,318 14,695 15,410 15,479 16,152 17,181 18,600 20,154 20,715 20,639
Total employment
costs........... $ 935.9 $ 917.3 $ 941.4 $ 949.5 $ 924.9 $ 940.7 $ 907.4 $ 979.0 $ 964.3 $ 945.8
-----------------------------------------------------------------------------------------------------------
<CAPTION>
1987
-----------
<S> <C>
RESULTS OF
OPERATIONS
Net sales........ $3,453.2
Depreciation..... 123.4
Interest expense. 62.8
Rent expense..... 68.9
Continuing
business
segments:
Income (loss)
before income
taxes.......... 97.5
Income taxes.... 14.2Cr.
Income (loss)... 111.7
Net income
(loss).......... 145.0
DATA APPLICABLE
TO COMMON STOCK
Average number of
shares.......... 31,815
Income (loss) per
share--basic
Continuing
business
segments....... $ 3.09
Net income
(loss)......... 4.14
Income (loss) per
share--diluted
Continuing
business
segments....... 3.05
Net income
(loss)......... 3.96
Dividends per
share........... --
Stockholders'
equity per
share........... 36.15
Stockholders of
record.......... 26,000
Shares traded
(average daily
volume)......... 178.9
CHANGES IN
FINANCIAL
POSITION
Cash provided
from (used for)
operations...... $ 169.1
Capital
expenditures.... 128.0
Investments in
and advances to
joint ventures,
net............. 10.5
Acquisitions..... --
Dividends
declared on
common stock.... --
Dividends
declared on
preferred stock. 13.9
Financing
Long-term debt
(net of
retirements)... (160.9)
Preferred stock. 96.6
Common stock.... 83.7
Net change in
liquidity....... 71.7
FINANCIAL
POSITION AT YEAR
END
Working capital.. $ 625.0
Property (net)... 1,488.1
Total assets..... 2,651.4
Long-term debt... 638.7
Redeemable
preferred stock. --
Minority
interest........ --
Temporary equity. --
Stockholders'
equity.......... 1,391.5
Unused credit
facilities...... 225
FINANCIAL RATIOS
Net income (loss)
as a percent of
sales........... 4.2%
Long-term debt to
total
capitalization.. 31.5%
Long-term debt
and redeemable
preferred to
total
capitalization.. 31.5%
Return on
stockholders'
equity.......... 10.4%
PRODUCTION AND
EMPLOYMENT
STATISTICS
Tons of raw steel
produced........ 5.5
Tons of steel
mill shipments.. 4.9
Average number of
employees....... 20,740
Total employment
costs........... $ 878.4
</TABLE>
Cr.=Credit
9
<PAGE>
FINANCIAL RESPONSIBILITY
Senior management is responsible for the integrity and objectivity of the
financial data reported by Inland Steel Industries, Inc. and its subsidiaries.
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, and in management's judgment reflect
fairly the consolidated financial position, cash flows and results of
operations of Inland and its subsidiary companies.
The Company maintains systems of internal accounting controls and procedures
to provide reasonable assurance of the safeguarding and accountability of
Company assets, and to ensure that its financial records provide a reliable
basis for the preparation of financial statements and other data.
Internal accounting control is maintained through:
. The on-going activities of corporate staff, line officers and accounting
management to monitor the adequacy of internal accounting control systems
throughout the Company
. The selection and proper training of qualified personnel
. The appropriate separation of duties in organizational arrangements
. The establishment and communication of accounting and business policies
together with detailed procedures for their implementation
. The use of an intensive ongoing program of internal auditing
. The use of a detailed budgeting system to assure that expenditures are
properly approved and charged.
Stockholders annually elect a firm of independent accountants to audit the
annual financial statements (their current report appears below). The
principal role of the Audit Committee of the Board of Directors (consisting
entirely of non-management Directors) is to review the conclusions reached by
management in its evaluation of internal accounting controls, approve the
scope of audit programs and evaluate audit results of both independent
accountants and internal auditors. Both groups have unrestricted access to the
Audit Committee, without the presence of management.
10
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Inland Steel Industries, Inc.
In our opinion, the consolidated financial statements on pages 12 through 36
present fairly, in all material respects, the financial position of Inland
Steel Industries, Inc. and Subsidiary Companies at December 31, 1997 and 1996,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Chicago, Illinois
February 18, 1998, except as to Note 20, which is as of March 17, 1998
11
<PAGE>
STATEMENT OF ACCOUNTING AND FINANCIAL POLICIES
The following briefly describes the Company's principal accounting and
financial policies.
ACCOUNTING FOR EQUITY INVESTMENTS
The Company's investments in less than majority-owned companies, joint
ventures and partnerships, and the Company's majority interest in the I/N Tek
partnership, are accounted for under the equity method.
PER SHARE RESULTS
Basic per share results are based on the weighted average number of common
shares outstanding and take into account the dividend requirements of
preferred stock, net of tax benefits related to leveraged Employee Stock
Ownership Plan ("ESOP") shares.
Diluted per share results reflect the dilutive effect of outstanding stock
options, the further dilutive effect of the assumed conversion into common
stock of the outstanding shares of convertible preferred stock, and the
elimination of the related preferred stock dividends. Also reflected in
diluted earnings per common share is an adjustment for the additional ESOP
contribution, net of tax benefits, that would be necessary to meet debt
service requirements that would arise upon conversion of the leveraged Series
E ESOP Convertible Preferred Stock ("Series E Preferred Stock"), due to the
current excess of the preferred dividend over the common dividend.
INVENTORY VALUATION
Inventories are valued at cost which is not in excess of market. Cost is
determined by the last-in, first-out method except for supply inventories,
which are determined by the average cost or first-in, first-out methods.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is depreciated for financial reporting
purposes over the estimated useful lives of the assets. Steelmaking machinery
and equipment, a significant class of assets, is depreciated on a production-
variable method, which adjusts straight-line depreciation to reflect
production levels at the steel plant. The adjustment is limited to not more
than a 25 percent increase or decrease from straight-line depreciation. Blast
furnace relining expenditures are capitalized and amortized on a unit-of-
production method over the life of the lining. All other assets are
depreciated on a straight-line method.
Expenditures for normal repairs and maintenance are charged to income as
incurred.
Gains or losses from significant abnormal disposals or retirements of
properties are credited or charged to income. The cost of other retired assets
less any sales proceeds is charged to accumulated depreciation.
EXCESS OF COST OVER NET ASSETS ACQUIRED
The excess of cost over fair value of net assets of businesses acquired is
being amortized over 25-year periods.
CASH EQUIVALENTS
Cash equivalents reflected in the Statement of Cash Flows are highly liquid,
short-term investments with maturities of three months or less that are an
integral part of the Company's cash management portfolio.
STOCK-BASED COMPENSATION
Financial Accounting Standards Board ("FASB") Statement No. 123, "Accounting
for Stock-Based Compensation," encourages, but does not require companies to
record compensation cost for stock-based
12
<PAGE>
employee compensation plans at fair value. The Company has chosen to continue
to account for stock-based compensation using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related Interpretations. Accordingly,
compensation cost for stock options is measured as the excess, if any, of the
quoted market price of the Company's stock at the date of the grant over the
amount an employee must pay to acquire the stock. Compensation cost for stock
appreciation rights and performance equity units is recorded annually based on
the quoted market price of the Company's stock at the end of the period.
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.
13
<PAGE>
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND REINVESTED EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------
1997 1996 1995
-------- -------- --------
DOLLARS IN MILLIONS
(EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
Net sales........................................ $5,046.8 $4,584.1 $4,781.5
-------- -------- --------
Operating costs and expenses:
Cost of goods sold (excluding depreciation).... 4,315.8 3,979.1 4,043.2
Selling, general and administrative expenses... 218.5 208.3 204.1
Depreciation................................... 157.4 146.5 142.6
State, local and miscellaneous taxes........... 69.3 58.2 63.1
Workforce reduction provision (Note 11)........ -- 26.3 --
-------- -------- --------
Total........................................ 4,761.0 4,418.4 4,453.0
-------- -------- --------
Operating profit................................. 285.8 165.7 328.5
-------- -------- --------
Other expense:
General corporate expense, net of income items. 15.2 4.2 19.5
Interest and other expense on debt............. 62.6 77.1 71.9
Gain from issuance of subsidiary stock (Note
1)............................................ -- (31.4) --
-------- -------- --------
Income before income taxes, minority interest and
extraordinary loss.............................. 208.0 115.8 237.1
-------- -------- --------
Provision for income taxes (Note 13):
Current taxes.................................. 29.2 2.7 11.1
Deferred taxes................................. 51.1 41.1 79.2
-------- -------- --------
Total........................................ 80.3 43.8 90.3
-------- -------- --------
Income before minority interest and extraordinary
loss............................................ 127.7 72.0 146.8
Minority interest in Ryerson Tull, Inc. (Note 1). 8.4 3.0 --
-------- -------- --------
Income before extraordinary loss................. 119.3 69.0 146.8
Extraordinary loss on early retirement of debt
(Note 4)........................................ -- (23.3) --
-------- -------- --------
Net income....................................... 119.3 45.7 146.8
Dividend requirements for preferred stock (net of
tax benefits related to leveraged ESOP shares).. 9.1 9.1 19.0
-------- -------- --------
Net income applicable to common stock............ $ 110.2 $ 36.6 $ 127.8
======== ======== ========
Per share of common stock
Basic:
Before extraordinary loss...................... $ 2.25 $ 1.23 $ 2.70
Extraordinary loss on early retirement of debt. -- (.48) --
-------- -------- --------
Net income................................... $ 2.25 $ .75 $ 2.70
======== ======== ========
Diluted:
Before extraordinary loss...................... $ 2.13 $ 1.17 $ 2.55
Extraordinary loss on early retirement of debt. -- (.45) --
-------- -------- --------
Net income................................... $ 2.13 $ .72 $ 2.55
======== ======== ========
CONSOLIDATED STATEMENT OF REINVESTED EARNINGS
Accumulated deficit at beginning of year......... $ (146.0) $ (172.8) $ (292.4)
Net income for the year.......................... 119.3 45.7 146.8
Dividends declared:
Common ($.20 per share)........................ (9.8) (9.8) (9.6)
Preferred (Notes 5 and 7)...................... (9.1) (9.1) (17.6)
-------- -------- --------
Accumulated deficit at end of year............... $ (45.6) $ (146.0) $ (172.8)
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements on pages 18-36.
