-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, GnJFnFO+U12knlWMLUDEHje0TPZ7MCpUH5enluWxlsl194ZBRU76lh90DD+VHehQ 8dFN/qPn9vnnko+aoxHKQQ== 0000950137-94-000019.txt : 19940404 0000950137-94-000019.hdr.sgml : 19940404 ACCESSION NUMBER: 0000950137-94-000019 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INLAND STEEL INDUSTRIES INC /DE/ CENTRAL INDEX KEY: 0000790528 STANDARD INDUSTRIAL CLASSIFICATION: 3312 IRS NUMBER: 363425828 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-09117 FILM NUMBER: 94519403 BUSINESS ADDRESS: STREET 1: 30 W MONROE ST CITY: CHICAGO STATE: IL ZIP: 60603 BUSINESS PHONE: 3128993917 MAIL ADDRESS: STREET 1: 30 WEST MONROE STREET STREET 2: 16TH FLOOR CITY: CHICAGO STATE: IL ZIP: 60603 10-K 1 INLAND STEEL'S 10-K 1 1993 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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, 1993 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 1-9117 INLAND STEEL INDUSTRIES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 36-3425828 (STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.) 30 WEST MONROE STREET, CHICAGO, ILLINOIS 60603 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (312) 346-0300 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- --------------------- COMMON STOCK ($1.00 PAR VALUE), INCLUDING NEW YORK STOCK EXCHANGE, INC. PREFERRED STOCK PURCHASE RIGHTS SERIES A $2.40 CUMULATIVE CONVERTIBLE CHICAGO STOCK EXCHANGE, INCORPORATED PREFERRED STOCK ($1.00 PAR VALUE) SERIES G. $4.625 CUMULATIVE CONVERTIBLE NEW YORK STOCK EXCHANGE, INC. EXCHANGEABLE PREFERRED STOCK ($1.00 PAR VALUE)
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 MARCH 15, 1994 THE AGGREGATE MARKET VALUE OF THE VOTING STOCK OF THE REGISTRANT HELD BY NON-AFFILIATES OF THE REGISTRANT WAS $1,435,453,418.(1) THE NUMBER OF SHARES OF COMMON STOCK ($1.00 PAR VALUE) OF THE REGISTRANT OUTSTANDING AS OF MARCH 15, 1994 WAS 41,221,095. (1)EXCLUDING STOCK HELD BY DIRECTORS AND OFFICERS OF REGISTRANT, WITHOUT ADMISSION OF AFFILIATE STATUS OF SUCH INDIVIDUALS FOR ANY OTHER PURPOSE; ALSO, EXCLUDING SERIES E ESOP CONVERTIBLE PREFERRED STOCK AND SERIES F EXCHANGEABLE PREFERRED STOCK OF THE REGISTRANT, NEITHER OF WHICH SERIES IS PUBLICLY TRADED. DOCUMENTS INCORPORATED BY REFERENCE PARTS I AND II OF THIS REPORT ON FORM 10-K INCORPORATE BY REFERENCE CERTAIN INFORMATION FROM THE ANNUAL REPORT TO STOCKHOLDERS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993. 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 25, 1994. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 PART I ITEM 1. BUSINESS. Inland Steel Industries, Inc. (the "Company"), a Delaware corporation, is the sole stockholder of Inland Steel Company and Inland Materials Distribution Group, Inc. ("Distribution"). Inland Steel Company is a fully integrated domestic steel company that produces and sells a wide range of steels, of which approximately 99% consists of carbon and high-strength low-alloy steel grades. It is also a participant in certain steel-finishing joint ventures. Distribution is the sole stockholder of Joseph T. Ryerson & Son, Inc. ("Ryerson") and J. M. Tull Metals Company, Inc. ("Tull"). Ryerson and Tull are leading steel service, distribution and materials processing organizations. BUSINESS SEGMENTS The business segments of the Company and its subsidiaries are Integrated Steel (including iron ore operations) and Steel Service Centers. For the three years ended December 31, 1993, information relating to net sales, operating profit, identifiable assets, depreciation and capital expenditures for both business segments of the Company appears in Note 15 of Notes to Consolidated Financial Statements in the Company's Annual Report to Stockholders for the fiscal year ended December 31, 1993. Such information is hereby incorporated by reference herein. Integrated Steel 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 two 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. In August 1988, Inland Steel Company realigned its operations into two divisions -- the Inland Steel Flat Products Company division and the Inland Steel Bar Company division. The purpose of the realignment was to allow management to better focus on the distinctive competitive factors and customer requirements in the markets for the products manufactured by each division. The Flat Products division manages Inland Steel Company's iron ore operations, conducts its ironmaking operations, and produces the major portion of its raw steel. This division also manufactures and sells steel sheet, strip and plate and certain related semi-finished products for the automotive, appliance, office furniture, steel service center and electrical motor markets. The Bar division manufactures and sells special quality bars and certain related semi-finished products for forgers, steel service centers, heavy equipment manufacturers, cold finishers and the transportation industry. The Bar division closed its 28-inch structural mill in early 1991, completing Inland Steel Company's withdrawal from the structural steel manufacturing business. Inland Steel Company and Nippon Steel Corporation ("NSC") are participants, through subsidiaries, in two joint ventures that operate steel-finishing facilities near New Carlisle, Indiana. The total cost of these two facilities was approximately $1.1 billion. I/N Tek, owned 60% by a wholly owned subsidiary of Inland Steel Company and 40% by an indirect wholly owned subsidiary of NSC, operates a cold-rolling mill that began shipping commercial product in 1990 and reached its design capability in 1992. I/N Kote, owned equally by wholly owned subsidiaries of Inland Steel Company and NSC (indirect in the case of NSC), operates two galvanizing lines which began start-up production in late 1991, became fully operational in the third quarter of 1992, and were operating near design capacity by August 1993. Inland Steel Company is also a participant, through a subsidiary, in another galvanizing joint venture located near Walbridge, Ohio. 1 3 Raw Steel Production and Mill Shipments The following table shows, for the five years indicated, Inland Steel Company's production of raw steel and, based upon American Iron and Steel Institute data, its share of total domestic raw steel production:
RAW STEEL PRODUCTION INLAND STEEL --------------------------------- INLAND STEEL INLAND STEEL COMPANY AS A % OF COMPANY U.S. STEEL (000 TONS*) INDUSTRY ------------ ----------------- 1993..................................................... 5,003 5.2%** 1992..................................................... 4,740 5.2 1991..................................................... 4,677 5.3 1990..................................................... 5,339 5.5 1989..................................................... 5,550 5.7
- --------------- * Net tons of 2,000 pounds. ** Based on preliminary data from the American Iron and Steel Institute. The annual raw steelmaking capacity of Inland Steel Company was reduced to 6.0 million net tons from 6.5 million net tons effective September 1, 1991, as Inland Steel Company ceased making ingots. The basic oxygen process accounted for 94% of raw steel production of Inland Steel Company in 1993 and 1992. The remainder of such production was accounted for by electric furnaces. The total tonnage of steel mill products shipped by Inland Steel Company for each of the five years 1989 through 1993 was 4.8 million tons in 1993; 4.3 million tons in 1992; 4.2 million tons in 1991; 4.7 million tons in 1990; and 4.9 million tons in 1989. In 1993, sheet, strip, plate and certain related semi-finished products accounted for 88% of the total tonnage of steel mill products shipped from the Indiana Harbor Works, and bar and certain related semi-finished products accounted for 12%. In 1993 and 1992, approximately 93% of the shipments of the Flat Products division and 92% of the shipments of the Bar division were to customers in 20 mid-American states. Approximately 75% of the shipments of the Flat Products division and 83% of the shipments of the Bar division in 1993 were to customers in a five-state area comprised of Illinois, Indiana, Ohio, Michigan and Wisconsin, compared to 72% and 83% in 1992. 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. According to data from the American Iron and Steel Institute, steel imports to the United States in 1993 totaled an estimated 19.5 million tons, compared with 17.1 million tons imported in 1992. Steel imports constituted approximately 18.8% of apparent domestic supply in 1993, compared with approximately 17.9% of apparent domestic supply in 1992. During 1984, the peak year for steel imports into the U.S., such imports accounted for 26.4% of apparent domestic supply. In addition to the importation of steel mill products, the U.S. steel industry has faced indirect imports of steel. Data from the American Iron and Steel Institute show that imports of steel contained in manufactured goods exceeded exports by an estimated 16 million tons in 1993. Many foreign steel producers are owned, controlled or subsidized by their governments. In 1992, the Company and certain domestic steel producers filed unfair trade petitions against foreign producers of certain bar, rod and flat-rolled products. During 1993, the International Trade Commission ("ITC") upheld final subsidy and dumping margins on essentially all of the bar and rod products and about half of the flat-rolled products, in each case based on the tonnage of the products against which claims were brought. The Company and certain domestic producers have filed formal appeals of the adverse ITC decisions in the U.S. Court of International Trade or similar jurisdiction bodies, and foreign producers have appealed certain of the findings against them. These appeals are pending and decisions are not expected before September 1994 in the bar and rod product cases, and mid-1995 in the flat-rolled product cases. It is not certain how the ITC actions and the appeals will impact imports of steel products into the United States or the price of such steel products. 2 4 On December 15, 1993, President Clinton notified the U.S. Congress of his intent to enter into agreements resulting from the Uruguay Round of multilateral trade negotiations under the General Agreement on Tariffs and Trade. The key provisions applicable to domestic steel producers include an agreement to eliminate steel tariffs in major industrial markets, including the United States, over a period of 10 years commencing July 1995, and agreements regarding various subsidy and dumping practices as well as dispute settlement procedures. Legislation must be enacted in order to implement the Uruguay Round agreements. Until that process is completed, it will not be possible to assess the extent to which existing U.S. laws against unfair trade practices may be weakened. Primarily as a result of the influx of foreign steel imports and the depressed demand for domestic steel products that began in the early 1980s, certain facilities at the Indiana Harbor Works were permanently closed during the second half of the 1980s and the early 1990s and others were shut down for temporary periods. The 28-inch structural mill was closed in early 1991, reflecting a decision to withdraw from the structural steel markets. In late 1991 the mold foundry, No. 8 Coke Oven Battery, and selected other facilities were closed either as part of a program to permanently reduce costs through the closure of uneconomic facilities or for environmental reasons. Provisions with respect to the shut-down of the structural mill were taken in 1987. Provisions for estimated costs incurred in connection with the closure of the mold foundry, No. 8 Coke Oven Battery, and selected other facilities were made in 1991. Included in such provisions were costs associated with Inland Steel Company's closure of its No. 11 Coke Oven Battery in June 1992. All remaining coke batteries were closed by year-end 1993, a year earlier than previously anticipated. An additional provision was required with respect to those closures. (See "Environment" below.) For the five years indicated, shipments by market classification of steel mill products produced by Inland Steel Company at its Indiana Harbor Works, including shipments to affiliates of the Company, are set forth below. The table confirms that a substantial portion of shipments by the Flat Products division was to steel service centers and transportation-related markets. The Bar division shipped more than 70% of its products to the steel converters/processors market over the five-year period shown in the table.
PERCENTAGE OF TOTAL TONNAGE OF STEEL SHIPMENTS ------------------------------------ 1993 1992 1991 1990 1989 ---- ---- ---- ---- ---- Steel Service Centers: Affiliates............................................ 9 % 7 % 8 % 8 % 9 % Non-Affiliates........................................ 21 22 24 20 20 ---- ---- ---- ---- ---- 30 29 32 28 29 Automotive.............................................. 37 28 25 26 27 Appliance............................................... 9 9 8 7 7 Industrial, Electrical and Farm Machinery............... 4 8 9 9 10 Construction and Contractors' Products.................. 3 3 4 8 10 Steel Converters/Processors............................. 10 18 12 15 11 Other................................................... 7 5 10 7 6 ---- ---- ---- ---- ---- 100 % 100 % 100 % 100 % 100 % ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
The increase in 1993 of sales to the automotive market and the decline in sales to the steel converters/processors market are indicative of Inland Steel Company's efforts to maximize its sales of value-added and higher margin products. Some value-added steel processing operations that Inland Steel Company does not have the capability to perform are performed by outside processors prior to shipment of certain products to Inland Steel Company's customers. In 1993, approximately 16% of the products produced by Inland Steel Company were processed further through value-added services such as electrogalvanizing, painting and slitting. Approximately 64% of the total tonnage of shipments by Inland Steel Company during 1993 from the Indiana Harbor Works was transported by truck, with the remainder transported primarily by rail. A wholly 3 5 owned truck transport subsidiary of Inland Steel Company was responsible for shipment of approximately 15% of the total tonnage of products transported by truck from the Indiana Harbor Works in 1993. Substantially all of the steel mill products produced by the Flat Products division are marketed through its own selling organization, with offices located in Chicago; Southfield, Michigan; St. Louis; 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 integrated steel operations. Raw Materials Inland Steel Company obtains iron ore pellets primarily from three iron ore properties, located in the United States and Canada, in which subsidiaries of Inland Steel Company have varying interests -- the Empire Mine in Michigan, the Minorca Mine in Minnesota and the Wabush Mine in Labrador and Quebec, Canada. In recent years Inland Steel Company has closed or terminated certain less cost-efficient iron ore mining operations. See "Properties Relating to Integrated Steel Segment -- Raw Materials Properties and Interests" in Item 2 below for further information relating to such iron ore properties. The following table shows (1) the iron ore pellets available to Inland Steel Company, as of December 31, 1993, from properties of its subsidiaries and through interests in raw materials ventures; (2) 1993 and 1992 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 1993 and 1992.
IRON ORE TONNAGES IN THOUSANDS (GROSS TONS OF PELLETS) --------------------------------- % OF AVAILABLE AS OF PRODUCTION REQUIREMENTS(1) DECEMBER 31, -------------- ------------- 1993(2) 1993 1992 1993 1992 --------------- ----- ----- ---- ---- INLAND STEEL MINING COMPANY PROPERTY Minorca -- Virginia, MN.............. 68,000 2,577 2,265 41% 38 % IRON ORE VENTURES AND LONG-TERM PURCHASE CONTRACTS Empire (40% owned) -- Palmer, MI; Wabush (13.75% owned) -- Wabush, Labrador and Pointe Noire, Quebec, Canada............................ 116,000 3,513 3,804 55 63 --------------- ----- ----- ---- ---- Total Iron Ore.................... 184,000 6,090 6,069 96% 101% --------------- ----- ----- ---- ---- --------------- ----- ----- ---- ----
- --------------- (1) Production in excess of requirements was sold or added to stockpile. Production below requirements was purchased or taken from stockpile. (2) Net interest in proven reserves. All of Inland Steel Company's coal requirements are satisfied from independent sources, with a portion of such requirements being met under two significant purchase contracts. The first such contract, extending through year-end 1994, requires Inland Steel Company to purchase (subject to force majeure provisions) a total of 1,270,000 tons of metallurgical and/or steam coal during the term of the contract at prices (intended to approximate market) determined with respect to certain cost factors. The contract requires the parties to enter into good-faith negotiations regarding extension of the arrangement at mutually agreeable terms and conditions prior to the end of the term. The term of the contract is likely to be extended covering solely steam coal, due to the shut-down of Inland Steel Company's coke batteries. During 1993, Inland Steel Company purchased 15% of its coal requirements under such contract, representing 8% of its metallurgical coal requirements and 33% of its steam coal requirements. 4 6 A second coal purchase contract extends through year-end 1995. Such contract covers substantially all of the coal needs of 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. The contract requires Inland Steel Company to purchase (subject to force majeure provisions) 95% of the requirements of PCI Associates (100% in 1993) of injection-quality coal through the term of the contract (currently estimated to be 1,520,000 tons) at prices determined by annual good-faith negotiations between the parties. The term of the agreement may be extended by mutual agreement of the parties. During 1993, Inland Steel Company purchased 5% of its total coal requirements under such contract, representing 100% of its injection coal requirements. The balance of Inland Steel Company's coal requirements was purchased from domestic sources under short-term purchase contracts and from other sources. In December 1993, the last of Inland Steel Company's coke-making facilities was permanently shut down. Inland Steel Company entered into a long-term purchase contract extending through July 1999 which required Inland Steel Company to purchase approximately 800,000 tons of coke on an annualized basis through July 1993, and requires Inland Steel Company to purchase 1,400,000 tons of coke on an annualized basis thereafter through the term of the contract at prices negotiated annually based on certain market determinants. The purchase requirement is subject to force majeure provisions. The term of the contract may be extended by mutual agreement of the parties. During 1993, Inland Steel Company satisfied 46% of its total coke needs under such arrangement. The remainder of its purchased coke requirements was obtained through contracts with independent domestic sources. Inland Steel Company's Michigan limestone and dolomite properties were sold in September 1990. As part of such sale, Inland Steel Company entered into a requirements contract (subject to force majeure provisions) with the buyer of the properties to purchase in each of the first five years of the contract term, beginning in 1992, the greater of its annual limestone needs or one million gross tons, with certain exceptions, and its annual limestone needs, with certain exceptions, for the remaining six years of the agreement. Prices (intended to approximate market) are determined with respect to certain cost factors. Approximately 75% of the iron ore pellets and virtually all of the limestone received by Inland Steel Company at its Indiana Harbor Works in 1993 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 26% of Inland Steel Company's coal requirements were transported in its hopper cars by unit train in 1993. The remainder of Inland Steel Company's coal requirements was transported in independent carrier-owned equipment. See "Energy" below for further information relating to the use of coal in the operations of Inland Steel Company. Steel Service Center Operations The Company's steel service center operations are conducted by its wholly owned steel service center management subsidiary, Inland Materials Distribution Group, Inc., through its operating subsidiaries -- Joseph T. Ryerson & Son, Inc. and J. M. Tull Metals Company, Inc. In August 1990, Ryerson, Tull and Ryerson Coil Processing, a specialized processing unit, were organized into five business units along regional and product lines. Ryerson, on a nationwide basis, and Tull, in the southeastern and south-central United States, each compete with a large number of other steel service centers, some of which are affiliated with foreign steelmakers. Competition is primarily on the basis of service, quality and price. The ability to meet just-in-time delivery requirements of customers depends on maintaining adequate inventories and processing capacity and highly trained personnel. Depending on location, the Company's steel service center operations are engaged in the sale of carbon, alloy and stainless steel; aluminum and aluminum alloys; nickel and nickel alloys; copper; brass; specialty metals; and industrial plastics. The service centers sell products in various forms, including, again depending on location, plate, sheet, coil, wire, rod, bar, tubing, pipe, structural, and expanded metal and grating. During 1993, the Steel Service Center segment shipped approximately 35% of its product (by sales revenue) to machinery manufacturers, 25% to metal producers and fabricators, 9% to transportation equipment producers, 5 7 10% to electrical machinery producers, 4% to wholesale distributors, 5% to construction-related purchasers, 3% to metal mills and foundries, and 9% to other customers. Approximately 20% of the tons of product purchased in 1993 by the Steel Service Center segment were from affiliates. Joseph T. Ryerson & Son, Inc. Ryerson, with business unit headquarters in Philadelphia, Pennsylvania, Chicago, Illinois, and Seattle, Washington, is a leading steel service center organization. With full-line service centers in 30 major cities, Ryerson is engaged in the nationwide sale of its products through its own sales organization. Ryerson maintains heavy-duty shears, slitters, precision cut-to-length lines, high-speed saws, flame-cutting machines and other processing equipment for use in furnishing custom cutting and miscellaneous shapes in accordance with customer orders. The Ryerson Coil Processing Company division, headquartered in Chicago, performs processing through six 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., acquired by Tull in June 1988, operate 19 service centers and two processing facilities located throughout the southeastern and south-central United States. Tull produces a variety of metal products with value-added processing, including welded steel tubing and roll-formed shapes. Tull's products are sold principally through its own sales staff. PRODUCT CLASSES The following table sets forth the percentage of consolidated net sales, for the five years indicated, contributed by each class of similar products in the Integrated Steel business segment that accounted for 10% or more of consolidated net sales in such time period. The Steel Service Center business segment of the Company did not have any class of similar products that accounted for 10% or more of such sales in any of such years.
1993 1992 1991 1990 1989 ---- ---- ---- ---- ---- Integrated Steel Operations Sheet, Strip and Plate...................... 45 % 45 % 45 % 43 % 44 % Bar and Structural.......................... 7 6 6 10 9 ---- ---- ---- ---- ---- Total Integrated Steel Operations............. 52 51 51 53 53 Steel Service Center Products................. 48 49 49 47 47 ---- ---- ---- ---- ---- 100 % 100 % 100 % 100 % 100 % ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
CAPITAL EXPENDITURES AND INVESTMENTS IN JOINT VENTURES In recent years, the Company and its subsidiaries have made substantial capital expenditures, principally at the Indiana Harbor Works, to improve quality and reduce costs, and for pollution control. Additions by the Company and its subsidiaries to property, plant and equipment, together with retirements and adjustments, for the five years ended December 31, 1993, are set forth below. Net capital additions during such period aggregated $386.9 million.
