<PAGE>
1997
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from _____________________to _____________________
Commission File No. 33-32504 and 33-1329
INLAND STEEL INDUSTRIES THRIFT PLAN
(Full Title of the Plan)
INLAND STEEL INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State of Incorporation)
36-3425828
(I.R.S. Employer Identification No.)
30 West Monroe Street, Chicago, Illinois
(Address of principal executive offices)
60603
(Zip Code)
Registrant's telephone number, including area code: (312) 346-0300
================================================================================
<PAGE>
INLAND STEEL INDUSTRIES THRIFT PLAN
-----------------------------------
FINANCIAL STATEMENTS AND
SUPPLEMENTAL SCHEDULES
----------------------
DECEMBER 31, 1997 and 1996
--------------------------
<PAGE>
INLAND STEEL INDUSTRIES THRIFT PLAN
-----------------------------------
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
--------------------------------------------------------
Page
----
Report of independent accountants 1
Financial statements:
Statements of net assets available
for plan benefits at December 31,
1997 and 1996 2
Statement of changes in net assets
available for plan benefits for the
year ended December 31, 1997 3
Statement of changes in net assets
available for plan benefits for the
year ended December 31, 1996 4
Notes to financial statements 5-13
Supplemental schedules:
Assets held for investment at
December 31, 1997 Schedule I
Aggregate transactions involving an amount
in excess of 5% of the current value of
plan assets for the year ended
December 31, 1997 Schedule II
All other schedules of additional financial information required by Section
2520.103-10 of the Department of Labor's Rules and Regulations for Reporting and
Disclosure under ERISA have been omitted because they are not applicable.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors of
Inland Steel Industries, Inc.
and the Participants in the
Inland Steel Industries
Thrift Plan
In our opinion, the financial statements listed in the accompanying index
present fairly, in all material respects, the net assets available for plan
benefits of the Inland Steel Industries Thrift Plan at December 31, 1997 and
1996, and the changes in net assets available for plan benefits for the years
then ended, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Plan's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information included in
Schedules I and II is presented for purposes of additional analysis and is not a
required part of the basic financial statements but is additional information
required by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. The Fund
Information in the Statement of Net Assets Available for Plan Benefits and the
Statement of Changes in Net Assets Available for Plan Benefits is presented for
purposes of additional analysis rather than to present the net assets available
for plan benefits and changes in net assets available for plan benefits of each
fund. Schedules I and II and the Fund Information have been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, are fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
PRICE WATERHOUSE LLP
Chicago, Illinois
May 30, 1998
<PAGE>
INLAND STEEL INDUSTRIES THRIFT PLAN
-----------------------------------
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN
BENEFITS WITH FUND INFORMATION AT DECEMBER 31,
1997 AND 1996
---------------------------------------------
<TABLE>
<CAPTION>
Assets 1997 1996
------ ---- ----
<S> <C> <C>
Investments:
Inland Steel Industries Common Stock Fund:
Inland Steel Industries common stock
(845,725 shares and 829,710 shares at
December 31, 1997 and 1996, respectively) $ 14,483,041 $ 16,594,200
Cash 1,009,127 725,598
------------ ------------
15,492,168 17,319,798
------------ ------------
Inland Steel Industries Series ESOP Preferred Stock Fund:
Shares allocated to participants
(1,603,623 shares and 1,447,642 shares
at December 31, 1997 and 1996, respectively) 77,926,456 70,346,715
Unallocated shares (1,410,925 shares
and 1,633,148 shares at December 31,
1997 and 1996, respectively) 68,562,489 79,361,194
------------ ------------
146,488,945 149,707,909
------------ ------------
Fidelity Stable Value Fixed Income Fund:
Unallocated investment contracts 233,070,344 239,868,519
Pooled investment funds 12,022,949 15,737,891
------------ ------------
245,093,293 255,606,410
------------ ------------
Mutual Benefit Fund (Note 3) 14,597,149 13,713,382
Fidelity Spartan U.S. Equity Index Portfolio 99,943,886 68,628,045
Fidelity Retirement Government Money Market Portfolio 6,595,304 6,597,214
Fidelity Asset Manager 70,203,218 60,509,128
Fidelity Magellan Fund 72,712,619 59,120,615
Warburg Pincus Emerging Growth Fund 10,959,469 8,509,895
Pincus International Equity Fund 5,225,209 4,843,743
------------ -----------
Total investments 687,311,260 644,556,139
------------ ------------
Loans receivable from participants 9,061,116 13,691,128
Employer contributions receivable 241,609 262,894
Cash held by ESOP Trust (Note 5) 5,577,771 5,735,792
------------ ------------
Total assets 702,191,756 664,245,953
------------ ------------
Liabilities
-----------
Notes payable of ESOP Trust (Note 5) 96,512,751 106,248,011
Interest payable 4,183,415 4,570,768
Accrued administrative expenses 15,745 26,618
------------ -----------
Total liabilities 100,711,911 110,845,397
------------ ------------
Net assets available for plan benefits $601,479,845 $553,400,556
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
-2-
<PAGE>
INLAND STEEL INDUSTRIES THRIFT PLAN
------------------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
WITH FUND INFORMATION FOR THE YEAR ENDED DECEMBER 31, 1997
----------------------------------------------------------
<TABLE>
<CAPTION>
Fidelity Fidelity
Fidelity Retirement Spartan
Mutual Stable Value Government Fidelity U.S. Equity Fidelity
Benefit Fixed Income Money Market Asset Index Magellan
Fund Fund Portfolio Manager Portfolio Fund
---- ---- --------- ------- --------- ----
<S> <C> <C> <C> <C> <C> <C>