14
<PAGE>
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH
YEARS ENDED DECEMBER 31
------------------------------
1997 1996 1995
--------- --------- ---------
DOLLARS IN MILLIONS
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income..................................... $ 119.3 $ 45.7 $ 146.8
-------- --------- ---------
Adjustments to reconcile net income to net cash
provided from operating activities:
Depreciation................................. 157.9 147.0 143.1
Deferred income taxes........................ 51.1 27.5 79.2
Deferred employee benefit cost............... (27.1) 24.2 (23.5)
Stock issued for coverage of employee benefit
plans....................................... 21.8 22.6 23.9
Gain from sale of assets..................... (17.9) -- --
Gain from issuance of subsidiary stock....... -- (31.4) --
Workforce reduction provision................ -- 26.3 --
Cokemaking project advance................... (30.0) -- --
Change in: Receivables....................... (11.4) 23.8 15.1
Inventories.............................. (52.3) (33.6) (31.5)
Accounts payable......................... .8 7.0 (34.8)
Accrued salaries and wages............... 3.1 (11.4) (.4)
Other accrued liabilities................ (9.7) (18.9) 29.6
Other items.................................. (38.0) (47.5) (17.3)
-------- --------- ---------
Net adjustments............................ 48.3 135.6 183.4
-------- --------- ---------
Net cash provided from operating
activities................................ 167.6 181.3 330.2
-------- --------- ---------
INVESTING ACTIVITIES
Capital expenditures........................... (139.7) (180.9) (134.6)
Acquisitions (Note 16)......................... (139.9) -- --
Investments in and advances to joint ventures,
net........................................... 15.3 18.2 16.4
Proceeds from sales of assets.................. 34.3 5.9 3.6
-------- --------- ---------
Net cash used for investing activities..... (230.0) (156.8) (114.6)
-------- --------- ---------
FINANCING ACTIVITIES
Issuance of subsidiary stock................... -- 77.1 --
Long-term debt issued.......................... 51.3 284.9 16.8
Long-term debt retired......................... (77.1) (391.2) (36.5)
Reduction of debt assumed in acquisitions...... (25.3) -- --
Dividends paid................................. (20.8) (21.0) (31.6)
Acquisition of treasury stock.................. (6.7) (3.7) (4.0)
-------- --------- ---------
Net cash used for financing activities..... (78.6) (53.9) (55.3)
-------- --------- ---------
Net increase (decrease) in cash and cash
equivalents................................... (141.0) (29.4) 160.3
Cash and cash equivalents--beginning of year... 238.0 267.4 107.1
-------- --------- ---------
Cash and cash equivalents--end of year......... $ 97.0 $ 238.0 $ 267.4
======== ========= =========
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for:
Interest (net of amount capitalized)......... $ 64.7 $ 67.0 $ 65.4
Income taxes, net............................ 27.5 8.6 9.4
Non-cash activities:
Reduction of deferred employee benefits
resulting from contribution of common stock
to the Company's Pension Trust.............. -- -- 100.0
Series F Preferred Stock exchanged for
Subordinated Voting Note.................... -- -- 185.0
</TABLE>
See Notes to Consolidated Financial Statements on pages 18-36.
15
<PAGE>
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AT DECEMBER 31
--------------------
1997 1996
--------- ---------
DOLLARS IN MILLIONS
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 97.0 $ 238.0
Receivables less provision for allowances, claims and
doubtful accounts of $23.5 and $22.5, respectively... 523.3 464.7
Inventories (Note 2).................................. 624.1 494.6
Deferred income taxes (Note 13)....................... 30.7 30.5
--------- ---------
Total current assets................................ 1,275.1 1,227.8
Investments and advances (see details page 17).......... 271.6 252.1
Property, plant and equipment, at cost, less accumulated
depreciation (see details page 17)..................... 1,641.8 1,637.0
Deferred income taxes (Note 13)......................... 231.4 287.5
Prepaid pension cost.................................... 77.4 --
Intangible pension asset (Note 12)...................... -- 76.3
Excess of cost over net assets acquired................. 82.3 22.3
Deferred charges and other assets....................... 66.9 38.6
--------- ---------
Total assets........................................ $ 3,646.5 $ 3,541.6
========= =========
LIABILITIES
Current liabilities:
Accounts payable...................................... $ 354.9 $ 321.4
Accrued liabilities:
Salaries, wages and commissions..................... 79.1 76.0
Taxes............................................... 84.0 78.3
Interest on debt.................................... 17.1 17.9
Terminated facilities costs and other (Note 11)..... 17.1 23.6
Long-term debt due within one year (Note 4)........... 62.7 19.6
--------- ---------
Total current liabilities............................... 614.9 536.8
Long-term debt (see details page 17 and Note 4)......... 704.9 773.2
Allowance for terminated facilities costs and other
(Note 11).............................................. 56.0 48.8
Deferred employee benefits (Note 12).................... 1,275.6 1,301.6
Deferred income......................................... 9.4 11.1
--------- ---------
Total liabilities................................... 2,660.8 2,671.5
--------- ---------
Minority interest in Ryerson Tull, Inc.................. 57.5 49.0
Common stock repurchase commitment (Note 5)............. 28.1 32.1
--------- ---------
STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value, 15,000,000 shares
authorized for all series, aggregate liquidation value
of $150.6 in 1997 and $153.9 in 1996 (Notes 6 and 7)... 3.1 3.2
Common stock, $1.00 par value; authorized--100,000,000
shares; issued--50,556,350 shares (Notes 7 through 9).. 50.6 50.6
Capital in excess of par value (Note 7)................. 1,032.5 1,040.2
Accumulated deficit..................................... (45.6) (146.0)
Unearned compensation--ESOP (Note 6).................... (68.6) (79.4)
Common stock repurchase commitment (Note 5)............. (28.1) (32.1)
Treasury stock at cost--Common stock of 1,557,635 shares
in 1997 and 1,647,954 shares in 1996................... (40.5) (44.2)
Cumulative translation adjustment....................... (3.3) (3.3)
--------- ---------
Total stockholders' equity.......................... 900.1 789.0
--------- ---------
Total liabilities, minority interest, temporary
equity, and stockholders' equity................... $ 3,646.5 $ 3,541.6
========= =========
</TABLE>
See Notes to Consolidated Financial Statements on pages 18-36.
16
<PAGE>
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
SCHEDULES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
AT DECEMBER 31
-------------------
1997 1996
--------- ---------
DOLLARS IN MILLIONS
<S> <C> <C>
INVESTMENTS AND ADVANCES
Steel processing joint ventures............................ $ 167.3 $ 153.3
Raw material joint ventures................................ 47.4 52.2
Common stock of Nippon Steel Corporation held for
investment, net of valuation allowances of $7.1 and $4.8,
respectively.............................................. 7.5 9.8
Other investments and advances............................. 49.4 36.8
--------- ---------
Total investments and advances......................... $ 271.6 $ 252.1
========= =========
PROPERTY, PLANT AND EQUIPMENT
Land, land improvements and mineral properties............. $ 156.5 $ 156.2
Buildings, machinery and equipment......................... 4,311.3 4,197.9
Transportation equipment................................... 144.9 145.0
Property under capital leases--primarily machinery and
equipment................................................. 37.0 37.0
--------- ---------
Total.................................................. 4,649.7 4,536.1
Less--
Accumulated depreciation................................. 2,871.5 2,763.0
Accumulated depreciation--capital leases................. 35.7 35.4
Allowance for retirements and terminated facilities (Note
11)..................................................... 100.7 100.7
--------- ---------
Net property, plant and equipment...................... $ 1,641.8 $ 1,637.0
========= =========
LONG-TERM DEBT
Inland Steel Industries, Inc.
Guaranteed ESOP notes, 8.43% and 8.80%, due through July
2, 2004................................................. $ 85.9 $ 96.5
Notes, 12 3/4%........................................... -- 5.6
Subordinated Voting Note, 10.23% due December 17, 1999... 100.0 100.0
--------- ---------
Total Inland Steel Industries, Inc..................... 185.9 202.1
Inland Steel Company
First Mortgage Bonds:
Series R, 7.9% due January 15, 2007...................... 61.4 72.0
Series T, 12% due December 1, 1998....................... -- 26.3
Pollution Control Series 1977, 5 3/4% due February 1,
2007.................................................... 25.5 26.5
Pollution Control Series 1978, 6 1/2%.................... -- 52.0
Pollution Control Series 1993, 6.8% due June 1, 2013..... 40.0 40.0
Pollution Control Series 1995, 6.85% due December 1,
2012.................................................... 17.0 17.0
--------- ---------
Total First Mortgage Bonds............................. 143.9 233.8
Obligations for Industrial Development Revenue Bonds:
Pollution Control Project No. 2, 5.9% due August 1, 1998. -- 5.0
Pollution Control Project No. 3, 6 1/4% due April 1,
1999.................................................... 3.0 6.0
Pollution Control Project No. 11, 7 1/8% due June 1,
2007.................................................... 20.0 20.0
Pollution Control Project No. 13, 7 1/4% due November 1,
2011.................................................... 38.0 38.0
Exempt Facilities Project No. 14, 6.7% due November 1,
2012.................................................... 5.1 5.1
Exempt Facilities Project No. 15, 5 3/4% due October 1,
2011.................................................... 52.0 --
--------- ---------
Total Inland Steel Company............................. 262.0 307.9
Ryerson Tull, Inc.
Notes, 8 1/2% due July 15, 2001.......................... 150.0 150.0
Notes, 9 1/8% due July 15, 2006.......................... 100.0 100.0
Joseph T. Ryerson & Son, Inc.