DOLLARS IN MILLIONS -------------------------------------------------------------- RETIREMENTS NET CAPITAL ADDITIONS* OR SALES* ADJUSTMENTS* ADDITIONS ---------- ----------- ------------ ----------- 1993.............................. $105.6 $ 143.4 $ (1.3) $ (39.1) 1992.............................. 64.4 74.9 (7.4) (17.9) 1991.............................. 140.2 95.3 (.6) 44.3 1990.............................. 268.1 49.3 1.4 220.2 1989.............................. 197.2 30.2 12.4 179.4
- --------------- * See detail in Schedule V -- Property, Plant and Equipment, of Financial Statement Schedules attached hereto and incorporated by reference herein. 6 8 In recent years, the Company's largest capital improvement projects at the Indiana Harbor Works have emphasized reducing costs and improving quality in the steel-processing sequence of Inland Steel Company. Approximately $10 million was spent in 1993 to complete upgrade projects begun in 1990 at the 80-inch Hot Strip Mill and at the 12-inch Bar Mill. The total cost of the 80-inch Hot Strip Mill and the 12-inch Bar Mill projects was approximately $214 million. The only major project undertaken and completed in 1993 was a mini-reline of the No. 7 Blast Furnace at a cost of $27 million. No major projects are planned for 1994. 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 one-third is cold-rolled substrate for I/N Kote. The I/N Tek facility, located near New Carlisle, Indiana, became operational in April 1990 and reached its design capability in March 1992. Inland Steel Company, which owns, through its subsidiary, a 60% interest in the I/N Tek partnership, is, with certain limited exceptions, the sole supplier of hot band to be processed by the I/N Tek facility and generally has exclusive rights to the production capacity of the facility. In September 1989, a wholly owned subsidiary of Inland Steel Company formed a second partnership, I/N Kote, with an indirect wholly owned subsidiary of NSC to construct, own, finance and operate two sheet steel galvanizing lines adjacent to the I/N Tek facility. The subsidiary of Inland Steel Company owns a 50% interest in I/N Kote. The I/N Kote facility consists of a hot-dip galvanizing line and an electrogalvanizing line with a combined annual capacity of 900,000 tons. The electrogalvanizing line began start-up operations in September 1991 and the hot-dip galvanizing line began start-up operations in November 1991. Both lines were operating near design capability by August 1993. Inland Steel Company has guaranteed 50% of I/N Kote's permanent financing. I/N Kote has contracted to acquire its cold-rolled steel substrate from Inland Steel Company, which supplies the substrate from the I/N Tek facility and Inland Steel Company's Indiana Harbor Works. Further information regarding the I/N Tek and I/N Kote joint venture projects will be set forth under the caption "Certain Relationships and Related Transactions -- Joint Ventures" in the Company's definitive Proxy Statement which will be furnished to stockholders in connection with the Annual Meeting scheduled to be held on May 25, 1994, and is incorporated by reference into Item 13 of this Report. Inland Steel Company sold half of its 25% ownership interest in the Walbridge, Ohio electrogalvanizing joint venture in the second quarter of 1992. In 1993, the Company and its subsidiaries made capital expenditures of $106 million. Such expenditures principally focused on new machinery and equipment related to maintaining or improving Integrated Steel operations. Approximately $86 million was spent for Integrated Steel capital projects in 1993, including replacements and renewals. Excluding amounts related to the purchase of the equity interest in Inland Steel Company's No. 2 BOF Shop Caster facility, the amount budgeted for 1994 capital expenditures by the Company and its subsidiaries is approximately $110 million. In March 1994 Inland Steel Company purchased the equity interest of the lessor of the Caster for $83 million. In addition, in connection with such purchase, Inland Steel Company recorded $63 million of debt. It is anticipated that capital expenditures will be funded from cash generated by operations and cash on hand at year-end 1993. (See "Environment" below for a discussion of capital expenditures for pollution control purposes.) EMPLOYEES The monthly average number of active employees of the Company and its subsidiaries receiving pay during 1993 was approximately 16,200, of whom approximately 10,900 were employed at Inland Steel Company. The majority of the remaining employees were employed at the Company's steel service center operations. At year-end, approximately 8,900 of the Company's employees, including 8,400 at Inland Steel Company, were represented by the United Steelworkers of America, of whom approximately 1,430 including 1,400 at Inland Steel Company, were on furlough or indefinite layoff. Approximately 1,100 employees were represented by other unions during 1993. The decline at Inland Steel Company in average employment from 12,100 in 1992 is attributable to improvements in productivity, the shut-down of older facilities, and workforce 7 9 reductions. Excluding the costs attributable to future workforce reductions, total employment costs decreased from $941 million in 1992 to $925 million in 1993. Beginning in 1991, the Company embarked upon a major turnaround strategy, with the assistance of an outside consulting firm, to significantly reduce costs, increase revenues and improve asset utilization at both the Company and Inland Steel Company. As a result, employment was reduced by 2,300 positions by year-end 1993. Another 1,200 positions are expected to be eliminated by the end of 1994. 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 provides a wage increase of $.50 per hour in 1995, a $500 bonus in each of 1993 and 1994 (totalling in each case approximately $4 million) and a potential bonus of up to $1,000 per employee (approximately $8 million in total) based on Inland Steel Company's achieving $150 million of pre-tax income in 1995 adjusted to exclude the incremental FASB Statement No. 106 costs and such bonus. In addition, all active employees receive an additional week of vacation in 1994 and in 1996. The agreement provides for a reopener on wages and certain benefits in 1996 with an arbitration provision to resolve unsettled issues, thereby precluding a work stoppage over the six-year term of the contract. The agreement also provides for election of a Union designee acceptable to the Company to the Company's Board of Directors, restrictions on the ability of Inland Steel Company to reduce the Union workforce (generally limited to attrition and major facilities shutdowns) while allowing greater flexibility to institute work rule changes, quarterly rather than annual payment of profit sharing amounts, significant improvements in pension benefits for active employees, and the securing of retiree health care obligations through certain trust and second mortgage arrangements. "First dollar" health care coverage is eliminated under the agreement through the institution of co-payments and increased deductibles on medical benefits. As of December 31, 1993, the number of active employees at Ryerson was approximately 4,045 of whom approximately 1,125 were covered by collective bargaining agreements. Of those employees covered by collective bargaining agreements, approximately 475 production, maintenance, and transportation employees were represented by the United Steelworkers of America and approximately 370 such employees were represented by the International Brotherhood of Teamsters. The current agreement with the United Steelworkers will expire on July 31, 1996. During 1993, Ryerson reached agreement at seven separate plants (San Francisco, Buffalo, Indianapolis, Chattanooga, St. Louis, Jersey City, and Los Angeles) represented by various unions covering 190 employees. These agreements expire on various dates from April 31, 1995 through October 31, 1997. The agreements, as well as the current agreement with the United Steelworkers of America, provide for modest wage increases, lump sum bonuses, pension improvements, and increased employee sharing of health care costs. Ryerson maintains agreements with the Teamsters covering 13 facilities. Teamster agreements expire on various dates during the period beginning March 31, 1994, and ending October 31, 1997. In addition, Ryerson contracts with independent third parties to provide approximately 175 drivers on a leased basis to nine Ryerson facilities. These leased drivers are covered by agreements between the Teamsters and such independent third parties, which agreements expire on March 31, 1994. ENVIRONMENT The Company is subject to environmental laws and regulations concerning emissions into the air, discharges into ground water and waterways, and the generation, handling, labeling, storage, transportation, treatment and disposal of waste material. These include various Federal statutes regulating the discharge or release of pollutants to the environment, including the Clean Air Act, Clean Water Act, Resource Conservation and Recovery Act, Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA," also known as "Superfund"), Safe Drinking Water Act, and Toxic Substances Control Act, as well as state and local requirements. Violations of these laws and regulations can give rise to a variety of civil, administrative, and, in some cases, criminal actions and could also result in substantial liabilities or require substantial capital expenditures. In addition, under CERCLA the United States Environmental Protection Agency (the "EPA") has authority to impose liability for site redemination 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. 8 10 By year-end 1993, the last of Inland Steel Company's coke-making facilities was permanently shut down. All coke battery closures were necessitated by the inability of the facilities to meet environmental regulations and their deteriorating condition and performance. The Company had anticipated the closure of such remaining coke-making facilities at year-end 1994. The October 1993 decision to close these facilities early necessitated a fourth-quarter 1993 pre-tax charge of $22.3 million that included the write-off of property, plant and equipment costs which were to be depreciated in 1994 and additional costs related to the earlier-than-anticipated displacement of personnel. Inland Steel Company has entered into a long-term contract to satisfy the majority of its coke needs. (See "Raw Materials" above). In addition, Inland Steel Company participates in a joint venture that has constructed and is operating a pulverized coal injection facility for blast furnace application, which process is anticipated to replace up to 30% of Inland Steel Company's coke needs. The facility is anticipated to substantially achieve operation at its design capacity by year-end 1994. On June 10, 1993, the U.S. District Court for the Northern District of Indiana entered a consent decree that resolved all matters raised by the lawsuit filed by the EPA in 1990. The consent decree includes a $3.5 million cash fine, environmentally beneficial projects at the Indiana Harbor Works through 1997 costing approximately $7 million, and sediment remediation of portions of the Indiana Harbor Ship Canal and Indiana Harbor Turning Basin estimated to cost approximately $19 million over the next several years. The fine and estimated remediation costs were provided for in 1991 and 1992. After payment of the fine, the Company's reserve for environmental liabilities totalled $19 million. The consent decree also defines procedures for corrective action at Inland Steel Company's Indiana Harbor Works. The procedures defined establish essentially a three-step process, each step of which requires agreement of the EPA before progressing to the next step in the process, consisting of: assessment of the site, evaluation of corrective measures for remediating the site, and implementation of the remediation plan according to the agreed-upon procedures. The Company is presently assessing the extent of environmental contamination. The Company anticipates that this assessment will cost approximately $1 million to $2 million per year and take another three to five years to complete. Because neither the nature and extent of the contamination nor the corrective actions can be determined until the assessment of environmental contamination and evaluation of corrective measures is completed, the Company cannot presently reasonably estimate the costs of or the time required to complete such corrective actions. Such corrective actions may, however, require significant expenditures over the next several years that may be material to the results of operations or financial position of the Company. Insurance coverage with respect to such corrective actions is not significant. Capital spending for pollution control projects totaled $7 million in 1993, down from $11 million in 1992. Another $44 million was spent in 1993 to operate and maintain such equipment, versus $46 million a year earlier. During the five years ended December 31, 1993, the Company has spent $302 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 $20 million in 1994 and $13 million in 1995. It is anticipated that the Company will make annual capital expenditures of $5 million to $10 million in each of the three years thereafter. In addition, Inland Steel Company will have ongoing annual expenditures of $40 million to $50 million for the operation of air and water pollution control facilities to comply with current Federal, state and local laws and regulations. Due to the inability to predict the costs of corrective action that may be required under the Resource Conservation and Recovery Act and the consent decree in the 1990 EPA lawsuit, the Company cannot predict the amount of additional environmental expenditures that will be required. Such additional environmental expenditures, excluding amounts that may be required in connection with the consent decree in the 1990 EPA lawsuit, however, are not expected to be material to the results of operations or financial position of Inland Steel Company. See Item 3 below for information concerning certain proceedings pertaining to environmental matters in which Inland Steel Company is involved. 9 11 ENERGY Coal, all of which is purchased from independent sources, together with coke, accounted for approximately 67.8% of the energy consumed by Inland Steel Company at the Indiana Harbor Works in 1993. In recent years Inland Steel Company has purchased varying portions of its coke requirements from outside sources, purchasing approximately 59% in 1993 and approximately 46% in 1992. See "Environment" above for a discussion of coke-making by Inland Steel Company and alternatives for obtaining coke. Natural gas and fuel oil supplied approximately 30% of the energy requirements of the Indiana Harbor Works in 1993 and are used extensively by the Company at other facilities that it owns or in which it has an interest. The Company anticipates that utilization of the pulverized coal injection facility (see "Environment" above) will substantially reduce natural gas and fuel oil consumption at the Indiana Harbor Works. The Company both purchases and, through Inland Steel Company, generates electricity to satisfy electrical energy requirements at the Indiana Harbor Works. In 1993, Inland Steel Company produced approximately 61% of its 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. ITEM 2. PROPERTIES. PROPERTIES RELATING TO INTEGRATED STEEL 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 and the No. 2 BOF Shop Caster Facility ("Caster"), are held by Inland Steel Company under leasing arrangements. Inland Steel Company purchased the equity interest of the lessor of the Caster in March 1994 and currently intends to terminate the lease and prepay or formally assume the applicable debt in the first half of 1994. Substantially all of the remaining property, plant and equipment at the Indiana Harbor Works is subject to the lien of the First Mortgage of Inland Steel Company dated April 1, 1928, as amended and supplemented. See "Business Segments -- Integrated Steel 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 at this location is subject to a lien securing related indebtedness. The I/N Tek facility is adequate to serve the present and anticipated needs of Inland Steel Company planned for such facility. I/N Kote, a partnership in which a subsidiary of Inland Steel Company owns a 50% interest, has constructed a 900,000-ton annual capacity steel galvanizing facility on approximately 25 acres of land, which it owns in fee, located adjacent to the I/N Tek site. Substantially all the property, plant and equipment owned by I/N Kote is subject to a lien securing related indebtedness. The I/N Kote facility is adequate to serve the present and anticipated needs of Inland Steel Company planned for such facility. PCI Associates, a partnership in which a subsidiary of Inland Steel Company owns a 50% interest, has constructed a pulvarized coal injection facility on land located within the Inland Harbor Works. Inland Steel Company leases PCI Associates the land upon which the facility is located. Substantially all the property, 10 12 plant and equipment owned by PCI Associates is subject to a lien securing related indebtedness. Upon achieving operation at design capacity, the PCI Associates facility will be adequate to serve the anticipated needs of Inland Steel Company planned for such facility. Inland Steel Company owns three vessels for the transportation of iron ore and limestone on the Great Lakes, and a subsidiary of Inland Steel Company owns a fleet of 404 coal hopper cars (100-ton capacity each) used in unit trains to move coal to the Indiana Harbor Works. See "Business Segments -- Integrated Steel 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 "Business Segments -- Integrated Steel 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:
ANNUAL PRODUCTION CAPACITY (IN THOUSANDS OF GROSS TONS OF PROPERTY LOCATION PELLETS) - ------------------------------------------ ------------------------ ------------------- Empire Mine............................... Palmer, Michigan 8,100 Minorca Mine.............................. Virginia, Minnesota 2,500 Wabush Mine............................... Wabush, Labrador and 4,500 Pointe Noire, Quebec, Canada
The Empire Mine is operated by the Empire Iron Mining Partnership, in which Inland Steel Company has a 40% interest. Inland Steel Company, through a subsidiary, is the sole owner and operator of the Minorca Mine. The Wabush Mine is a taconite project in which Inland Steel Company owns a 13.75% interest. Inland Steel Company also owns a 38% interest in the Butler Taconite project (permanently closed in 1985) in Nashwauk, Minnesota. The reserves at the Empire Mine, the Minorca Mine and the Wabush Mine are held under leases expiring, or expected at current production rates to expire, between 2012 and 2040. Substantially all of the reserves at Butler Taconite are held under leases. Inland Steel Company's share of the production capacity of its interests in such iron ore properties is sufficient to provide the majority of its present and anticipated iron ore pellet requirements. Any remaining requirements have been and are expected to continue to be readily available from independent sources. During 1992, the Minorca Mine's original ore body was depleted and production shifted to a new major iron ore body, the Laurentian Reserve, acquired by lease in 1990. Limestone and Dolomite The limestone and dolomite properties of Inland Steel Company located near the town of Gulliver in the Upper Peninsula of Michigan were permanently closed on December 29, 1989 and sold in 1990. 11 13 Coal Inland Steel Company's sole remaining coal property, the Lancashire No. 25 Property, located near Barnesboro, Pennsylvania, is permanently closed. All Inland Steel Company coal requirements for the past several years have been and are expected to continue to be met through contract purchases and other purchases from independent sources. PROPERTIES OF STEEL SERVICE CENTER SEGMENT Joseph T. Ryerson & Son, Inc. Ryerson owns its regional business unit headquarters offices in Chicago and leases regional headquarters offices in West Chester (PA) and Renton (WA). Ryerson/East division maintains steel service centers at Allston (MA), Buffalo, Carnegie (PA), Charlotte, Chattanooga, Cleveland, Jersey City, Philadelphia, and Wallingford (CT). Ryerson/Central's service centers are in Chicago, Cincinnati, Dallas, Detroit, Houston, Indianapolis, Kansas City, Milwaukee, Plymouth (MN), St. Louis, and Tulsa. Ryerson/West's service centers are in Commerce City (CO), Emeryville (CA), Los Angeles, Phoenix, Portland (OR), Renton (WA), Spokane, and Salt Lake City. Ryerson Coil Processing division's processing facilities are located in Chicago, Marshalltown (IA), Plymouth (MN) and New Hope (MN). All of Ryerson's operating facilities are held in fee with the exception of a portion of the property at St. Louis (held under long-term lease), a portion of the property in Portland (held under short-term lease), a satellite facility at Omaha (held under short-term lease), two facilities in Chicago (held under short-term lease), two facilities in New Hope (MN) (one partly held in fee and partly under short-term lease, the other held under short-term lease), one facility in Marshalltown (IA) (held under an installment purchase contract) and one facility in Salt Lake City (held under short-term lease). In addition, Ryerson holds in fee approximately 44 acres of unimproved property in Powder Springs (GA) and approximately eight acres of property in Elk Grove Village (IL), formerly the site of an operating facility. Ryerson's properties are adequate to serve its present and anticipated needs. J. M. Tull Metals Company, Inc. Tull maintains service centers in Birmingham, Columbia (SC), Jacksonville, Miami, Tampa, Baton Rouge, New Orleans, Charlotte, Greensboro (NC), Greenville (SC), Richmond, and Norcross (GA), where its headquarters is located. All of these facilities are owned by Tull in fee, except for the Columbia facility, which is held under short-term lease. Tull's AFCO Metals, Inc. subsidiary operates service centers in Fort Smith (AR), Oklahoma City, Shreveport, West Memphis (AR), Wichita, Jackson (MS) and Little Rock. AFCO's headquarters are located in Norcross (GA), where it leases space owned in fee by Tull. Each of AFCO's facilities is held in fee except the Wichita facility, which is held under a short-term lease. Tull holds in fee land improved with a parking garage in Atlanta. Tull's properties are adequate to serve its present and anticipated needs. OTHER PROPERTIES The Company and certain of its subsidiaries lease, under a long-term arrangement, approximately 63% of the space in the Inland Steel Building located at 30 West Monroe Street, Chicago, Illinois (where the Company's principal executive offices are located), which property interest is adequate to serve the Company's present and anticipated needs. Approximately 12% of such space is under sublease to other parties. Magnetics International, Inc., a subsidiary of the Company, owns approximately 63 acres in northern Indiana, on which site it has constructed an iron oxide plant that began operation in April 1991. Such facility is adequate to serve the present and anticipated needs of Magnetics International, Inc. Certain subsidiaries of the Company hold in fee at various locations an aggregate of approximately 355 acres of land, all of which is for sale. Inland Steel Company also holds in fee approximately 300 acres of land adjacent to the I/N Tek and I/N Kote sites, which land is available for future development. Approximately 1,060 acres of rural land, which are held in fee at various locations in the north-central United States by various raw materials ventures, are 12 14 also for sale. I R Construction Products Company, Inc. (formerly Inryco, Inc.), a subsidiary of Inland Steel Company and the Company's former Construction Products business segment, owns, in fee, a combination office building and warehouse in Hoffman Estates (IL), which is for sale. ITEM 3. LEGAL PROCEEDINGS. On August 12, 1992, Inland Steel Administrative Service Company ("ISAS"), a wholly owned subsidiary of Inland Steel Company, filed a lawsuit in the Court of Common Pleas in Lorain County, Ohio against Western Steel Group, Inc. ("Western") to collect the unpaid balance of its account for steel products sold to Western by Inland Steel Company in the amount of $5.7 million. On October 15, 1992, Western filed a counterclaim against ISAS and a third-party complaint against Inland Steel Company for $40 million actual damages and $100 million punitive damages, alleging, among other things, breach of contract and wrongful interference with contractual relations in connection with a refusal by Inland Steel Company to continue selling steel products to Western and defamation of Western and a patent held by Western in connection with discussions with third parties. All claims were settled between the parties in February 1994 and the settlement was approved by the court. Under the terms of the settlement, ISAS has received $3.4 million and all counterclaims against Inland Steel Company and ISAS have been released. On June 10, 1993, the U.S. District Court for the Northern District of Indiana entered a consent decree that resolved all matters raised by the lawsuit filed by the EPA in 1990. The consent decree includes a $3.5 million cash fine, environmentally beneficial projects at the Indiana Harbor Works through 1997 costing approximately $7 million, and sediment remediation of portions of the Indiana Harbor Ship Canal and Indiana Harbor Turning Basin estimated to cost approximately $19 million over the next several years. The fine and estimated remediation costs were provided for in 1991 and 1992. After payment of the fine, the Company's reserve for environmental liabilities totalled $19 million. The consent decree also defines procedures for corrective action at Inland Steel Company's Indiana Harbor Works. The procedures defined establish essentially a three-step process, each step of which requires agreement of the EPA before progressing to the next step in the process, consisting of: assessment of the site, evaluation of corrective measures for remediating the site, and implementation of the remediation plan according to the agreed-upon procedures. The Company is presently assessing the extent of environmental contamination. The Company anticipates that this assessment will cost approximately $1 million to $2 million per year and take another three to five years to complete. Because neither the nature and extent of the contamination nor the corrective actions can be determined until the assessment of environmental contamination and evaluation of corrective measures is completed, the Company cannot presently reasonably estimate the costs of or the time required to complete such corrective actions. Such corrective actions may, however, require significant expenditures over the next several years that may be material to the results of operations or financial position of the Company. Insurance coverage with respect to such corrective actions is not significant. On March 22, 1985, the EPA issued an administrative order to Inland Steel Company's former Inland Steel Container Company Division ("Division") naming the former Division and various other unrelated companies as responsible parties under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") in connection with the cleanup of a waste disposal facility operated by Duane Marine Salvage Corporation at Perth Amboy, New Jersey. The administrative order alleged that certain of the former Division's wastes were transported to, and disposed of at, that facility and required Inland Steel Company to join with other named parties in taking certain actions relating to the facility. Inland Steel Company and the other administrative order recipients have completed the work required by the order. In unrelated matters, the EPA also advised the former Division and various other unrelated parties of other sites located in New Jersey at which the EPA expects to spend public funds on any investigative and corrective measures that may be necessary to control any releases or threatened releases of hazardous substances, pollutants and contaminants pursuant to the applicable provisions of CERCLA. The notice also indicated that the EPA believes Inland Steel Company may be a responsible party under CERCLA. The extent of Inland Steel Company's involvement and participation in these matters has not yet been determined. While it is not possible at this time to predict the amount of Inland Steel Company's potential liability, none of these matters is expected to materially affect Inland Steel Company's financial position. 13 15 The EPA has adopted a national policy of seeking substantial civil penalties against owners and operators of sources for noncompliance with air and water pollution control statutes and regulations under certain circumstances. It is not possible to predict whether further proceedings will be instituted against the Company or any of its subsidiaries pursuant to such policy, nor is it possible to predict the amount of any such penalties that might be assessed in any such proceeding. The Indiana Department of Environmental Management ("IDEM") from time to time advises various parties of alleged violations of air pollution regulations by issuing Notices of Violation so as to initiate discussions concerning corrective measures. Inland Steel Company has three currently outstanding unresolved Notices of Violation at its Indiana Harbor Works. Inland Steel Company is presently in discussions with the staff of IDEM with respect to these matters and cannot currently estimate the time period within which these matters will be resolved. 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. Inland Steel Company received a Notice of Violation from IDEM dated March 3, 1989 alleging violations of Inland Steel Company's National Pollution Discharge Elimination System permit regarding water discharges. Inland Steel Company is presently in discussions with the staff of IDEM with respect to these matters and cannot currently estimate the time period within which these matters will be resolved. While it is not possible at this time to predict the amount of Inland Steel Company's potential liability, this matter is not expected to materially affect Inland Steel Company's financial position. Inland Steel Company received a Special Notice of Potential Liability ("Special Notice") from IDEM on February 18, 1992 relating to the Four County Landfill Site, Fulton County, Indiana (the "Facility"). The Special Notice stated that IDEM has documented the release of hazardous substances, pollutants and contaminants at the Facility and was planning to spend public funds to undertake an investigation and control the release or threatened release at the Facility unless IDEM determined that a potentially responsible party ("PRP") will properly and promptly perform such action. The Special Notice further stated that Inland Steel Company may be a PRP and that Inland Steel Company, as a PRP, may have potential liability with respect to the Facility. In August 1993, Inland Steel Company, along with other PRPs, entered into an Agreed Order with IDEM, pursuant to which the PRPs agreed to perform a Remedial Investigation/Feasibility Study ("RI/FS") for the Facility and pay certain past and future IDEM costs. In addition, the PRPs agreed to provide funds for operation and maintenance necessary for stabilization of the Facility. Those costs which Inland Steel Company has agreed to assume under the Agreed Order are not currently anticipated to exceed $154,000. 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. ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS. Not applicable. EXECUTIVE OFFICERS OF REGISTRANT. Officers are elected by the Board of Directors of the Company to serve for a period ending with the next succeeding annual meeting of the Board of Directors held immediately after the annual meeting of stockholders. All executive officers of the Company, with the exception of Earl L. Mason, H. William Howard, Olivia M. Thompson, and Maurice S. Nelson, Jr., have been employed by the Company or a subsidiary of the Company throughout the past five years. 14 16 Set forth below are the executive officers of the Company as of March 1, 1994 and the age of each as of such date. Their principal occupations held presently 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 POSITIONS AND OFFICES HELD PRESENT POSITION WITH REGISTRANT DURING THE PAST FIVE YEARS - ----------------------------------- -------------------------------------------------------- Robert J. Darnall, 56.............. Mr. Darnall has been Chairman, President and Chief Chairman, President, Chief Executive Officer of the Company since September 1, Executive Officer and Director 1992. A Director of the Company and a member of the Executive and Finance and Retirement Committees of the Board of Directors since April 23, 1986, he became Chairman of the Finance and Retirement Committee on April 24, 1991 and Chairman of the Executive Committee on January 1, 1993. He was President and Chief Operating Officer of the Company from April 16, 1986 to September 1, 1992. He has been Chairman and Chief Executive Officer of Inland Steel Company since September 1, 1992 and was also its President from November 1987 to September 1, 1992. Mr. Darnall has also been a Director of Inland Steel Company since April 1983. He also has been Chairman of the Board of Directors of Inland Materials Distribution Group, Inc. (and its predecessor company) since November 1990. Prior to November 1990, he had been Chairman of the Board of its subsidiaries Joseph T. Ryerson & Son, Inc. since May 1986 and J. M. Tull Metals Company, Inc. since July 1986. W. Gordon Kay, 57.................. Mr. Kay has been Senior Vice President of the Company Senior Vice President since July 1990 and President and Chief Operating Officer of Inland Materials Distribution Group, Inc. (and its predecessor company) and Chairman of its subsidiaries, Joseph T. Ryerson & Son, Inc. and J. M. Tull Metals Company, Inc., since November 1990. He also has been President of Joseph T. Ryerson & Son, Inc. since January 1990 and was President and Chief Executive Officer of J. M. Tull Metals Company, Inc. (acquired by the Company in July 1986) from July 1984 until November 1990. Maurice S. Nelson, Jr., 56......... Mr. Nelson has been Senior Vice President of the Company Senior Vice President and President and Chief Operating Officer of Inland Steel Company since September 1, 1992. He also holds the position of President of the Inland Steel Flat Products Company division of Inland Steel Company, which he assumed on joining the Company on November 1, 1991. Prior to joining Inland Steel Company, he was President, Sheet and Plate Division, Aluminum Company of America ("ALCOA"), from August 1991 to October 1991 and Vice President, Sheet and Plate Division, ALCOA, from October 1986 to July 1991.
15 17
NAME, AGE AND POSITIONS AND OFFICES HELD PRESENT POSITION WITH REGISTRANT DURING THE PAST FIVE YEARS - ----------------------------------- -------------------------------------------------------- Earl L. Mason, 46.................. Mr. Mason has been Vice President and Chief Financial Vice President and Officer of the Company since January 24, 1994. Prior to Chief Financial Officer such appointment, he was Vice President -- Finance and Principal Financial Officer of the Company from June 17, 1991. Prior to joining the Company, he was Group Executive -- Logistics and Asset Management of Digital Equipment Corporation (a manufacturer of data processing equipment) ("Digital") from July 1990 until joining the Company in June 1991, and Chief Financial Officer for the European operations of Digital from September 1987 to June 1990. David B. Anderson, 51.............. Mr. Anderson has been Secretary of the Company and of Vice President -- Corporate Inland Steel Company since January 1, 1994. He also has Planning, General Counsel and been Vice President -- Corporate Planning and General Secretary Counsel of the Company since April 23, 1986. Jay E. Dittus, 61.................. Mr. Dittus has been Vice President -- Finance since Vice President -- Finance January 24, 1994. Prior to such appointment, he was Treasurer of the Company from April 23, 1986, Treasurer of Inland Steel Company from May 1981, Treasurer of Joseph T. Ryerson & Son, Inc. from October 1990, Assistant Treasurer of Joseph T. Ryerson & Son, Inc. from April 1986 to October 1990, and Treasurer of J. M. Tull Metals Company, Inc. from September 1988. He also has been Vice President of Inland Steel Company since November 1988. Judd R. Cool, 58................... Mr. Cool has been Vice President -- Human Resources of Vice-President -- Human Resources the Company since September 21, 1987 and Vice President -- Human Resources of Inland Steel Flat Products Company division since January 11, 1993. H. William Howard, 59.............. Mr. Howard has been Vice President -- Information Vice President -- Information Technology of the Company since September 1, 1990 and Technology Vice President -- Automation and Information Technology of Inland Steel Flat Products Company division since January 11, 1993. Prior to joining the Company, he was the Vice President of Information Technology of the Bechtel Group, Inc. (involved in engineering and construction) from May 1987 to September 1990. Vicki L. Avril, 39................. Ms. Avril has been Treasurer of the Company and of Treasurer and Director of Pension Inland Steel Company since January 24, 1994, and Investments and Administration Treasurer of Joseph T. Ryerson & Son, Inc. and J. M. Tull Metals Company, Inc. since February 10, 1994. In addition, she has been Director of Pension Investments and Administration since June 1991. She was Assistant Treasurer of the Company from May 1993 until January 1994, Manager -- Planning -- Distribution Business from February 1990 until June 1991, and Manager -- Pension Investments from March 1988 until February 1990.
16 18
NAME, AGE AND POSITIONS AND OFFICES HELD PRESENT POSITION WITH REGISTRANT DURING THE PAST FIVE YEARS - ----------------------------------- -------------------------------------------------------- Olivia M. Thompson, 44............. Ms. Thompson has been Controller of the Company since Controller and Principal August 17, 1992 and Controller of Inland Steel Company Accounting Officer since February 1, 1993. Prior to joining the Company, she was employed by Allied-Signal, Inc. (involved in aerospace, automotive and engineered materials) as Director of Business Planning and Development for the Automotive Sector from September 1991 to July 1992, Assistant Corporate Controller -- Operations Analysis and Accounting from June 1990 to August 1991, and Group Controller -- Bendix Safety Restraints Group from January 1987 to June 1990.
PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS. The common stock of the Company is listed and traded on the New York Stock Exchange. As of March 15, 1994, the number of holders of record of common stock of the Company was 15,388. The remaining information called for by this Item 5 is set forth under the caption "Summary by Quarter" in the Company's Annual Report to Stockholders for the fiscal year ended December 31, 1993, and is hereby incorporated by reference herein. ITEM 6. SELECTED FINANCIAL DATA. The information called for by this Item 6 with respect to each of the last five years of the Company and its predecessor is set forth under the caption "Eleven-Year Summary of Selected Financial Data and Operating Results" in the Company's Annual Report to Stockholders for the fiscal year ended December 31, 1993, and is hereby incorporated by reference herein. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information called for by this Item 7 is set forth in the Financial Review section of the Company's Annual Report to Stockholders for the fiscal year ended December 31, 1993, and, excluding the tables entitled "Inland Steel Company -- Steel Shipments by Market" and "Inland Materials Distribution Group - -- Shipments by Market" and the bar charts entitled "Inland Steel Industries -- Debt to Total Capitalization," "Inland Steel Industries -- Capital Expenditures versus Depreciation," "Inland Steel Industries -- Total Employment Costs" and "Inland Steel Industries -- Average Employment Cost Per Employee" contained therein, is hereby incorporated by reference herein. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The consolidated financial statements of the Company called for by this Item 8, together with the report thereon of the independent accountants dated February 23, 1994, are set forth under the captions "Report of Independent Accountants" and "Statement of Accounting and Financial Policies" as well as in all consolidated financial statements and schedules of the Company and the "Notes to Consolidated Financial Statements" in the Company's Annual Report to Stockholders for the fiscal year ended December 31, 1993, and are hereby incorporated by reference herein. The financial statement schedules listed under Item 14(a)2 of this Report on Form 10-K, together with the report thereon of the independent accountants dated February 23, 1994, 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 17 19 thereto. Separate consolidated financial statements for Inland Steel Company are set forth in Inland Steel Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993. Separate consolidated financial statements for Inland Materials Distribution Group, Inc. are set forth in Appendix A to this Report. Consolidated quarterly sales, earnings and per share common stock information for 1992 and 1993 are set under the caption "Summary by Quarter" in the Company's Annual Report to Stockholders for the fiscal year ended December 31, 1993, and are hereby 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 caption "Election of Directors" 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 25, 1994, 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 25, 1994, 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 Series F Exchangeable Preferred Stock 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 25, 1994, and is hereby incorporated by reference herein. 18 20 The following beneficial owners of Series A $2.40 Cumulative Convertible Preferred Stock are the only persons known to the Company to be the beneficial owners (as defined by the Securities and Exchange Commission), as of March 15, 1994, of more than five percent of that class of the Company's voting securities:
NUMBER PERCENT NAME AND ADDRESS OF SHARES OF CLASS ------------------------------------------------------------------- --------- -------- Joseph H. Campbell................................................. 7,500 7.78 2003 Country Club Drive Midland, TX 79701 Harry Kifferstein.................................................. 10,025 10.40 c/o Warren Kifferstein 6735 Telegraph Road, Suite 330 Bloomfield Hills, MI 48301 Janice F. McCollough............................................... 7,200 7.47 5778 Lake Breeze Court Sarasota, FL 34233 Donald F. Reinhardt................................................ 5,181 5.38 24638 Elmhurst Drive Elkhart, IN 46517
(b) The information called for by this Item 12 with respect to the security ownership of directors and of management will be set forth under the caption "Security Ownership of Directors and Management" in the Company's definitive Proxy Statement which will be furnished to stockholders in connection with the Annual Meeting of Stockholders to be held on May 25, 1994, and is hereby incorporated by reference herein. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Information called for by this Item 13 will be set forth under the caption "Additional Information Relating to Voting Securities -- 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 25, 1994, 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 the Company's Annual Report to Stockholders for the fiscal year ended December 31, 1993, and are incorporated by reference in Item 8 of this Annual Report on Form 10-K. Report of Independent Accountants dated February 23, 1994. Statement of Accounting and Financial Policies. Consolidated Statements of Operations and Reinvested Earnings for the three years ended December 31, 1993. Consolidated Statement of Cash Flows for the three years ended December 31, 1993. Consolidated Balance Sheet at December 31, 1993 and 1992. Schedules to Consolidated Financial Statements at December 31, 1993 and 1992, relating to: Investments and Advances. 19 21 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 23, 1994. (Included on page 27 of this Report) Consent of Independent Accountants. (Included on page 27 of this Report) For the years ended December 31, 1993, 1992 and 1991: Schedule III -- Condensed Financial Information (Parent Company Only). (Included on pages 28 to 30, inclusive, of this Report) Schedule V -- Property, Plant and Equipment. (Included on page 31 of this Report) Schedule VI -- Reserve for Depreciation, Amortization and Depletion of Property, Plant and Equipment. (Included on page 32 of this Report) Schedule VIII -- Reserves. (Included on page 33 of this Report) Schedule IX -- Short-Term Borrowings. (Included on page 34 of this Report) Schedule X -- Supplementary Profit and Loss Information. (Included on page 35 of this Report) 3. CONSOLIDATED FINANCIAL STATEMENTS OF INLAND MATERIALS DISTRIBUTION GROUP, INC. The consolidated financial statements listed below are set forth in Appendix A on pages A-1 to A-13 inclusive, of this Report. Report of Independent Accountants dated February 23, 1994. (Page A-2) Consolidated Statements of Operations and Reinvested Earnings for the three years ended December 31, 1993. (Page A-3) Consolidated Statement of Cash Flows for the three years ended December 31, 1993. (Page A-4) Consolidated Balance Sheet at December 31, 1993 and 1992. (Page A-5) Statement of Accounting and Financial Policies. (Page A-6) Notes to Consolidated Financial Statements. (Pages A-7 to A-13, inclusive) 4. EXHIBITS. The exhibits required to be filed by Item 601 of Regulation S-K are listed under the caption "Exhibits" below. (B) REPORTS ON FORM 8-K. No reports on Form 8-K were filed by the Company during the quarter ended December 31, 1993. (C) EXHIBITS. 3.(i) Copy of Certificate of Incorporation, as amended, of the Company. (Filed as Exhibit 4-A to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1991, and incorporated by reference herein.)