Sources of net assets:
Employee contributions - $ 4,851,726 $ 339,320 $ 2,625,051 $ 3,525,500 $ 3,234,584
Employer contributions - - - - - -
Interfund transfers - (6,337,436) (209,209) (1,558,506) 9,306,721 (801,300)
Loans repaid - principal - 2,648,106 119,815 924,959 1,136,000 1,219,794
interest - 437,187 17,766 146,194 170,152 176,050
Investment income:
Interest and dividend income $1,089,366 16,323,991 354,184 6,180,027 2,175,999 4,653,985
Realized gain (loss) - - - 2,269,080 6,340,645 3,334,631
Unrealized gain (loss) - - - 4,619,020 15,359,732 7,152,544
---------- ------------- --------- ----------- ----------- -----------
Total investment income 1,089,366 16,323,991 354,184 13,068,127 23,876,376 15,141,160
---------- ------------- --------- ----------- ----------- -----------
Total sources of net assets 1,089,366 17,923,574 621,876 15,205,825 38,014,749 18,970,288
---------- ------------- --------- ----------- ----------- -----------
Applications of net assets:
Withdrawals 205,599 25,791,797 523,244 4,620,637 5,547,395 4,187,547
Loans issued - 2,561,797 99,270 882,824 1,145,495 1,188,663
Interest expense - notes payable - - - - - -
Management fees - 83,097 1,272 8,274 6,018 2,074
---------- -------------- --------- ----------- ----------- -----------
Total applications of net assets 205,599 28,436,691 623,786 5,511,735 6,698,908 5,378,284
---------- ------------- --------- ----------- ----------- -----------
Increase (decrease) in net assets $ 883,767 ($ 10,513,117) ( $1,910) $ 9,694,090 $31,315,841 $13,592,004
========== ============== ========== =========== =========== ===========
Net assets available for plan
benefits:
Beginning of year
End of year
</TABLE>
<TABLE>
<CAPTION>
Inland Steel
Warburg Warburg Inland Steel Industries
Pincus Pincus Industries Series E ESOP
Emerging International Common Preferred
Growth Equity Stock Stock Loan
Fund Fund Fund Fund Fund Total
---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Sources of net assets:
Employee contributions $ 845,786 $ 539,842 $ 252,162 - - $ 16,213,971
Employer contributions - - 428,118 $ 10,643,969 - 11,072,087
Interfund transfers 570,772 348,435 (240,575) (1,078,902) - -
Loans repaid - principal 201,522 127,824 140,132 - ($6,518,152) -
interest 31,951 17,797 24,281 - - 1,021,378
Investment income:
Interest and dividend income 652,335 753,788 184,742 11,017,876 - 43,386,293
Realized gain (loss) 367,712 (205,458) 611,515 - - 12,718,125
Unrealized gain (loss) 544,072 (874,784) (2,191,088) - - 24,609,496
---------- --------- ------------- ------------- ----------- -------------
Total investment income 1,564,119 (326,454) (1,394,831) 11,017,876 - 80,713,914
---------- --------- ------------- ------------- ----------- -------------
Total sources of net assets 3,214,150 707,444 (790,713) 20,582,943 (6,518,152) 109,021,350
---------- --------- ------------- ------------- ----------- -------------
Applications of net assets:
Withdrawals 624,240 253,281 911,583 5,279,839 4,327,825 52,272,987
Loans issued 139,951 72,631 125,334 - (6,215,965) -
Interest expense - notes payable - - - 8,564,320 - 8,564,320
Management fees 385 66 - 3,568 - 104,754
---------- --------- ------------- ------------- ----------- ------------
Total applications of net assets 764,576 325,978 1,036,917 13,847,727 (1,888,140) 60,942,061
---------- --------- ------------- ------------- ----------- ------------
Increase (decrease) in net assets $2,449,574 $ 381,466 ($ 1,827,630) $ 6,735,216 ($4,630,012) $ 48,079,289
========== ========= ============= ============= ===========
Net assets available for plan
benefits:
Beginning of year 553,400,586
------------
End of year $601,479,845
============
</TABLE>
The accompanying notes are an integral part of these statements.
- 3 -
<PAGE>
INLAND STEEL INDUSTRIES THRIFT PLAN
-----------------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
WITH FUND INFORMATION FOR THE YEAR ENDED DECEMBER 31, 1996
----------------------------------------------------------
<TABLE>
<CAPTION>
Fidelity Fidelity
Fidelity Retirement Spartan
Mutual Stable Value Government Fidelity U.S. Equity
Benefit Fixed Income Money Market Asset Index
Fund Fund Portfolio Manager Portfolio
---- ---- --------- ------- ---------
<S> <C> <C> <C> <C> <C>
Sources of net assets:
Employee contributions - $ 5,794,112 $ 392,220 $ 2,841,348 $ 2,886,138
Employer contributions - - - - -
Interfund transfers - (5,781,698) (431,311) (3,827,421) 5,970,784
Loans repaid - principal - 3,030,226 132,665 1,087,342 1,069,236
interest - 475,400 18,807 156,060 150,429
Investment income:
Interest and dividend income $809,704 15,764,090 332,271 4,771,776 1,692,052
Realized gain (loss) - - - 379,731 1,162,577
Unrealized gain (loss) - - - 1,836,708 9,475,522
-------- ------------ ----------- ----------- -----------
Total investment income 809,704 15,764,090 332,271 6,988,215 12,330,151
-------- ------------ ----------- ----------- -----------
Total sources of net assets 809,704 19,282,130 444,652 7,245,544 22,406,738
-------- ------------ ----------- ----------- -----------
Applications of net assets:
Withdrawals 196,317 27,358,360 932,015 3,110,782 3,445,611
Loans issued - 3,583,462 86,316 1,014,194 1,184,274
Interest expense - notes payable - - - - -
Management fees - 84,505 1,499 7,622 3,822
-------- ------------ ----------- ----------- -----------
Total applications of net assets 196,317 31,026,327 1,019,830 4,132,598 4,633,707
-------- ------------ ----------- ----------- -----------
Increase (decrease) in net assets $613,387 ($11,744,197) ($ 575,178) $ 3,112,946 $17,773,031
======== ============ =========== =========== ===========
Net assets available for plan benefits:
Beginning of year
End of year
</TABLE>
<TABLE>
<CAPTION>
Warburg Warburg Inland Steel
Pincus Pincus Industries
Fidelity Emerging International Common
Magellan Growth Equity Stock
Fund Fund Fund Fund
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sources of net assets:
Employee contributions $ 3,664,413 $ 524,655 $ 258,216 $ 291,560
Employer contributions - - - 416,775