Obligation for Industrial Revenue Bond with floating
rate, set weekly based on 13-week Treasury bills, due
November 1, 2007........................................ 7.0 7.0
J. M. Tull Metals Company, Inc.
Obligations for Industrial Revenue Bonds and other long-
term debt with variable rates and fixed rates to 9 7/8%,
due through August 17, 1998............................. -- 6.2
--------- ---------
Total long-term debt................................... $ 704.9 $ 773.2
========= =========
</TABLE>
See Notes to Consolidated Financial Statements on pages 18-36.
17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1/RECAPITALIZATION
In the 1996 second quarter, the Company undertook a recapitalization that
involved the Company and both its Inland Steel Company and Ryerson Tull, Inc.
("RT") subsidiaries. As part of the restructuring, RT, formerly Inland
Materials Distribution Group, Inc. ("IMDG"), exchanged existing shares of IMDG
common stock, all of which were owned by the Company, for 34.0 million shares
of new-issue RT Class B common stock, $1.00 par value per share. RT also sold
5.2 million shares of new-issue Class A common stock, $1.00 par value per
share, in a public offering, the net proceeds of which approximated $77.1
million. The Company recognized a $31.4 million gain on the sale of the RT
Class A common stock. At year-end 1997 and 1996, the Company's ownership of RT
approximated 87 percent.
Prior to the issuance of the Class A common stock, RT declared and paid
dividends of $445.9 million to the Company, of which $152.1 million was in
cash and $293.8 million was in the form of a note payable. The Company used
$63.2 million of the cash dividends to repay intercompany borrowing from RT
and its subsidiaries. In July, RT sold $250 million of Notes, the net proceeds
of which, along with a portion of RT's cash on hand, was used to pay the
$293.8 million note balance due the Company.
NOTE 2/INVENTORIES
Inventories were classified on December 31 as follows:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
DOLLARS IN MILLIONS
<S> <C> <C>
In process and finished products:
Steel Manufacturing Operations........................ $ 120.9 $ 106.5
Materials Distribution Operations..................... 422.9 311.9
--------- ---------
543.8 418.4
--------- ---------
Raw materials and supplies:
Iron ore.............................................. 39.7 42.4
Scrap and other raw materials......................... 23.7 16.7
Supplies.............................................. 16.9 17.1
--------- ---------
80.3 76.2
--------- ---------
Total............................................... $ 624.1 $ 494.6
========= =========
</TABLE>
Replacement costs for the LIFO inventories exceeded LIFO values by
approximately $389 million and $406 million on December 31, 1997 and 1996,
respectively. The effect on cost of goods sold of LIFO liquidations in each of
the three years ended December 31, 1997 was not material.
NOTE 3/BORROWING ARRANGEMENTS
On December 31, 1997, the Company's subsidiaries had available unused credit
facilities totaling $375 million. Each facility requires compliance with
various financial covenants including minimum net worth and leverage ratios.
In the 1997 third quarter, RT extended the term of its $250 million bank
credit facility to September 2002. Both the interest rates and commitment fee
related to the facility were reduced.
A special-purpose subsidiary of Inland Steel Company has a $125 million
revolving credit facility, which extends to November 30, 2000. Inland Steel
Company has agreed to sell substantially all of its receivables to this
special-purpose subsidiary and these receivables are used to secure this
facility.
With the recapitalization that occurred in 1996, the ability of RT and its
subsidiaries to transfer cash to the Company has been more tightly restricted.
Covenants in the RT credit facility limited the amount of cash that
18
<PAGE>
RT could transfer to the Company in the form of dividends and advances to
approximately $76 million at year-end 1997. This amount is subject to change
based on the financial performance of RT. Additionally, there are certain
other limitations on advances. As part of the recapitalization, the Company
and RT entered into an agreement to maintain the existence of the Company and
RT as separate corporate entities. Included in this agreement is a requirement
that any transactions between the entities, including loans or advances from
RT to the Company, must be on an arms-length basis.
NOTE 4/LONG-TERM DEBT
Each series of First Mortgage Bonds issued by Inland Steel Company is
limited to the principal amount outstanding, with the Pollution Control Series
1977 Bonds and the Series R First Mortgage Bonds subject to a sinking fund. A
substantial portion of the property, plant and equipment owned by Inland Steel
Company at its Indiana Harbor Works is subject to the lien of the First
Mortgage. This property had a net book value of approximately $1.0 billion on
December 31, 1997.
Inland Steel Company refinanced $52 million of 6 1/2 percent pollution
control revenue bonds with 5 3/4 percent tax-exempt refunding bonds during the
1997 fourth quarter. Also during the quarter, the Company redeemed the
remaining $5.6 million principal amount outstanding of the Company's 12 3/4%
Notes.
As part of the restructuring undertaken by the Company in 1996, RT issued
$150 million of 8 1/2 percent debt due July 15, 2001, and $100 million of 9
1/8 percent debt due July 15, 2006.
During 1996, the Company and Inland Steel Company respectively tendered for
the repurchase of all outstanding 12 3/4% Notes and Series T 12% First
Mortgage Bonds. Of the $150 million principal amount of Notes outstanding and
the $125 million principal amount of Series T Bonds outstanding, $144.2
million and $98.7 million, respectively, were tendered. Inland Steel Company
also called $38 million of 10 percent Pollution Control Project No. 9 Bonds
for early redemption, which were refinanced at an interest rate of 7.25
percent. As a result of the tenders and early redemption, the Company
recognized an extraordinary after-tax loss of $23.3 million, $36.9 million
before income taxes.
During the third quarter of 1995, Inland Steel Company refinanced $17
million of 10.75 percent pollution control revenue bonds with bonds bearing an
interest rate of 6.85 percent. Also during the third quarter, the Company
exchanged its Series F Exchangeable Preferred Stock for a $185 million 10.23%
Subordinated Voting Note. On December 18, 1996, $85 million of the
Subordinated Voting Note was repaid, with the remaining $100 million required
to be redeemed on December 17, 1999, plus, in each instance, accrued and
unpaid interest thereon. See Note 5 for additional information on the
Subordinated Voting Note.
The outstanding borrowing of the Company's ESOP is recorded as a liability
of the Company because the Company has committed to make payments (dividends
and supplemental contributions) to the ESOP Trust sufficient to service the
ESOP debt. The ESOP notes are payable in semi-annual installments through July
2004 and are guaranteed by Joseph T. Ryerson & Son, Inc., a majority owned
subsidiary of the Company. See Note 6 for additional information on the ESOP
debt.
Maturities of long-term debt and capitalized lease obligations due within
five years are: $62.7 million in 1998, $115.5 million in 1999, $18.8 million
in 2000, $169.9 million in 2001, and $21.1 million in 2002. See Note 18
regarding commitments and contingencies for other scheduled payments.
Interest cost incurred by the Company totaled $64.3 million in 1997, $79.6
million in 1996, and $73.7 million in 1995. Included in these totals is
capitalized interest of $1.7 million in 1997, $2.5 million in 1996, and $1.8
million in 1995.
NOTE 5/SUBORDINATED VOTING NOTE
In December 1989, the Company sold 185,000 shares of the Company's Series F
Exchangeable Preferred Stock, $1.00 par value per share ("Series F Preferred
Stock"), for $185 million to NS Finance III, Inc., an
19
<PAGE>
indirect wholly owned subsidiary of Nippon Steel Corporation ("NSC"). The
preferred stock was exchanged in the third quarter of 1995 for the Company's
10.23% Subordinated Voting Note (see Note 4). The preferred stock entitled the
holder to 30.604 votes per share and the Subordinated Voting Note entitles the
holder to 30.604 votes per $1,000 of principal amount outstanding, which
number may be adjusted from time to time upon the occurrence of certain
events. The voting power was based on the equivalent number of common shares
represented by a market value of $185 million at the time the preferred stock
was issued. In the event of a change in control or certain other events, the
holder may require the Company to redeem the Subordinated Voting Note at a 10
percent premium. In the event of an early redemption, the Company may be
required to reimburse the holder for certain costs incurred as a result of
such redemption.
In connection with the sale of the Series F Preferred Stock, the Company
agreed to repurchase $185 million of the Company's common stock, of which $157
million (amounting to 5.1 million shares) has been repurchased. As of December
31, 1997, the amount representing the remaining repurchase commitment of $28
million has been classified as temporary equity with a corresponding reduction
of stockholders' equity. In December 1990, the Company suspended open-market
stock purchases and agreed to maintain cash, certain securities, a surety bond
or letter of credit, or some combination thereof, currently equal to $9
million to meet its obligation under the Series F Preferred Stock sale
agreement.
The terms of a letter agreement between the Company and NSC which provided
for the purchase of the Series F Preferred Stock generally restrict the
acquisition by NSC of additional securities of the Company and the disposition
of the Subordinated Voting Note. Under certain circumstances related to a
potential change in control of the Company, NSC may seek to acquire voting
securities of the Company on terms and conditions no less favorable to the
Company's stockholders than the terms and conditions offered in connection
with the potential change in control.
So long as the purchaser and permitted transferees beneficially own at least
$100 million aggregate principal amount of the Subordinated Voting Note, the
Company has agreed with NSC to nominate a mutually acceptable individual for
election to the Company's Board of Directors. No such individual has been
nominated.
NOTE 6/EMPLOYEE STOCK OWNERSHIP PLAN
The Company sponsors a savings plan through which eligible salaried
employees may elect to save a portion of their salary, of which the Company
matches the first five percent of each participant's salary contributed,
subject to certain IRS limitations. In July 1989, the Board of Directors
amended the savings plan to include a leveraged ESOP. The ESOP Trust purchased
3.1 million newly issued shares of Series E Preferred Stock from the Company
with the proceeds of loans totaling $150 million. As a result, effective
January 1, 1990, the matching in the savings plan is in shares of Series E
Preferred Stock provided principally by the Company's ESOP, supplemented as
needed by newly issued shares. The Company accounts for its ESOP in accordance
with AICPA Statement of Position 76-3.
Effective January 1, 1998, salaried employees at RT will no longer
participate in the above described savings plan and will no longer receive
ESOP shares, except for dividend replacement shares, in their savings plan
accounts. Shares allocated to such employees prior to year-end 1997 will
remain in their accounts and dividend replacement shares will continue to be
allocated to their accounts consistent with plan provisions. Future matching
will be provided in cash consistent with provisions of a new savings plan
established by RT. Compensation expense recognized at RT will not be
materially impacted as a result of the change in savings plans.