20 22 3.(ii) Copy of By-laws, as amended, of the Company. (Filed as Exhibit 3-B to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated by reference herein.) 4.A Copy of Certificate of Designations, Preferences and Rights of Series A $2.40 Cumulative Convertible Preferred Stock of the Company. (Filed as part of Exhibit B to the definitive Proxy Statement of Inland Steel Company dated March 21, 1986 that was furnished to stockholders in connection with the annual meeting held April 23, 1986, and incorporated by reference herein.) 4.B Copy of Certificate of Designation, Preferences and Rights of Series D Junior Participating Preferred Stock of the Company. (Filed as Exhibit 4-D to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, and incorporated by reference herein.) 4.C Copy of Rights Agreement, dated as of November 25, 1987, as amended and restated as of May 24, 1989, between the Company and The First National Bank of Chicago, as Rights Agent (Harris Trust and Savings Bank, as successor Rights Agent). (Filed as Exhibit 1 to the Company's Current Report on Form 8-K filed on May 24, 1989, and incorporated by reference herein.) 4.D Copy of Certificate of Designations, Preferences and Rights of Series E ESOP Convertible Preferred Stock of the Company. (Filed as Exhibit 4-F to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1989, and incorporated by reference herein.) 4.E Copy of Certificate of Designations, Preferences and Rights of Series F Exchangeable Preferred Stock of the Company. (Filed as Exhibit 4(b) to the Company's Current Report on Form 8-K filed on December 18, 1989, and incorporated by reference herein.) 4.F Copy of Certificate of Designations of Series G $4.625 Cumulative Convertible Exchangeable Preferred Stock of the Company. (Filed as Exhibit 2.8 to the Company's Registration Statement on Form 8-A filed on March 25, 1991, and incorporated by reference herein.) 4.G Copy of Indenture dated as of December 15, 1992, between the Company and Harris Trust and Savings Bank, as Trustee, respecting the Company's $150,000,000 12-3/4% Notes due December 15, 2002. (Filed as Exhibit 4-G to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated by reference herein.) 4.H 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-Second Supplemental Indenture, incorporated by reference from the following Exhibits: (i) Exhibits B-1(a), B-1(b), B-1(c), B-1(d) and B-1(e), filed with Steel Company's Registration Statement on Form A-2 (No. 2-1855); (ii) Exhibits D-1(f) and D-1(g), filed with Steel Company's Registration Statement on Form E-1 (No. 2-2182); (iii) Exhibit B-1(h), filed with Steel Company's Current Report on Form 8-K dated January 18, 1937; (iv) Exhibit B-1(i), filed with Steel Company's Current Report on Form 8-K, dated February 8, 1937; (v) Exhibits B-1(j) and B-1(k), filed with Steel Company's Current Report on Form 8-K for the month of April, 1940; (vi) Exhibit B-2, filed with Steel Company's Registration Statement on Form A-2 (No. 2-4357); (vii) Exhibit B-1(l), filed with Steel Company's Current Report on Form 8-K for the month of January, 1945; (viii) Exhibit 1, filed with Steel Company's Current Report on Form 8-K for the month of November, 1946; (ix) Exhibit 1, filed with Steel Company's Current Report on Form 8-K for the months of July and August, 1948; (x) Exhibits B and C, filed with Steel Company's Current Report on Form 8-K for the month of March, 1952; (xi) Exhibit A, filed with Steel Company's Current Report on Form 8-K for the month of July, 1956; (xii) Exhibit A, filed with Steel Company's Current Report on Form 8-K for the month of July, 1957;
21 23 (xiii) Exhibit B, filed with Steel Company's Current Report on Form 8-K for the month of January, 1959; (xiv) the Exhibit filed with Steel Company's Current Report on Form 8-K for the month of December, 1967; (xv) the Exhibit filed with Steel Company's Current Report on Form 8-K for the month of April, 1969; (xvi) the Exhibit filed with Steel Company's Current Report on Form 8-K for the month of July, 1970; (xvii) the Exhibit filed with the amendment on Form 8 to Steel Company's Current Report on Form 8-K for the month of April, 1974; (xviii) Exhibit B, filed with Steel Company's Current Report on Form 8-K for the month of September, 1975; (xix) Exhibit B, filed with Steel Company's Current Report on Form 8-K for the month of January, 1977; (xx) Exhibit C, filed with Steel Company's Current Report on Form 8-K for the month of February, 1977; (xxi) Exhibit B, filed with Steel Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1978; (xxii) Exhibit B, filed with Steel Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1980; (xxiii) Exhibit 4-D, filed with Steel Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1980; (xxiv) Exhibit 4-D, filed with Steel Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1982; (xxv) Exhibit 4-E, filed with Steel Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1983; (xxvi) Exhibit 4(i) filed with the Steel Company's Registration Statement on Form S-2 (No. 33-43393); and (xxvii) Exhibit 4 filed with Steel Company's Current Report on form 8-K dated June 23, 1993. 4.I Copy of consolidated reprint of First Mortgage Indenture, dated April 1, 1928, between Inland Steel Company and First Trust and Savings Bank and Melvin A. Traylor, as Trustees, as amended and supplemented by all supplemental indentures thereto, to and including the Thirteenth Supplemental Indenture. (Filed as Exhibit 4-E to Form S-1 Registration Statement No. 2-9443, and incorporated by reference herein.) [The registrant hereby agrees to provide a copy of any other agreement relating to long-term debt at the request of the Commission.] 10.A* Copy of Inland Steel Industries, Inc. Annual Incentive Plan, as amended. 10.B* Copy of Inland Steel Industries, Inc. Special Achievement Award Plan. (Filed as Exhibit 10-I to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, and incorporated by reference herein.) 10.C* Copy of Inland 1975 Executive Stock Option Plan, as amended. (Filed as Exhibit 10-A to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, and incorporated by reference herein.) 10.D* Copy of Inland 1984 Incentive Stock Plan, as amended. 10.E* Copy of Inland 1988 Incentive Stock Plan, as amended. 10.F* Copy of Inland 1992 Incentive Stock Plan, as amended. 10.G* Copy of Inland Steel Industries Non-Qualified Thrift Plan, as amended. (Filed as Exhibit 10-H to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, and incorporated by reference herein.) 10.H* Copy of Inland 1992 Stock Plan for Non-Employee Directors. (Filed as Exhibit B to the Company's definitive Proxy Statement dated March 16, 1992 that was furnished to stockholders in connection with the annual meeting held April 22, 1992, and incorporated by reference herein.) 10.I* Copy of Inland Steel Industries Supplemental Retirement Benefit Plan for Covered Employees, as amended.
- --------------- * Management contract or compensatory plan or arrangement required to be filed as an exhibit to the Company's Annual Report on Form 10-K. 22 24 10.J* Copy of Inland Steel Industries Special Retirement Benefit Plan for Covered Employees, as amended. 10.K* Copy of the Inland Steel Industries Deferred Compensation Plan for Certain Employees. (Filed as Exhibit 10-K to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, and incorporated by reference herein.) 10.L* Copy of Inland Steel Industries Deferred Compensation Plan for Directors, as amended. (Filed as Exhibit 10-L to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated by reference herein.) 10.M* Copy of Inland Steel Industries Director Retirement Plan. 10.N* 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.O.(1)* Copy of form of Severance Agreement dated June 28, 1989 between the Company and each of the seven executive officers of the Company identified on the exhibit relating to terms and conditions of termination of employment following a change in control of the Company. (Filed as Exhibit 10-O-(1) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, and incorporated by reference herein.) 10.O.(2)* Amended listing of executive officers of the Company who are parties to the form of Severance Agreement dated June 28, 1989 in Exhibit 10.O.(1) hereof. 10.O.(3)* Copy of Severance Agreement dated June 28, 1989 between the Company and Judd R. Cool. (Filed as Exhibit 10-O-(2) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, and incorporated by reference herein.) 10.O.(4)* Copy of Severance Agreement dated September 4, 1990 between the Company and H. William Howard. (Filed as Exhibit 10-M-(5) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, and incorporated by reference herein.) 10.O.(5)* Copy of Severance Agreement dated June 26, 1991 between the Company and Earl L. Mason. (Filed as Exhibit 10-X to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1991, and incorporated by reference herein.) 10.O.(6)* Copy of Severance Agreement dated November 27, 1991 between the Company and Maurice S. Nelson, Jr. (Filed as Exhibit 10-O-(6) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated by reference herein.) 10.O.(7)* Copy of Severance Agreement dated August 17, 1992 between the Company and Olivia M. Thompson. (Filed as Exhibit 10-O-(7) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated by reference herein.) 10.O.(8)* Copy of Severance Agreement dated March 23, 1994 between the Company and Vicki L. Avril. 10.P.(1)* Copy of letter to Judd R. Cool dated September 2, 1987 relating to terms and conditions of employment. (Filed as Exhibit 10-K to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, and incorporated by reference herein.) 10.P.(2)* Copy of letter agreement dated November 23, 1987 between the Company and Judd R. Cool. (Filed as Exhibit 10-L to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, and incorporated by reference herein.)
- --------------- * Management contract or compensatory plan or arrangement required to be filed as an exhibit to the Company's Annual Report on Form 10-K. 23 25 10.P.(3)* Copy of letter agreement dated December 10, 1993 between the Company and Judd R. Cool restating certain provisions of the September 2, 1987 and November 23, 1987 letters in Exhibits 10.P.(1) and (2). 10.Q* Copy of letter to H. William Howard dated July 17, 1990 relating to terms and conditions of employment. (Filed as Exhibit 10-P to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, and incorporated by reference herein.) 10.R* Copy of letter to Earl L. Mason dated May 17, 1991 relating to terms and conditions of employment. (Filed as Exhibit 10-W to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1991, and incorporated by reference herein.) 10.S* Copy of letter to Maurice S. Nelson, Jr. dated March 26, 1993 relating to supplemental pension arrangement. (Filed as Exhibit 10-S to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated by reference herein.) 10.T* Copy of Letter of Credit with respect to the Supplemental and Special Retirement Benefit Plan obligations of the Company to W. Gordon Kay. 10.U* Copy of letter to Olivia M. Thompson dated June 24, 1992 relating to terms and conditions of employment. (Filed as Exhibit 10-T to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated by reference herein.) 10.V Copy of Stock Purchase Agreement, dated as of July 7, 1989, between the Company and Harris Trust and Savings Bank, as ESOP Trustee. (Filed as Exhibit 4-G to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1989, and incorporated by reference herein.) 10.W.(1) Copy of Letter Agreement dated December 18, 1989 among the Company, Nippon Steel Corporation and NS Finance III, Inc. (an indirectly wholly owned subsidiary of Nippon Steel Corporation) relating to sale to NS Finance III, Inc. of 185,000 shares of Series F Exchangeable Preferred Stock of the Company. (Filed as Exhibit 4(b) to the Company's Current Report on Form 8-K filed on December 18, 1989, and incorporated by reference herein.) 10.W.(2) Copy of Steel Technology Agreement dated as of July 14, 1989 between Inland Steel Company and Nippon Steel Corporation relating to technology sharing between the signatories. (Filed as Exhibit 10-S-(2) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, and incorporated by reference herein.) 10.W.(3) Copy of Basic Agreement dated as of July 21, 1987 between the Company and Nippon Steel Corporation relating to the I/N Tek joint venture. (Filed as Exhibit 10-S-(3) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, and incorporated by reference herein.) 10.W.(4) Copy of Partnership Agreement dated as of July 21, 1987 between ISC Tek, Inc. (an indirectly wholly owned subsidiary of the Company) and NS Tek, Inc. (an indirectly wholly owned subsidiary of Nippon Steel Corporation) relating to the I/N Tek joint venture. (Filed as Exhibit 10-S-(4) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, and incorporated by reference herein.) 10.W.(5) Copy of Basic Agreement dated as of September 12, 1989 between the Company and Nippon Steel Corporation relating to the I/N Kote joint venture. (Filed as Exhibit 10-S-(5) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, and incorporated by reference herein.)
- --------------- * Management contract or compensatory plan or arrangement required to be filed as an exhibit to the Company's Annual Report on Form 10-K. 24 26 10.W.(6) Copy of Partnership Agreement dated as of September 12, 1989 between ISC Kote, Inc. (an indirectly wholly owned subsidiary of the Company) and NS Tek, Inc. (an indirectly wholly owned subsidiary of Nippon Steel Corporation) relating to the I/N Kote joint venture. (Filed as Exhibit 10-S-(6) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, and incorporated by reference herein.) 10.W.(7) Copy of Substrate Supply Agreement dated as of September 12, 1989 between Inland Steel Company and I/N Kote, an Indiana general partnership. (Filed as Exhibit 10-S-(7) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, and incorporated by reference herein.) 10.W.(8) First Amendment to Substrate Supply Agreement dated as of May 1, 1990 between Inland Steel Company and I/N Kote relating to the I/N Kote joint venture. (Filed as Exhibit 10-R-(8) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, and incorporated by reference herein.) 10.W.(9) Letter Agreement dated as of May 1, 1990 among I/N Kote, the Company and Nippon Steel Corporation relating to partner loans. (Filed as Exhibit 10-R-(9) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, and incorporated by reference herein.) 10.W.(10) First Amendment to I/N Kote Basic Agreement dated as of May 1, 1990 between the Company and Nippon Steel Corporation relating to the I/N Kote joint venture. (Filed as Exhibit 10-R-(10) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, and incorporated by reference herein.) 10.W.(11) Letter Agreement dated as of April 19, 1990 between the Company and Nippon Steel Corporation relating to capital contributions to I/N Tek. (Filed as Exhibit 10-R-(11) to Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, and incorporated by reference herein.) 10.W.(12) Letter Agreement dated April 20, 1990 between ISC Tek, Inc. (an indirectly wholly owned subsidiary of the Company) and NS Tek, Inc. (an indirectly wholly owned subsidiary of Nippon Steel Corporation) relating to amendment of the partnership agreement of I/N Tek. (Filed as Exhibit 10-R-(12) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, and incorporated by reference herein.) 10.W.(13) CCM Override Amendment dated as of April 20, 1990 among the Company; Nippon Steel Corporation; Inland Steel Company; ISC Tek, Inc.; I/N Tek; NS Sales, Inc.; and NS Tek, Inc. relating to I/N Tek. (Filed as Exhibit 10-R-(13) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, and incorporated by reference herein.) 10.X Copy of ESOP Stock Purchase Agreement, dated May 30, 1990, between the Company and Harris Trust and Savings Bank, as ESOP Trustee. (Filed as Exhibit 10-T to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1990, and incorporated by reference herein.) 10.Y Copy of Inland Steel Industries Thrift Plan ESOP Trust, dated July 7, 1989, between the Company and Harris Trust and Savings Bank, as ESOP Trustee. (Filed as Exhibit 10-P to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1989, and incorporated by reference herein.) 10.Z Letter Agreement dated March 1, 1991 between Nippon Steel Corporation and the Company regarding Series F Exchangeable Preferred Stock. (Filed as Exhibit 10-U to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, and incorporated by reference herein.)
25 27 10.AA Letter Agreement dated May 10, 1991 by and between Nippon Steel Corporation and Inland Steel Industries, Inc. relating to Letter Agreement dated December 18, 1989. (Filed as Exhibit 10-V to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1991, and incorporated by reference herein.) 11 Statement of Earnings per Share of Common Stock. 13 Information incorporated by reference from Annual Report to Stockholders for the fiscal year ended December 31, 1993. 21 List of certain subsidiaries of the Company. 23 Consent of Independent Accountants, appearing on page 27 of this Annual Report on Form 10-K. 24 Powers of attorney. 99 Letter to stockholders of common stock of the Company dated December 22, 1987 explaining Stockholder Rights Plan adopted by Board of Directors on November 25, 1987. (Filed as Exhibit 3 to the Company's Current Report on Form 8-K filed on December 18, 1987, and incorporated by reference herein.)
26 28 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 23, 1994 appearing on page 26 of the 1993 Annual Report to Stockholders of Inland Steel Industries, Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedules listed in Item 14(a)2 of this Annual Report on Form 10-K. In our opinion, these Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. PRICE WATERHOUSE Chicago, Illinois February 23, 1994 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. 33-48770), Registration Statement on Form S-8 (No. 33-22902); Registration Statement on Form S-8 (No. 33-32504); and Post-Effective Amendment No. 2 to Form S-8 Registration Statement (No. 33-6627) of Inland Steel Industries, Inc. of our report dated February 23, 1994, appearing on page 26 of the 1993 Annual Report to Stockholders of Inland Steel Industries, Inc. which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedules, which appears above. PRICE WATERHOUSE Chicago, Illinois March 30, 1994 27 29 INLAND STEEL INDUSTRIES, INC. Schedule III--Condensed Financial Information (Parent Company Only) STATEMENT OF OPERATIONS YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS) - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
1993 1992 1991 ------ ------- ------- Income: Intercompany interest income.................................. $ 18.5 $ 15.9 $ 31.6 Equity in losses of subsidiaries.............................. (34.4) (868.9) (395.7) Interest income and other revenue............................. 1.2 2.0 1.6 ------ ------- ------- (14.7) (851.0) (362.5) Expenses: Interest and other expenses................................... 22.6 10.1 4.2 Intercompany interest expense................................. 2.4 1.6 .9 Restructuring provision....................................... -- -- 10.0 ------ ------- ------- 25.0 11.7 15.1 Loss before income taxes........................................ (39.7) (862.7) (377.6) Provision for income taxes...................................... 2.1Cr. 6.5Cr. 102.5Cr. ------ ------- ------- Loss before cumulative effect of changes in accounting principles.................................................... (37.6) (856.2) (275.1) Cumulative effect of changes in accounting principles: Adoption of FASB Statement No. 109 (Accounting for Income Taxes)..................................................... -- 47.2 -- Adoption of FASB Statement No. 106 (Employers' Accounting for Postretirement Benefits other than Pensions)............... -- (6.6) -- ------ ------- ------- Net loss........................................................ $(37.6) $(815.6) $(275.1) ------ ------- ------- ------ ------- -------
- --------------- Cr. = Credit See Notes to Consolidated Financial Statements in Item 8. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 28 30 INLAND STEEL INDUSTRIES, INC. Schedule III--Condensed Financial Information (Parent Company Only) STATEMENT OF CASH FLOWS YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS) - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
1993 1992 1991 ------- ------- ------- OPERATING ACTIVITIES Net loss....................................................... $ (37.6) $(815.6) $(275.1) Adjustments to reconcile net loss to net cash provided from (used for) operating activities: Equity in undistributed earnings of subsidiaries.......... 34.4 868.9 395.7 Depreciation.............................................. .6 .7 .6 Deferred income tax....................................... 11.5 (45.2) (93.7) Deferred employee benefit cost............................ .1 .7 1.5 Stock issued for coverage of employee benefit plan expense................................................. 19.1 13.4 14.0 Restructuring provision................................... -- -- 7.9 Change in: Intercompany accounts.......................... 183.6 (73.0) 228.2 Notes receivable............................... .2 .4 (.6) Accounts payable............................... (1.9) .5 (.9) Accrued liabilities............................ .3 7.2 (2.8) Other deferred items...................................... (3.0) (.9) (.5) ------- ------- ------- Net adjustments......................................... 244.9 772.7 549.4 ------- ------- ------- Net cash provided from (used for) operating activities........................................... 207.3 (42.9) 274.3 ------- ------- ------- INVESTING ACTIVITIES Net investments in subsidiaries................................ (312.1) (76.0) (350.0) Dividends received from subsidiaries........................... 25.8 24.4 8.6 ------- ------- ------- Net cash used for investing activities.................. (286.3) (51.6) (341.4) ------- ------- ------- FINANCING ACTIVITIES Sale of common stock........................................... 178.7 97.9 -- Sale of preferred stock........................................ -- -- 72.8 Long-term debt issued.......................................... -- 145.4 -- Long-term debt retired......................................... (7.1) (6.6) (2.0) Dividends paid................................................. (35.7) (35.8) (37.6) Acquisition of treasury stock.................................. (9.5) (3.5) (2.3) ------- ------- ------- Net cash provided from financing activities............. 126.4 197.4 30.9 ------- ------- ------- Net increase (decrease) in cash and cash equivalents........... 47.4 102.9 (36.2) Cash and cash equivalents--beginning of year................... 157.4 54.5 90.7 ------- ------- ------- Cash and cash equivalents--end of year......................... $ 204.8 $ 157.4 $ 54.5 ------- ------- ------- ------- ------- -------
See Notes to Consolidated Financial Statements in Item 8. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 29 31 INLAND STEEL INDUSTRIES, INC. Schedule III--Condensed Financial Information (Parent Company Only) BALANCE SHEET AT DECEMBER 31, 1993 AND 1992 (DOLLARS IN MILLIONS--EXCEPT PER SHARE DATA) - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
1993 1992 -------- ------- ASSETS Current Assets: Cash and cash equivalents.......................................... $ 204.8 $ 157.4 Receivables from subsidiary companies.............................. 99.3 282.9 Deferred income taxes.............................................. .3 -- Notes receivable................................................... -- .2 -------- ------- Total current assets............................................. 304.4 440.5 Investment in subsidiary companies...................................... 614.2 365.3 Investment in Nippon Steel Corporation, net of valuation allowances of $5.1 and $5.8, respectively........................................... 9.5 8.8 Property, net of accumulated depreciation of $6.1 and $5.5, respectively.......................................................... 2.8 3.3 Deferred income taxes................................................... 16.3 21.5 Deferred charges and other assets....................................... 7.8 8.2 -------- ------- Total assets..................................................... $ 955.0 $ 847.6 -------- ------- -------- ------- LIABILITIES Current Liabilities: Accounts payable................................................... $ 9.0 $ 10.9 Accrued liabilities................................................ 17.8 17.3 Deferred federal income taxes...................................... -- .2 Long-term debt due within one year................................. 7.7 7.1 -------- ------- Total current liabilities........................................ 34.5 35.5 Long-term debt.......................................................... 273.6 281.2 Deferred employee benefits.............................................. 16.3 16.2 Deferred income......................................................... 7.2 8.4 -------- ------- Total liabilities................................................ 331.6 341.3 -------- ------- TEMPORARY EQUITY Redeemable preferred stock, Series F, $1.00 par value, 185,000 shares issued and outstanding, redeemable at $1,000 per share................ 185.0 185.0 Common stock repurchase commitment...................................... 40.8 49.9 -------- ------- STOCKHOLDERS' EQUITY Preferred stock, $1.00 par value, 15,000,000 shares authorized for all series including Series F, aggregate liquidation value $230.6 in 1993 and $231.6 in 1992.................................................... 4.7 4.7 Common stock, $1.00 par value; authorized--100,000,000 shares; issued--47,854,208 shares for 1993 and 42,104,208 shares for 1992..... 47.9 42.1 Capital in excess of par value.......................................... 1,106.4 945.0 Accumulated deficit..................................................... (371.9) (302.3) Unearned compensation--ESOP............................................. (112.2) (122.2) Common stock repurchase commitment...................................... (40.8) (49.9) Treasury stock at cost--common stock of 6,767,139 shares in 1993 and 6,857,020 shares in 1992.............................................. (236.5) (246.0) -------- ------- Total stockholders' equity....................................... 397.6 271.4 -------- ------- Total liabilities, temporary equity, and stockholders' equity.... $ 955.0 $ 847.6 -------- ------- -------- -------
Maturities of Long-Term Debt due within five years are: $7.7 million in 1994, $8.3 million in 1995, $9.0 million in 1996, $9.7 million in 1997, and $10.5 million in 1998. See Notes to Consolidated Financial Statements in Item 8. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 30 32 INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS) - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
OTHER BALANCE CHANGES BALANCE AT ---------- AT BEGINNING ADDITIONS RETIREMENTS INCREASE END CLASSIFICATION OF YEAR AT COST OR SALES (DECREASE) OF YEAR - ---------------------------------------- --------- --------- ----------- ---------- -------- YEAR ENDED DECEMBER 31, 1993 ------------------------------------------------------------------ PROPERTY, PLANT AND EQUIPMENT: Land, land improvements and mineral properties......................... $ 155.9 $ 1.2 $ .8 $ .2(A) $ 156.5 Buildings, machinery and equipment.... 3,786.0 104.0 140.6 1.2(A) 3,749.0 (1.6)(B) Transportation equipment.............. 136.7 .4 2.0 -- 135.1 Property under capital leases--primarily machinery and equipment.......................... 44.2 -- -- (1.1)(A) 43.1 --------- --------- ----------- ---------- -------- Total............................ $ 4,122.8 $ 105.6 $ 143.4 $ (1.3) $4,083.7 --------- --------- ----------- ---------- -------- --------- --------- ----------- ---------- -------- YEAR ENDED DECEMBER 31, 1992 ------------------------------------------------------------------ PROPERTY, PLANT AND EQUIPMENT: Land, land improvements and mineral properties......................... $ 154.6 $ 1.4 $ .1 $-- $ 155.9 Buildings, machinery and equipment.... 3,797.7 62.5 66.8 (4.8)(A) 3,786.0 (2.6)(B) Transportation equipment.............. 144.2 .5 8.0 -- 136.7 Property under capital leases--primarily machinery and equipment.......................... 44.2 -- -- -- 44.2 --------- --------- ----------- ---------- -------- Total............................ $ 4,140.7 $ 64.4 $ 74.9 $ (7.4) $4,122.8 --------- --------- ----------- ---------- -------- --------- --------- ----------- ---------- -------- YEAR ENDED DECEMBER 31, 1991 ------------------------------------------------------------------ PROPERTY, PLANT AND EQUIPMENT: Land, land improvements and mineral properties......................... $ 149.1 $ 6.0 $ .5 $-- $ 154.6 Buildings, machinery and equipment.... 3,754.8 131.7 87.5 (1.3)(B) 3,797.7 Transportation equipment.............. 149.1 2.4 7.3 -- 144.2 Property under capital leases--primarily machinery and equipment.......................... 43.4 .1 -- .7(A) 44.2 --------- --------- ----------- ---------- -------- Total............................ $ 4,096.4 $ 140.2 $ 95.3 $ (.6) $4,140.7 --------- --------- ----------- ---------- -------- --------- --------- ----------- ---------- --------
- --------------- NOTES: (A) Transfer between property, plant and equipment and other assets and other miscellaneous adjustments. (B) Reflects the change in book value of rolls, annealing covers and convector plates. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 31 33 INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES SCHEDULE VI--RESERVE FOR DEPRECIATION, AMORTIZATION AND DEPLETION OF PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS) - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
OTHER CHANGES BALANCE AT ---------- BALANCE AT BEGINNING ADDITIONS RETIREMENTS INCREASE END OF CLASSIFICATION OF YEAR AT COST OR SALES (DECREASE) YEAR - --------------------------------------- ----------- --------- ----------- ---------- ---------- YEAR ENDED DECEMBER 31, 1993 --------------------------------------------------------------------- DEPRECIATION, AMORTIZATION, DEPLETION: Land improvements and mineral properties........................ $ 68.7 $ 2.7 $ .3 $-- $ 71.1 Buildings, machinery and equipment... 2,242.3 122.5 128.9 (.7)(A) 2,235.2 Transportation equipment............. 122.3 5.0 1.5 -- 125.8 Property under capital leases--primarily machinery and equipment......................... 34.5 1.6 -- (.6)(A) 35.5 ----------- --------- ----------- ---------- ---------- 2,467.8 131.8 130.7 (1.3) 2,467.6 Allowance for terminated facilities costs............................. 106.2 7.7 6.8 1.3(A) 108.4 ----------- --------- ----------- ---------- ---------- Total........................... $ 2,574.0 $ 139.5 $ 137.5 $-- $2,576.0 ----------- --------- ----------- ---------- ---------- ----------- --------- ----------- ---------- ---------- YEAR ENDED DECEMBER 31, 1992 --------------------------------------------------------------------- DEPRECIATION, AMORTIZATION, DEPLETION: Land improvements and mineral properties........................ $ 66.0 $ 2.7 $-- $-- $ 68.7 Buildings, machinery and equipment... 2,186.1 118.8 62.7 .1(A) 2,242.3 Transportation equipment............. 123.8 6.0 7.3 (.2)(A) 122.3 Property under capital leases--primarily machinery and equipment......................... 32.5 2.1 -- (.1)(A) 34.5 ----------- --------- ----------- ---------- ---------- 2,408.4 129.6 70.0 (.2) 2,467.8 Allowance for terminated facilities costs............................. 97.3 11.6 2.7 -- 106.2 ----------- --------- ----------- ---------- ---------- Total........................... $ 2,505.7 $ 141.2 $ 72.7 $ (.2) $2,574.0 ----------- --------- ----------- ---------- ---------- ----------- --------- ----------- ---------- ---------- YEAR ENDED DECEMBER 31, 1991 --------------------------------------------------------------------- DEPRECIATION, AMORTIZATION, DEPLETION: Land improvements and mineral properties........................ $ 63.5 $ 2.5 $-- $-- $ 66.0 Buildings, machinery and equipment... 2,159.0 105.2 75.5 (2.6)(A) 2,186.1 Transportation equipment............. 122.5 6.4 5.3 .2(A) 123.8 Property under capital leases--primarily machinery and equipment......................... 28.1 4.0 -- .4(A) 32.5 ----------- --------- ----------- ---------- ---------- 2,373.1 118.1 80.8 (2.0) 2,408.4 Allowance for terminated facilities costs............................. 15.0 85.0 2.7 -- 97.3 ----------- --------- ----------- ---------- ---------- Total........................... $ 2,388.1 $ 203.1 $ 83.5 $ (2.0) $2,505.7 ----------- --------- ----------- ---------- ---------- ----------- --------- ----------- ---------- ----------
- --------------- NOTE: (A) Reclassification among indicated reserve accounts and other miscellaneous adjustments. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 32 34 INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES SCHEDULE VIII--RESERVES FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS) - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
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 - ----------- ---------- --------- ---------- ---------- 1993 $ 23.2 $14.4 $ (3.7)(A) $ 28.2 (5.7)(B) 1992 $ 30.2 $ 6.9 $ (7.6)(A) $ 23.2 (6.3)(B) 1991 $ 29.9 $13.7 $ (5.2)(A) $ 30.2 (8.2)(B)
- --------------- NOTES: (A) Bad debts written off during year. (B) Allowances granted during year. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 33 35 INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES SCHEDULE IX--SHORT-TERM BORROWINGS FOR YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS) - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
MAXIMUM AVERAGE WEIGHTED AMOUNT AMOUNT AVERAGE YEARS CATEGORY OF BALANCE OUTSTANDING OUTSTANDING INTEREST RATE ENDED SHORT-TERM AT END DURING THE DURING THE DURING THE DECEMBER 31 BORROWINGS OF YEAR YEAR YEAR(A) YEAR(B) - ----------- ----------- ------- ----------- ----------- ------------- 1993 -- -- -- -- 1992 Bank -- $ 40.0 $13.4 4.9% 1991 Bank -- $ 140.0 $85.0 6.6%
- --------------- NOTES: (A) The average outstanding amount was computed by aggregating the daily balances of short-term debt outstanding and dividing the aggregate by the number of days in the year. (B) The weighted average interest rate during the year was computed by dividing interest expense on short-term debt by the average short-term debt outstanding during the year. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 34 36 INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES SCHEDULE X--SUPPLEMENTARY PROFIT AND LOSS INFORMATION FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS) - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
1993 1992 1991 ------ ------ ------ Maintenance and repairs.................................. $178.4 $182.4 $179.7 ------ ------ ------ ------ ------ ------ Taxes, other than payroll and income taxes: Real estate and personal property...................... $ 48.8 $ 50.3 $ 46.2 Excise, sales and use, and other....................... 11.5 11.3 12.4 ------ ------ ------ $ 60.3 $ 61.6 $ 58.6 ------ ------ ------ ------ ------ ------
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 35 37 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. By: /s/ ROBERT J. DARNALL Robert J. Darnall Chairman, President and Chief Executive Officer Date: March 30, 1994 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.