Interfund transfers (10,418,135) 8,351,776 4,558,419 2,727,895
Loans repaid - principal 1,309,761 122,576 56,346 179,416
interest 187,657 17,427 8,915 29,439
Investment income:
Interest and dividend income 10,107,508 17,939 193,653 142,468
Realized gain (loss) (2,239,754) (76,454) (5,907) (841,839)
Unrealized gain (loss) (1,425,862) (45,654) (58,485) (1,968,897)
------------ ---------- ---------- -----------
Total investment income 6,441,892 (104,169) 129,261 (2,668,268)
------------ ---------- ---------- -----------
Total sources of net assets 1,185,588 8,912,265 5,011,157 976,817
------------ ---------- ---------- -----------
Applications of net assets:
Withdrawals 4,379,789 327,931 138,738 836,059
Loans issued 1,243,283 74,373 28,656 239,661
Interest expense - notes payable - - - -
Management fees 2,064 66 20 -
------------ ---------- ---------- -----------
Total applications of net assets 5,625,136 402,370 167,414 1,075,720
------------ ---------- ---------- -----------
Increase (decrease) in net assets ($ 4,439,548) $8,509,895 $4,843,743 ($ 98,903)
============ ========== ========== ===========
Net assets available for plan benefits:
Beginning of year
End of year
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Inland Steel
Industries
Series E ESOP
Preferred
Stock Loan
Fund Fund Total
---- ---- -----
<S> <C> <C> <C>
Sources of net assets:
Employee contributions - - $ 16,652,662
Employer contributions $11,358,904 - 11,775,679
Interfund transfers (1,150,309) - -
Loans repaid - principal - ($6,987,568) -
interest - - 1,044,134
Investment income:
Interest and dividend income 10,898,273 - 44,729,734
Realized gain (loss) - - (1,621,646)
Unrealized gain (loss) - - 7,813,332
----------- ----------- ------------
Total investment income 10,898,273 - 50,921,420
----------- ----------- ------------
Total sources of net assets 21,106,868 (6,987,568) 80,393,895
----------- ----------- ------------
Applications of net assets:
Withdrawals 4,258,278 475,500 45,459,380
Loans issued - (7,454,219) -
Interest expense - notes payable 9,324,071 - 9,324,071
Management fees 12,806 - 112,404
----------- ----------- ------------
Total applications of net assets 13,595,155 (6,978,719) 54,895,855
----------- ----------- ------------
Increase (decrease) in net assets $ 7,511,713 ($ 8,849) 25,498,040
=========== ===========
Net assets available for plan benefits:
Beginning of year 527,902,516
------------
End of year $553,400,556
============
</TABLE>
The accompanying notes are an integral part of these statements.
-4-
<PAGE>
INLAND STEEL INDUSTRIES THRIFT PLAN
-----------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1997 AND 1996
--------------------------
NOTE 1 - DESCRIPTION OF THE PLAN:
- --------------------------------
The Inland Steel Industries Thrift Plan ("Plan") is a defined contribution
profit sharing (thrift-savings) plan which is available to all salaried,
nonbargaining unit employees of Inland Steel Industries, Inc. ("Company") and
certain of its subsidiaries and affiliates (the Company, the subsidiaries, and
its affiliates collectively referred to as "Employers"). The Plan, which is
subject to the provisions of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), was adopted effective January 1, 1975. In 1989, the
Company amended the Plan to include an Employee Stock Ownership Plan ("ESOP"),
effective January 1, 1990.
Employees electing to participate in the Plan may contribute up to fifteen
percent of their base salary. Participants have the option of making
contributions on a before-tax (limited to ten percent of base salary) and/or
after-tax basis. The first five percent of participants' contributions (the
"basic contribution") is matched as follows by the Employers. A participant who
is an employee of the Company or its participating subsidiaries receives an
allocation to his or her ESOP account of shares of Company Series E ESOP
Convertible Preferred Stock ("Series E Preferred Stock") and, under certain
circumstances, Company common stock, with a fair market value equal to such
participant's basic contribution. Because employees of I/N Tek and I/N Kote
(joint venture partnerships owned by subsidiaries of the Company and Nippon
Steel Corporation) are not permitted by law to participate in the ESOP portion
of the Plan, employer matching contributions for these employees are made in
cash, which is then invested in Company common stock and credited to each
participant's Inland Steel Industries Stock Fund ("Common Stock Fund") account.
For purposes of determining the number of shares to be contributed to
participant accounts, Company common stock is valued at the closing price per
share on the New York Stock Exchange - Composite Transactions on the last day
such stock was traded prior to the date of contribution. The Series E Preferred
Stock is currently valued at $48.594 per share, as determined annually by an
independent appraiser, plus accrued dividends.
Participants can designate the investment of their contributions in integral
multiples of one percent in any of the Fidelity Retirement Government Money
Market Portfolio, Fidelity Stable Value Fixed Income Fund, Fidelity Spartan U.S.
Equity Index Portfolio (previous to 1997, the name of this fund was Fidelity
U.S. Equity Index Portfolio), Fidelity Asset Manager, Fidelity Magellan Fund,
Inland Steel Industries Common Stock Fund, Warburg Pincus Emerging Growth Fund
or the Warburg Pincus International Equity fund. The Warburg Pincus Emerging
Growth Fund and the Warburg Pincus International Equity became available as
investment options for Plan participants effective May 6, 1996. Individual
participant accounts are
-5-
<PAGE>
maintained for each investment fund as well as for individual ESOP accounts to
record participant contributions, employer matching contributions, investment
appreciation or depreciation, dividends and interest income. Dividends on shares
of Company common stock and Series E Preferred Stock that have been allocated to
individual participant accounts are credited to participant accounts in the form
of additional shares of stock.