The Company makes annual contributions to the ESOP equal to the ESOP's debt
service less dividends on leveraged shares (shares purchased by the ESOP Trust
in July 1989) received by the ESOP Trust. All dividends received by the ESOP
are used to pay debt service. Dividends on Series E Preferred Stock are
recorded as declared as reductions to retained earnings, net of applicable tax
benefits on unallocated shares. Dividends on allocated leveraged shares are
replaced with additional ESOP shares. Dividends on unallocated leveraged
shares serve to reduce interest expense recognized by the Company.
20
<PAGE>
In each of 1997, 1996 and 1995, the ESOP Trust received $10.6 million in
dividends and $8.1 million in contributions from the Company to make required
principal and interest payments.
As principal and interest payments are made, ESOP shares are made available
for allocation based on the proportion of current payments to the total of
current plus future payments. As shares are allocated, the Company records
compensation expense equal to the original stated value of the shares of
Series E Preferred Stock allocated to the participants during the period.
Compensation expense related to the ESOP recognized by the Company totaled
$8.4 million in 1997, $9.1 million in 1996, and $8.9 million in 1995. ESOP
shares remaining unallocated are reported as unearned compensation on the
Company's consolidated balance sheet.
Interest expense is recognized as it is incurred by the ESOP Trust. Interest
expense incurred by the ESOP Trust totaled $8.6 million, $9.3 million, and
$10.0 million in 1997, 1996 and 1995, respectively.
The ESOP shares as of December 31 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Allocated shares............................... 1,603,623 1,447,642 1,268,126
Unreleased shares.............................. 1,410,925 1,633,148 1,850,475
--------- --------- ---------
Total ESOP shares............................ 3,014,548 3,080,790 3,118,601
========= ========= =========
</TABLE>
NOTE 7/CAPITAL STOCK
On December 31, 1997, 7,972,744 shares of common stock remained reserved for
issuance under the Company's various employee stock plans and upon conversion
of shares of preferred stock.
In the second quarter of 1995, the Company contributed 3.9 million shares of
its common stock with an aggregate value of $100 million to the Company's
Pension Trust.
The Series A $2.40 Cumulative Convertible Preferred Stock, $1.00 par value
per share ("Series A Preferred Stock"), is convertible into common stock at
the rate of one share of common stock for each share of Series A Preferred
Stock and is redeemable, at the Company's option, at $44 per share plus any
accrued and unpaid dividends. Each such share is entitled to one vote and
generally votes together with holders of common stock as one class.
Shares of Series E Preferred Stock, $1.00 par value per share, entitle the
holder to cumulative annual dividends of $3.523 per share, payable semi-
annually, and to 1.25 votes per share. Shares of Series E Preferred Stock are
convertible into the Company's common stock on a one-for-one basis. From time
to time, the Company elects to provide additional shares of Series E Preferred
Stock to the ESOP Trust to cover employee matching requirements not covered by
the release of shares through scheduled principal and interest payments by the
ESOP Trust on its outstanding notes (see Note 6).
21
<PAGE>
The following table details changes in capital accounts:
<TABLE>
<CAPTION>
PREFERRED STOCK CAPITAL
------------------------------ IN EXCESS OF
COMMON STOCK TREASURY STOCK SERIES A SERIES E PAR VALUE
-------------- --------------- -------------- --------------- ------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS DOLLARS
------ ------- ------ ------- ------ ------- ------ ------- ------------
SHARES IN THOUSANDS AND DOLLARS IN MILLIONS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1995................... 50,556 $50.6 (6,006) $(200.9) 95 $ .1 3,103 $3.1 $1,088.0
Acquisition of treasury
stock................. -- -- (138) (4.0) -- -- -- -- --
Issued under employee
benefit plans......... -- -- 415 15.6 -- -- 44 -- (3.1)
Redemption of Series E
Preferred Stock....... -- -- -- -- -- -- (28) -- (1.3)
Conversion of Series A
Preferred Stock....... -- -- 1 -- (1) -- -- -- --
Issuance of Common
Stock to Pension
Trust................. -- -- 3,946 139.0 -- -- -- -- (39.0)
Other changes.......... -- -- (33) (.8) -- -- -- -- 1.1
------ ----- ------ ------- --- ---- ----- ---- --------
Balance at December 31,
1995................... 50,556 50.6 (1,815) (51.1) 94 .1 3,119 3.1 1,045.7
Acquisition of treasury
stock................. -- -- (164) (3.7) -- -- -- -- --
Issued under employee
benefit plans......... -- -- 401 12.5 -- -- 67 .1 (1.6)
Redemption of Series E
Preferred Stock....... -- -- -- -- -- -- (105) (.1) (5.0)
Other changes.......... -- -- (70) (1.9) -- -- -- -- 1.1
------ ----- ------ ------- --- ---- ----- ---- --------
Balance at December 31,
1996................... 50,556 50.6 (1,648) (44.2) 94 .1 3,081 3.1 1,040.2
Acquisition of treasury
stock................. -- -- (299) (6.7) -- -- -- -- --
Issued under employee
benefit plans......... -- -- 415 11.0 -- -- 58 -- --
Redemption of Series E
Preferred Stock....... -- -- -- -- -- -- (124) (.1) (6.0)
Other changes.......... -- -- (26) (.6) -- -- -- -- (1.7)
------ ----- ------ ------- --- ---- ----- ---- --------
Balance at December 31,
1997................... 50,556 $50.6 (1,558) $ (40.5) 94 $ .1 3,015 $3.0 $1,032.5
====== ===== ====== ======= === ==== ===== ==== ========
</TABLE>
NOTE 8/STOCK OPTION PLANS
The Company has adopted the disclosure-only provisions of FASB Statement No.
123, "Accounting for Stock-Based Compensation." Accordingly, no compensation
cost has been recognized for the stock option plans. Had compensation cost for
the option plans been determined based on the fair value at the grant date for
awards in 1997, 1996 and 1995 consistent with the provisions of FASB Statement
No. 123, the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1996 1995
------ ----- ------
DOLLARS IN MILLIONS
(EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Net income--as reported.................................... $119.3 $45.7 $146.8
Net income--pro forma...................................... $116.0 $42.4 $145.9
Earnings per share--as reported............................ $ 2.25 $ .75 $ 2.70
Earnings per share--pro forma.............................. $ 2.18 $ .68 $ 2.68
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1997: dividend yield of 1.00%; expected
volatility of 32.67%; risk-free interest rate of 6.63%; and expected term of 5
years.
In July 1996, after the initial public offering of RT common stock, the
compensation committee of RT elected to allow the substitution of RT common
stock options for Company common stock options. As the exercise price of
substituted options exceeded the then current market price of RT stock and all
other terms of the options remained unchanged, there was no material increase
in value to the employees resulting from the substitution and no material
increase in cost to RT. 1,041,949 RT stock options were substituted for
855,494 Company stock options. Options substituted retain their originally
granted vesting schedules. During 1997, RT granted options to employees. 87
percent of the compensation cost for these options, had they been determined
on the fair value at the grant date consistent with the provisions of FASB
Statement No. 123, is included in the above pro forma numbers.
22
<PAGE>
Options granted under each of the plans vest in not less than one year.
Options granted in 1995 vested over a two year period, one-half after one year
and one-half after two years. Options granted in 1996 vest over a three year
period with one-third becoming fully vested at the end of each year. Options
granted in 1997 vest over a two year period, one-half after one year and one-
half after two years.
COMPANY PLAN
The Inland 1995 Incentive Stock Plan, approved by stockholders on May 24,
1995, provides for the issuance, pursuant to options and other awards, of 2.0
million shares of common stock to officers and other key employees. Options
remain outstanding and exercisable under the Inland 1992 and 1988 Incentive
Stock Plans; however, no further options may be granted under these plans.
Under the various plans, the per share option exercise price may not be less
than 100 percent of the fair market value per share on the date of grant.
During 1997, options were granted to 19 executives under the 1995 Plan and a
total of 1,179,665 shares was available for future grants under that Plan as
of December 31, 1997. The following summarizes the status of options under the
plans for the periods indicated:
<TABLE>
<CAPTION>
OPTION EXERCISE WEIGHTED
NUMBER OF PRICE OR RANGE AVERAGE
SHARES PER SHARE EXERCISE PRICE
--------- --------------- --------------
<S> <C> <C> <C>
Options (granted and unexercised) at
December 31, 1994................... 2,244,007 $15.31-$39.75 $30.03
Granted............................ 469,600 23.19- 28.50 28.36
Exercised.......................... (138,117) 15.31- 31.06 23.87
Forfeited.......................... (104,600) 22.31- 39.75 31.17
Expired............................ (96,300) 21.38- 39.75 36.78
--------- ------------- ------
Options (granted and unexercised) at
December 31, 1995 (1,615,826
exercisable)........................ 2,374,590 15.31- 39.75 29.73
Granted............................ 1,416,900 22.69- 24.69 24.57
Exercised.......................... (1,800) 15.31- 26.13 20.12
Forfeited.......................... (136,200) 21.38- 33.75 26.09
Expired............................ (94,050) 21.38- 39.75 33.34
Substituted by RT.................. (855,494) 21.38- 39.75 27.76
--------- ------------- ------
Options (granted and unexercised) at
December 31, 1996 (1,610,246
exercisable)........................ 2,703,946 21.38- 39.75 27.72
Granted............................ 34,300 24.38 24.38
Exercised.......................... (17,400) 21.38- 26.13 21.78
Forfeited.......................... (97,500) 22.69- 39.75 27.46
Expired............................ (38,110) 25.50- 39.75 32.65
--------- ------------- ------
Options (granted and unexercised) at
December 31, 1997 (1,978,823
exercisable)........................ 2,585,236 21.38- 39.75 27.72
--------- ------------- ------
</TABLE>
The weighted-average fair value of options granted during 1997 was $9.05.