SIGNATURE TITLE DATE ----------- ----------- ----------- /s/ ROBERT J. DARNALL Chairman, President and March 30, 1994 Robert J. Darnall Chief Executive Officer and Director /s/ EARL L. MASON Vice President and March 30, 1994 Earl L. Mason Chief Financial Officer (Principal Financial Officer) /s/ OLIVIA M. THOMPSON Controller and Principal March 30, 1994 Olivia M. Thompson Accounting Officer A. Robert Abboud Director James W. Cozad Director James A. Henderson Director Emerson Kampen Director Robert B. McKersie Director By: /s/ EARL L. MASON Earl L. Mason Attorney in-fact March 30, 1994 Donald S. Perkins Director Joshua I. Smith Director Nancy H. Teeters Director Raymond C. Tower Director Arnold R. Weber Director
36 38 APPENDIX A INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES (A WHOLLY OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
ITEM PAGE - -------------------------------------------------------------------------------------- ----- Report of Independent Accountants..................................................... A-2 Consolidated Statements of Operations and Reinvested Earnings for the three years ended December 31, 1993............................................................. A-3 Consolidated Statement of Cash Flows for the three years ended December 31, 1993...... A-4 Consolidated Balance Sheet at December 31, 1993 and 1992.............................. A-5 Statement of Accounting and Financial Policies........................................ A-6 Notes to Consolidated Financial Statements............................................ A-7
A-1 39 REPORT OF INDEPENDENT ACCOUNTANTS TO THE BOARD OF DIRECTORS AND STOCKHOLDER OF INLAND MATERIALS DISTRIBUTION GROUP, INC. In our opinion, the consolidated financial statements listed in the index appearing on page A-1 present fairly, in all material respects, the financial position of Inland Materials Distribution Group, Inc. (a wholly owned subsidiary of Inland Steel Industries, Inc.) and Subsidiary Companies at December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Notes 4 and 5 to the consolidated financial statements, in 1992 the Company changed its method of accounting for postretirement benefits other than pensions and for income taxes. PRICE WATERHOUSE Chicago, Illinois February 23, 1994 A-2 40 INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES (A WHOLLY OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.) CONSOLIDATED STATEMENTS OF OPERATIONS AND REINVESTED EARNINGS DOLLARS IN MILLIONS - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31 -------------------------------- 1993 1992 1991 -------- -------- -------- CONSOLIDATED STATEMENT OF OPERATIONS NET SALES.................................................... $1,893.3 $1,716.6 $1,655.9 -------- -------- -------- OPERATING COSTS AND EXPENSES: Cost of goods sold (excluding depreciation)............... 1,663.8 1,516.1 1,465.9 Selling, general and administrative expenses.............. 144.4 145.5 145.4 Depreciation and amortization............................. 20.6 20.1 19.7 State, local and miscellaneous taxes...................... 8.1 7.8 8.7 -------- -------- -------- Total................................................... 1,836.9 1,689.5 1,639.7 -------- -------- -------- OPERATING PROFIT............................................. 56.4 27.1 16.2 OTHER EXPENSE: General corporate expense................................. 7.4 8.4 10.6 Interest expense, net of interest income.................. 10.9 12.8 17.1 -------- -------- -------- INCOME (LOSS) BEFORE INCOME TAXES............................ 38.1 5.9 (11.5) PROVISION FOR INCOME TAXES (NOTE 5).......................... 11.4 2.6 2.3Cr. -------- -------- -------- Income (loss) before cumulative effect of changes in accounting principles..................................... 26.7 3.3 (9.2) Cumulative effect of changes in accounting principles (Notes 4 and 5).................................................. -- (84.1) -- -------- -------- -------- NET INCOME (LOSS)............................................ $ 26.7 $ (80.8) $ (9.2) -------- -------- -------- -------- -------- -------- CONSOLIDATED STATEMENT OF REINVESTED EARNINGS Balance at beginning of year................................. $ 5.4 $ 86.2 $ 95.4 Net income (loss) for the year............................... 26.7 (80.8) (9.2) -------- -------- -------- Reinvested earnings at end of year........................... $ 32.1 $ 5.4 $ 86.2 -------- -------- -------- -------- -------- --------
The accompanying notes are an integral part of these statements. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- A-3 41 INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES (A WHOLLY OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.) CONSOLIDATED STATEMENT OF CASH FLOWS DOLLARS IN MILLIONS - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH YEARS ENDED DECEMBER 31 -------------------------- 1993 1992 1991 ------ ------ ------ OPERATING ACTIVITIES Net income (loss)................................................. $ 26.7 $(80.8) $ (9.2) ------ ------ ------ Adjustments to reconcile net income (loss) to net cash provided from (used for) operating activities: Depreciation and amortization.................................. 20.6 20.1 19.7 Net loss (gain) on sales of assets............................. (.1) .5 .1 Deferred employee benefit cost, including cumulative effect of change in accounting principle................................. 3.9 121.5 (.4) Deferred income taxes, including cumulative effect of change in accounting principle........................................... (8.3) (31.9) -- Change in: Receivables.................................................. (22.8) 2.7 24.2 Inventories.................................................. (18.2) (.1) 29.8 Accounts payable............................................. (31.5) 10.0 (15.3) Payable to related companies................................. 1.7 2.4 (5.7) Accrued liabilities.......................................... 2.7 1.7 (2.8) ------ ------ ------ Net adjustments.............................................. (52.0) 126.9 49.6 ------ ------ ------ Net cash provided from (used for) operating activities....... (25.3) 46.1 40.4 ------ ------ ------ INVESTING ACTIVITIES Capital expenditures.............................................. (19.3) (9.3) (9.8) Proceeds from the sales of assets................................. .9 .5 .3 ------ ------ ------ Net cash used for investing activities....................... (18.4) (8.8) (9.5) ------ ------ ------ FINANCING ACTIVITIES Long-term debt issued............................................. 7.5 -- -- Long-term debt retired............................................ (5.3) (6.2) (6.3) Capital contribution from Inland Steel Industries................. 150.0 -- -- Decrease in notes payable to related companies.................... (79.0) (31.1) (24.6) ------ ------ ------ Net cash provided from (used for) financing activities....... 73.2 (37.3) (30.9) ------ ------ ------ Net increase in cash and cash equivalents......................... 29.5 -- -- Cash and equivalents -- beginning of year......................... -- -- -- ------ ------ ------ Cash and equivalents -- end of year............................... $ 29.5 $ -- $ -- ------ ------ ------ ------ ------ ------ SUPPLEMENTAL DISCLOSURES Cash paid (received) during the year for: Interest, net of amount capitalized............................ $ 11.3 $ 13.5 $ 15.2 Income taxes, net.............................................. 22.6 (4.6) (2.2)
The accompanying notes are an integral part of these statements. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- A-4 42 INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES (A WHOLLY OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.) CONSOLIDATED BALANCE SHEET DOLLARS IN MILLIONS - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
AT DECEMBER 31 ---------------- 1993 1992 ------ ------ ASSETS Current assets: Cash and cash equivalents................................................. $ 29.5 $ -- Receivables less provision for allowances, claims and doubtful accounts of $5.5 and $5.4, respectively............................................ 196.0 173.2 Inventories (Note 1)...................................................... 278.9 260.7 Deferred income taxes (Note 5)............................................ 11.8 9.3 ------ ------ Total current assets................................................. 516.2 443.2 ------ ------ Property, plant and equipment, at cost: Buildings, machinery and equipment........................................ 427.4 412.1 Land and land improvements................................................ 27.8 26.9 ------ ------ 455.2 439.0 Less accumulated depreciation............................................. 198.0 181.2 ------ ------ 257.2 257.8 ------ ------ Excess of cost over net assets acquired..................................... 26.4 27.7 Deferred income taxes (Note 5).............................................. 28.5 22.7 ------ ------ Total assets......................................................... $828.3 $751.4 ------ ------ ------ ------ LIABILITIES Current liabilities: Accounts payable, including outstanding checks in excess of funds on deposit................................................................ $ 77.2 $108.7 Payables to related companies: Notes.................................................................. 29.6 108.5 Other.................................................................. 9.0 7.3 Accrued Liabilities: Salaries and wages..................................................... 17.1 15.2 Taxes other than Federal income tax.................................... 7.5 7.2 Other.................................................................. 4.0 3.4 Long-term debt due within one year........................................ 5.0 5.2 ------ ------ Total current liabilities............................................ 149.4 255.5 Long-term debt (Note 3)................................................... 28.2 25.7 Deferred employee benefits and other liabilities (Note 4)................. 124.0 120.2 ------ ------ Total liabilities.................................................... 301.6 401.4 ------ ------ STOCKHOLDER'S EQUITY Common stock, par value $1.00; 3,000 shares authorized; one share issued................................................................. -- -- Additional paid-in capital (Note 6)....................................... 494.6 344.6 Earnings reinvested in the business....................................... 32.1 5.4 ------ ------ Total stockholder's equity........................................... 526.7 350.0 ------ ------ Total liabilities and stockholder's equity........................... $828.3 $751.4 ------ ------ ------ ------
The accompanying notes are an integral part of these statements. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- A-5 43 INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES (A Wholly Owned Subsidiary of Inland Steel Industries, Inc.) STATEMENT OF ACCOUNTING AND FINANCIAL POLICIES - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The following briefly describes the Company's principal accounting and financial policies. Principles of Consolidation The accompanying consolidated financial statements include the accounts of Joseph T. Ryerson & Son, Inc., and J. M. Tull Metals Company, Inc., which are wholly owned subsidiaries of the Company. The accounts of J. M. Tull Metals Company, Inc. are consolidated with its wholly owned subsidiary, AFCO Metals, Inc. Inventory valuation Inventories are valued at cost which is not in excess of market. Cost is determined principally by the last-in, first-out (LIFO) method. Property, plant and equipment Property, plant and equipment is depreciated, for financial reporting purposes, on the straight-line method over the estimated useful lives of the assets. Expenditures for normal repair and maintenance are charged against income in the period incurred. Excess of cost over net assets acquired The excess of cost over fair value of net assets of businesses acquired (goodwill) is amortized on the straight-line method over a 25-year period. Accumulated amortization of goodwill totaled $7.5 million at December 31, 1993 and $6.1 million at December 31, 1992. Benefits for retired employees Pension benefits are provided by the Company to substantially all employees under a trusteed noncontributory plan of Inland Steel Industries, Inc. ("Industries"). Life insurance and certain medical benefits are provided for substantially all retired employees. The estimated costs of pension, medical, and life insurance benefits are determined annually by consulting actuaries. With the adoption of Financial Accounting Standards Board ("FASB") Statement No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," effective January 1, 1992, the cost of health care benefits for retirees, previously recognized as incurred, is now being accrued during their term of employment (see Note 4). Pensions are funded in accordance with ERISA requirements in a trust established under the plan. Costs for retired employee medical benefits and life insurance are funded when claims are submitted. Cash and cash equivalents Cash management activities are performed by the Company's parent, Inland Steel Industries, Inc., to which cash is periodically transferred. Cash equivalents are highly liquid, short-term investments with maturities of three months or less. The carrying amount of cash equivalents approximates fair value because of the short maturity of those instruments. Income taxes Effective January 1, 1992, the Company adopted FASB Statement No. 109, "Accounting for Income Taxes" (see Note 5). - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- A-6 44 INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES (A Wholly Owned Subsidiary of Inland Steel Industries, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOTE 1/INVENTORIES: The Company's inventories consist principally of finished steel, nonferrous and industrial plastic products for sale at service center locations. The difference between LIFO values and approximate replacement costs for the LIFO inventories was $106.0 million at December 31, 1993 and $103.3 million at December 31, 1992. NOTE 2/BORROWING ARRANGEMENTS: At December 31, 1993 and 1992, the Company's subsidiaries had available two unused credit facilities totaling $125 million. Each facility requires compliance with various financial covenants including minimum net worth and leverage ratio tests. The covenants also limit the amount of cash that the Company can transfer to Industries in the form of dividends and other advances. A $100 million unsecured credit agreement between Joseph T. Ryerson and Son, Inc. and a group of banks provides a revolving credit facility to March 31, 1995. J. M. Tull Metals Company, Inc. has a $25 million unsecured revolving credit agreement with other banks, which extends to December 15, 1994. NOTE 3/LONG-TERM DEBT: The Company's long-term debt is as follows:
DECEMBER 31 ---------------- 1993 1992 ----- ----- DOLLARS IN MILLIONS JOSEPH T. RYERSON & SON, INC. Obligation for Industrial Revenue Bond with floating rate, set weekly based on 13-week Treasury bills, due November 1, 2007................................................. $ 7.0 $ 7.0 Other long-term debt 10-1/4% due through November 30, 1997.................................................... 1.9 2.0 J. M. TULL METALS COMPANY, INC. Senior Notes, 9.43% due through July 29, 1997.............. 14.3 17.8 Term note--LIBOR plus 62.5 basis points per annum; due August 17, 1998......................................... 7.4 -- Industrial Revenue Bonds with interest rates ranging from 4.8% to 6.5% through January 1, 1997.................... 2.1 2.8 Other...................................................... .5 1.3 ----- ----- 33.2 30.9 Less maturities due within one year........................ 5.0 5.2 ----- ----- Long-term debt.......................................... $28.2 $25.7 ----- ----- ----- -----
Maturities of long-term debt are: $5.0 million in 1994, $4.7 million in 1995, $4.7 million in 1996, $5.6 million in 1997, $6.2 million in 1998 and $7.0 million thereafter. The Company has entered into an interest rate swap agreement to reduce the impact of changes in LIBOR on the term note. At December 31, 1993 the Company had outstanding an interest rate swap - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- A-7 45 INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES (A Wholly Owned Subsidiary of Inland Steel Industries, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- agreement with the bank having a notional principal amount equal to the outstanding principal of the related term note. This agreement effectively changes the Company's interest rate exposure on its term note to a fixed rate of 5.925%. The interest rate swap matures August 17, 1998. The Company is exposed to potential credit loss in the event of nonperformance by the bank; however, the Company does not anticipate such nonperformance. Under the provisions of certain loan agreements, the Company is required to maintain specified amounts of working capital and net worth, as outlined in the agreements, and is restricted as to dividends that may be paid to Industries. The estimated fair value of the Company's long-term debt (including current portions thereof) using quoted market prices of Company debt securities recently traded and market-based prices of similar securities for those securities not recently traded was $.7 million greater than the carrying value of $33.2 million included in the balance sheet at year-end 1993. NOTE 4/RETIREMENT BENEFITS: Pensions The Inland Steel Industries Pension Plan and Pension Trust (the "Plan"), covers certain employees, retirees and their beneficiaries of Industries and its subsidiaries, including the Company. The Plan is a noncontributory defined benefit plan that provides benefits based on final pay and years of service for all salaried employees and certain wage employees, and years of service and a fixed rate (in most instances based on frozen pay level or on job class) for all other wage employees, including employees under collective bargaining agreements. Because the fair value of pension plan assets pertains to all participants in the Plan, no separate determination is made solely with respect to the Company. At year-end 1993 and 1992, the actuarial present value of benefits for service rendered to date and the fair value of plan assets available for benefits for the Industries consolidated group were as follows:
DECEMBER 31 ---------------- 1993 1992 ------ ------ DOLLARS IN MILLIONS Fair value of plan assets.................................... $1,794 $1,686 ------ ------ Actuarial present value of benefits for service rendered to date: Accumulated Benefit Obligation based on compensation to date.................................................... 1,960 1,534 Additional benefits based on estimated future compensation levels.................................................. 117 82 ------ ------ Projected Benefit Obligation............................... 2,077 1,616 ------ ------ Plan assets in excess (shortfall) of Projected Benefit Obligation................................................. $ (283) $ 70 ------ ------ ------ ------
In 1993, Industries recorded an additional minimum pension liability of $122.1 million representing the excess of the unfunded Accumulated Benefit Obligation over previously accrued pension costs. A corresponding intangible asset was recorded as an offset to this additional liability as prescribed. A weighted average discount (settlement) rate of 7.25% in 1993 and 8.6% in 1992 was used in the determination of the actuarial present value of benefits. The Company recorded a net pension charge of $.1 million in 1993 and credits of $.4 million in 1992 and $.6 million in 1991. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- A-8 46 INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES (A Wholly Owned Subsidiary of Inland Steel Industries, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The cost of other industry welfare and retirement funds, for bargaining unit employees, was $2.9 million in 1993, $2.5 million in 1992, and $2.7 million in 1991. 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 did not prefund any of these postretirement benefits in 1993. The Company has adopted FASB Statement No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," effective January 1, 1992. FASB Statement No. 106 requires accrual accounting for all postretirement benefits other than pensions. The Company must be fully accrued for these postretirement benefits by the date each employee attains full eligibility for such benefits. In conjunction with the adoption of FASB Statement No. 106, the Company elected to immediately recognize the accumulated postretirement benefit obligation for current and future retirees (the "transition obligation"). Prior to the adoption of FASB Statement No. 106, the cost of medical benefits for retired employees was expensed as incurred. For 1993, the accrued expense for benefits other than pensions recorded in accordance with FASB Statement No. 106 exceeded the expense that would have been recorded under the prior accounting methods by $4.9 million or $3.2 million after tax. For 1992, the incremental expense was $10.9 million or $7.1 million after tax. The amount of net periodic postretirement benefit cost for 1993 and 1992 is composed of the following:
1993 1992 ---- ----- DOLLARS IN MILLIONS Service cost................................................. $3.2 $ 3.2 Interest cost................................................ 8.0 11.1 Net amortization and deferral................................ (1.9) -- ---- ----- Total net periodic postretirement benefit cost........ $9.3 $14.3 ---- ----- ---- -----
The following table sets forth components of the accumulated postretirement benefit obligation:
DECEMBER 31 ---------------- 1993 1992 ------ ------ DOLLARS IN MILLIONS Accumulated postretirement benefit obligation attributable to: Retirees................................................... $ 51.0 $ 54.1 Fully eligible plan participants........................... 19.5 22.8 Other active plan participants............................. 25.8 31.5 ------ ------ Accumulated postretirement benefit obligation.............. 96.3 108.4 Unrecognized net gain........................................ 18.4 -- Unrecognized prior service credit............................ 22.2 24.0 ------ ------ Accrued postretirement benefit obligation.................... $136.9 $132.4 ------ ------ ------ ------
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- A-9 47 INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES (A Wholly Owned Subsidiary of Inland Steel Industries, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Any net gain or loss in excess of 10 percent of the accumulated postretirement benefit obligations will be amortized over the remaining service period of active plan participants. The assumptions used to determine the data on the preceding tables are as follows:
DECEMBER 31 --------------- 1993 1992 ------ ------ Discount Rate................................................ 7.25% 9.0% Rate of compensation increase................................ 5.0% 5.0% Medical cost trend rate...................................... 7%-5% 9%-5% Year ultimate rate reached................................... 1996 1997
A one percentage point increase in the assumed health care cost trend rates for each future year increases annual periodic postretirement benefit cost and the accumulated postretirement benefit obligation as of December 31, 1993 by $1.5 million and $12.0 million, respectively. Postemployment Benefits In November 1992, the FASB issued Statement No. 112, "Employer's Accounting for Postemployment Benefits." Adoption of the new Standard, which is required by the first quarter of 1994, is not anticipated to have a material impact on results of operations or the financial position of the Company. NOTE 5/TAXES ON INCOME: The Company adopted FASB Statement No. 109, "Accounting for Income Taxes," effective January 1, 1992. As a result of adopting Statement No. 109, the Company recorded a $11.8 million charge reflecting the cumulative effect of the change on prior years. The Company is now required to record deferred tax assets and liabilities on its balance sheet as compared with the Company's past practice under APB Opinion No. 11 and Industries' former tax-sharing agreement under which no such recording was required. To comply with the provisions of FASB Statement No. 109, a new tax-sharing agreement was adopted under which current and deferred income tax provisions are determined for each company in the Industries group on a stand-alone basis. Companies with taxable losses record current income tax credits not to exceed current income tax charges recorded by profitable companies. NOL and tax credit carryforwards are allocated to each company in accordance with applicable tax regulations as if a company were to leave the consolidated group. The elements of the provision for income taxes for three years indicated below are as follows:
1993 1992 1991 ----- ---- ---- DOLLARS IN MILLIONS Current income taxes: Federal............................................. $17.3 $5.5 $1.6Cr. State and local..................................... 2.6 .9 .7Cr. ----- ---- ---- 19.9 6.4 2.3Cr. Deferred income taxes................................. 8.5Cr. 3.8Cr. -- ----- ---- ---- Total provision for income taxes.................... $11.4 $2.6 $2.3Cr. ----- ---- ---- ----- ---- ----
In accordance with FASB No. 109, the Company adjusted its deferred tax assets and liabilities for the effect of the change in the corporate federal income tax rate from 34 to 35 percent, effective January 1, 1993. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- A-10 48 INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES (A Wholly Owned Subsidiary of Inland Steel Industries, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- A credit to income of $.6 million, which includes the effect of the rate change on deferred tax asset and liability balances as of January 1, 1993 as well as the effect on 1993 tax benefits recorded by the Company prior to the enactment date of August 10, 1993, was recorded in the third quarter of 1993. The components of the deferred income tax assets and liabilities arising under FASB Statement No. 109 were as follows:
DECEMBER 31 ----------------- 1993 1992 ------ ------ DOLLARS IN MILLIONS Deferred tax assets (excluding postretirement benefits other than pensions): Net operating loss carryforwards....................... $17.8 $15.3 Other deductible temporary differences................. 23.6 20.6 ------ ------ 41.4 35.9 ------ ------ Deferred tax liabilities: Fixed asset basis difference........................... 40.2 39.8 Other taxable temporary differences.................... 11.2 11.1 ------ ------ 51.4 50.9 ------ ------ Net deferred tax liability (excluding postretirement benefits other than pensions)............................................ (10.0) (15.0) FASB Statement No. 106 impact............................... 50.3 47.0 ------ ------ Net deferred tax asset...................................... $40.3 $32.0 ------ ------ ------ ------
At December 31, 1993, the Company had approximately $50.7 million of net operating loss carryforwards available for regular Federal income tax purposes, expiring as follows: $16.3 million in the year 2005, $20.9 million in the year 2006, $7.8 million in the year 2007, and $5.7 million in the year 2008. The Company believes that it is more likely than not that the $50.7 million of NOL carryforwards will be utilized prior to their expiration. This belief is based upon the factors discussed below. The NOL carryforwards and existing deductible temporary differences (excluding those relating to FASB Statement No. 106) are offset by existing taxable temporary differences reversing within the 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 (Note 4). This adoption resulted in a $47.0 million deferred tax asset at December 31, 1992, and future annual charges under FASB Statement No. 106 are expected to continue to exceed deductible amounts for many years. Thereafter, even if the Company should have a tax loss in any year in which the deductible amount would exceed the financial statement expense, the tax law provides for a 15-year carryforward period of that loss. Because of the extremely long period that is available to realize these future tax benefits, a valuation allowance for this deferred tax asset is not necessary. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- A-11 49 INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES (A Wholly Owned Subsidiary of Inland Steel Industries, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Total income taxes reflected in the Consolidated Statement of Operations differ from the amounts computed by applying the Federal tax rate as follows:
YEARS ENDED DECEMBER 31 ---------------- 1993 1992 ----- ---- DOLLARS IN MILLIONS Federal income tax provision computed at statutory tax rate of 35% in 1993 and 34% in 1992........................... $13.4 $2.0 Additional taxes or credits from: State and local income taxes, net of Federal income tax effect................................................ 1.7 .6 Change in Federal statutory rate......................... .6Cr. -- All other, net........................................... 3.1Cr. -- ----- ---- Total income tax provision.......................... $11.4 $2.6 ----- ---- ----- ----
- --------------- Cr. = Credit Due to the existence of the former tax-sharing agreement, such reconciliation does not provide meaningful information for 1991 and has therefore been omitted. A state tax sharing agreement, similar to the Federal agreement, also exists with Industries for those states in which the consolidated group is charged state taxes on a unitary or combined basis. NOTE 6/RELATED PARTY TRANSACTIONS: The Company sells products to and purchases products from related companies primarily at prevailing market prices. These transactions were as follows:
YEARS ENDED DECEMBER 31 -------------------------- 1993 1992 1991 ------ ------ ------ DOLLARS IN MILLIONS Net product sales..................................... $ 10.7 $ 9.4 $ 10.2 Net product purchases................................. 187.1 132.5 147.1
Administrative expenses covering management, financial and legal services provided to the Company were charged to the Company by Industries. Such charges totaled $7.4 million in 1993, $8.4 million in 1992 and $10.6 million in 1991. Additionally, interest, at prevailing prime market rates, is charged on all intercompany loans within the Industries consolidated group. Net intercompany interest expense amounted to $7.7 million in 1993, $8.9 million in 1992 and $8.2 million in 1991. In December 1993, Industries made a capital contribution of $150 million to the Company. The capital contribution has been recorded as "additional paid in capital" at December 31, 1993. NOTE 7/COMMITMENTS AND CONTINGENCIES: The Company has noncancellable operating leases for which future minimum rental commitments are estimated to total $31.9 million, including approximately $9.2 million in 1994, $6.8 million in 1995, $4.5 million in 1996, $3.8 million in 1997, $3.8 million in 1998, and $3.8 million thereafter. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- A-12 50 INLAND MATERIALS DISTRIBUTION GROUP, INC. AND SUBSIDIARY COMPANIES (A Wholly Owned Subsidiary of Inland Steel Industries, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Rental expense under operating leases totaled $16.8 million in 1993, $18.6 million in 1992, and $17.4 million in 1991. Ryerson is the guarantor of $131 million of the Inland Steel Industries Thrift Plan ESOP notes. The notes are payable in installments through July, 2004. There are various claims and pending actions against the Company. The amount of liability, if any, for these claims and actions at December 31, 1993 is not determinable but, in the opinion of management, such liability, if any, will not have a material adverse effect on the Company's financial position or results of operations. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- A-13 51 INDEX TO EXHIBITS
EXHIBIT SEQUENTIAL NUMBER DESCRIPTION PAGE NO. - --------- ----------------------------------------------------------------------- ---------- 3.(i) Copy of Certificate of Incorporation, as amended, of the Company. (Filed as Exhibit 4-A to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1991, and incorporated by reference herein.) -- 3.(ii) Copy of By-laws, as amended, of the Company. (Filed as Exhibit 3-B to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated by reference herein.) -- 4.A Copy of Certificate of Designations, Preferences and Rights of Series A $2.40 Cumulative Convertible Preferred Stock of the Company. (Filed as part of Exhibit B to the definitive Proxy Statement of Inland Steel Company dated March 21, 1986 that was furnished to stockholders in connection with the annual meeting held April 23, 1986, and incorporated by reference herein.) -- 4.B Copy of Certificate of Designation, Preferences and Rights of Series D Junior Participating Preferred Stock of the Company. (Filed as Exhibit 4-D to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, and incorporated by reference herein.) -- 4.C Copy of Rights Agreement, dated as of November 25, 1987, as amended and restated as of May 24, 1989, between the Company and The First National Bank of Chicago, as Rights Agent (Harris Trust and Savings Bank, as successor Rights Agent). (Filed as Exhibit 1 to the Company's Current Report on Form 8-K filed on May 24, 1989, and incorporated by reference herein.) -- 4.D Copy of Certificate of Designations, Preferences and Rights of Series E ESOP Convertible Preferred Stock of the Company. (Filed as Exhibit 4-F to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1989, and incorporated by reference herein.) -- 4.E Copy of Certificate of Designations, Preferences and Rights of Series F Exchangeable Preferred Stock of the Company. (Filed as Exhibit 4(b) to the Company's Current Report on Form 8-K filed on December 18, 1989, and incorporated by reference herein.) 4.F Copy of Certificate of Designations of Series G $4.625 Cumulative Convertible Exchangeable Preferred Stock of the Company. (Filed as Exhibit 2.8 to the Company's Registration Statement on Form 8-A filed on March 25, 1991, and incorporated by reference herein.) -- 4.G Copy of Indenture dated as of December 15, 1992, between the Company and Harris Trust and Savings Bank, as Trustee, respecting the Company's $150,000,000 12 3/4% Notes due December 15, 2002. (Filed as Exhibit 4-G to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated by reference herein.) -- 4.H 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-Second Supplemental Indenture, incorporated by reference from the following Exhibits: (i) Exhibits B-1(a), B-1(b), B-1(c), B-1(d) and B-1(e), filed with Steel Company's Registration Statement on Form A-2 (No. 2-1855); (ii) Exhibits D-1(f) and D-1(g), filed with Steel Company's Registration Statement on Form E-1 (No. 2-2182); (iii) Exhibit B-1(h), filed with Steel Company's Current Report on Form 8-K dated January 18, 1937; (iv) Exhibit B-1(i), filed with Steel