Participants vest immediately in their contributions and the earnings thereon.
Participants with less than five years of vesting service become vested in the
Company's matching contributions twenty-four months after the contributions are
made. Participants become immediately vested in all of the Company's matching
contributions upon the completion of five years of vesting service or upon
termination of employment due to a distributable event, such as retirement,
death, disability or other events as set forth in the Plan. Upon termination of
employment for reasons other than a distributable event, nonvested matching
contributions are forfeited at the time of distribution. Nonvested Company
contributed Series E Preferred Stock and shares of Company common stock that are
forfeited are used to reduce future contributions by the Company. At December
31, 1997, 3,308 forfeited shares of Series E Preferred Stock were held by the
Plan for future matching contributions.
After a participant's shares of common stock contributed by the Company have
been held for at least twenty-four months, the participant may elect to reinvest
these shares in any of the Fidelity Retirement Government Money Market
Portfolio, Fidelity Stable Value Fixed Income Fund, Fidelity Asset Manager,
Fidelity Spartan U.S. Equity Index Portfolio, Fidelity Magellan Fund, Warburg
Pincus Emerging Growth Fund, or the Warburg Pincus International Equity Fund.
Participants who have reached the age of fifty-nine and one-half years or who
have become subject to certain distributable events may, at any time, transfer
amounts allocated to their individual ESOP accounts or shares of common stock
contributed by the Company to these other investment funds, subject to certain
restrictions.
Participants may withdraw their contributions and the earnings thereon, subject
to certain limitations set forth in the Plan. Certain withdrawals are subject to
federal and state income taxes and penalties as required by the Internal Revenue
Service ("IRS").
Participants may borrow up to fifty percent or $50,000 of their vested balance,
whichever is less (subject to certain limitations set forth in the Plan),
excluding their investment in the Mutual Benefit Fund (see Note 3 - Mutual
Benefit Fund), for terms not exceeding five years, subject to acceleration under
certain circumstances. The interest rate charged on loans is based upon a
nationally published prime rate in effect at the beginning of the month in which
the loan application is accepted.
Participants are entitled to a distribution of all vested amounts upon
termination of employment with the Company. Participants may elect to receive a
lump sum payment or, under certain circumstances set forth in the Plan,
installment payments, starting no later than April 1 of the year following the
attainment of age seventy and one-half years. Participants receiving
distributions from the Common Stock Fund or from their ESOP accounts may elect
to receive
-6-
<PAGE>
such distributions in the form of whole shares of common stock, with fractional
shares distributed in cash, or entirely in cash. Amounts attributable to a
participant's interest in all other funds are distributed in cash.
Each participant has the right to confidentially direct the ESOP trustee to vote
the shares of the Company's common stock and Series E ESOP Preferred Stock that
have been allocated to the participant's accounts, whether or not vested. All
undirected and unallocated shares are voted by the ESOP trustee in the same
proportion as the shares actually directed by participants. All shares of
Company stock in the Plan which are not allocated to participants' accounts will
be tendered in proportion to the tender offer instructions made and deemed to be
made by participants.
Description of the Series E Preferred Stock
- -------------------------------------------
Shares of Series E Preferred Stock entitle holders to cumulative annual
dividends of $3.523 per share, payable semi-annually. The Series E shares are
convertible at the option of the holder into shares of the Company's common
stock on a one-for-one basis, subject to certain adjustments. The Company may,
at its option, redeem all or any portion of the Series E Preferred Stock at
specified prices, but not less than $48.594 per share, plus all accrued and
unpaid dividends to the redemption date. Holders of Series E Preferred Stock
would be entitled to preference on distribution of Company assets over holders
of Company common stock or any other class or series of stock junior to the
Series E Preferred Stock.
Administration
- --------------
The Plan is administered by the Inland Steel Industries Thrift Plan Committee
("Committee"), which consists of certain officers of the Company appointed by
the Company's Board of Directors. The Harris Trust and Savings Bank served as
the trustee of the Common Stock Fund and ESOP Preferred Stock Fund through June
30, 1996. Effective July 1, 1996, LaSalle National Trust N.A., now known as
LaSalle National Bank, was appointed trustee of the Common Stock Fund and ESOP
Preferred Stock Fund.
Fidelity Management Trust Company ("Fidelity") is Trustee under the Plan with
responsibility for administering, holding and investing certain assets of the
Plan. The costs of certain administrative and investment services provided by
Fidelity are paid from participants' accounts or assets within the appropriate
investment option, as applicable.
This description summarizes major provisions of the Plan and is provided for
general information purposes only. It does not cover all provisions, limitations
and exclusions of the Plan. A full copy of the Plan and additional information
about the Plan may be requested from the Plan Administrator.
-7-
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
- ---------------------------------------------------
Basis of accounting
- -------------------
The Plan's financial statements have been prepared on the accrual basis of
accounting.
Use of estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the consolidated financial statements and related
notes to financial statements. Changes in such estimates may affect amounts
reported in future periods.
Investments and investment income
- ---------------------------------
Investments in Inland Steel Industries common stock are valued at the last
reported sales price on the last business day of the year. Inland Steel
Industries Series E Convertible Preferred Stock is currently valued at $48.594
per share, as determined at least annually by an independent appraiser, plus
accrued dividends.
The Stable Value Fixed Income Fund consists of unallocated investment contracts
with various insurance companies and pooled investment funds held by Fidelity.
The unallocated investment contracts earned a fixed rate of return ranging from
5.56 percent to 95.69 percent in 1997 and are stated at contract value plus
interest earned to date. All unallocated investment contracts individually
represent less than five percent of the Plan's net assets at December 31, 1997
and 1996. The pooled investment funds, which consist of money market funds, are
valued at cost plus interest earned to date, which approximates market value.
See Note 3 and Note 4 for a description of the accounting treatment with respect
to the Mutual Benefit Fund and the Confederation Life contract, respectively.