23
<PAGE>
The following table summarizes information about fixed-price stock options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------- ----------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
NUMBER REMAINING AVERAGE NUMBER AVERAGE
RANGE OF OF CONTRACTUAL EXERCISE OF EXERCISE
XERCISE PRICESE SHARES LIFE PRICE SHARES PRICE
- --------------- ------- ----------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
$37.75 to $39.75........... 243,350 1 year $38.81 243,350 $ 38.81
21.38 to 33.75........... 219,877 3 years 28.76 219,877 28.76
25.50..................... 229,385 4 years 25.50 229,385 25.50
26.13..................... 320,324 5 years 26.13 320,324 26.13
30.88..................... 276,500 6 years 30.88 276,500 30.88
28.50..................... 303,000 7 years 28.50 303,000 28.50
22.69 to 24.69........... 958,500 8 years 24.50 386,387 24.51
24.38..................... 34,300 9 years 24.38 -- N/A
</TABLE>
Stock appreciation rights ("SARs") may also be granted with respect to
shares subject to outstanding options. No SAR has been granted since 1990. SAR
compensation expense recorded by the Company was not material for any of the
three years.
The 1995 Plan also provides, as did the 1992 and 1988 Plans, for the
granting of restricted stock and performance awards to officers and other key
employees. During 1997, 139 performance awards were granted totaling 571,560
shares of stock and the equivalent of an additional 294,440 shares of stock
payable in either stock or cash. None of these performance awards were paid in
1997 and 285,780 shares were forfeited when performance goals were not
achieved. Also during 1997, no restricted stock awards were granted, however,
59,500 shares of previously granted restricted stock awards vested while 5,600
shares of restricted stock were forfeited. Of the performance awards granted
prior to 1997, 6,618 shares (including dividend-equivalent shares) were issued
to recipients while no shares were forfeited. During 1996, restricted stock
awards totaling 16,100 shares were granted to 11 executives and no performance
awards were granted. Also during 1996, 82,200 shares of previously granted
restricted stock awards vested while 28,300 shares of restricted stock were
forfeited, 31,424 shares of restricted stock were substituted by RT restricted
stock, and 4,941 shares (including dividend-equivalent shares) were issued to
recipients of performance awards previously granted while 28,079 shares
(including dividend-equivalent shares) subject to performance awards were
forfeited. During 1995, restricted stock awards totaling 28,524 shares were
granted to 17 executives and one performance award totaling 2,000 shares was
granted. Also during 1995, 16,105 shares of previously granted restricted
stock awards vested while 18,405 shares of restricted stock were forfeited,
and 16,841 shares (including dividend-equivalent shares) were issued to
recipients of performance awards previously granted while 19,532 shares
(including dividend-equivalent shares) subject to performance awards were
forfeited.
The Company also sponsors an employee stock purchase plan where employees
have the opportunity to sign up twice a year to purchase stock at the end of
each six month period at a price that is 90 percent of the fair market value
price on the last day of the period. In 1997, 1996 and 1995, employees
received stock with a total value that was approximately $100,000, $120,000
and $120,000, respectively, greater than the price paid for the stock issued.
RT PLAN
The Ryerson Tull 1996 Incentive Stock Plan provides for the issuance,
pursuant to options and other awards, of 2.3 million shares of RT common stock
to officers and other key employees. Under this plan, the per share option
exercise price may not be less than 100 percent of the fair market value per
share on the date of grant. A total of 879,491 shares was available for future
grants under that Plan as of December 31, 1997.
24
<PAGE>
The following summarizes the status of RT options under the plan for the
periods indicated:
<TABLE>
<CAPTION>
OPTION EXERCISE WEIGHTED
NUMBER OF PRICE OR RANGE AVERAGE
SHARES PER SHARE EXERCISE PRICE
--------- --------------- --------------
<S> <C> <C> <C>
Substituted for Company options. 1,041,949 $17.55-$32.63 $22.79
Forfeited....................... (8,768) 20.26- 25.34 21.50
--------- ------------- ------
Options (granted and unexercised)
at December 31, 1996 (511,359
exercisable)..................... 1,033,181 17.55- 32.63 22.80
Granted......................... 324,500 14.06- 15.75 14.10
Expired......................... (4,625) 25.50 25.50
Forfeited....................... (20,971) 14.06- 32.63 23.15
--------- ------------- ------
Options (granted and unexercised)
at December 31, 1997 (713,514
exercisable)..................... 1,332,085 14.06- 32.63 20.67
--------- ------------- ------
</TABLE>
The weighted-average fair value of options granted during 1997 was $6.97.
The following table summarizes information about RT fixed-price stock
options outstanding at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------- ----------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
NUMBER REMAINING AVERAGE NUMBER AVERAGE
RANGE OF OF CONTRACTUAL EXERCISE OF EXERCISE
EXERCISE PRICES SHARES LIFE PRICE SHARES PRICE
--------------- ------- ----------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
$30.99 to $32.63........ 64,968 1 year $32.08 64,968 $ 32.08
17.55 to 27.70........ 65,723 3 years 25.15 65,723 25.15
20.93.................. 58,462 4 years 20.93 58,462 20.93
21.44.................. 89,360 5 years 21.44 89,360 21.44
25.34 to 29.55........ 147,245 6 years 26.04 147,245 26.04
23.39.................. 142,489 7 years 23.39 142,489 23.39
20.26.................. 440,338 8 years 20.26 145,267 20.26
14.06.................. 313,500 9 years 14.06 -- N/A
14.75 to 15.75........ 10,000 10 years 15.30 -- N/A
</TABLE>
The Plan provides that SARs may be granted with the same terms as the
Company Plan. No SARs have been granted.
The Plan provides for the granting of restricted stock and performance
awards to officers and other key employees. During 1997, restricted stock
awards totaling 5,500 shares were granted to 3 executives and 94 performance
awards totaling 90,900 shares were granted. Shares totaling 63,885 were
forfeited when performance hurdles were not met. Also during 1997, 23,050
shares of previously granted restricted stock awards vested while 1,218 shares
of restricted stock were forfeited. During 1996, 31,424 shares of previously
granted Company restricted stock were substituted by 38,273 shares of RT
stock. Also during 1996, restricted stock awards totaling 18,854 were granted
to 10 executives and no performance awards were granted.
RT employees participate in the Company employee stock purchase plan where
employees have the opportunity to sign up twice a year to purchase stock at
the end of each six month period at a price that is 90 percent of the fair
market value price on the last day of the period. In 1997, 1996 and 1995, RT
employees received Company stock with a total value that was approximately
$20,000, $30,000 and $30,000, respectively, greater than the price paid for
the stock issued.
25
<PAGE>
NOTE 9/STOCKHOLDER RIGHTS PLAN
Pursuant to a stockholder rights plan, on November 25, 1997, the Board of
Directors declared a dividend distribution, payable to stockholders of record
on December 17, 1997, of one preferred stock purchase right (a "Right") for
each outstanding share of the Company's common stock. The Rights will expire
December 17, 2007, and will become exercisable only if a person or group
becomes the beneficial owner of 20 percent or more of the common stock (a "20
percent holder"), commences a tender or exchange offer which would result in
the offeror beneficially owning 20 percent or more of the common stock, or is
determined by the Board to beneficially own at least 10 percent of the common
stock and either intends to cause the Company to take certain actions not in
the best long-term interests of the Company and its stockholders or is
reasonably likely, through such beneficial ownership, to cause a material
adverse impact on the business or prospects of the Company and its
stockholders (an "Adverse Person"). Each Right will entitle stockholders to
buy one newly issued unit of one one-hundredth of a share of Series D Junior
Participating Preferred Stock at an exercise price of $80, subject to certain
antidilution adjustments. The Company (with the concurrence of the independent
continuing directors) will generally be entitled to redeem the Rights at $.01
per Right at any time prior to 15 days after a public announcement of the
existence of a 20 percent holder.
If a person or group accumulates 20 percent or more of the common stock
(except pursuant to an offer for all outstanding shares of common stock which
the independent continuing directors determine to be fair to and otherwise in
the best interests of the Company and its stockholders) or the Board
determines that a person or group is an Adverse Person, each Right (other than
Rights held by such 20 percent holder and certain related parties which become
void) will represent the right to purchase, at the exercise price, common
stock (or, in certain circumstances, a combination of securities and/or
assets) having a current market value equal to twice the exercise price. In
addition, if, following the public announcement of the existence of a 20
percent holder, the Company is acquired in a merger or other business
combination transaction, except a merger or other business combination
transaction that takes place after the consummation of an offer for all
outstanding shares of common stock that the independent continuing directors
have determined to be fair, or a sale of 50 percent or more of the Company's
assets or earning power is made to a third party, each Right (unless
previously voided) will represent the right to purchase, at the exercise
price, common stock of the acquiring entity having a value of twice the
exercise price at the time.
The Board of Directors has the option at any time after a person or group
becomes a 20 percent holder or an Adverse Person to exchange all or part of
the Rights (other than Rights held by such 20 percent holder or Adverse
Person) for shares of the Company's common stock provided that the Company may
not make such an exchange after any person becomes the beneficial owner of 50
percent or more of the Company's outstanding common stock.
NOTE 10/DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value.
Derivatives
The Company has only limited involvement with derivative financial
instruments, none of which are used for trading purposes. Derivatives are used
to hedge exposure to fluctuations in costs caused by the price volatility of
certain metal commodities and natural gas supplies. Gains and losses
associated with these hedging transactions become part of the cost of the item
being hedged. At no time during 1997, 1996 or 1995 were such hedging
transactions material.
Cash and cash equivalents
The carrying amount of cash equivalents approximates fair value because of
the short maturity of those instruments.
26
<PAGE>
Long-term investment
In 1989, the Company and NSC, through a subsidiary, each purchased in the
open market approximately $15 million of the other company's common stock. The
estimated fair value of the NSC common stock at year-end 1997 and 1996, based
on the quoted market price and exchange rate at each year end, was $3.6
million and $7.2 million, respectively, as compared with the carrying value of
$7.5 million and $9.8 million included in the balance sheet at December 31,
1997 and 1996, respectively.