(i) 52
EXHIBIT SEQUENTIAL NUMBER DESCRIPTION PAGE NO. - --------- ----------------------------------------------------------------------- ---------- Company's Current Report on Form 8-K, dated February 8, 1937; (v) Exhibits B-1(j) and B-1(k), filed with Steel Company's Current Report on Form 8-K for the month of April, 1940; (vi) Exhibit B-2, filed with Steel Company's Registration Statement on Form A-2 (No. 2-4357); (vii) Exhibit B-1(l), filed with Steel Company's Current Report on Form 8-K for the month of January, 1945; (viii) Exhibit 1, filed with Steel Company's Current Report on Form 8-K for the month of November, 1946; (ix) Exhibit 1, filed with Steel Company's Current Report on Form 8-K for the months of July and August, 1948; (x) Exhibits B and C, filed with Steel Company's Current Report on Form 8-K for the month of March, 1952; (xi) Exhibit A, filed with Steel Company's Current Report on Form 8-K for the month of July, 1956; (xii) Exhibit A, filed with Steel Company's Current Report on Form 8-K for the month of July, 1957; (xiii) Exhibit B, filed with Steel Company's Current Report on Form 8-K for the month of January, 1959; (xiv) the Exhibit filed with Steel Company's Current Report on Form 8-K for the month of December, 1967; (xv) the Exhibit filed with Steel Company's Current Report on Form 8-K for the month of April, 1969; (xvi) the Exhibit filed with Steel Company's Current Report on Form 8-K for the month of July, 1970; (xvii) the Exhibit filed with the amendment on Form 8 to Steel Company's Current Report on Form 8-K for the month of April, 1974; (xviii) Exhibit B, filed with Steel Company's Current Report on Form 8-K for the month of September, 1975; (xix) Exhibit B, filed with Steel Company's Current Report on Form 8-K for the month of January, 1977; (xx) Exhibit C, filed with Steel Company's Current Report on Form 8-K for the month of February, 1977; (xxi) Exhibit B, filed with Steel Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1978; (xxii) Exhibit B, filed with Steel Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1980; (xxiii) Exhibit 4-D, filed with Steel Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1980; (xxiv) Exhibit 4-D, filed with Steel Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1982; (xxv) Exhibit 4-E, filed with Steel Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1983; (xxvi) Exhibit 4(i) filed with the Steel Company's Registration Statement on Form S-2 (No. 33-43393); and (xxvii) Exhibit 4 filed with Steel Company's Current Report on form 8-K dated June 23, 1993 -- 4.I Copy of consolidated reprint of First Mortgage Indenture, dated April 1, 1928, between Inland Steel Company and First Trust and Savings Bank and Melvin A. Traylor, as Trustees, as amended and supplemented by all supplemental indentures thereto, to and including the Thirteenth Supplemental Indenture. (Filed as Exhibit 4-E to Form S-1 Registration Statement No. 2-9443, and incorporated by reference herein.) -- [The registrant hereby agrees to provide a copy of any other agreement relating to long-term debt at the request of the Commission.] 10A* Copy of Inland Steel Industries, Inc. Annual Incentive Plan, as amended................................................................ 10.B* Copy of Inland Steel Industries, Inc. Special Achievement Award Plan. (Filed as Exhibit 10-I to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, and incorporated by reference herein.) --
- --------------- * 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) 53
EXHIBIT SEQUENTIAL NUMBER DESCRIPTION PAGE NO. - --------- ----------------------------------------------------------------------- ---------- 10.C* Copy of Inland 1975 Executive Stock Option Plan, as amended. (Filed as Exhibit 10-A to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, and incorporated by reference herein.) -- 10.D* Copy of Inland 1984 Incentive Stock Plan, as amended................... 10.E* Copy of Inland 1988 Incentive Stock Plan, as amended................... 10.F* Copy of Inland 1992 Incentive Stock Plan, as amended................... 10.G* Copy of Inland Steel Industries Non-Qualified Thrift Plan, as amended. (Filed as Exhibit 10-H to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, and incorporated by reference herein.) -- 10.H* Copy of Inland 1992 Stock Plan for Non-Employee Directors. (Filed as Exhibit B to the Company's definitive Proxy Statement dated March 16, 1992 that was furnished to stockholders in connection with the annual meeting held April 22, 1992, and incorporated by reference herein.) -- 10.I* Copy of Inland Steel Industries Supplemental Retirement Benefit Plan for Covered Employees, as amended...................................... 10.J* Copy of Inland Steel Industries Special Retirement Benefit Plan for Covered Employees, as amended.......................................... 10.K* Copy of the Inland Steel Industries Deferred Compensation Plan for Certain Employees. (Filed as Exhibit 10-K to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, and incorporated by reference herein.) -- 10.L* Copy of Inland Steel Industries Deferred Compensation Plan for Directors, as amended. (Filed as Exhibit 10-L to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated by reference herein.) -- 10M* Copy of Inland Steel Industries Director Retirement Plan............... 10.N* 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.O.(1)* Copy of form of Severance Agreement dated June 28, 1989 between the Company and each of the seven executive officers of the Company identified on the exhibit relating to terms and conditions of termination of employment following a change in control of the Company. (Filed as Exhibit 10-O-(1) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, and incorporated by reference herein.) -- 10.O.(2)* Amended listing of executive officers of the Company who are parties to the form of Severance Agreement dated June 28, 1989 in Exhibit 10.O.(1) hereof................................................................. 10.O.(3)* Copy of Severance Agreement dated June 28, 1989 between the Company and Judd R. Cool. (Filed as Exhibit 10-O-(2) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, and incorporated by reference herein.) -- 10.O.(4)* Copy of Severance Agreement dated September 4, 1990 between the Company and H. William Howard. (Filed as Exhibit 10-M-(5) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, and incorporated by reference herein.) --
- --------------- * 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) 54
EXHIBIT SEQUENTIAL NUMBER DESCRIPTION PAGE NO. - --------- ----------------------------------------------------------------------- ---------- 10.O.(5)* Copy of Severance Agreement dated June 26, 1991 between the Company and Earl L. Mason. (Filed as Exhibit 10-X to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1991, and incorporated by reference herein.) -- 10.O.(6)* Copy of Severance Agreement dated November 27, 1991 between the Company and Maurice S. Nelson, Jr. (Filed as Exhibit 10-O-(6) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated by reference herein.) -- 10.O.(7)* Copy of Severance Agreement dated August 17, 1992 between the Company and Olivia M. Thompson. (Filed as Exhibit 10-O-(7) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated by reference herein.) -- 10.O.(8)* Copy of Severance Agreement dated March 23, 1994 between the Company and Vicki L. Avril..................................................... 10.P.(1)* Copy of letter to Judd R. Cool dated September 2, 1987 relating to terms and conditions of employment. (Filed as Exhibit 10-K to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, and incorporated by reference herein.) -- 10.P.(2)* Copy of letter agreement dated November 23, 1987 between the Company and Judd R. Cool. (Filed as Exhibit 10-L to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, and incorporated by reference herein.) -- 10.P.(3)* Copy of letter agreement dated December 10, 1993 between the Company and Judd R. Cool restating certain provisions of the September 2, 1987 and November 23, 1987 letters in Exhibits 10.P.(1) and (2)............. 10.Q* Copy of letter to H. William Howard dated July 17, 1990 relating to terms and conditions of employment. (Filed as Exhibit 10-P to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, and incorporated by reference herein.) -- 10.R* Copy of letter to Earl L. Mason dated May 17, 1991 relating to terms and conditions of employment. (Filed as Exhibit 10-W to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1991, and incorporated by reference herein.) -- 10S* Copy of letter to Maurice S. Nelson, Jr. dated March 26, 1993 relating to supplemental pension arrangement. (Filed as Exhibit 10-S to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated by reference herein.) -- 10.T* Copy of Letter of Credit with respect to the Supplemental and Special Retirement Benefit Plan obligations of the Company to W. Gordon Kay.... 10.U* Copy of letter to Olivia M. Thompson dated June 24, 1992 relating to terms and conditions of employment. (Filed as Exhibit 10-T to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated by reference herein.) --
- --------------- * 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) 55
EXHIBIT SEQUENTIAL NUMBER DESCRIPTION PAGE NO. - --------- ----------------------------------------------------------------------- ---------- 10.V Copy of Stock Purchase Agreement, dated as of July 7, 1989, between the Company and Harris Trust and Savings Bank, as ESOP Trustee. (Filed as Exhibit 4-G to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1989, and incorporated by reference herein.) -- 10.W.(1) Copy of Letter Agreement dated December 18, 1989 among the Company, Nippon Steel Corporation and NS Finance III, Inc. (an indirectly wholly owned subsidiary of Nippon Steel Corporation) relating to sale to NS Finance III, Inc. of 185,000 shares of Series F Exchangeable Preferred Stock of the Company. (Filed as Exhibit 4(b) to the Company's Current Report on Form 8-K filed on December 18, 1989, and incorporated by reference herein.) -- 10.W.(2) Copy of Steel Technology Agreement dated as of July 14, 1989 between Inland Steel Company and Nippon Steel Corporation relating to technology sharing between the signatories. (Filed as Exhibit 10-S-(2) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, and incorporated by reference herein.) -- 10.W.(3) Copy of Basic Agreement dated as of July 21, 1987 between the Company and Nippon Steel Corporation relating to the I/N Tek joint venture. (Filed as Exhibit 10-S-(3) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, and incorporated by reference herein.) -- 10.W.(4) Copy of Partnership Agreement dated as of July 21, 1987 between ISC Tek, Inc. (an indirectly wholly owned subsidiary of the Company) and NS Tek, Inc. (an indirectly wholly owned subsidiary of Nippon Steel Corporation) relating to the I/N Tek joint venture. (Filed as Exhibit 10-S-(4) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, and incorporated by reference herein.) -- 10.W.(5) Copy of Basic Agreement dated as of September 12, 1989 between the Company and Nippon Steel Corporation relating to the I/N Kote joint venture. (Filed as Exhibit 10-S-(5) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, and incorporated by reference herein.) -- 10.W.(6) Copy of Partnership Agreement dated as of September 12, 1989 between ISC Kote, Inc. (an indirectly wholly owned subsidiary of the Company) and NS Tek, Inc. (an indirectly wholly owned subsidiary of Nippon Steel Corporation) relating to the I/N Kote joint venture. (Filed as Exhibit 10-S-(6) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, and incorporated by reference herein.) -- 10.W.(7) Copy of Substrate Supply Agreement dated as of September 12, 1989 between Inland Steel Company and I/N Kote, an Indiana general partnership. (Filed as Exhibit 10-S-(7) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, and incorporated by reference herein.) -- 10.W.(8) First Amendment to Substrate Supply Agreement dated as of May 1, 1990 between Inland Steel Company and I/N Kote relating to the I/N Kote joint venture. (Filed as Exhibit 10-R-(8) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, and incorporated by reference herein.) -- 10.W.(9) Letter Agreement dated as of May 1, 1990 among I/N Kote, the Company and Nippon Steel Corporation relating to partner loans. (Filed as Exhibit 10-R-(9) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, and incorporated by reference herein.) -- 10.W.(10) First Amendment to I/N Kote Basic Agreement dated as of May 1, 1990 between the Company and Nippon Steel Corporation relating to the I/N Kote joint venture. (Filed as Exhibit 10-R-(10) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, and incorporated by reference herein.) --
(v) 56
EXHIBIT SEQUENTIAL NUMBER DESCRIPTION PAGE NO. - --------- ----------------------------------------------------------------------- ---------- 10.W.(11) Letter Agreement dated as of April 19, 1990 between the Company and Nippon Steel Corporation relating to capital contributions to I/N Tek. (Filed as Exhibit 10-R-(11) to Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, and incorporated by reference herein.) -- 10.W.(12) Letter Agreement dated April 20, 1990 between ISC Tek, Inc. (an indirectly wholly owned subsidiary of the Company) and NS Tek, Inc. (an indirectly wholly owned subsidiary of Nippon Steel Corporation) relating to amendment of the partnership agreement of I/N Tek. (Filed as Exhibit 10-R-(12) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, and incorporated by reference herein.) -- 10.W.(13) CCM Override Amendment dated as of April 20, 1990 among the Company; Nippon Steel Corporation; Inland Steel Company; ISC Tek, Inc.; I/N Tek; NS Sales, Inc.; and NS Tek, Inc. relating to I/N Tek. (Filed as Exhibit 10-R-(13) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, and incorporated by reference herein.) -- 10.X Copy of ESOP Stock Purchase Agreement, dated May 30, 1990, between the Company and Harris Trust and Savings Bank, as ESOP Trustee. (Filed as Exhibit 10-T to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1990, and incorporated by reference herein.) -- 10.Y Copy of Inland Steel Industries Thrift Plan ESOP Trust, dated July 7, 1989, between the Company and Harris Trust and Savings Bank, as ESOP Trustee. (Filed as Exhibit 10-P to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1989, and incorporated by reference herein.) -- 10.Z Letter Agreement dated March 1, 1991 between Nippon Steel Corporation and the Company regarding Series F Exchangeable Preferred Stock. (Filed as Exhibit 10-U to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, and incorporated by reference herein.) -- 10.AA Letter Agreement dated May 10, 1991 by and between Nippon Steel Corporation and Inland Steel Industries, Inc. relating to Letter Agreement dated December 18, 1989. (Filed as Exhibit 10-V to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1991, and incorporated by reference herein.) -- 11 Statement of Earnings per Share of Common Stock........................ 13 Information incorporated by reference from Annual Report to Stockholders for the fiscal year ended December 31, 1993............... 21 List of certain subsidiaries of the Company............................ 23 Consent of Independent Accountants, appearing on page 27 of this Annual Report on Form 10-K. -- 24 Powers of attorney..................................................... 99 Letter to stockholders of common stock of the Company dated December 22, 1987 explaining Stockholder Rights Plan adopted by Board of Directors on November 25, 1987 (Filed as Exhibit 3 to the Company's Current Report on Form 8-K filed on December 18, 1987, and incorporated by reference herein.) --
(vi) EX-10.A 2 EXHIBIT 10 A 1 Exhibit 10.A INLAND STEEL INDUSTRIES, INC. ANNUAL INCENTIVE PLAN 1. PURPOSE The purpose of the Annual Incentive Plan (the "Plan") of Inland Steel Industries, Inc. (the "Company") is to promote the interests of the Company and its stockholders by (i) attracting and retaining salaried employees of outstanding ability; (ii) strengthening the Company's capability to develop, maintain and direct a competent employee population; (iii) motivating salaried employees, by means of performance-related incentives, to achieve financial rewards; (iv) providing annual incentive compensation opportunities which are competitive with those of other major corporations; and (v) enabling salaried employees to participate in the growth and financial success of the Company. 2. DEFINITIONS "Affiliate" -- means any corporation or other entity which is not a Subsidiary but as to which the Company possesses a direct or indirect ownership interest and has power to exercise management control. "Award" -- means an amount for an Award Period determined to be payable to a Participant under the Plan. "Award Period" -- means a calendar quarter or a calendar year, as the Committee may establish from time to time with respect to any Hay point class or resulting salary grade designations, to any Corporate Unit, or to a combination of these factors. "Award Schedule" -- means the schedule to be used for determining Awards as established by the Committee and set forth in the Addendum to the Plan applicable to the Corporate Unit covered thereby. "Committee" -- means the Compensation Committee of the Board of Directors of the Company. "Consolidated Earnings" -- means the net income for the relevant Award Period, on a consolidated basis, of the Company and all Subsidiaries, adjusted as follows: (i) by adding back any amounts credited to the fund or funds under the Plan for the Award Period in question; (ii) by adding back any provisions of federal, state or municipal taxes which are based on or determined by earnings or net income and imposed on the Company or any Subsidiary; (iii) by eliminating gains or losses from sales or other dispositions of assets arising other than in the ordinary course of business or arising from discontinued operations (after adjusting for taxes in 2 the manner provided in (ii) above); and (iv) by deducting or adding back any other earnings or charges (after adjusting for taxes in the manner provided in (ii) above) that have been designated by the Committee for exclusion or inclusion under the Plan. "Corporate Unit" -- means the Company, Inland Steel Company, Inland Materials Distribution Group, Inc., Joseph T. Ryerson & Son, Inc./East, Joseph T. Ryerson & Son/Central, Joseph T. Ryerson & Son/West, Ryerson Coil Processing, J. M. Tull Metals Company, Inc., and any Affiliate, other Subsidiary or any division or group of the Company or any Subsidiary designated as a Corporate Unit from time to time by the Board of Directors of the Company. "Employee" -- means an employee eligible to be designated a Participant in the Plan. "Operating Assets" -- means the average for an Award Period of the sum (computed on a month-end basis) of (i) working capital (with inventory adjusted to current value and excluding cash, marketable securities, interest-bearing receivables, notes payable and long-term debt due in one year); (ii) property, plant and equipment, net of accumulated depreciation; and (iii) any other operating assets. "Operating Profit" -- means the operating profit set forth in the Company's Quarterly Report on Form 10-Q or Annual Report to Stockholders for a Corporate Unit for the applicable Award Period, or if not separately stated, as determined in accordance with generally accepted accounting principles based on the financial results presented in such Quarterly Report on Form 10-Q or Annual Report, in each case as adjusted by the Committee to reflect such items as the Committee determines appropriate. "Participant" -- means an Employee who is selected by the Committee to receive an Award under the Plan. "Return on Equity" -- means Consolidated Earnings divided by Stockholders' Equity. "Return on Operating Assets" -- means Operating Profit divided by Operating Assets (expressed as a percentage), provided that Operating Profit shall be computed for this purpose without giving effect to any payments to Participants for the Award Period in question. "Stockholders' Equity" -- means the average of the amounts so designated on a consolidated basis in the Company's Quarterly Report on Form 10-Q or Annual Report to Stockholders as of the close of the applicable Award Period for which Awards under the Plan are being made and with respect to annual Award Periods, as of the close of the preceding fiscal year, and with respect to quarterly Award Periods, as of the close of the preceding fiscal -2- 3 quarter, less the aggregate amount of any equity financings from external sources during the applicable Award Period for which Awards are being made. "Subsidiary" -- means any corporation in which the Company possesses directly or indirectly more than fifty percent (50%) of the total combined voting power of all classes of its stock. "Target Award" -- means the percentage of a Participant's base salary earnings for an Award Period as established by the Committee pursuant to paragraph 6 of the Plan and set forth in the Addendum to the Plan applicable to the Corporate Unit in which such Participant is employed. "Threshold" -- means the minimum financial performance (established by the Committee and set forth in the Addendum to the Plan applicable to such Corporate Unit) required by a Corporate Unit before an Award may be paid to a Participant employed in such Corporate Unit. 3. ADMINISTRATION The Plan shall be administered by the Committee. No member of the Committee shall be eligible to receive an Award while serving on the Committee. The Committee shall 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. In addition, the Committee may delegate to one or more senior executive officers of the Company the right to administer the Plan as it pertains to employees who are not officers of the Company or any other Corporate Unit. Notwithstanding any other provision of the Plan to the contrary, the Committee may impose such conditions on participation in and Awards under the Plan as it deems appropriate. Such conditions may include conditions applicable to one or more Participants which are intended to cause Awards payable to such Participants to be disregarded for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended, including but not limited to conditions which subject payment of Awards to stockholder approval of the Plan and conditions which preclude the Committee from exercising any discretion otherwise provided by the Plan to adjust Consolidated Earnings or Operating Profits or to adjust individual Awards in accordance with paragraph 7, if the effect of any such adjustment would be to increase the amount of any Award otherwise payable to such Participants. 4. ELIGIBILITY Except as otherwise provided by the Committee, all full-time salaried employees of a Corporate Unit as of (a) the first day and the last day of a quarterly Award Period, or (b) June 30 and December 31 of an annual Award Period, as applicable, are eligible -3- 4 to be designated Participants in the Plan for such Award Period, provided, however, that the Committee may adopt criteria restricting the number of full-time salaried employees of a Corporate Unit eligible to be so designated, which criteria shall be set forth in the Addendum to the Plan applicable to such Corporate Unit. 5. DESIGNATION OF PARTICIPANTS The Committee shall determine and designate from time to time those Employees who shall be Participants. The designation of an Employee as a Participant in the Plan for any Award Period shall not bestow upon such Employee any right to receive an Award for such Award Period or the right to be designated a Participant for any subsequent Award Period. 6. INDIVIDUAL AWARD OPPORTUNITY For each Award Period, the Committee shall establish for each Participant a Target Award, expressed as a percentage of his or her base salary earnings for such Award Period, on the basis of his or her Hay point classification or resulting salary grade designation. 7. DETERMINATION OF AWARDS Awards for each Award Period for Participants in each Corporate Unit shall be determined in accordance with the Award Schedule established by the Committee for such Corporate Unit, provided, however, that no Award shall be paid to any Participant in a Corporate Unit for any Award Period in which the performance of such Corporate Unit did not equal or exceed the Threshold applicable to such Corporate Unit. The Award for each Participant in a Corporate Unit shall be the percentage of his or her Target Award determined in accordance with the applicable Award Schedule, provided, however, that subject to Paragraph 3 hereof, the Committee may adjust such Award for individual performance on the basis of such quantitative and qualitative performance measures and evaluations as it deems appropriate, and provided, further, that the Committee may also make such adjustments as it deems appropriate in the case of Participants whose Hay point classifications or resulting salary grade designations have changed during the applicable Award Period or who have been employed in more than one Corporate Unit during an Award Period. In no event may a participant be paid an Award in any calendar year in excess of $2,000,000. No segregation of any moneys or the creation of any trusts or the making of any special deposits shall be required in connection with any Awards made or to be made under the Plan. 8. PAYMENT OF AWARDS Awards shall be paid in cash as soon as practicable after the end of the Award Period for which the Award is made. If a -4- 5 Participant to whom an Award has been made dies prior to the payment of the Award, such Award shall be delivered to his or her legal representative or to such other person or persons as shall be determined by the Chief Executive Officer of the Company. The Company or other applicable Corporate Unit shall have the right to deduct from all Awards payable under the Plan any taxes required by law to be withheld by the Company or other Corporate Unit with respect thereto, provided however, that to the extent provided by the Committee, any payment under the Plan may be deferred and to the extent deferred, may be credited with an interest or earnings factor as determined by the Committee. 9. TERMINATION OF EMPLOYMENT Except in the case of death, disability or retirement or except as provided in paragraph 10, a Participant must be an employee as of the end of the Award Period in order to be eligible for an Award. 10. CHANGE OF CONTROL In the event of a Change of Control of the Company (as hereinafter defined), the Plan shall remain in full force and effect for the remainder of the calendar year in which such Change of Control occurs, and each Participant shall receive an Award for all Award Periods occurring in such calendar year, at least equal to his or her Target Award, regardless of whether or not Awards would otherwise have been payable under the Plan for such Award Periods and regardless of whether or not such Participant was an Employee at the end of any Award Period occurring in such calendar year. A "Change of Control of the Company" shall be deemed to have occurred if there shall have been a change in the composition of the Board of Directors of the Company such that a majority of the Board of Directors shall have been members of the Board of Directors for less than twenty-four months, unless the election of each new director who was not a director at the beginning of the twenty-four month 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 such period. 11. TRANSFERABILITY Any payment to which a Participant may be entitled under the Plan shall be free from the control or interference of any creditor of such Participant and shall not be subject to attachment or susceptible of anticipation or alienation. The interests of a Participant shall not be transferable except by will or the laws of descent and distribution. -5- 6 12. NO RIGHT TO PARTICIPATION; EMPLOYMENT Neither the adoption of the Plan nor any action of the Committee shall be deemed to give any Employee any right to be designated as a Participant under the Plan. Further, nothing contained in the Plan, nor any action by the Committee or any other person hereunder, shall be deemed to confer upon any Employee any right of continued employment with any Corporate Unit or to limit or diminish in any way the right of any Corporate Unit to terminate his or her employment any time with or without cause. 13. NONEXCLUSIVITY OF THE PLAN This Plan is not intended to and shall not preclude the Board of Directors of the Company from adopting or continuing such additional compensation arrangements as it deems desirable for Participants under this Plan, including any thrift, savings, investment, stock purchase, stock option, profit sharing, pension, retirement, insurance or other incentive plan. 14. AMENDMENT Except as provided in paragraph 10 hereof, the Board of Directors of the Company may amend, suspend or terminate the Plan at any time. -6- EX-10.D 3 EXHIBIT 10 D 1 Exhibit 10.D Inland Steel Industries INLAND 1984 INCENTIVE STOCK PLAN AS AMENDED THROUGH JANUARY 26, 1994 2 INLAND 1984 INCENTIVE STOCK PLAN AS AMENDED THROUGH JANUARY 26, 1994 1. Purpose. The purpose of the Inland 1984 Incentive Stock Plan (the "Plan") is to attract and retain outstanding individuals as officers and key employees of the "Company" (which, on and after May 1, 1986, shall be Inland Steel Industries, Inc., and prior to that date shall be Inland Steel 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 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 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 in its sole discretion determine. 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. 3. Shares Reserved under the Plan. The maximum number of shares of common stock, $1.00 par value, of the Company which may be issued pursuant to all grants made under the Plan shall not exceed 800,000, of which no more than 300,000 shares shall be issued pursuant to restricted stock awards and performance awards granted under the Plan. Any shares subject to any grant which terminates by expiration, cancellation or otherwise prior to the issuance of such shares or, in the case of a restricted stock award, prior to vesting shall again be available for future grants under the Plan. Shares of common stock to be issued pursuant to grants under the Plan may be authorized and unissued shares of common stock, treasury common stock, or any combination thereof. 1 3 4. Administration of the Plan. The Plan shall be administered by the Compensation Committee (the "Committee") of the Board of Directors of the Company. No member of the Committee shall be eligible to receive any grant, or shall have been eligible to receive any grant for at least one year prior to becoming a member, under the Plan or any other stock option, stock appreciation rights or other incentive stock plan of the Company or any subsidiary of the Company. 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 the grant, whether as a stock option, stock appreciation right, restricted stock award, performance award or a combination thereof, the number of shares or units subject to the grant, the time and conditions of exercise or vesting, the fair market value of the common stock of the Company for purposes of the Plan, and all other terms and conditions of any grant; and (iv) to prescribe the form of agreement, certificate or other instrument evidencing the grant. 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 and Term of Plan. The Plan shall be submitted to the stockholders of the Company for approval at the annual meeting to be held on April 25, 1984, or any adjournment thereof, and, if approved by the affirmative vote of the holders of a majority of the shares of common stock and Series A $2.40 Cumulative Convertible Preferred Stock of the Company (voting together and not as separate classes) present in person or by proxy, shall become effective on the date of such approval. The Plan shall terminate five years after it becomes effective unless terminated sooner by action of 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. 6. Stock Options. (a) Grants. Options to purchase shares of common stock of the Company, including "incentive stock options" within the meaning of Section 422A of the Internal Revenue Code of 1954, as amended (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. 2 4 (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 one or more than ten years after the date of grant. The per share option price shall not be less than 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, or in a combination thereof. (c) Restrictions Relating to Incentive Stock Options. No incentive stock option granted prior to January 1, 1987, may be exercised by an optionee while there is outstanding (within the meaning of Section 422A(c)(7) of the Code) any incentive stock option previously granted to such optionee to purchase stock in the Company or any subsidiary of the Company or in a corporation which is a predecessor to the Company or any subsidiary. The aggregate fair market value (determined as of the time the option is granted) of the common stock of the Company for which any employee may be granted incentive stock options in any calendar year (under this Plan or any other plan of the Company or any of its subsidiaries) shall not exceed $100,000 (or such other individual grant limit as may be in effect under the Code on the date of grant) plus any unused limit carryover to such year permitted under Section 422A of the Code. (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 Company) 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 a period ending on the first anniversary of the date of such cessation of employment or the date of expiration of such option, whichever first occurs. 