The Fidelity Spartan U.S. Equity Index Portfolio is a pooled investment fund
which invests in various common stocks. The net assets of this fund are valued
at the closing market price on the last business day of the year for the
individual securities held in the portfolio.
The Fidelity Retirement Government Money Market Portfolio consists of short term
obligations issued or guaranteed by the U.S. Government. The assets in the fund
are stated at cost plus interest, which approximates market value.
The Fidelity Asset Manager Fund is an asset-allocation fund which consists of a
mix of short-term instruments, bonds and equities. The net assets of the fund
are valued at the closing market price on the last business day of the year for
the individual assets held in the portfolio.
-8-
<PAGE>
The Fidelity Magellan Fund consists of common stock and securities that are
convertible into common stock. The net assets of the fund are valued at the
closing market price on the last business day of the year for the individual
assets held in the portfolio.
The Warburg Pincus Emerging Growth Fund invests in domestic common stocks of
small and medium-sized companies. The net assets of the fund are valued at the
closing market price on the last business day of the year for the individual
assets held in the portfolio.
The Warburg Pincus International Equity Fund invests in international equity
securities. The net assets of the fund are valued at the closing market price on
the last business day of the year for the individual assets held in the
portfolio.
Realized gains and losses on investment transactions are calculated using the
current value method. Under the current value method, realized gains and losses
on investments sold are calculated as sales proceeds less an adjusted cost
representing current value at the beginning of the year or acquisition cost if
acquired during the year.
In accordance with the policy of stating investments at fair market value, the
net unrealized appreciation or depreciation of the market value of investments
for the year, if any, is reflected in the Statement of Changes in Net Assets
Available for Plan Benefits. Unrealized gains or losses are calculated as the
current value of investments held at the end of the year less their current
value at the beginning of the year or acquisition cost if acquired during the
year.
Interest income is accrued as earned, and dividend income is recorded as of the
record date.
Contributions and withdrawals
- -----------------------------
The Employers must contribute, at a minimum, an amount at least equal to the
principal and interest payments due on the Notes Payable of the ESOP Trust less
any preferred dividends (see Note 5 - Notes Payable). Since these contributions
are used for payments of principal and interest, they are not allocated to
participants' accounts. Contributions are recorded in the period accrued by the
Company.
Withdrawals and transfers are valued as of the close of the business day in
which they occur.
Administrative expenses
- -----------------------
Certain trustee fees, certain recordkeeping fees and the investment management
fees of all funds except the ESOP Fund and the Common Stock Fund are paid by the
Plan. All other management fees and administrative expenses of the Plan are paid
by the Company.
-9-
<PAGE>
NOTE 3 - MUTUAL BENEFIT FUND:
- ----------------------------
The Plan maintains an unallocated investment contract with Mutual Benefit Life
Insurance Company ("Mutual Benefit"). This contract was initially purchased in
January 1989 as an investment of the Fixed Income Investment Fund. The stated
terms of the contract include an interest rate of 8.75 percent per annum, with
interest paid annually each December 31, and scheduled maturities of fifty
percent of the contract value at September 30, 1991 and the remaining balance of
the contract value plus any unpaid interest at March 31, 1992.
On July 16, 1991, Mutual Benefit was placed under rehabilitation directed by New
Jersey insurance regulators and policy withdrawals and redemptions were
suspended pending completion of this plan. Consequently, none of the scheduled
maturity payments of the Plan's contract with Mutual Benefit have been received.
Interest on the contract through December 31, 1990 has been received.
In response to Mutual Benefit being placed under rehabilitation, the Plan was
amended, effective July 1, 1991, to segregate the carrying value of the Mutual
Benefit contract, including accrued interest determined in accordance with the
terms of the Mutual Benefit contract through June 30, 1991, into a separate
fund, called the Mutual Benefit Fund. The amount credited to each participant's
Mutual Benefit account was equal to the participant's proportionate interest in
the carrying value of the Mutual Benefit Fund at June 30, 1991. No
contributions, withdrawals, loans or transfers to or from the Mutual Benefit
Fund are permitted, except in certain circumstances as described below. Loans,
withdrawals and transfers are limited to the participants' vested balances in
the Plan, as defined by the Plan, excluding the participants' balances in the
Mutual Benefit Fund.
In November 1993, the Mutual Benefit rehabilitation plan was approved by the
courts and in January 1994, the rehabilitation plan was finalized. In accordance
with the terms of the rehabilitation plan, during March 1994, Plan participants
were given the option of withdrawing their interests in the Mutual Benefit Fund
at a reduced value (the "opt-out election") or participating in the
rehabilitation plan (the "opt-in election"). Such withdrawal payments were made
in September 1994 through a transfer to participants' Stable Value Fixed Income
Fund accounts.
Participants who chose the opt-in election will be entitled to their full
principal balance plus accrued interest, but will not receive any cash payments,
except under certain circumstances, until after the end of the Rehabilitation
Period on December 31, 1999. Opt-in participants have been credited with the
contract interest rate of 8.75 percent for 1991, 4.0 percent for 1992, 3.5
percent for both 1993 and 1994, 3.55 percent for 1995, 5.75 percent for 1996 and
6.35 percent for 1997. Interest rates for future years will be determined
annually based on the investment results of Mutual Benefit. At December 31,
1999, account balances attributed to opt-in participants are to be paid out.
Principal and interest on the Mutual Benefit contract is reinsured by a group of
insurance companies led by Metropolitan Life Insurance Company and Prudential
Life Insurance Company. The carrying value of the portion of the Mutual Benefit
-10-
<PAGE>
contract related to the opt-in participants has not been reduced for any
potential loss relating to this contract. At December 31, 1997, the carrying
value of the Mutual Benefit Fund in the accompanying financial statements
reflects the July 16, 1991 contract value, plus accrued interest through
December 31, 1997 under the terms of the rehabilitation plan.