Long-term debt
The estimated fair value of the Company's long-term debt and the current
portions thereof (excluding the Subordinated Voting Note), using quoted market
prices of Company debt securities recently traded and market-based prices of
similar securities for those securities not recently traded, was $712 million
at December 31, 1997 and $720 million at December 31, 1996 as compared with
the carrying value of $668 million and $693 million included in the balance
sheet at year-end 1997 and 1996, respectively.
Subordinated voting note
The Company believes that it is not practical to estimate a fair market
value different from this security's carrying value of $100 million as the
security was sold to a joint venture partner and has numerous features unique
to this security including, but not limited to, the right to appoint a
director, the right of first refusal in change in control situations, a
limitation on the acquisition of additional Company stock, and the agreement
by the Company to buy back $185 million of the Company's common stock.
NOTE 11/PROVISIONS FOR RESTRUCTURING
In the fourth quarter of 1997, the Company recorded a charge of $10 million
relating to additional restructuring provisions for previously discontinued
raw material operations primarily related to retiree health care and other
benefit costs.
At year-end 1996, the Company recorded a charge of $26 million for
provisions related to pensions, health care, and severance costs resulting
from a salaried workforce reduction plan.
In the 1995 third quarter, the Company recorded a charge of $35 million for
provisions related to pensions, health care, and severance costs resulting
from the acceptance by approximately 300 salaried Inland Steel Company
employees of a voluntary retirement package offered during the quarter. In
addition, Inland Steel Company announced the closure of its plate operation.
Provisions for pensions and other employee benefits related to the shutdown of
this operation had been previously accrued.
With the closure of the plate operation, the Company completed the workforce
reduction program announced in 1991. A final computation of the employee
benefit costs required for the 1991 program resulted in unused reserves due to
differences between the actual makeup of the population leaving the Company
under this program and the projections used in 1991. The Company, therefore,
reversed $65 million of unused reserves from the balance sheet and recorded a
corresponding credit to income in the third quarter of 1995.
During the 1995 third quarter, the Company also increased reserves for
previously discontinued or reduced operations related to the Company's
restructuring efforts by $18 million, approximately half of which related to
benefit costs, primarily at a closed iron ore mining facility, and half
related to impairment of assets beyond amounts previously recognized. In
addition, the Company increased its environmental reserves by $7 million.
Inland Steel Company has taken initiatives to reduce its production costs by
the shutdown of certain Indiana Harbor Works facilities and raw materials
operations. Reserve balances related to provisions recorded for these
shutdowns, which include long-term liabilities for mine reclamation costs and
employee benefits, totaled $129.5 million, $131.6 million and $135.9 million
at December 31, 1997, 1996 and 1995, respectively.
27
<PAGE>
NOTE 12/RETIREMENT BENEFITS
Pensions
The Company's non-contributory defined benefit pension plans cover
substantially all Company employees, retirees and their beneficiaries.
Benefits provided participants of the plans are based on final pay and years
of service for all salaried employees and certain wage employees, and years of
service and a fixed rate for all other wage employees, including members of
the United Steelworkers of America.
Effective April 30, 1996, that portion of the Company's pension plan
covering RT's current and former employees was separated and became the
Ryerson Tull Pension Plan. Due to this separation, the Company remeasured each
subsidiary's benefit obligation using plan data and actuarial assumptions as
of the date of separation. An amount of assets proportional to the liabilities
assumed by the Ryerson Tull Pension Plan was allocated to such plan.
Effective January 1, 1998, RT froze its defined benefit pension plan for
certain salaried employees and instituted a defined contribution plan.
Salaried participants vested in their accrued benefits under the pension plan
at December 31, 1997 and will be entitled to those benefits on retirement.
Certain employees that meet specified age and service requirements will
continue to accrue benefits for an additional five years under the pension
plan. The changes to the retirement plan for affected salaried employees
resulted in a $8.9 million curtailment gain recorded by RT in 1997.
While funding was not required under ERISA funding standards, the Company
elected to fund its Pension Trust in the 1995 second quarter, its first
funding since 1984, with 3.9 million shares of Company common stock with an
aggregate value of $100 million. In 1997, the Company elected to fund its
pension plans with cash, contributing $30.0 million to the Company's plan and
$6.9 million to RT's plan.
The assumptions used to determine the plans' funded status at September 30
were as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Discount (settlement) rate......................................... 7.5% 8.0%
Rate of compensation increase...................................... 4.0% 4.0%
Rate of return on plan assets...................................... 9.5% 9.5%
</TABLE>
The funded status of the Industries Pension Plan (excluding Ryerson Tull)
and the Ryerson Tull Pension Plan as of September 30, 1997 and 1996 were as
follows:
<TABLE>
<CAPTION>
SEPTEMBER 30
-------------------------------------
1997 1996
------------------ ------------------
RYERSON RYERSON
INDUSTRIES TULL INDUSTRIES TULL
---------- ------- ---------- -------
DOLLARS IN MILLIONS
<S> <C> <C> <C> <C>
Fair value of plan assets
Equities............................... $1,381 $203 $1,081 $157
Bonds.................................. 461 68 501 73
Real estate............................ 113 17 112 16
Cash equivalents and accrued interest.. 36 5 35 5
------ ---- ------ ----
1,991 293 1,729 251
------ ---- ------ ----
Actuarial present value of benefits for
service rendered to date:
Accumulated Benefit Obligation based on
compensation to date, including vested
benefits of $1,765 and $1,620 for
Industries, and $256 and $211 for
Ryerson Tull in 1997 and 1996,
respectively.......................... 1,894 274 1,746 225
Additional benefits based on estimated
future compensation levels............ 73 29 105 27
------ ---- ------ ----
Projected Benefit Obligation........... 1,967 303 1,851 252
------ ---- ------ ----
Plan assets in excess of (shortfall to)
Projected Benefit Obligation............ $ 24 $(10) $ (122) $ (1)
====== ==== ====== ====
</TABLE>
28
<PAGE>
The Projected Benefit Obligation is the full measure of the Company's "going
concern" liability for pensions accrued to date based on current interest
rates. It includes the effect of future compensation increases for benefits
based on final pay. It does not, however, take into consideration contingent
benefits that are not expected to be paid but that would require funding in
any plan termination.
The accrued pension cost reflected in the balance sheet can be reconciled to
the excess of or shortfall to plan assets as shown below:
<TABLE>
<CAPTION>
SEPTEMBER 30
-------------------------------------
1997 1996
------------------ ------------------
RYERSON RYERSON
INDUSTRIES TULL INDUSTRIES TULL
---------- ------- ---------- -------
DOLLARS IN MILLIONS
<S> <C> <C> <C> <C>
Plan assets in excess of (shortfall to)
Projected Benefit Obligation............. $24 $(10) $(122) $(1)
Unrecognized transition asset............. (47) (5) (67) (8)
Unrecognized net loss (gain).............. (18) 14 131 3
Unrecognized prior service cost........... 105 8 117 8
Adjustment required to recognize
additional minimum liability............. -- -- (76) --
--- ---- ----- ---
Prepaid (accrued) pension cost............ 64 7 (17) 2
Expense, October through December......... (2) (1) -- (1)
Pension curtailment gain.................. -- 9 -- --
Workforce reduction provision............. -- -- (19) --
--- ---- ----- ---
Prepaid (accrued) pension cost at
December 31............................ $62 $ 15 $ (36) $ 1
=== ==== ===== ===
</TABLE>
The additional minimum pension liability in 1996 represented the excess of
the unfunded Accumulated Benefit Obligation over previously accrued pension
costs. A corresponding intangible asset was recorded as an offset to this
additional liability as prescribed.
The unrecognized transition asset is being recognized in income by reducing
pension expense in equal annual installments of $23.1 million through 1999.
Any subsequent unrecognized net gain or loss in excess of 10 percent of the
greater of the Projected Benefit Obligation or the fair value of plan assets
will be amortized over the remaining service period of active employees.
Pension cost for 1997, 1996 and 1995 is composed of the components set forth
in the table below:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
DOLLARS IN MILLIONS
<S> <C> <C> <C>
Service cost--present value of benefits earned
during year....................................... $ 28 $ 29 $ 28
Interest on service cost and Projected Benefit
Obligation........................................ 164 155 153
Actual return on plan assets....................... (433) (213) (290)
Net amortization and deferral...................... 250 35 117
------ ------ ------
Total pension cost................................. $ 9 $ 6 $ 8
====== ====== ======
</TABLE>
Benefits Other Than Pensions
Substantially all of the Company's employees are covered under
postretirement life insurance and medical benefit plans that involve
deductible and co-insurance requirements. The postretirement life insurance
benefit formula used in the determination of postretirement benefit cost is
primarily based on applicable annual earnings at retirement for salaried
employees and specific amounts for hourly employees. The Company does not
prefund any of these postretirement benefits. Effective January 1, 1994, a
Voluntary Employee Benefit Association Trust was established for payment of
health care benefits made to Inland Steel Company United Steelworkers of
America retirees. Funding of the Trust is made as claims are submitted for
payment.
29
<PAGE>
The amount of net periodic postretirement benefit cost for 1997, 1996 and
1995 is composed of the following:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
DOLLARS IN MILLIONS
<S> <C> <C> <C>
Service cost.......................................... $ 12 $ 13 $ 12
Interest cost......................................... 71 74 74
Net amortization and deferral......................... (18) (14) (21)
------ ------ ------
Total net periodic postretirement benefit cost...... $ 65 $ 73 $ 65
====== ====== ======
</TABLE>
The following table sets forth components of the accumulated postretirement
benefit obligation:
<TABLE>
<CAPTION>
SEPTEMBER 30
-------------
1997 1996
------ ------
DOLLARS IN
MILLIONS
<S> <C> <C>
Accumulated postretirement benefit obligation attributable
to:
Retirees.................................................. $ 605 $ 542
Fully eligible plan participants.......................... 100 88
Other active plan participants............................ 295 273
------ ------
Accumulated postretirement benefit obligation............... 1,000 903
Unrecognized net gain..................................... 194 277
Unrecognized prior service credit......................... 64 60
------ ------
Accrued postretirement benefit obligation................... 1,258 1,240
Expense, net of benefits provided, October through December. 4 8
Workforce reduction provision............................... -- 4
------ ------
Accrued postretirement benefit obligation at December 31.. $1,262 $1,252
====== ======
</TABLE>
Any net gain or loss in excess of 10 percent of the accumulated
postretirement benefit obligation is amortized over the remaining service
period of active plan participants.