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 held by 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. (e) Additional Terms and Conditions. The agreement or instrument evidencing the grant of a stock option may contain such 3 5 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. Rights entitling the grantee to receive cash or shares of common stock of the Company having a fair market value 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 rights, but not both, as to any of the same shares subject to the stock option and the rights, or the rights may be granted independently of a related 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 one 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 6(d) of the Plan. The Committee may at any 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 compliance with section 16(a) or 16(b) of the Securities Exchange Act of 1934 and the rules and regulations thereunder. (c) Payment on Exercise. Upon exercise of a stock appreciation right, the grantee 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 4 6 grantee 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 grantee shall be paid cash in lieu of any fractional share of common stock to which such grantee would otherwise be entitled. The number of shares which may be issued pursuant to all grants under the Plan shall be reduced in connection with the exercise of any stock appreciation right by the number of shares paid out pursuant to such exercise. (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. 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, 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 shall not be less than one 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. The Committee may in its sole discretion at the time of the award or at any time thereafter provide for the early vesting of such award in the event of termination of employment by retirement, death, incapacity or otherwise prior to the end of the restriction period. 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 monetary units or units which are equivalent to 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. Such awards shall be contingent on the achievement over a period of not less than three or more than ten years of such corporate, division, subsidiary, group or other objectives as shall be established by the Committee. Such objectives shall be established by the Committee prior to the beginning of the performance period, but may be revised by the 5 7 Committee from time to time during the performance period to take into account significant unforeseen events or changes in circumstances. (b) Termination of Employment. 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 holder of the award does not remain continuously in the employ of the Company and its subsidiaries at all time during the applicable performance period. (c) Payment. Following the end of the performance period, the holder of a performance award shall be entitled to receive payment of an amount, not exceeding the maximum value of the performance award established by the Committee, based on the level of achievement of the objectives for the performance period as determined by the Committee. Payment may be made in cash, shares of common stock, or a combination thereof, as determined by the Committee. Any payment to be made in common stock shall be based on the fair market value of such stock on the payment date. 10. Adjustments for Changes in Capitalization, Etc. Stock options, stock appreciation rights, restricted stock awards, and performance awards shall be subject to adjustment by the Committee in its sole discretion as to the number, kind and price of shares or other consideration subject to such grants in the event of changes in the outstanding common stock by reason of stock dividends, stock splits, recapitalizations, reorganizations, mergers, consolidations, combinations, exchanges or other relevant changes in corporate structure or capitalization occurring after the date of the grant of any stock option, stock appreciation right, restricted stock award or performance award. In the event of any such change in the outstanding common stock, the maximum number of shares which may be issued pursuant to all grants under the Plan and pursuant to restricted stock awards and performance awards may also be appropriately adjusted by the Committee. 11. Effect of Liquidation, Merger, Consolidation or Other Events. Unless otherwise determined by the Committee, and notwithstanding any other provisions of the Plan, each outstanding stock option and stock appreciation right and each restricted stock award and performance award shall automatically terminate upon the effective date of (i) the liquidation or dissolution of the Company, (ii) any merger or consolidation in which the Company is not the surviving corporation or pursuant to which the common stock of the Company does not remain outstanding, or (iii) the acquisition by another person of all or substantially all of the assets of the Company; provided, however, that the Committee in anticipation of any such event or any similar event, or in the event of (a) the acquisition by any person of the beneficial ownership of 25% or 6 8 more of the outstanding voting securities of the Company or (b) any offer by any person to acquire any voting securities of the Company which, if accepted, would result in the beneficial ownership by such person of 25% or more of the outstanding voting securities of the Company, may accelerate the time within which such stock options and stock appreciation rights may be exercised as well as the time for the vesting of restricted stock and performance awards. 12. Amendment and Termination of Plan. The Plan may be amended or terminated by the Board of Directors of the Company in any respect except that (other than pursuant to paragraph 10 of the Plan) no amendment may be made without stockholder approval if such amendment would increase the maximum number of shares available for issuance pursuant to all grants under the Plan or pursuant to restricted stock awards and performance awards. 13. 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 Stockholder. 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 the participant), for tax withholding purposes, cash or shares of common stock of the Company, valued at their fair market value, but in no event shall the cash or fair market value of the number of shares so withheld (or accepted) exceed the amount necessary to 7 9 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. 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. 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. 8 EX-10.E 4 EXHIBIT 10 E 1 Exhibit 10.E Inland Steel Industries INLAND 1988 INCENTIVE STOCK PLAN AS AMENDED THROUGH JANUARY 26, 1994 2 INLAND 1988 INCENTIVE STOCK PLAN 1. Purpose. The purpose of the Inland 1988 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 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 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. 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. The maximum number of shares of common stock, $1.00 par value per share, of the Company which may be issued pursuant to grants made under the Plan shall not exceed 1,700,000 plus such number of shares as shall have been authorized for issuance pursuant to the Inland 1984 Incentive Stock Plan (heretofore approved by stockholders) and shall not have been or be issued pursuant to such plan. Any shares subject to any grant (including any grant under the Inland 1984 Incentive Stock Plan) which terminates by expiration, cancellation or otherwise without the issuance of such shares or without payment thereunder, or in the case of a restricted stock award without vesting, shall again be available for future grants under the Plan. Shares of common stock to be issued pursuant to grants under the Plan may be authorized and unissued shares of common stock, treasury common stock, or any combination thereof. 1 3 4. Administration of the Plan. The Plan shall be administered by the Compensation Committee (the "Committee") of the Board of Directors of the Company. No member of the Committee shall be eligible to receive any grant, or shall have been eligible to receive any grant for at least one year prior to becoming a member, under the Plan or any other stock option, stock appreciation rights or other incentive stock plan of the Company or any subsidiary of the Company. 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 or units subject to the grant, the time and conditions of exercise or vesting, the fair market value of the common stock of the Company for purposes of the Plan, and all other terms and conditions of any grant; and (iv) to prescribe the form of agreement, certificate or other instrument evidencing the grant. 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 April 27, 1988, or any adjournment thereof, and, if approved by the affirmative vote of the holders of a majority of the shares of common stock and Series A $2.40 Cumulative Convertible Preferred Stock of the Company, voting as a single class, represented in person or by proxy, shall be deemed to have become effective on the date of such approval. 6. Stock Options. (a) Grants. Options to purchase shares of common stock of the Company, including "incentive stock options" within the meaning of Section 422A 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 of the Company and its subsidiaries as may be selected by the Committee. (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 one or more than ten years after the date of grant. The per share option price shall not be less than 100% of the fair market value of a share of common stock of the Company on the date the option is granted. Upon exercise, 2 4 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, or in a combination 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 this 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 a period ending on the third anniversary of the date of such cessation of employment or the date of expiration of such option, whichever first occurs. 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 held by 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. (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. 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. 3 5 (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 one 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 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 grantee 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 grantee 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 grantee shall be paid cash in lieu of any fractional share of common stock to which such grantee would otherwise be entitled. The number of shares which may be issued pursuant to grants under the Plan shall be reduced in connection with the exercise of any stock appreciation right by the number of shares with respect to which such right is exercised. (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. 4 6 8. Restricted Stock Awards. 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, 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 shall not be less than one 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. The Committee may in its sole discretion at the time of the award or at any time thereafter provide for the early vesting of such award in the event of termination of employment by retirement, death, incapacity or otherwise prior to the end of the restriction period. 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 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. Such awards shall be contingent on the achievement over a period of not less than one or more than ten years of such corporate, division, subsidiary, group or other objectives as shall be established by the Committee. Such objectives may be revised by the Committee at any time and from time to time during the performance period to take into account significant unforeseen events or changes in circumstances. 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 holder 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 5 7 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. In the case of any payment made in whole or in part in cash (other than amounts attributable to dividend equivalents payable in cash), the number of shares of common stock which may be issued pursuant to grants under the Plan shall be reduced by that number of shares of such stock (including any fraction as a whole share) having a fair market value that is equal to the amount of such cash. 10. Adjustments for Changes in Capitalization, Etc. Subject to the provisions of Section 11 of the Plan, stock options, stock appreciation rights, restricted stock awards, and performance awards shall be appropriately adjusted by the Committee as to the number, kind and price of shares or other consideration subject to such grants in the event of changes in the outstanding common stock by reason of stock dividends, stock splits, recapitalizations, reorganizations, mergers, consolidations, combinations, exchanges or other relevant changes in capitalization occurring after the date of the grant of any stock option, stock appreciation right, restricted stock award or performance award. In the event of any such change in the outstanding common stock, the maximum number of shares which may be issued pursuant to grants under the Plan shall also be appropriately adjusted by the Committee. No adjustment to either (i) the number or price of shares of common stock subject to incentive stock options or (ii) the maximum number of shares which may be issued pursuant to incentive stock options shall be permitted hereunder to the extent that such adjustment would cause an incentive stock option to be considered as modified or the Plan to be treated as newly adopted under the Code. 11. Effect of Merger, Consolidation, Liquidation and Certain Other Events. (a) Acceleration of Benefits. In the event of a "Change of Control" as defined in paragraph (b) of this Section 11, (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 of Control Price" (as defined in paragraph (c) of this Section 11) as of the date the Change of 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 6 8 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 at the time such awards are made. (b) Change of Control. For purposes of this Section 11, a Change of 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 of 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 the voting power of the Company, the surviving corporation or corporation directly or indirectly controlling the Company or the surviving corporation, as the case may be, is held only by the same persons (as defined below) (although not necessarily in 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 30% or more of the combined voting power of the Company is acquired by any "person" as defined in Sections 13(d) and 14(d) of the Exchange Act (other than any trustee or other fiduciary holding securities under an employee benefit or other similar stock plan of the Company); or (iii) at any time during any period of two consecutive years, individuals who at the beginning of such period were members of the Board of Directors of the Company cease for any reason to constitute at least a majority thereof (unless the election, or the nomination for election by the Company's stockholders, of each new director was approved by a vote of at least two-thirds of the directors still in office at the time of such election or nomination who were directors at the beginning of such period). (c) Change of Control Price. For purposes of this Section 11, Change of Control Price means (i) with respect to a Change of Control by reason of a merger or consolidation of the Company described in paragraph (b)(i) of this Section 11 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 of Control by reason of an acquisition of securities described in 7 9 paragraph (b)(ii) of this Section 11, the highest price per share for any share of the Company's common stock paid by any holder of any of the securities representing 30% or more of the combined voting power of the Company giving rise to the Change of Control, and (iii) with respect to a Change of 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 11), stockholder approval of an agreement or plan described in paragraph (b)(i) of this Section 11 or a change in the composition of the Board of Directors described in paragraph (b)(iii) of this Section 11, 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 of 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. 12. 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 10 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. 13. Prior Plan. Upon the effectiveness of this Plan, no further grants shall be made under the Inland 1984 Incentive Stock Plan. The discontinuance of the Inland 1984 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. 14. 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, 8 10 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 the participant), for tax withholding purposes, cash or shares of common stock of the Company, valued at their fair market value, but in no event shall the cash or 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. 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. 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. 9 EX-10.F 5 EXHIBIT 10 F 1 EXHIBIT 10.F INLAND 1992 INCENTIVE STOCK PLAN AS AMENDED THROUGH MAY 26, 1993 1. Purpose. The purpose of the Inland 1992 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 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 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. 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. 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 2,200,000, subject, however, to adjustment pursuant to the provisions of Section 10 of the Plan. Except to the extent otherwise determined by the Committee, any shares subject to any grant or award which terminates by expiration, cancellation or otherwise without the issuance of such shares or which is settled in cash (to the extent so settled), or in the case of a restricted stock award without vesting, shall again be available for future grants under the Plan. Shares of common stock to be issued pursuant to grants 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. No member of the Committee shall be eligible to receive any grant, or shall have been eligible to receive any grant for at least one year prior to becoming a member, under the Plan or any other stock option, stock appreciation rights or other incentive stock plan for employees of the Company or any subsidiary of the Company. 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 2 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 or units subject to the grant, the time and conditions of exercise or vesting, the fair market value of the common stock of the Company for purposes of the Plan, and all other terms and conditions of any grant; and (iv) to prescribe the form of agreement, certificate or other instrument evidencing the grant. 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 April 22, 1992, 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. 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 of the Company and its subsidiaries as may be selected by the Committee. (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 one or more than ten years after the date of grant. The per share option price shall not be less than 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, or in a combination 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. 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 held by 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 - 2 - 3 option was exercisable immediately prior to the date of cessation of employment. (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. 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. (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 one 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 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 grantee 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 grantee 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 grantee shall be paid cash in lieu of any fractional share of common stock to which such grantee would otherwise be entitled. The number of shares which may be issued pursuant to grants under the Plan shall be reduced in connection with the exercise of any stock appreciation right by the number of shares issued pursuant to such exercise. (d) Additional Terms and Conditions. The agreement or instrument evidencing the grant of stock appreciation rights may contain such other - 3 - 4 terms, provisions and conditions not inconsistent with the Plan as may be determined by the Committee in its sole discretion. 8. Restricted Stock Awards. 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, 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 shall not be less than one 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. The Committee may in its sole discretion at the time of the award or at any time thereafter provide for the early vesting of such award in the event of termination of employment by retirement, death, incapacity or otherwise prior to the end of 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 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. Such awards shall be contingent on the achievement over a period of not less than one or more than ten years of such corporate, division, subsidiary, group or other objectives as shall be established by the Committee. Such objectives may be revised by the Committee at any time and from time to time during the performance period to take into account significant unforeseen events or changes in circumstances. 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 holder 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. Adjustments for Changes in Capitalization, Etc. Subject to the provisions of Section 11 of the Plan, stock options, stock appreciation rights, restricted stock awards, and performance awards may be - 4 - 5 appropriately adjusted by the Committee as to the number, kind and price of shares or other consideration subject to such grants in the event of stock dividends, stock splits, spinoffs or other distributions of assets (other than normal cash dividends), recapitalizations, reorganizations, mergers, consolidations, combinations, exchanges or other relevant changes in corporate structure or capitalization occurring after the date of the grant of any stock option, stock appreciation right, restricted stock award or performance award. In any such event, the maximum number of shares which may be issued pursuant to grants under the Plan may also be appropriately adjusted by the Committee. 11. Effect of Merger, Consolidation, Liquidation and Certain Other Events. (a) Acceleration of Benefits. In the event of a "Change in Control" as defined in paragraph (b) of this Section 11, (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 11) 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 at the time such awards are made. (b) Change in Control. For purposes of this Section 11, 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 the voting power of the Company, the surviving corporation or corporation directly or indirectly controlling the Company or the surviving corporation, as the case may be, is held only by the same persons (as defined below) (although not necessarily in 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 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 11, 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 11 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 - 5 - 6 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 11, 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 11), stockholder approval of an agreement or plan described in paragraph (b)(i) of this Section 11 or a change in the composition of the Board of Directors described in paragraph (b)(iii) of this Section 11, 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. 12. 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 10 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. 13. Prior Plan. Upon the effectiveness of this Plan, no further grants shall be made under the Inland 1988 Incentive Stock Plan. The discontinuance of the Inland 1988 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. 14. 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. - 6 - 7 (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. 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. 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. - 7 - EX-10.I 6 EXHIBIT 10 I 1 Exhibit 10.I INLAND STEEL INDUSTRIES SUPPLEMENTAL RETIREMENT BENEFIT PLAN FOR COVERED EMPLOYEES As Amended and Restated, Through and Including January 26, 1994, Effective As Of July 1, 1990 ARTICLE 1 1.1 Purpose. It is the intention of Inland Steel Industries, Inc. (the "Company") to maintain appropriate levels of retirement benefits for individuals who are entitled to benefits under the Inland Steel Industries Pension Plan Supplement for Salaried Employees of Inland Steel Industries, Inc. and Certain Subsidiaries, Revised As Of January 1, 1989, and as thereafter amended, and for individuals who are entitled to benefits under the Inland Steel Industries Pension Plan Supplement for Employees of J. M. Tull Metals Company, Inc., Effective As Of December 31, 1988, and as thereafter amended (each a "Pension Plan Supplement"). Accordingly, the Board of Directors of Inland Steel Industries, Inc., acting on behalf of the Company, hereby establishes this amended and restated Inland Steel Industries Supplemental Retirement Benefit Plan for Covered Employees (the "Supplemental Retirement Benefit Plan") as a successor to and continuation of the Inland Steel Company Supplemental Retirement Benefit Plan for Covered Employees heretofore adopted by Inland Steel Company effective as of January 1, 1976 and the Inland Steel Industries Supplemental Retirement Benefit Plan for Covered Employees heretofore adopted by the Company effective as of January 1, 1989. This Supplemental Retirement Benefit Plan is intended to provide benefits to eligible persons in a manner so as to maintain the level of total retirement benefits which, but for the limitations on benefits required by Section 415 of the Internal Revenue Code of 1986, as amended (the "Code"), would otherwise be payable under the Pension Plan Supplement. The Supplemental Retirement Benefit Plan shall maintain such total retirement benefit levels by means of supplemental unfunded payments made by the Company to the individuals eligible for such payments as more fully described in Articles 3 and 4. This Supplemental Retirement Benefit 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. 1.2 Effective Date. This amended and restated Supplemental Retirement Benefit Plan is effective as of July 1, 1990 (the "Effective Date"). 2 1.3 Funding Not Required. The Company shall not be required to establish any fund or set aside any monies for the payment of Supplemental Retirement Benefits under this Supplemental Retirement Benefit Plan. ARTICLE 2 2.1 Retirement Committee. The Company hereby delegates authority to administer the Supplemental Retirement Benefit Plan to the Inland Steel Industries Retirement Committee (the "Committee") as established under the Inland Steel Industries Pension Plan, As Revised, Effective December 1, 1988, and as may thereafter be amended (the "Inland Steel Industries Pension Plan"). Any action by the Committee shall be evidenced by a written document, certified by the Secretary of the Committee. References to the Company's authority, right, or power to act contained in any notice, disclosure, or communication which is made with a view toward effectuating the purposes of this Supplemental Retirement Benefit Plan shall be construed to include such actions by the Committee on the Company's behalf and such actions by others to whom the Committee has delegated its authority. 2.2 Authority of Committee. The Committee shall have authority to control and manage the operation and administration of the Supplemental Retirement Benefit Plan, including the authority and discretion to construe and interpret the Supplemental Retirement Benefit Plan, decide all questions of eligibility for and the amount, manner and time of payment of Supplemental Retirement Benefits hereunder and such other rights and powers necessary or convenient to the carrying out of its functions hereunder. The authority and responsibilities of the Committee shall be coextensive with its authority and responsibilities under the Inland Steel Industries Pension Plan. ARTICLE 3 3.1 Participation. Each Employee of the Company and/or its subsidiaries who, on or after the Effective Date, is entitled to an accrued benefit under the Pension Plan Supplement the amount of which is limited by reason of the application of the limitations imposed by Code Section 415, as amended from time to time, and the regulations and rulings thereunder or the terms of the Inland Steel Industries Pension Plan implementing those limitations (the "Section 415 Limitations") shall be a "Participant" in this Supplemental Retirement Benefit Plan and upon retirement shall be entitled to receive the benefit (the "Supplemental Retirement Benefit"), if any, determined in accordance with Article 4 hereof. - 2 - 3 3.2 Beneficiary. The spouse or other person entitled to a benefit under the Pension Plan Supplement upon the death of a Participant hereunder shall, upon the death of the Participant, be a "Beneficiary" under this Supplemental Retirement Benefit Plan entitled to receive the Supplemental Retirement Benefit, if any, determined in accordance with Article 4 hereof. ARTICLE 4 4.1 Amount of Supplemental Retirement Benefit. The amount of Supplemental Retirement Benefit which a Participant or Beneficiary shall accrue and be entitled to receive and the Company shall be obligated to pay under this Supplemental Retirement Benefit Plan with respect to each Limitation Year (as defined below) shall be equal to the excess, if any, of the amount described in paragraph (a) of this Section 4.1 over the amount described in paragraph (b) of this Section 4.1: (a) The amount of the annual benefit which would have been accrued with respect to such Participant or Beneficiary under the Pension Plan Supplement as of the last day of the Limitation Year under the terms of the Pension Plan Supplement as in effect on the last day of such Limitation Year if such benefit were computed without giving effect to the Section 415 Limitations for such Limitation Year. (b) The amount of the annual benefit which was accrued for such Participant or Beneficiary with respect to such Limitation Year under the terms of the Pension Plan Supplement as in effect on the last day of that Limitation Year, including those terms implementing the Section 415 Limitations referred to above, as indexed. As used in this Section 4.1, "Limitation Year" means the Plan Year applicable to the Pension Plan Supplement, being the period beginning on January 1 of each year and ending on December 31 of the same year. It is the intent of this Section 4.1 that the Supplemental Retirement Benefit described above shall be determined at all times in a manner consistent with the then current Section 415 Limitations. Accordingly, the determinations made pursuant to this Section 4.1 shall be based upon adjustments employed in determining the amount of the annual benefit described above, and shall be subject to adjustments which reflect the Section 415 Limitations with respect to the computation of benefits under the Pension Plan Supplement. If a Participant receives a single sum distribution under the Pension Plan Supplement, but has elected another form of benefit under this Supplemental Retirement Benefit Plan, the amount of the annual benefit payable under this Supplemental Retirement Benefit Plan in each Limitation Year shall be the - 3 - 4 same as that payable in the year in which the single sum distribution is made. Except as provided in Section 5.3 hereof, no Supplemental Retirement Benefit shall be payable to any Participant or his Beneficiaries unless, at the time of the Participant's termination of employment with the Company and all Affiliates, the Participant has been credited with at least five Years of Vesting Service under the Pension Plan Supplement. 4.2 Payment of Supplemental Retirement Benefit (a) Except as provided hereinafter, the Supplemental Retirement Benefit which a Participant or Beneficiary is eligible to receive shall be paid by the Company at such time, in the same form and subject to the same conditions, as is the benefit paid to such Participant or Beneficiary under the Pension Plan Supplement. (b) (i) The Committee, in its sole discretion and after considering the needs and circumstances of the Participant or Beneficiary concerned, may at any time elect to direct payment of the Supplemental Retirement Benefit to the Participant or Beneficiary in any form of benefit provided under the Pension Plan Supplement, including a lump sum. (ii) A Participant or Beneficiary may in writing request payment of his Supplemental Retirement Benefit in a form other than the form of benefit payment under the Pension Plan Supplement. After receiving such a request, the Committee shall consider the request and the circumstances on which it is based and shall, in its sole discretion, approve or disapprove the request and inform the requesting Participant or Beneficiary of its decision. (iii) Any optional form of benefit shall be the actuarial equivalent of the benefit otherwise payable to the Participant or Beneficiary, determined by applying the appropriate interest rate and other actuarial assumptions then set forth in the Pension Plan Supplement. (c) The Company may purchase an annuity with respect to any portion of a Participant's accrued Supplemental Retirement Benefit in full satisfaction thereof to the extent provided by paragraphs (a) through (i) of Section 4.4 and shall be obligated to purchase an annuity or make a lump sum payment to the extent provided by paragraph (j) of Section 4.4. 4.3 Pension Plan Supplement Increase. In the event the Pension Plan Supplement is amended to increase the benefit payable to participants or beneficiaries then receiving pensions under the Pension Plan Supplement, benefits payable under this Supplemental Retirement Benefit Plan shall be adjusted or commenced accordingly for Participants or Beneficiaries; provided that no such adjustment shall be made if the - 4 - 5 Participant received a single sum distribution under this Supplemental Retirement Benefit Plan; and provided, further, that no such adjustment shall be made with respect to any portion of a Participant's accrued Supplemental Retirement Benefit for which an annuity has been purchased under Section 4.4. 