It may be possible under the rehabilitation plan for the Plan to withdraw its
participation in the Mutual Benefit contract, however the amounts to be received
from such withdrawal would be based on the liquidation value of Mutual Benefit
assets at that time. For 1998, Mutual Benefit has announced that such
withdrawals may be at contract value, plus accrued interest, without the payment
of any fee. Mutual Benefit may also permit individual participant withdrawals
for retired participants, certain hardships, death or disability. However, the
availability and amount of such withdrawals can only be determined upon the
submission of a request to Mutual Benefit and its subsequent review of that
request.
Certain unsecured creditors of Mutual Benefit challenged the rehabilitation plan
shortly after its approval. In 1996, a settlement agreement was reached with the
majority of these unsecured creditors, thereby reducing the possibility of the
rehabilitation plan being overturned and any resulting adverse effects on the
value of the Mutual Benefit Account.
NOTE 4 - CONFEDERATION LIFE:
- ---------------------------
The Plan maintained an unallocated insurance contract with Confederation Life
Insurance Company ("Confederation Life"). This contract was initially purchased
as an investment of the Stable Value Fixed Income Fund in February 1993. The
stated terms of the contract included an interest rate of 6.08 percent per
annum, with interest paid annually each February, and a scheduled maturity of
January 1, 1998.
In August 1994, following the placement of Confederation Life's Canadian
operations under the regulatory control of the Canadian government, Michigan
insurance regulators filed an order of rehabilitation against the U.S. Branch of
Confederation Life Insurance Company.
In response to the seizure of Confederation Life, the trustee and investment
manager of the Stable Value Fixed Income Fund (Fidelity) suspended the accrual
of interest for the period August 12, 1994 to August 31, 1994 and, effective
September 1, 1994, resumed interest accruals at an annual effective rate of 2.00
percent. The contract was not segregated from the Stable Value Fixed Income Fund
and participants continued to have the right to make contributions, loans,
transfers, and withdrawals to and from this fund. In October 1996, the
Confederation Life rehabilitation plan was approved by the courts and in
November 1996, the rehabilitation plan was finalized.
The carrying value of the Confederation Life contract in the accompanying
financial statements reflects the principal amount of the contract of $5,000,000
plus accrued interest of $296,018 for the year ended December 31, 1996, in
accordance with the terms stated above. The carrying value represented
Fidelity's best estimate of the fair market value of this contract based on the
-11-
<PAGE>
financial information available as of December 31, 1996.
In accordance with the rehabilitation plan, during March 1997, the Plan elected
to receive its contract payments including accrued interest in installments
commencing in April 1997. As of May 30, 1997, the Plan has received contract
payments totaling $5,908,981 from Confederation Life and state guaranty
associations, and additional payments are expected to be minor. The excess of
the contract payments received as compared to the carrying value of the
Confederation Life contract at December 31, 1996 is due to the rate at which
interest was accrued by the Plan and will be recognized as income over a twelve
month period extending into 1998.
NOTE 5 - NOTES PAYABLE:
- ----------------------
In July 1989, the Company and Inland Steel Company ("ISC"), a wholly owned
subsidiary of the Company, provided loans to the ESOP Trust of $146,913,160 and
$3,086,800, respectively. The ESOP Trust used the proceeds of these loans to
purchase 3,086,800 leveraged shares of Series E Preferred Stock from the
Company. In September 1990, the ESOP Trust refinanced its loan from the Company
through the private placement of notes totaling $146,913,160 with eighteen
lenders. The notes are payable in semi-annual installments through July 2004,
with an initial average interest rate of 8.65 percent per annum, and are
guaranteed by Joseph T. Ryerson & Son, Inc., a majority owned subsidiary of the
Company. The note due to ISC was repaid in installments during 1990 and 1991.
Interest and principal payments made by the ESOP Trust are funded by dividends
paid by the Company on leveraged shares of the Series E Preferred Stock and
additional contributions made by the Company. From time to time, the Company
elects to provide additional shares of nonleveraged Series E Preferred Stock to
the ESOP Trust to cover employee matching requirements not covered by the
release of shares through scheduled principal and interest payments by the ESOP
Trust on its outstanding notes.
Cash held by the ESOP Trust at December 31, 1997 and 1996 of $5,327,757 and
$5,333,574, respectively, was used for payment of principal and interest due on
the Notes Payable of the ESOP Trust. The remaining cash held by the ESOP Trust
of $250,014 and $402,218 at December 31, 1997 and 1996, respectively, was used
to purchase additional shares of nonleveraged Series E Preferred Stock that were
allocated to participants' accounts.
NOTE 6 - TAX STATUS OF THE PLAN:
- -------------------------------
On March 18, 1997, the IRS issued a favorable determination letter conditioned
upon the adoption of a technical amendment with respect to the qualified tax
status of the Plan, as amended, as of September 9, 1996. Such technical
amendment was adopted by the Plan subsequent to March 18, 1997. The Plan
administrator and the Plan's tax counsel believe that the Plan is designed and
is currently being operated in compliance with the applicable requirements of
the Internal Revenue Code.
-12-
<PAGE>
NOTE 7 - PLAN TERMINATION:
- -------------------------
The Company anticipates that the Plan will continue, but reserves the right to
terminate the Plan at any time. Upon termination of the Plan, all amounts
allocated to the participants' accounts, including all employer matching
contributions, shall vest immediately. If the ESOP loans are outstanding at the
time of termination, they shall be repaid in full through sale of all
unallocated shares of the Series E Preferred Stock and any remaining proceeds of
such sale shall be allocated to participants' individual ESOP accounts in
proportion to shares credited to their ESOP accounts. The Trustee shall then
direct the method and manner of distribution of the Plan's assets to
participants or their beneficiaries.
NOTE 8 - SUBSEQUENT EVENTS:
- --------------------------
Ryerson Tull, Inc. established the Ryerson Tull Savings Plan (the "RT Plan")
effective January 1, 1998. As a result, all Ryerson Tull employees who were
participating in the Plan were transferred to the RT Plan effective January 1,
1998. All assets of both the Plan and the RT Plan are held in a master trust of
which Fidelity is the trustee. The trustee maintains a separate account
reflecting the equitable share of each plan in the master trust and in all
investments, receipts, disbursements and other transactions under the master
trust.