The assumptions used to determine the plan's accumulated postretirement
benefit obligation are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30
-------------
1997 1996
------ ------
<S> <C> <C>
Discount rate.................................................. 7.5% 8.0%
Rate of compensation increase.................................. 4.0% 4.0%
Medical cost trend rate........................................ 4.5% 4.5%
</TABLE>
A one percentage point increase in the assumed health care cost trend rates
for each future year increases the sum of the service cost and interest cost
components of the annual net periodic postretirement benefit cost and the
accumulated postretirement benefit obligation as of September 30, 1997 by $10
million and $113 million, respectively.
30
<PAGE>
NOTE 13/INCOME TAXES
The elements of the provisions for income taxes for each of the three years
indicated below were as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31
--------------------
1997 1996 1995
----- ----- -----
DOLLARS IN
MILLIONS
<S> <C> <C> <C>
Current income taxes:
Federal.................................................. $23.0 $ 2.3Cr. $ 4.8
State and foreign........................................ 6.2 5.0 6.3
----- ----- -----
29.2 2.7 11.1
Deferred income taxes...................................... 51.1 41.1 79.2
----- ----- -----
Total tax expense........................................ $80.3 $43.8 $90.3
===== ===== =====
</TABLE>
- --------
Cr. = Credit
The components of the deferred income tax assets and liabilities arising
under FASB Statement No. 109 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------
1997 1996
----- -----
DOLLARS IN
MILLIONS
<S> <C> <C>
Deferred tax assets (excluding postretirement benefits other than
pensions):
Net operating loss and tax credit carryforwards................ $ 315 $ 314
Restructuring and termination reserves......................... 28 28
Other deductible temporary differences......................... 52 105
Less valuation allowances...................................... (3) (3)
----- -----
392 444
----- -----
Deferred tax liabilities:
Fixed asset basis difference................................... 499 482
Other taxable temporary differences............................ 82 86
----- -----
581 568
----- -----
Net deferred liability (excluding postretirement benefits other
than pensions).................................................. (189) (124)
FASB Statement No. 106 impact (postretirement benefits other than
pensions)....................................................... 451 442
----- -----
Net deferred asset............................................... $ 262 $ 318
===== =====
</TABLE>
For tax purposes, the Company had available, at December 31, 1997, net
operating loss ("NOL") carryforwards for regular federal income tax purposes
of approximately $745 million which will expire as follows: $232 million in
the year 2006, $287 million in the year 2007, $132 million in the year 2008,
$14 million in the year 2009, and $80 million in the year 2011. The Company
also had investment tax credit and other general business credit carryforwards
for tax purposes of approximately $6 million, which expire during the years
1998 through 2006. A valuation allowance has been established for those tax
credits which are not expected to be realized. Additionally, in conjunction
with the Alternative Minimum Tax ("AMT") rules, the Company had available AMT
credit carryforwards for tax purposes of approximately $48 million, which may
be used indefinitely to reduce regular federal income taxes.
The Company believes that it is more likely than not that all of the NOL
carryforwards will be utilized prior to their expiration. This belief is based
upon the factors discussed below.
31
<PAGE>
The NOL carryforwards and existing deductible temporary differences
(excluding those relating to FASB Statement No. 106) are substantially offset
by existing taxable temporary differences reversing within the carryforward
period. Furthermore, any such recorded tax benefits which would not be so
offset are expected to be realized by continuing to achieve future profitable
operations.
Subsequent to the adoption of FASB Statement No. 109, the Company adopted
FASB Statement No. 106 and recognized the entire transition obligation at
January 1, 1992, as a cumulative effect charge in 1992. At December 31, 1997,
the deferred tax asset related to the Company's FASB Statement No. 106
obligation was $451 million. To the extent that future annual charges under
FASB Statement No. 106 continue to exceed deductible amounts, this deferred
tax asset will continue to grow. Thereafter, even if the Company should have a
tax loss in any year in which the deductible amount would exceed the financial
statement expense, the tax law provides for a 20-year carryforward period of
that loss. Because of the extremely long period that is available to realize
these future tax benefits, a valuation allowance for this deferred tax asset
is not necessary.
The Company operates in a highly cyclical industry and consequently has had
a history of generating and then fully utilizing significant amounts of NOL
carryforwards. During the years 1986 through 1989, the Company utilized
approximately $600 million of NOL carryforwards and for the years 1995 and
1997 in total utilized approximately $283 million of NOL carryforwards.
Total income taxes reflected in the Consolidated Statement of Operations
differ from the amounts computed by applying the federal corporate rate as
follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31
-----------------------
1997 1996 1995
----- ----- -----
DOLLARS IN
MILLIONS
<S> <C> <C> <C>
Federal income tax expense computed at statutory tax
rate of 35%........................................ $72.8 $40.5 $83.0
Additional taxes or credits from:
State and local income taxes, net of federal
income tax effect................................ 9.7 5.4 9.4
Percentage depletion.............................. 3.0Cr. 2.8Cr. 2.9Cr.
All other, net.................................... .8 .7 .8
----- ----- -----
Total income tax expense........................ $80.3 $43.8 $90.3
===== ===== =====
</TABLE>
- --------
Cr. = Credit
NOTE 14/I/N TEK AND I/N KOTE JOINT VENTURES
I/N Tek, a general partnership formed for a joint venture between the
Company and NSC, owns and operates a cold-rolling facility. I/N Tek is 60
percent owned by a wholly owned subsidiary of Inland Steel Company and 40
percent owned by an indirect wholly owned subsidiary of NSC. Inland Steel
Company has exclusive rights to the productive capacity of the facility,
except in certain limited circumstances, and, under a tolling arrangement with
I/N Tek, has an obligation to use the facility for the production of cold
rolled steel. Under the tolling arrangement, Inland Steel Company was charged
$149.2 million, $144.8 million and $147.5 million in 1997, 1996 and 1995,
respectively, for such tolling services. The Company and NSC each have
guaranteed a portion of the long-term financing of I/N Tek. At December 31,
1997, the Company's share of such guaranty amounted to $116 million.
The Company and NSC also own and operate another joint venture which
consists of a 400,000 ton electrogalvanizing line and a 500,000 ton hot-dip
galvanizing line adjacent to the I/N Tek facility. I/N Kote, the general
partnership formed for this joint venture, is owned 50 percent by a wholly
owned subsidiary of Inland Steel Company and 50 percent by an indirect wholly
owned subsidiary of NSC. Inland Steel Company and NSC each have guaranteed the
share of long-term financing attributable to their respective subsidiary's
interest in the partnership. I/N Kote had $376 million outstanding under its
long-term financing agreement at December 31, 1997. I/N Kote is required to
buy all of its cold rolled steel from Inland Steel Company, which is required
to furnish such cold rolled steel at a price that results in an annual return
on equity to the partners of I/N Kote, depending upon operating levels, of up
to 10 percent after operating and financing costs; this price is subject to
32
<PAGE>
an adjustment if Inland Steel Company's return on sales differs from I/N
Kote's return on sales. Purchases of Inland Steel Company cold rolled steel by
I/N Kote aggregated $320.6 million in 1997, $314.9 million in 1996 and $303.7
million in 1995. At year-end 1997 and 1996, I/N Kote owed the Company $12.8
million and $18.4 million, respectively, related to these purchases. Prices of
cold rolled steel sold by Inland Steel Company to I/N Kote are determined
pursuant to the terms of the joint venture agreement and are based, in part,
on operating costs of the partnership. In 1997, 1996 and 1995, Inland Steel
Company sold cold rolled steel to I/N Kote at prices that exceeded production
costs but were less than the market prices for cold rolled steel products. I/N
Kote also provides tolling services to Inland Steel Company for which it was
charged $22.1 million in 1997, $24.5 million in 1996 and $32.6 million in
1995. Inland Steel Company sells all I/N Kote products that are distributed in
North America.
NOTE 15/INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
The Company's investments in unconsolidated joint ventures accounted for by
the equity method consist primarily of its 60 percent interest in I/N Tek, 50
percent interest in I/N Kote, 50 percent interest in PCI Associates, 50
percent interest in Ryerson de Mexico, 50 percent interest in I.M.F. Steel
International Ltd., 40 percent interest in the Empire Iron Mining Partnership,
15 percent interest in Wabush Mines in 1996 and 1995, and 12 1/2 percent
interest in Walbridge Electrogalvanizing Company. I/N Tek and I/N Kote are
joint ventures with NSC (see Note 14). The Company does not exercise control
over I/N Tek, as all significant management decisions of the joint venture
require agreement by both of the partners. Due to this lack of control by the
Company, the Company accounts for its investment in I/N Tek under the equity
method. PCI Associates is a joint venture which operates a pulverized coal
injection facility at the Indiana Harbor Works. Ryerson de Mexico is a
materials distribution joint venture operated in Mexico. The I.M.F. joint
venture markets Company products and services abroad and purchases certain raw
materials. Empire is an iron ore mining and pelletizing venture owned in
various percentages primarily by U.S. steel companies. In 1997, the Company,
through its Inland Steel Company subsidiary, sold its interest in Wabush
Mines, resulting in a $9 million pretax gain. Walbridge is a venture that
coats cold rolled steel in which Inland has the right to 25 percent of the
productive capacity. Following is a summary of combined financial information
of the Company's unconsolidated joint ventures:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
DOLLARS IN MILLIONS
<S> <C> <C> <C>
Results of Operations for the years ended
December 31:
Gross revenue................................ $1,282.8 $1,355.5 $1,282.2
Costs and expenses........................... 1,163.8 1,277.2 1,203.2
-------- -------- --------
Net income................................... $ 119.0 $ 78.3 $ 79.0
======== ======== ========
Financial Position at December 31:
Current assets............................... $ 281.8 $ 306.3 $ 313.6
Total assets................................. 1,477.3 1,857.2 1,897.3
Current liabilities.......................... 244.7 249.3 282.2
Total liabilities............................ 1,034.6 1,421.7 1,487.8
Net assets................................... 442.7 435.5 409.5
</TABLE>
NOTE 16/ACQUISITIONS
During 1997, the Company, through its majority-owned subsidiary Ryerson
Tull, Inc., acquired Thypin Steel Co., Inc., Omni Metals, Inc. and the assets
of Cardinal Metals, Inc. for an aggregate of $139.9 million in cash plus
assumption of debt. The acquisitions have been accounted for by the purchase
method of accounting and the purchase price has been allocated to assets
acquired and liabilities assumed. Results of operations since acquisition for
each company are included in the consolidated results. The pro forma effect
for 1997 and 1996 had these acquisitions occurred at the beginning of each
such year is not material.