4.4 Purchase of Annuities. The Company may at any time, in the sole discretion of the Committee or the Company's Board of Directors, purchase one or more annuities with respect to all or any portion of the Supplemental Retirement Benefit accrued under the Plan by any Participant, subject to the following: (a) The Company shall not be obligated to purchase an annuity for any Participant or for any portion of a Participant's accrued Supplemental Retirement Benefit, notwithstanding the purchase of an annuity with respect to any other Participant or any other portion of the Participant's accrued Supplemental Retirement Benefit. (b) The purchase of annuities under this Section 4.4 shall be limited to Supplemental Retirement Benefits accrued by Participants who meet all of the following requirements: (i) completion of at least five years of Vesting Service under the Pension Plan Supplement; (ii) annual compensation in excess of $150,000; and (iii) attainment of age 55. (c) Any such annuity purchased with respect to any Participant's accrued Supplemental Retirement Benefit shall be issued to and distributed to such Participant, who shall be the sole owner of such annuity and shall contain such terms not inconsistent with this Section 4.4 as the Committee shall determine in its sole discretion. (d) Annuity payments to a Participant under any such annuity shall commence as of the date on which the Participant attains age 65 or the first day of the month thereafter; provided, however, that any such annuity may provide that, in the event of the Participant's death prior to attainment of age 65, benefits payable to any Beneficiary may commence as of any earlier date provided by the terms of the annuity. (e) The monthly benefit amount to be provided by any such annuity shall be such amount as the Committee, in its sole discretion, determines would provide, on an after-tax basis, an amount equal to the amount estimated to be the after-tax benefit to the Participant of monthly benefits - 5 - 6 payable by the Company commencing at age 65 under Section 4.2. Such determination shall be made by the Committee, in its sole discretion, based upon such rates and factors as the Committee, in its sole discretion, deems appropriate. No change in annuity benefits shall be required by reason of any subsequent change in such rates and factors; provided, however, that in determining the amount of any subsequent annuity purchased under this Section 4.4, the Committee may, in its sole discretion, take into account any change in such rates and factors and the benefits payable under any annuity previously purchased under this Section 4.4. Notwithstanding the foregoing, with the consent of the Participant, the Committee may substitute any form of fixed or variable annuity in lieu of the annuity otherwise provided by this paragraph (e), provided that such substitution does not result in a change in the cost of the annuity or the commencement date of the annuity payments. (f) The Company shall make a tax gross-up payment to any Participant for whom an annuity is purchased under this Section 4.4 in such amount as the Committee shall determine, in its sole discretion, would be necessary to make such Participant whole for federal, state and local income taxes attributable to the receipt of the annuity and the gross-up payment, based upon such tax rates as the Committee shall determine in its sole discretion. (g) To the extent that the Company has purchased an annuity under this Section 4.4 with respect to any portion of a Participant's accrued Supplemental Retirement Benefit, such annuity and the tax gross-up payment under paragraph (f) above shall be in full satisfaction of all obligations of the Company to the Participant or any Beneficiary of the Participant attributable to such portion of the Participant's accrued Supplemental Retirement Benefit. (h) A purchase of an annuity under this Section 4.4 shall have no effect on the monthly benefits payable to the Participant under Sections 4.1 and 4.3 prior to the Participant's attainment of age 65. In the event of the Participant's death prior to attainment of age 65, the benefit payable to any Beneficiary of the Participant shall be determined solely on the basis of the monthly benefits which would otherwise have been payable to the Participant under the Plan prior to attainment of age 65 and taking into account the amount payable to the Beneficiary under the Pension Plan Supplement. (i) This Section 4.4 shall apply to Supplemental Retirement Benefits accrued by any Participant under the Plan prior to October 1, 1993, only if such Participant consents (in such manner and at such time as the Committee may require) - 6 - 7 to such application and waives any right which the Participant might otherwise be entitled to assert under Section 5.2 by reason of the adoption and application to the Participant of this Section 4.4. (j) If an annuity has not been purchased in accordance with the foregoing provisions of this Section 4.4 with respect to any portion of the accrued Supplemental Retirement Benefit payable after attainment of age 65 to a Participant who meets all of the requirements of paragraph (b) above and who has executed a consent and waiver in accordance with paragraph (i) above, then, except for any portion payable in the form of a lump sum in accordance with Section 4.2, upon such Participant's termination of employment with the Company and its affiliates, the Company shall, as soon as practicable thereafter, purchase an annuity for such portion in accordance with paragraphs (c) through (h) above. ARTICLE 5 5.1 Amendment to Conform with Law. The Company may by amendment make such changes in, additions to, and substitutions in the provisions of this Supplemental Retirement Benefit Plan, to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of conforming this Supplemental Retirement Benefit 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. 5.2 Other Amendments and Termination. The Company may amend or terminate this Supplemental Retirement Benefit Plan at any time, without the consent of any Participant or Beneficiary. Notwithstanding the foregoing, this Supplemental Retirement Benefit 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 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 cancelled; provided that, in the event the Pension Plan Supplement is terminated or curtailed with the result that pension payments to retired employees and survivor and contingent annuity payments to beneficiaries are discontinued or reduced, the Supplemental Retirement Plan Benefit then being paid or in the future payable pursuant to the Supplemental Retirement Benefit Plan shall similarly be discontinued or reduced in the same ratio as payments under the Pension Plan Supplement are discontinued or reduced. - 7 - 8 5.3 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 Committee 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 Company with a bank or corporate trustee pursuant to one or more "rabbi trusts". (b) For purposes of this Section 5.3, a "Change in Control" shall be deemed to have occurred if: (i) 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 (A) the Company or any of its subsidiaries, (B) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries, (C) an underwriter temporarily holding securities pursuant to an offering of such securities, or (D) 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 (not including any period prior to November 22, 1989), individuals who at the beginning of such period constitute the Board of Directors of the Company 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), (iii) or (iv) of this paragraph (b)), 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 corpora- -8- 9 tion, other than (A) 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 the Company or any of its subsidiaries, at least 80% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (B) 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. (c) The provisions of this Section 5.3 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 Supplemental Retirement Benefit 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 Pension Plan Supplement as of the date of the Change in Control, both immediately prior to the Change in Control and at the date of such amendment. 5.4 Manner and Form of Amendment or Termination. Any amendment or termination of this Supplemental Retirement Benefit Plan by the Company shall be made only by action of the Board of Directors of the Company or any officer of the Company duly authorized by the Board of Directors. Certification of any amendment or termination of this Supplemental Retirement Benefit Plan shall be furnished to the Committee by the Company. 5.5 Notice of Amendment or Termination. The Committee shall notify Participants or Beneficiaries who are affected by any amendment or termination of this Supplemental Retirement Benefit Plan within a reasonable time thereof. ARTICLE 6 6.1 No Right to Employment, etc. Neither the creation of this Supplemental Retirement Benefit Plan nor anything contained herein shall be construed as - 9 - 10 giving any Participant hereunder or other employees of the Company or any subsidiary any right to remain in the employ of the Company or any subsidiary. 6.2 Successors and Assigns. All rights and obligations of this Plan shall inure to, and be binding upon the successors and assigns of the Company. 6.3 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 interest in any payments under this Supplemental Retirement Benefit 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. 6.1 Incompetency. If any Participant or Beneficiary is, in the opinion of the Committee, legally incapable of giving a valid receipt and discharge for any payment, the Committee 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 Committee 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 Supplemental Retirement Benefit Plan to the extent of and as to that payment, and neither the Committee nor the Company will have any obligation regarding the application of the payment. 6.5 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 Supplemental Retirement Benefit Plan. 6.6 Severability. If any provisions of this Supplemental Retirement Benefit Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Supplemental Retirement Benefit Plan, but this Supplemental Retirement Benefit Plan shall be construed and enforced as if the illegal and invalid provisions never had been included herein. - 10 - 11 6.7 Limitations on Provisions. The provisions of this Supplemental Retirement Benefit Plan and any Supplemental Retirement Benefits shall be limited as described herein. Any benefit payable under the Pension Plan Supplement shall be paid solely in accordance with the terms and provisions of the Pension Plan Supplement, as appropriate, and nothing in this Supplemental Retirement Benefit Plan shall operate or be construed in any way to modify, amend, or affect the terms and provisions of the Pension Plan Supplement. 6.8 Gender and Number. Whenever the context requires or permits, the gender and number of words shall be interchangeable. ARTICLE 7 7.1 Application for Benefits and Review Procedures. The Inland Steel Industries Claims Procedure set forth in the Pension Plan Supplement shall apply to any claim for benefits under this Supplemental Retirement Benefit Plan. The "Plan Administrator" for purposes of applying such Claims Procedure to this Supplemental Retirement Benefit Plan shall be the Committee. INLAND STEEL INDUSTRIES, INC. By: /s/ Judd R. Cool ------------------------------------ Judd R. Cool Vice President, Human Resources Date: July 25, 1990 - 11 - EX-10.J 7 EXHIBIT 10 J 1 Exhibit 10.J INLAND STEEL INDUSTRIES SPECIAL RETIREMENT BENEFIT PLAN FOR COVERED EMPLOYEES As Amended and Restated, Through and Including January 26, 1994, Effective As Of July 1, 1990 ARTICLE 1 1.1 Purpose. It is the intention of Inland Steel Industries, Inc. (the "Company") to continue to maintain certain levels of retirement benefits for employees of the Company and its subsidiaries who are entitled to benefits under the Inland Steel Industries Pension Plan Supplement for Salaried Employees of Inland Steel Industries, Inc. and Certain Subsidiaries, Revised As Of January 1, 1989, and as thereafter be amended, and for individuals who are entitled to benefits under the Inland Steel Industries Pension Plan Supplement for Employees of J. M. Tull Metals Company, Inc., Effective As of December 31, 1988, and as thereafter amended (each a "Pension Plan Supplement"). Accordingly, the Company hereby amends and restates the Inland Steel Industries Special Retirement Benefit Plan for Covered Employees (the "Special Retirement Plan") to provide benefits to eligible employees in a manner so as to maintain the level of total retirement benefits which would be payable under the Pension Plan Supplement but for certain limitations imposed under Section 401(a)(17) and/or Section 415 of the Internal Revenue Code of 1986 (the "Code") and such employee's participation in the Inland Steel Industries Nonqualified Thrift Plan. 1.2 Effective Date. This amended and restated Special Retirement Benefit Plan is effective as of July 1, 1990 (the "Effective Date"). 1.3 Funding Not Required. The Company shall not be required to establish any fund or set aside any monies for the payment of Special Retirement Benefits under this Special Retirement Benefit Plan. ARTICLE 2 2.1 Retirement Committee. The Company hereby delegates authority to administer the Special Retirement Benefit Plan to the Inland Steel Industries Retirement Committee (the "Committee") as established under the Inland Steel Industries Pension Plan, As Revised, Effective December 1, 1988, and as may thereafter be amended (the "Inland Steel Industries Pension Plan"). Any action by the Committee shall 2 be evidenced by a written document, certified by the Secretary of the Committee. References to the Company's authority, right, or power to act contained in any notice, disclosure, or communication which is made with a view toward effectuating the purposes of this Special Retirement Benefit Plan shall be construed to include such actions by the Committee on the Company's behalf and such actions by others to whom the Committee has delegated its authority. 2.2 Authority Of Committee. The Committee shall have authority to control and manage the operation and administration of the Special Retirement Benefit Plan, including the authority and discretion to construe and interpret the Special Retirement Benefit Plan, decide all questions of eligibility for and the amount, manner and time of payment of Special Retirement Benefits hereunder and such other rights and powers necessary or convenient to the carrying out of its functions hereunder. The authority and responsibilities of the Committee shall be coextensive with its authority and responsibilities under the Inland Steel Industries Pension Plan. ARTICLE 3 3.1 Participation. Each Employee of the Company and/or its subsidiaries who on or after the Effective Date: (a) is entitled to an accrued benefit under the Pension Plan Supplement; and (b) has Earnings used in the determination of "Average Monthly Earnings" (each as defined in the Pension Plan Supplement) during any period which exceed the maximum amount of such Earnings which may be into account under Code Section 401(a)(17) as may be amended from time to time, and any rulings or regulations promulgated thereunder or the terms of the Pension Plan Supplement implementing such Code Section (the "401(a)(17) Earnings Limitation") in determining the amount of such accrued benefit payments under the Pension Plan Supplement, shall be a "Participant" in this Special Retirement Plan and upon retirement shall be entitled to receive the benefit (the "Special Retirement Benefit"), if any, determined in accordance with Article 4 hereof. 3.2 Beneficiary. The spouse or other person entitled to a benefit under the Pension Plan Supplement upon the death of a Participant hereunder shall, upon the death of the Participant, be a "Benefi- - 2 - 3 ciary" under this Special Retirement Benefit Plan entitled to receive the Special Retirement Benefit, if any, determined in accordance with Article 4 hereof. ARTICLE 4 4.1 Amount of Special Retirement Benefit. The amount of Special Retirement Benefit which a Participant or Beneficiary shall accrue and be entitled to receive and the Company shall be obligated to pay under this Special Retirement Plan with respect to each Plan Year applicable to the Pension Plan Supplement shall be equal to the excess, if any, of the amount described in paragraph (a) of this Section 4.1 over the amount described in paragraph (b) of this Section 4.1: (a) The amount of the annual benefit which would have been accrued with respect to such Participant or Beneficiary under the Pension Plan Supplement as of the last day of the Plan Year under the terms of the Pension Plan Supplement as in effect on the last day of the Plan Year if such benefit were computed by including in the Participant's "Earnings" used in the determination of "Average Monthly Earnings" (each as defined under the Pension Plan Supplement) the amount of "Participant Contributions" made by the Participant under the Inland Steel Industries Nonqualified Thrift Plan as if such amounts had otherwise been paid currently to the Participant, and without giving effect to the 401(a)(17) Earnings Limitation or the limitations imposed by Code Section 415. (b) The sum of the amount of the annual benefit which was accrued for the Participant or Beneficiary with respect to such Plan Year under (i) the terms of the Pension Plan Supplement as in effect on the last day of such Plan Year plus (ii) the terms of the Inland Steel Industries Supplemental Retirement Benefit Plan for Covered Employees. It is the intent of this Section 4.1 that the Special Retirement Benefit described above shall be determined at all times in a manner consistent with the then current 401(a)(17) Earnings Limitation and the limitations imposed by Code Section 415. Accordingly, the determinations made pursuant to this Section 4.1 shall be based upon adjustments employed in determining the amount of the annual benefit described above, and shall be subject to adjustments which reflect the 401(a)(17) Limitation and the limitations imposed by Code Section 415 with respect to the computation of benefits under the Pension Plan Supplement. If a Participant receives a single sum distribution under the Pension Plan Supplement, but has elected another form of benefit under this Special Retirement Benefit Plan, the amount of the annual benefit payable under this Special Retirement Benefit Plan in each Limitation Year shall be the same as that payable in the year in which the single sum distribution is - 3 - 4 made. Except as provided in Section 5.3 hereof, no Special Retirement Benefit shall be payable to any Participant or his Beneficiaries hereunder unless at the time of the Participant's termination of employment with the Company and all Affiliates the Participant has been credited with at least five Years of Vesting Service under the Pension Plan Supplement. 4.2 Payment of Special Retirement Benefit. (a) Except as provided hereinafter, the Special Retirement Benefit which a Participant or Beneficiary is eligible to receive shall be paid by the Company at such time, in the same form and subject to the same conditions, as is the benefit paid to such Participant or Beneficiary under the Pension Plan Supplement. (b) (i) The Committee, in its sole discretion and after considering the needs and circumstances of the Participant or Beneficiary concerned, may at any time elect to direct payment of the Special Retirement Benefit to the Participant or Beneficiary in any form of benefit provided under the Pension Plan Supplement, including a lump sum. (ii) A Participant or Beneficiary may in writing request payment of his Special Retirement Benefit in a form other than the form of benefit payment under the Pension Plan Supplement. After receiving such a request, the Committee shall consider the request and the circumstances on which it is based and shall, in its sole discretion, approve or disapprove the request and inform the requesting Participant or Beneficiary of its decision. (iii) Any optional form of benefit shall be the actuarial equivalent of the benefit otherwise payable to the Participant or Beneficiary, determined by applying the appropriate interest rate and other actuarial assumptions then set forth in the Pension Plan Supplement. (c) The Company may purchase an annuity with respect to any portion of a Participant's accrued Special Retirement Benefit in full satisfaction thereof to the extent provided by paragraphs (a) through (i) of Section 4.4 and shall be obligated to purchase an annuity or make a lump sum payment to the extent provided by paragraph (j) of Section 4.4. 4.3 Pension Plan Supplement Increase. In the event the Pension Plan Supplement is amended to increase the benefit payable to participants or beneficiaries then receiving pensions under the Pension Plan Supplement, benefits payable under this Special Retirement Benefit Plan shall be adjusted or commenced accordingly for Participants or Beneficiaries; provided - 4 - 5 that no such adjustment shall be made if the Participant received a single sum distribution under this Special Retirement Benefit Plan; and provided, further, that no such adjustment shall be made with respect to any portion of a Participant's accrued Special Retirement Benefit for which an annuity has been purchased under Section 4.4. 4.4 Purchase of Annuities. The Company may at any time, in the sole discretion of the Committee or the Company's Board of Directors, purchase one or more annuities with respect to all or any portion of the Special Retirement Benefit accrued under the Plan by any Participant, subject to the following: (a) The Company shall not be obligated to purchase an annuity for any Participant or for any portion of a Participant's accrued Special Retirement Benefit, notwithstanding the purchase of an annuity with respect to any other Participant or any other portion of the Participant's accrued Special Retirement Benefit. (b) The purchase of annuities under this Section 4.4 shall be limited to Special Retirement Benefits accrued by Participants who meet all of the following requirements: (i) completion of at least five years of Vesting Service under the Pension Plan Supplement; (ii) annual compensation in excess of $150,000; and (iii) attainment of age 55. (c) Any such annuity purchased with respect to any Participant's accrued Special Retirement Benefit shall be issued to and distributed to such Participant, who shall be the sole owner of such annuity and shall contain such terms not inconsistent with this Section 4.4 as the Committee shall determine in its sole discretion. (d) Annuity payments to a Participant under any such annuity shall commence as of the date on which the Participant attains age 65 or the first day of the month thereafter; provided, however, that any such annuity may provide that, in the event of the Participant's death prior to attainment of age 65, benefits payable to any Beneficiary may commence as of any earlier date provided by the terms of the annuity. (e) The monthly benefit amount to be provided by any such annuity shall be such amount as the Committee, in its sole discretion, determines would provide, on an after-tax basis, an amount equal to the amount estimated to be the after-tax benefit to the Participant of monthly benefits payable by the - 5 - 6 Company commencing at age 65 under Section 4.2. Such determination shall be made by the Committee, in its sole discretion, based upon such rates and factors as the Committee, in its sole discretion, deems appropriate. No change in annuity benefits shall be required by reason of any subsequent change in such rates and factors; provided, however, that in determining the amount of any subsequent annuity purchased under this Section 4.4, the Committee may, in its sole discretion, take into account any change in such rates and factors and the benefits payable under any annuity previously purchased under this Section 4.4. Notwithstanding the foregoing, with the consent of the Participant, the Committee may substitute any form of fixed or variable annuity in lieu of the annuity otherwise provided by this paragraph (e), provided that such substitution does not result in a change in the cost of the annuity or the commencement date of the annuity payments. (f) The Company shall make a tax gross-up payment to any Participant for whom an annuity is purchased under this Section 4.4 in such amount as the Committee shall determine, in its sole discretion, would be necessary to make such Participant whole for federal, state and local income taxes attributable to the receipt of the annuity and the gross-up payment, based upon such tax rates as the Committee shall determine in its sole discretion. (g) To the extent that the Company has purchased an annuity under this Section 4.4 with respect to any portion of a Participant's accrued Special Retirement Benefit, such annuity and the tax gross-up payment under paragraph (f) above shall be in full satisfaction of all obligations of the Company to the Participant or any Beneficiary of the Participant attributable to such portion of the Participant's accrued Special Retirement Benefit. (h) A purchase of an annuity under this Section 4.4 shall have no effect on the monthly benefits payable to the Participant under Sections 4.1 and 4.3 prior to the Participant's attainment of age 65. In the event of the Participant's death prior to attainment of age 65, the benefit payable to any Beneficiary of the Participant shall be determined solely on the basis of the monthly benefits which would otherwise have been payable to the Participant under the Plan prior to attainment of age 65 and taking into account the amount payable to the Beneficiary under the Pension Plan Supplement. (i) This Section 4.4 shall apply to Special Retirement Benefits accrued by any Participant under the Plan prior to October 1, 1993, only if such Participant consents (in such manner and at such time as the Committee may require) to such application and waives any right which the Participant might otherwise be entitled to assert under Section 5.2 by reason of - 6 - 7 the adoption and application to the Participant of this Section 4.4. (j) If an annuity has not been purchased in accordance with the foregoing provisions of this Section 4.4 with respect to any portion of the accrued Special Retirement Benefit payable after attainment of age 65 to a Participant who meets all of the requirements of paragraph (b) above and who has executed a consent and waiver in accordance with paragraph (i) above, then, except for any portion payable in the form of a lump sum in accordance with Section 4.2, upon such Participant's termination of employment with the Company and its affiliates, the Company shall, as soon as practicable thereafter, purchase an annuity for such portion in accordance with paragraphs (c) through (h) above. ARTICLE 5 5.1 Amendment to Conform with Law. The Company may by amendment make such changes in, additions to, and substitutions in the provisions of this Special Retirement Benefit Plan, to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of conforming this Special Retirement Benefit 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. 5.2 Other Amendments and Termination. The Company may amend or terminate this Special Retirement Benefit Plan at any time, without the consent of any Participant or Beneficiary. Notwithstanding the foregoing, this Special Retirement Benefit 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 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 cancelled; provided that, in the event the Pension Plan Supplement is terminated or curtailed with the result that pension payments to retired employees and survivor and contingent annuity payments to beneficiaries are discontinued or reduced, the Special Retirement Plan Benefit then being paid or in the future payable pursuant to the Special Retirement Benefit Plan shall similarly be discontinued or reduced in the same ratio as payments under the Pension Plan Supplement are discontinued or reduced. 5.3 Effect of Change in Control. (a) In the event of a Change in Control (as defined below), all benefits accrued as of the date such Change in Control hereunder shall become full (i.e., 100%) and irrevocably vested and - 7 - 8 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 Committee 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 Company with a bank or corporate trustee pursuant to one or more "rabbi trusts". (b) For purposes of this Section 5.3, a "Change in Control" shall be deemed to have occurred if: (i) 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 (A) the Company or any of its subsidiaries, (B) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries, (C) an underwriter temporarily holding securities pursuant to an offering of such securities, or (D) 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 (not including any period prior to November 22, 1989), individuals who at the beginning of such period constitute the Board of Directors of the Company 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), (iii) or (iv) of this paragraph (b)), 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) 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 the Company or any of its - 8 - 9 subsidiaries, at least 80% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (B) 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. (c) The provisions of this Section 5.3 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 Special Retirement Benefit 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 Pension Plan Supplement as of the date of the Change in Control, both immediately prior to the Change in Control and at the date of such amendment. 5.4. Manner and Form of Amendment or Termination. Any amendment or termination of this Special Retirement Benefit Plan by the Company shall be made only by action of the Board of Directors of the Company or any officer of the Company duly authorized by the Board of Directors. Certification of any amendment or termination of this Special Retirement Benefit Plan shall be furnished to the Committee by the Company. 5.5 Notice of Amendment or Termination. The Committee shall notify Participants or Beneficiaries who are affected by any amendment or termination of this Special Retirement Benefit Plan within a reasonable time thereof. ARTICLE 6 6.1 No Right to Employment, etc. Neither the creation of this Special Retirement Benefit Plan nor anything contained herein shall be construed as giving any Participant hereunder or other employees of the Company or any subsidiary any right to remain in the employ of the Company or any subsidiary. - 9 - 10 6.2 Successors and Assigns. All rights and obligations of this Plan shall inure to, and be binding upon the successors and assigns of the Company. 6.3 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 interest in any payments under this Special Retirement Benefit 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. 6.4 Incompetency. If any Participant or Beneficiary is, in the opinion of the Committee, legally incapable of giving a valid receipt and discharge for any payment, the Committee 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 Committee 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 Special Retirement Benefit Plan to the extent of and as to that payment, and neither the Committee nor the Company will have any obligation regarding the application of the payment. 6.5 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 Special Retirement Benefit Plan. 6.6 Severability. If any provisions of this Special Retirement Benefit Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Special Retirement Benefit Plan, but this Special Retirement Benefit Plan shall be construed and enforced as if the illegal and invalid provisions never had been included herein. 6.7 Limitations on Provisions. The provisions of this Special Retirement Benefit Plan and any Special Retirement Benefits shall be limited as described herein. Any benefit payable under the Pension Plan Supplement shall be paid solely in accordance with the terms and provisions of the - 10 - 11 Pension Plan Supplement, as appropriate, and nothing in this Special Retirement Benefit Plan shall operate or be construed in any way to modify, amend, or affect the terms and provisions of the Pension Plan Supplement. 6.8 Gender and Number. Whenever the context requires or permits, the gender and number of words shall be interchangeable. ARTICLE 7 7.1 Application for Benefits and Review Procedures. The Inland Steel Industries Claims Procedure set forth in the Pension Plan Supplement shall apply to any claim for benefits under this Special Retirement Benefit Plan. The "Plan Administrator" for purposes of applying such Claims Procedure to this Special Retirement Benefit Plan shall be the Committee. INLAND STEEL INDUSTRIES, INC. By: /s/ Judd R. Cool Judd R. Cool Vice President, Human Resources Date: July 25, 1990 - 11 - EX-10.M 8 EXHIBIT 10 M 1 Exhibit 10.M INLAND STEEL INDUSTRIES, INC. DIRECTOR RETIREMENT PLAN AS AMENDED AND RESTATED THROUGH AND INCLUDING JANUARY 26, 1994 1. PURPOSE. The purpose of the Director Retirement Plan (the "Plan") of Inland Steel Industries, Inc. (the "Company") is to provide retirement income to members of the Board of Directors of the Company who serve as non-employee Directors for a specified number of years. 2. ELIGIBILITY. Each present and future member of the Board of Directors of the Company (other than any Director who was previously an officer or other employee of the Company or any subsidiary of the Company and who is receiving or has received or is eligible to receive any benefit or benefits under any pension plan of the Company or any of its subsidiaries) who (a) completes at least ten years of continuous service as a non-employee Director or (b) completes at least five years of continuous service as a non-employee Director and remains on the Board of Directors until age 70 shall be eligible to participate in the Plan. 3. BENEFITS. Benefits shall be paid to an eligible Director in quarterly installments equal to one-fourth of the annual retainer for services as a member of the Board of Directors in effect at the time of the last Board meeting attended by such Director. The payment of benefits shall begin in the calendar quarter following the date on which an eligible Director ceases to be a member of the Board of Directors, provided, however, that if such Director has not then attained the age of 65, the payment of benefits shall begin in the calendar quarter following the attainment of age 65 by such Director. The payment of benefits shall continue for the number of full years of non-employee service by such eligible Director up to a maximum of ten years. Except as otherwise provided in paragraph 4 hereof, such payments shall terminate on the death of such Director. 