On May 27, 1998 the Company announced that it had signed a definitive agreement
under which Ispat International N.V. will acquire Inland Steel Company, the
wholly-owned steel manufacturing subsidiary of the Company. The definitive
agreement has been approved by the Boards of Directors of both companies and
contemplates closing on June 30th, subject to final satisfaction of conditions
involving the Pension Benefit Guaranty Corporation, Nippon Steel Corporation and
Hart-Scott-Rodino review and other matters.
-13-
<PAGE>
SCHEDULE I
----------
INLAND STEEL INDUSTRIES THRIFT PLAN
ASSETS HELD FOR INVESTMENT AT PLAN YEAR-END
DECEMBER 31, 1997
-----------------
<TABLE>
<CAPTION>
Identity of issue, borrower, Description of investment including Current
lessor or similar party maturity date, rate of interest Cost Value
- ----------------------- ------------------------------- ---- -----
<S> <C> <C> <C>
Cash held by ESOP Trust $ 5,577,771 $ 5,577,771
------------ ------------
Cash held by Common Stock Fund 1,009,127 1,009,127
------------ ------------
Receivables
- -----------
Loans to participants* - 9,061,116
Contributions receivable 241,609 241,609
------------ ------------
Sub-total - Receivables 241,609 9,302,725
------------ ------------
Corporate Stocks - Common
- -------------------------
Inland Steel Industries, Inc.* 845,725 shares common stock 23,115,621 14,483,041
------------ ------------
Corporate Stocks - Convertible Preferred
- ----------------------------------------
Inland Steel Industries ESOP Series E*:
Shares allocated to participants 1,603,623 shares preferred stock 77,926,456 77,926,456
Unallocated shares 1,410,925 shares preferred stock 68,562,489 68,562,489
------------ ------------
Sub-total - Convertible Preferred Stock 146,488,945 146,488,945
------------ ------------
Interest in Pooled Investment Funds
- -----------------------------------
Fidelity Short-term Investment Fund* 12,022,949 12,022,949
Fidelity Spartan U.S. Equity Index Portfolio* 2,857,172 shares in pooled investment fund 68,574,841 99,943,886
Fidelity Retirement Government Money Market* 6,595,305 shares in pooled investment fund 6,595,304 6,595,304
Fidelity Asset Manager* 3,825,788 shares in pooled investment fund 61,858,921 70,203,218
Fidelity Magellan Fund* 763,227 shares in pooled investment fund 62,311,064 72,712,619
Warburg Pincus Emerging Growth Fund 290,163 shares in pooled investment fund 10,221,544 10,959,469
Warburg Pincus International Equity Fund 307,184 shares in pooled investment fund 6,079,873 5,225,209
------------ ------------
Sub-total - Interest in Pooled Investment Funds 227,664,496 277,662,654
------------ ------------
Unallocated Investment Contracts
- --------------------------------
Bankers Trust Synthetic Contract, due on various maturity
dates through 1/4/00, 6.07% 9,852,192 9,852,192
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Identity of issue, borrower, Description of investment including Current
lessor or similar party maturity date, rate of interest Cost Value
- ---------------------------- ----------------------------------- ---- -----
Unallocated Investment Contracts (Cont.)
- --------------------------------
<S> <C> <C> <C>
CDC Capital Inc Synthetic Contract, due on various maturity 10,188,548 10,188,548
dates through 8/15/01, 7.78%
CDC Capital Inc Synthetic Contract, due on various maturity 2,322,235 2,322,235
dates through 8/15/01, 6.46%
Chase Manhattan Bank Synthetic Contract, due on various maturity 4,788,634 4,788,634
dates through 6/17/02, 7.40%
Chase Manhattan Bank Synthetic Contract, due on various maturity 782,264 782,264
dates through 6/1/98, 95.69%
Combined Insurance Guaranteed Investment Contract, due 5,701,729 5,701,729
on 3/31/99, 6.12%
Deutsche Bank Synthetic Contract, due on various maturity 2,985,574 2,985,574
dates through 12/15/99, 6.08%
Deutsche Bank Synthetic Contract, due on various maturity 6,133,670 6,133,670
dates through 5/17/04, 5.90%
Deutsche Bank Synthetic Contract, due on various maturity 6,158,190 6,158,190
dates through 8/12/02, 5.88%
Deutsche Bank Synthetic Contract, due on various maturity 5,524,473 5,524,473
dates through 1/15/99, 5.56%
John Hancock Mutual Synthetic Contract, due on various maturity 8,342,156 8,342,156
dates through 4/16/02
Lincoln National Guaranteed Investment Contract, due 11,816,477 11,816,477
on 1/4/00, 5.85%
Metropolitan Life Guaranteed Investment Contract, due on 4,316,723 4,316,723
6/1/99, 6.42%
Morgan Guaranty Synthetic Contract, due on various maturity 9,912,527 9,912,527
on 8/15/00, 7.85%
Morgan Guaranty Synthetic Contract, due on various maturity 9,904,434 9,904,434
on 1/15/01, 7.90%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Identity of issue, borrower, Description of investment including Current
lessor or similar party maturity date, rate of interest Cost Value
- ---------------------------- ------------------------------- ---- -----
Unallocated Investment Contracts (Cont.)