33
<PAGE>
NOTE 17/EARNINGS PER SHARE
BASIC EARNINGS PER SHARE
<TABLE>
<CAPTION>
1997 1996 1995
------ ----- ------
DOLLARS AND SHARES
IN MILLIONS (EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
Income before extraordinary items......................... $119.3 $69.0 $146.8
Less preferred stock dividends............................ 9.1 9.1 19.0
------ ----- ------
Income available to common stockholders................... 110.2 59.9 127.8
Extraordinary items....................................... -- (23.3) --
------ ----- ------
Net income available to common stockholders............... $110.2 $36.6 $127.8
====== ===== ======
Average shares of common stock outstanding................ 48.9 48.8 47.3
====== ===== ======
Basic earnings per share
Before extraordinary items.............................. $ 2.25 $1.23 $ 2.70
Extraordinary items..................................... -- (.48) --
------ ----- ------
Net income.............................................. $ 2.25 $ .75 $ 2.70
====== ===== ======
</TABLE>
DILUTED EARNINGS PER SHARE
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
DOLLARS AND SHARES
IN MILLIONS (EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
Income available to common stockholders................ $110.2 $ 59.9 $127.8
Effect of dilutive securities
Series A preferred stock............................. -- -- .2
Series E leveraged preferred stock................... 8.7 8.5 8.2
Additional ESOP funding required on conversion of
Series E leveraged preferred stock, net of tax...... (8.1) (7.9) (7.6)
------ ------ ------
Income available to common stockholders and assumed
conversions before extraordinary items................ 110.8 60.5 128.6
Extraordinary items.................................... -- (23.3) --
------ ------ ------
Net income available to common stockholders and assumed
conversions........................................... $110.8 $ 37.2 $128.6
====== ====== ======
Average shares of common stock outstanding............. 48.9 48.8 47.3
Assumed conversion of
Series A preferred stock............................. -- -- .1
Series E leverage preferred stock.................... 3.0 3.0 3.0
Dilutive effect of stock options....................... -- -- .1
------ ------ ------
Shares outstanding for diluted earnings per share
calculation........................................... 51.9 51.8 50.5
====== ====== ======
Diluted earnings per share
Before extraordinary items........................... $ 2.13 $ 1.17 $ 2.55
Extraordinary items.................................. -- (.45) --
------ ------ ------
Net income........................................... $ 2.13 $ .72 $ 2.55
====== ====== ======
</TABLE>
NOTE 18/COMMITMENTS AND CONTINGENCIES
At year-end 1997, Inland Steel Company guaranteed $18.3 million of long-term
debt attributable to a subsidiary's interest in PCI Associates.
34
<PAGE>
As part of the agreement covering the 1990 sale of the Inland Lime & Stone
Company division assets, Inland Steel Company agreed, subject to certain
exceptions, to purchase, at prices which approximate market, the annual
limestone needs of the Indiana Harbor Works through 2002.
The Company and its subsidiaries have various operating leases for which
future minimum lease payments are estimated to total $155.8 million through
2022, including approximately $36.6 million in 1998, $31.9 million in 1999,
$26.5 million in 2000, $20.8 million in 2001, and $12.7 million in 2002.
It is anticipated that the Company will make capital expenditures of $2
million to $5 million annually in each of the next five years for the
construction, and have ongoing annual expenditures of $40 million to $50
million for the operation, of air and water pollution control facilities to
comply with current federal, state and local laws and regulations. The Company
is involved in various environmental and other administrative or judicial
actions initiated by governmental agencies. While it is not possible to
predict the results of these matters, the Company does not expect
environmental expenditures, excluding amounts that may be required in
connection with the consent decree in the 1990 EPA lawsuit, to materially
affect the Company's results of operations or financial position. Corrective
actions relating to the EPA consent decree may require significant
expenditures over the next several years that may be material to the results
of operations or financial position of the Company. At December 31, 1997, the
Company's reserves for environmental liabilities totaled $25 million, $19
million of which related to the sediment remediation under the 1993 EPA
consent decree.
The total amount of firm commitments of the Company and its subsidiaries to
contractors and suppliers, primarily in connection with additions to property,
plant and equipment, approximated $35 million at year-end 1997.
NOTE 19/BUSINESS SEGMENTS AND CONCENTRATION OF CREDIT RISK
The Company operates in two business segments, Steel Manufacturing and
Materials Distribution.
Steel Manufacturing operations include the manufacture of steel mill
products and the mining and processing of iron ore. Steel Manufacturing
produces and sells a wide range of steels, of which approximately 99 percent
consists of carbon and high-strength low-alloy steel grades. Approximately 78
percent of this segment's sales were to customers in five mid-American states,
and 94 percent were to customers in 20 mid-American states. Over half the
sales are to the steel service center and transportation (including
automotive) markets.
The Materials Distribution business segment processes and distributes a
broad line of steel products, non-ferrous metals and industrial plastics to a
wide range of industrial users on a nationwide basis. This segment includes
Joseph T. Ryerson & Son, Inc. and J. M. Tull Metals Company, Inc.
Substantially all sales between segments are recorded at current market
prices. Operating profit consists of total sales less operating expenses.
Operating expenses of segments do not include any allocation of general
corporate income and expense, other non-operating income or expense, interest
income or expense, or income taxes.
Identifiable assets are those that are associated with each business
segment. Corporate assets are principally investments in cash equivalents,
except those at RT, the intangible pension asset in 1996 and 1995, and the
assets of discontinued segments.
Substantially all of the Company's operations are located in the United
States, and foreign sales are not material. At year-end 1997, investments in
foreign operations were not material.
35
<PAGE>
INFORMATION ABOUT BUSINESS SEGMENTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------
1997 1996 1995
-------- -------- --------
DOLLARS IN MILLIONS
<S> <C> <C> <C>
NET SALES
Steel Manufacturing Operations:
Sales to unaffiliated customers................... $2,259.1 $2,195.2 $2,337.4
Intersegment sales................................ 208.4 202.1 175.9
-------- -------- --------
2,467.5 2,397.3 2,513.3
-------- -------- --------
Materials Distribution Operations:
Sales to unaffiliated customers................... 2,780.5 2,382.7 2,437.8
Intersegment sales................................ 8.9 11.3 12.3
-------- -------- --------
2,789.4 2,394.0 2,450.1
-------- -------- --------
Eliminations and adjustments...................... (210.1) (207.2) (181.9)
-------- -------- --------
Total net sales................................. $5,046.8 $4,584.1 $4,781.5
======== ======== ========
OPERATING PROFIT
Steel Manufacturing Operations.................... $ 143.8 $ 48.0 $ 181.7
Materials Distribution Operations................. 144.2 120.0 148.7
Eliminations and adjustments...................... (2.2) (2.3) (1.9)
-------- -------- --------
Total operating profit.......................... $ 285.8 $ 165.7 $ 328.5
======== ======== ========
IDENTIFIABLE ASSETS
Steel Manufacturing Operations.................... $2,323.9 $2,280.4 $2,291.5
Materials Distribution Operations................. 1,164.1 929.1 821.2
-------- -------- --------
3,488.0 3,209.5 3,112.7
General corporate and other....................... 158.5 332.1 445.6
-------- -------- --------
Total assets on December 31..................... $3,646.5 $3,541.6 $3,558.3
======== ======== ========
DEPRECIATION
Steel Manufacturing Operations.................... $ 133.0 $ 124.6 $ 121.2
Materials Distribution Operations................. 23.2 20.8 20.4
-------- -------- --------
156.2 145.4 141.6
General corporate and other....................... 1.7 1.6 1.5
-------- -------- --------
Total depreciation.............................. $ 157.9 $ 147.0 $ 143.1
======== ======== ========
CAPITAL EXPENDITURES
Steel Manufacturing Operations.................... $ 98.4 $ 155.8 $ 113.9
Materials Distribution Operations................. 40.4 24.1 19.3
-------- -------- --------
138.8 179.9 133.2
General corporate and other....................... .9 1.0 1.4
-------- -------- --------
Total capital expenditures...................... $ 139.7 $ 180.9 $ 134.6
======== ======== ========
</TABLE>
NOTE 20/RECENT DEVELOPMENTS
On March 17, 1998, the Company announced it had signed a binding letter
agreement with Ispat International N.V. ("Ispat") whereby Ispat will acquire
Inland Steel Company ("ISC") for a total transaction value of approximately
$1.43 billion. The agreement has been approved by the Boards of Directors of
both companies. As part of the $1.43 billion transaction, Ispat will: i) pay
$650 million in cash for the common stock of ISC held by the Company; ii) pay
$238.2 million for the preferred stock of ISC held by the Company; iii) repay
the intercompany debt of ISC owed to the Company, which at December 31, 1997,
was $230.7 million; and iv) assume debt owed to third parties of approximately
$307.9 million. The Company intends to distribute a significant portion of the
net proceeds from the sale to its stockholders through stock repurchases,
dividends or a combination thereof. The sale is subject to a definitive
agreement, antitrust clearance, other closing conditions, and the need to give
the United Steelworkers of America the opportunity to make an offer to
purchase ISC. It is anticipated that the transaction will close in the third
quarter of 1998. Following the sale, the Company's primary business will be
metals distribution, presently conducted by RT. The Company is currently
considering a plan to combine with RT into one entity subsequent to the
closing of the sale.
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