- --------------------------------
<S> <C> <C> <C>
Mutual Benefit Life Insurance Company Group Annuity Contract GA-5016-002 14,597,149 14,597,149
original maturity schedule for two
installments due on 9-01-91 and 3-31-92,
original interest 8.75%
New York Life Guaranteed Investment Contract, due 7,293,079 7,293,079
on 11/19/01, 6.88%
Ohio National Life Insurance Guaranteed Investment Contract, due 5,200,964 5,200,964
on 4/10/01, 7.02%
Pacific Mutual Life Insurance Guaranteed Investment Contract, due in three 13,293,844 13,293,844
installments on 3/31/98, 6/30/98, 12/30/98, 7.00%
Peoples Security Life Synthetic Contract, due on various maturity 5,424,456 5,424,456
dates through 9/28/00, 6.77%
Peoples Security Life Synthetic Contract, due on various maturity 4,329,146 4,329,146
dates through 7/31/00, 6.67%
Peoples Security Life Synthetic Contract, due on various maturity 2,397,783 2,397,783
dates through 3/26/01, 6.16%
Peoples Security Life Synthetic Contract, due on various maturity 9,583,787 9,583,787
dates through 7/25/01, 7.68%
Peoples Security Life Synthetic Contract, due on various maturity 9,826,109 9,826,109
dates through 9/25/98, 8.25%
Peoples Security Life Synthetic Contract, due on various maturity 7,975,148 7,975,148
dates through 3/15/01, 5.81%
Peoples Security Life Synthetic Contract, due on various maturity 2,401,518 2,401,518
dates through 3/15/01, 5.81%
Peoples Security Life Synthetic Contract, due on various maturity 1,400,696 1,400,696
dates through 6/25/98, 7.62%
Principal Mutual Guaranteed Investment Contract, due on 4,431,965 4,431,965
7/02/01, 7.15%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Identity of issue, borrower, Description of investment including Current
lessor or similar party maturity date, rate of interest Cost Value
----------------------- ------------------------------- ---- -----
Unallocated Investment Contracts (Cont.)
- ---------------------------------
<S> <C> <C> <C>
Principal Mutual Guaranteed Investment Contract, due on 2,428,010 2,428,010
12/31/00, 7.00%
Principal Mutual Guaranteed Investment Contract, due on 5,476,534 5,476,534
8/30/01, 7.23%
Provident Life & Accident Guaranteed Investment Contract, due 15,006,426 15,006,426
on 12/1/98, 6.10%
Safeco Life Insurance Guaranteed Investment Contract, due 5,106,836 5,106,836
on 8/31/00, 7.09%
Security Life of Denver Guaranteed Investment Contract, due 3,060,615 3,060,615
on 8/31/99, 6.22%
State Street Bank Synthetic Contract, due on various 3,558,108 3,558,108
maturity dates through 4/15/03, 5.81%
Transamerica Occidental Guaranteed Investment Contract, due 5,197,294 5,197,294
on 2/12/01, 6.89%
Union Bank of Switzerland Synthetic Contract, due on various 5,270,748 5,270,748
maturity dates through 5/20/02, 6.36%
Union Bank of Switzerland Synthetic Contract, due on various 2,006,214 2,006,214
maturity dates through 8/15/02, 6.78%
Union Bank of Switzerland Synthetic Contract, due on various 10,161,794 10,161,794
maturity dates through 11/9/98, 7.88%
Union Bank of Switzerland Synthetic Contract, due on various 3,509,444 3,509,444
maturity dates through 4/15/04, 6.82% ------------ ------------
Sub-total - Unallocated Investment Contracts 247,667,493 247,667,493
------------ ------------
Total Assets $651,765,062 $702,191,756
============ ============
</TABLE>
*Permitted party in interest transaction.
<PAGE>
SCHEDULE II
-----------
INLAND STEEL INDUSTRIES THRIFT PLAN
-----------------------------------
AGGREGATE TRANSACTIONS INVOLVING AN AMOUNT
IN EXCESS OF 5% OF THE CURRENT VALUE OF
PLAN ASSETS FOR THE YEAR ENDED DECEMBER 31, 1997
------------------------------------------------
<TABLE>
<CAPTION>
Expense Current value
incurred of asset on
Identity of party Purchase Selling Lease with Cost of transaction Net gain
involved Description of asset price price rental transaction asset date or (loss)
- ----------------- -------------------- ----------- ----------- ------ ----------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Series of Transactions
- ----------------------
with the Same Party
- -------------------
Fidelity Management Stable Value $53,561,248 - - $53,561,248 $53,561,248 -
Trust Company Fixed Income Fund $91,368,259 - - 91,368,259 91,368,259 -
Fidelity Management Magellan Fund 18,752,423 - - 18,752,423 18,752,423 -
Trust Company 30,105,609 - - 26,502,056 26,770,978 $3,603,553
Fidelity Management ESOP Fund 8,611,029 - - 8,611,029 8,611,029 -
Trust Company 27,879,082 - - 22,397,244 26,242,165 5,481,838
Fidelity Management Asset Manager 16,618,882 - - 16,618,882 16,618,882 -
Trust Company 27,140,190 - - 23,986,301 24,871,110 3,153,889
Fidelity Management Spartan US 29,109,403 - - 29,109,403 29,109,403 -
Trust Company Equity Index 36,708,721 - - 27,035,339 30,368,076 9,673,383
</TABLE>
<PAGE>
SIGNATURES
Inland Steel Industries Thrift Plan. Pursuant to the requirements of the
Securities Exchange Act of 1934, the trustees (or other persons who administer
the employee benefit plan) have duly caused this annual report to be signed on
its behalf by the undersigned hereunto duly authorized.
INLAND STEEL INDUSTRIES THRIFT PLAN
------------------------------------
(Name of Plan)
Date: June 25, 1998 By: VICKI L. AVRIL
--------------------------
Vicki L. Avril
Treasurer
and
Member of Inland Steel
Industries Thrift
Plan Committee
<PAGE>
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page No.
- ------- ---------------------------------- ----------
<S> <C> <C>
1 Consent of Independent Accountants --
</TABLE>
<PAGE>
EXHIBIT 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-32504) and Post-Effective Amendment No. 1 to Form
S-8 Registration Statement (No. 33-1329) of Inland Steel Industries, Inc. of our
report dated May 30, 1998 appearing on page 1 of Exhibit 1 to this Form 11-K.
PRICE WATERHOUSE LLP
Chicago, Illinois
June 25, 1998