4. SURVIVOR BENEFIT. In the event of the death of a former Director who is receiving benefits under the Plan or who would be entitled to receive benefits upon his or her attainment of age 65 or in the event of the death of any Director who would be entitled to receive benefits thereunder if he or she had ceased to be a Director on or prior to the date of his or her death, any benefits that would otherwise have been payable thereafter to such Director shall be paid to such legal or natural person as is designated by the Director as his or her beneficiary in a writing filed prior to the Director's death with the Secretary of the Company. If a Director fails to so designate a beneficiary, the Director's surviving spouse, if any, will be deemed to have been designated as the beneficiary. Any beneficiary designation filed with the Secretary of 2 - 2 - the Company may provide that, in lieu of the payments to which the beneficiary would otherwise be entitled, the beneficiary shall be paid a lump sum amount which is equal to the present value of such payments. In the event that any retirement benefits otherwise payable to a Director are not paid prior to the last to die of the Director and the Director's beneficiary, the present value of the remaining payments shall be paid in a lump sum to the estate of the Director or the Director's beneficiary, whichever is the last to die. For purposes of the Plan, present value shall be determined by using a discount factor equal to the interest rate applied by the Pension Benefit Guaranty Corporation for purposes of valuing immediate annuities on the date of death of the Director or beneficiary, as the case may be. 5. BENEFITS NOT TRANSFERABLE. The interest of a Director or surviving spouse in benefits under the Plan is personal to such Director or surviving spouse and may not be assigned or otherwise transferred by him or her. Any payment to which a Director or surviving spouse may be entitled under the Plan shall be free from the control or interference of any creditor of such Director or surviving spouse and shall not be subject to attachment or susceptible of anticipation or alienation. 6. FUNDING NOT REQUIRED. The Company shall not be required to establish any fund or segregate or set aside any moneys for the payment of benefits under the Plan. 7. PAST SERVICE. Past service as a Director of the Company on the effective date of the Plan and past service as a Director of Inland Steel Company prior to May 1, 1986 shall be considered service for purposes of the Plan. 8. EFFECTIVE DATE. The effective date of the Plan is May 1, 1988. EX-10.O2 9 EXHIBIT 10.O2 1 Exhibit 10.O.(2) Robert J. Darnall W. Gordon Kay David B. Anderson Jay E. Dittus EX-10.O8 10 EXHIBIT 10.O 8 1 Exhibit 10.O(8) Inland Steel Industries, Inc. 30 West Monroe Street Chicago, Illinois 60603 March 23, 1994 Vicki L. Avril Inland Steel Industries, Inc. 30 West Monroe Street Chicago, Illinois 60603 Dear Ms. Avril: Inland Steel Industries, Inc. (together with its subsidiaries, the "Company") considers it essential to the best interests of its stockholders to foster the continuous employment of key management personnel. In this connection, the Board of Directors of the Company (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 the Company 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, although no such 2 March 23, 1994 Page 2 change is now contemplated. 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, the Company 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) under the circumstances described below. 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. 1. Term of Agreement. This Agreement shall commence on the date hereof and shall continue in effect through December 31, 1994; provided, however, that commencing on January 1, 1995 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Company shall have given notice that it does not wish to extend this Agreement; provided further, if a 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 occurred. 2. Change in Control. (i) No benefits shall be payable hereunder unless there shall have been a change in control of the 3 March 23, 1994 Page 3 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 or any of its subsidiaries, (x) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries, (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; (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 the Company to effect a transaction described in clauses (A), (C) or (D) 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 4 March 23, 1994 Page 4 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 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 the Company, at least 80% 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 (D) 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 the Company's assets. (ii) For purposes of this Agreement, a "potential change in control of the Company" shall be deemed to have occurred if (A) the Company 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 the Company) publicly announces 5 March 23, 1994 Page 5 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 or any of its subsidiaries, (x) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries, (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, who is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 9.5% or more of the combined voting power of the Company's then outstanding 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. 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. (iii) The foregoing to the contrary notwithstanding, a change in control shall not be deemed to have occurred with respect 6 March 23, 1994 Page 6 to you if (A) the event first giving rise to the potential change in control 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 of Directors and (B) you are "part of a purchasing group" proposing the transaction. A change in control shall also not be deemed to have occurred with respect to you if you are part of a purchasing group which consummates the change in control transaction. You shall be deemed "part of a purchasing group" for purposes of the two preceding sentences 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 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 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 7 March 23, 1994 Page 7 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 in accordance with the Company's retirement policy, including early retirement, 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, 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 8 March 23, 1994 Page 8 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 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 other than any such 9 March 23, 1994 Page 9 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 75 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 present business travel obligations; (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 Company's Annual Incentive Plan, Inland Special Achievement Award Plan, Inland 1986 Employee Stock Purchase Plan, Inland 1992 Incentive Stock Plan, Supplemental Retirement Benefit Plan, Special Retirement Benefit Plan, Inland Steel Industries Non-Qualified Thrift Plan, Inland Steel Industries Pension 10 March 23, 1994 Page 10 Plan and the Inland Steel Industries 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, or disability plans 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 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 the Company to obtain a satisfactory agreement from any successor to assume and agree to perform 11 March 23, 1994 Page 11 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 (iv) below (and, if applicable, the requirements of Subsection (ii) above); for purposes of this Agreement, no such purported termination shall be effective. Your right to terminate your employment pursuant to this Subsection 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 12 March 23, 1994 Page 12 employment is terminated pursuant to Subsection (ii) or (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 (ii) above shall not be less than thirty (30) days, and in the case of a termination pursuant to Subsection (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); 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 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 13 March 23, 1994 Page 13 plans 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. Amounts paid under this Subsection 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 Inland Steel Industries Pension Plan, Supplemental Retirement Benefit Plan or Special Retirement Benefit Plan during such period, until this Agreement is terminated pursuant to Section 3(i) hereof. Thereafter, or in the event your employment shall be terminated by the Company or by you for Retirement, or by reason of your death, your benefits shall be determined under the Company's retirement, insurance and other compensation programs then in effect in accordance with the terms of such programs. (ii) If your employment shall be terminated by the Company for Cause or by you other than for Good Reason, Disability, 14 March 23, 1994 Page 14 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 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 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 payment (together with the payments provided in paragraphs C, D and E below, the "Severance Payments") equal to two 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 aggregate amount of the Award paid to you pursuant to the Annual Incentive Plan or similar predecessor or successor 15 March 23, 1994 Page 15 plan with respect to the two years preceding that in which the Date of Termination occurs. (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 the Company ("Company Shares") issuable upon exercise of outstanding options ("Options"), if any, granted to you under the Company'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 Code) ("ISOs") granted after the date hereof, the closing price of the Company's shares as reported on the New York Stock Exchange Composite Tape on or nearest the Date of Termination, or (y) in the case of all other Options, the higher of such closing price or the highest 16 March 23, 1994 Page 16 per share price for Company Shares actually paid in connection with any change in control of the Company, over the per share exercise price of each Option held by you (whether or not then fully exercisable), times (ii) the number of Company Shares covered by each such option. (E) in lieu of Company Shares awarded or issuable to you as performance and/or restricted shares, if any, pursuant to the Inland 1992 Incentive Stock Plan, the Inland 1988 Incentive Stock Plan, the Inland 1984 Incentive Stock Plan or similar successor plan (which Company Shares 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 higher of the closing price of Company Shares as reported on the New York Stock Exchange Composite Tape on the Date of Termination or the highest per share price for Company Shares actually paid in connection with any change in control of the Company times (ii) the total of the number of restricted shares awarded to you and then outstanding pursuant to the Inland 1992 Incentive Stock Plan, the Inland 1988 Incentive Stock Plan, the Inland 1984 Incentive Stock Plan and/or any similar successor plan, plus a number of performance shares equal to the total number of performance shares paid or payable to you with respect to the two immediately preceding performance periods under any performance award or awards made pursuant to the Inland 1992 Incentive Stock Plan and/or any similar successor plan. 17 March 23, 1994 Page 17 (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 (I) 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 the Executive becomes 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 Internal Revenue Code of 1986, as amended (the "Code"), the Company shall pay to the Executive, 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 the Executive, after deduction of any Excise Tax on the Contract Payments and such other Total Payments and any federal and state and local income tax and Excise Tax upon the payment provided for by this subsection, shall be equal to the Contract Payments and such other Total Payments. 18 March 23, 1994 Page 18 (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 the Executive in connection with a change in control of the Company or the Executive's 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 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)(1) of the Code shall be treated as subject to the Excise Tax unless in the opinion of tax counsel selected by the Company's independent auditors and reasonably acceptable to the Executive, 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)(B) of the Code, in excess of the base amount allocable to such reasonable compensation 19 March 23, 1994 Page 19 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)(1) 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 the Company'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, the Executive 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 the Executive's 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 the Executive's employment, the Executive 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- 20 March 23, 1994 Page 20 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 the Executive 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 the Executive's 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 to 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 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 21 March 23, 1994 Page 21 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 twenty-four (24) 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 twenty-four (24) month period following your termination, and any such benefits actually received by you shall be reported by the Company. (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 Inland Steel Industries Pension Plan, Supplemental Retirement Benefit Plan or Special Retirement Benefit Plan or any successor plans thereto, the Company shall pay you in cash at the time and in the manner provided in paragraph (K) 22 March 23, 1994 Page 22 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 substitute 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 Inland Steel Industries Pension Plan (without regard to any amendment to the Inland Steel Industries Pension Plan 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) twenty-four (24) additional months of service credit thereunder at your highest annual rate of compensation during the twelve (12) months immediately preceding the Date of Termination, over (y) the actuarial equivalent of the retirement pension (taking into account any early retirement substitute 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 greater benefit) which you had then accrued pursuant to the provisions of the Inland Steel Industries Pension Plan. For purposes of this Subsection, "actuarial equivalent" shall be determined using the same assumptions utilized under the Inland Steel Industries Pension Plan for purposes of determining 23 March 23, 1994 Page 23 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. (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 Inland Steel Industries Pension Plan, the Inland Steel Industries Thrift Plan, Supplemental Retirement Benefit Plan, Special Retirement Benefit Plan, Inland Steel Industries Non-Qualified Thrift Plan and any other plan or agreement relating to retirement benefit. 5. Successors; Binding Agreement. (i) The Company 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 the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company 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 24 March 23, 1994 Page 24 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. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. (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 Company shall be directed to the attention of the Board with a copy to the Secretary of the Company, or to 25 March 23, 1994 Page 25 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 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 26 March 23, 1994 Page 26 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 the Executive 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 the Executive 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 the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's 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. 27 March 23, 1994 Page 27 If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely, INLAND STEEL INDUSTRIES, INC. By \s\ Judd R. Cool ----------------------------------- Judd R. Cool Vice President - Human Resources Agreed to this 23rd day of March 1994 /s/ Vicki L. Avril - ------------------------ EX-10.P3 11 EXHIBIT 10 P 3 1 Exhibit 10.P.(3) December 10, 1993 Mr. Judd R. Cool Vice President-Human Resources 0 F F I C E This letter will clarify, restate and supersede in their entirety all provisions for supplemental pension and other benefits arrangements referred to (a) under the heading "Benefits" in that certain letter from Frank W. Luerssen, as Chairman and Chief Executive Officer of Inland Steel Industries, Inc. ("the Company"), to you dated September 2, 1987 and (b) in that certain letter from Frank W. Luerssen to you dated November 23, 1987. A. Supplemental Pension Benefits Upon your retirement as an employee of the Company, the Company will make supplemental pension payments to you equal to the excess, if any, of payments you would have received under the Company's qualified and non-qualified pension plans as if your total Company and prior employer's (Kennecott's) service and earnings were included in the calculation of benefit payments under such plans over (i) payments you would receive from your prior employer's qualified and non-qualified pension plans (based on your actual vested benefits under those plans, but paid on the commencement date and in accordance with the annuity form of payment under the Inland Steel Industries Pension Plan Supplement For Salaried Employees of Inland Steel Industries, Inc. and Certain Subsidiaries (the "Plan")) and (ii) payments you actually receive from the Company's qualified and non-qualified pension plans. Any such supplemental pension benefits paid to you or to your Surviving Spouse (as defined in the Plan) shall begin upon the commencement of payments under the Company's pension plans and shall be of the same annuity form as benefit payments made under the Plan, provided, however, that upon your death at any time prior to or after your retirement, your Surviving Spouse will be deemed to be immediately eligible to receive a Surviving Spouse Benefit (as defined in the Plan), and provided, further, that if you had not attained the age of 62 at the time your Surviving Spouse first becomes entitled to receive any supplemental pension payments hereunder, the amount of such payments shall be calculated as if you had then attained such age and for service purposes had continued to be employed by the Company until the attainment of such age. 2 -2- B. Salary Continuation Benefit You shall be entitled to a monthly salary continuation benefit on your retirement at or after age 60 or on your attainment of age 60 under certain other circumstances. The amount of such benefit shall be one two hundred fortieth (1/240) of your Salary Continuation Benefit Amount (referred to below), payable to you on the first day of each month during the period commencing with the month immediately following your retirement at or after age 60 and ending with the two hundred fortieth (240th) payment. If your employment with the Company terminates prior to your attainment of age 60 for any reason other than your voluntary resignation or for cause, and if you thereafter live to age 60, you will be entitled to this benefit for a period commencing with the month immediately following your attainment of age 60 and ending with the two hundred fortieth (240th) payment. The Salary Continuation Benefit Amount referred to above, which is a percentage of your annual base salary at retirement (or in the event that the immediately preceding sentence applies, 360% of your annual base salary at the time your employment with the Company terminates), shall be determined in accordance with the following table:
Salary Continuation Benefit Amount (% of Annual Base Your Age at Retirement Salary at Retirement) ---------------------- --------------------- 60 360% 61 380 62 or more 400
If you die prior to receiving all monthly salary continuation benefit payments to which you are entitled in accordance with these provisions, all remaining payments shall be made to your spouse (payable to her on the first day of each month during the remainder of the period), or if she has predeceased you or dies prior to receiving all payments to which she is entitled, a lump sum amount equal to the present value of all then remaining monthly payments shall be made to your estate. The discount rate for purposes of calculating the present value of such payments shall be the interest rate used by the PBGC in valuing immediate benefits. C. Life Insurance Coverage The Company will provide you with insurance on your life having a death benefit equal to (a) during the period of your employment with the Company, 300% of your then annual base salary (determined as of each January 1 during such period) and (b) upon your retirement from the Company and thereafter during your lifetime, 60% of the death benefit in force at the time of your 3 -3- retirement (with the other 40% of such coverage to be retained by you, in whole or in part, at your option, and at your own personal expense). If the life insurance program of the Company for eligible employees and retirees provides for death benefits in your case that are less than the amount or amounts stipulated above, the Company will provide you with such additional insurance on your life as may be necessary to provide the stipulated coverage. For this purpose, you agree to cooperate fully with the company in the acquisition of such life insurance (or additional life insurance, as the case may be), on a term or whole-life basis, through the purchase of life insurance on a "split-dollar" basis, by the exercise of any conversion option available to you under the Company's life insurance program for eligible employees and retirees, or otherwise; and it is understood that your interest and(or) the interest of any beneficiary in such life insurance shall be limited to the death benefit provided thereunder. All Federal, state and local income taxes payable with respect to the acquisition and maintenance of any insurance on your life shall be for your account. D. Retiree Health Care Coverage If you are not eligible on your retirement, or if your spouse is not eligible on your death prior to your retirement, to participate in the Company's health care program then in force for eligible retirees and their spouses, the Company will thereafter provide you and(or) your spouse with such health care coverage as may from time to time be provided by the Company for eligible retirees and their spouses, subject to the following: (a) the coverage provided to you and (or) your spouse will be subject to all of the terms, limitations and conditions of such coverage, other than the requirement that you complete at least 10 years of service for eligibility for such coverage; (b) you (or your spouse) shall be required to make the contributions that are generally required of other retirees (or their spouses) from time to time; and (c) to the extent determined by the Company, the value of the coverage in excess of the amount described in paragraph (b) shall be reported as taxable income to you (or your spouse) each year. To the extent that the value of the health care coverage provided to you (or your spouse) is includible in your income (or your spouse's income) for income tax purposes pursuant to paragraph (c) above and to the extent such amounts would not be includible in your income (or your spouse's income) for income tax purposes if you had continued in the employ of the Company until such time as you would otherwise have been eligible for coverage under the 4 -4- Company's health care program for eligible retirees and their spouses, the Company will pay to you (or your spouse) each year an amount which is equal to the sum of: (1) the aggregate amount of additional Federal, state or local income taxes payable by you (or your spouse) for that year as a result of the fact that the value of the health care coverage was includible in your taxable income (or your spouse's taxable income) pursuant to paragraph (c) above; (2) the aggregate amount of additional Federal, state and local income taxes payable by you (or your spouse) for that year as a result of the payment made to you (or your spouse) pursuant to paragraph (1). Nothing in this Agreement shall require, or shall be construed so as to require, the Company or any of its affiliates to establish, maintain or continue to maintain any health care program for retirees of the Company or their spouses. Please acknowledge your agreement with respect to these matters by signing and returning to me the enclosed copy of this letter. Sincerely, /s/ Robert J. Darnall -------------------------- Robert J. Darnall Chairman, President and Chief Executive Officer Acknowledged and agreed to this 13th day of December, 1993. /s/ Judd R. Cool - --------------------------- Judd R. Cool EX-10.T 12 EXHIBIT 10 T 1 Exhibit 10-T APPLICATION AND AGREEMENT FOR IRREVOCABLE STANDBY LETTER OF CREDIT Instructions: (A) Applicant(s) should consult with a Bank officer before completing this Application and Agreement. Items 1, 2, 3, 4, 5, and 6 must be fully completed. (B) This Application and Agreement must be dated on the date it is executed by the Applicant(s). (C) Each Applicant must properly execute this Application and Agreement in the space provided. (D) Read the Terms and Conditions set forth on the reverse side hereof.
Issuing Bank: Letter of Credit Number (To Be Completed by Bank) Trust Company Bank International Division Letter of Credit Fee P.O. Box 4418 (To Be Completed by Bank) Atlanta, Georgia 30302 1. APPLICANT(S): (Insert full name and address of 2. BENEFICIARY: (Insert full name and each person or entity who is applying to address of the person or entity who Issuing Bank for issuance of the Letter of shall be entitled to draw under the Credit) Letter of Credit) J. M. Tull Metals Company, Inc. W. Gordon Kay 4400 Peachtree Industrial Blvd. 6940 Hunters Knoll Norcross, GA 30071 Atlanta, GA 30328 3. AMOUNT OF LETTER OF CREDIT: (Amount stated is 4. EXPIRATION DATE OF LETTER OF CREDIT United States Dollars unless specifically stated otherwise.) February 1, 1995 $421,289.65
2 5. Each Applicant hereby applies for and authorizes Issuing Bank to issue its Irrevocable Standby Letter of Credit in the amount set forth in item 3 above in favor of the Beneficiary, for the account of Applicant(s), available by sight draft or drafts drawn by Beneficiary and presented to Issuing Bank by the close of the business day on the expiration date set forth in item 4 above. Each such draft must be accompanied by a signed and dated statement of the Beneficiary stating as follows (If none, so state): SEE ATTACHED 6. Each Applicant agrees that Issuing Bank shall include the following special provisions in the Irrevocable Standby Letter of Credit issued pursuant to this Application and Agreement (If none, so state): SEE ATTACHED To induce Issuing Bank to issue its Irrevocable Standby Letter of Credit in the above tenor, and in consideration of such issuance, each Applicant hereby agrees to the above provisions and to all of the Terms and Conditions set forth on the reverse side hereof which Terms and Conditions are incorporated herein by this reference. Executed under hand and seal on the 17th day of December, 1993. APPLICANT(S) /s/ J. E. Dittus 2 3 Each person or entity signing the reverse side hereof as an "Applicant" hereby agrees as follows: 1. That the following terms as used herein shall have the meanings hereinafter set forth: (A) The term "Applicant" as used herein shall mean each Applicant individually and any two or more Applicants collectively. (B) The term "Beneficiary" shall mean the person or entity that shall be entitled to draw under the Irrevocable Standby Letter of Credit issued pursuant to this Application and Agreement. (C) The term "Bank" shall mean the Issuing Bank set forth on the reverse side hereof. (D) The term "Credit" shall mean the Irrevocable Stand by Letter of Credit issued pursuant to the terms of this Application and Agreement. 2. To pay to Bank in cash or immediately available funds, the amount of each draft drawn under or purporting to be drawn under the Credit, such payment to be made immediately upon demand by Bank. Such payment to Bank will be made by Applicant at Bank's main office, in lawful money of the United States of America. As to drafts which are payable in currency other than United States currency, the amount to be paid by Applicant will be the amount required to purchase the currency from Bank at Bank's current selling rate for cable transfers to the place of payment in the currency and amount in which such draft was drawn. If there is then no current selling rate generally offered by Bank for effecting such cable transfers, Applicant agrees on demand to pay Bank an amount which Bank then deems necessary to pay or provide for the payment of Applicant's obligations hereunder. By prior arrangement satisfactory to Bank, as to any draft payable in currency other than United States currency, Applicant may pay to Bank the amount of such draft by making such amount immediately available to Bank by the deposit of such amount (in the currency in which such draft is payable) to an account maintained by Bank at a financial institution to be specified by Bank. Notwithstanding the manner of payment or the currency in which any draft is drawn, Applicant shall remain liable for any deficiency which may result if the actual cost to Bank of settlement of Bank's obligation under the Credit proves to be in excess of the amount so paid by Applicant and Applicant shall be entitled to a refund, without interest, of any excess 3 4 payment made to Bank. 3. To pay to Bank on demand, with respect to the Credit, a fee at such rate as Bank may determine to be proper, and any and all charges and expenses which may be paid or incurred by Bank in connection with the Credit. If a change in any law or regulation, or in the interpretation thereof by any court or administrative or governmental authority, or in relevant accounting principles, shall impose, modify or deem applicable any reserve, capital requirement, special deposit, fee, assessment or similar requirement with respect to any Credit issued or committed to pursuant to this Application and Agreement, which change directly or indirectly increases the expense to Bank of issuing, committing to issue, or maintaining in effect said Credit, then, upon demand by Bank and its certification of said increased expense, the Applicant shall promptly reimburse Bank for such expense. 4. To pay to Bank on demand interest on any and all amounts not paid when due or payable hereunder at a rate per annum equal to five percentage points above Bank's prime rate (as publicly announced) from time to time in effect (which interest rate shall change simultaneously with any change in the Bank's prime rate) but in no event shall the interest rate so charged exceed the highest interest rate permitted by applicable law, if any. 5. Applicant agrees, at any time and from time to time, on Bank's demand to deliver, transfer or assign to Bank such property of a value and character satisfactory to Bank (including but not limited to cash collateral if Bank so requests) which shall be held by Bank as collateral for: (a) any and all obligations and liabilities of Applicant to Bank hereunder, and (b) any and all other obligations and liabilities of Applicant to Bank, whether now existing or hereinafter arising, due or to become due, whether individually or jointly with others, and whether direct, indirect, absolute or contingent as maker, endorser, guarantor, surety or otherwise. 6. Applicant agrees that all property belonging to Applicant of every kind and nature whatsoever, now or at any time hereafter delivered, conveyed, transferred, assigned or paid to Bank, or coming into Bank's possession or into the possession of anyone for Bank in any manner whatsoever, whether expressly as collateral for any obligations or liabilities of Applicant to Bank, for safekeeping or otherwise, including any items received for collection or transmission and the proceeds thereof, whether or not such property is in whole or in part released to Applicant on trust or bailee receipt, are hereby made collateral for all obligations and liabilities of Applicant to Bank referred to in paragraph 5(a) and (b) above. Applicant further agrees that any indebtedness due or owing to Applicant from Bank may at any time be set off and applied 4 5 against any liability or obligation of Applicant hereunder. 7. An "Event of Default" shall occur hereunder if any one or more of the following events shall occur: (a) If Applicant shall fail to make any payment required to be paid to Bank hereunder as and when such payment is due; or (b) Upon the death of any Applicant who is a natural person or upon the dissolution or termination of existence of any Applicant who is not a natural person; or (c) Any involuntary petition is filed against Applicant under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect and such petition remains undismissed for a period of thirty (30) days or Applicant approves, consents, or acquiesces thereto; or (d) If Applicant makes an assignment for the benefit of creditors or files a voluntary petition seeking relief under any provision of any bankruptcy, reorganization, arrangement, insolvency or readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect; or (e) Applicant shall fail to perform or observe any agreement or undertaking contained in this Application and Agreement including but not limited to the agreement of Applicant to provide Bank with collateral as set forth in paragraph five (5) above; [RIDER A] or (f) Any event shall occur or any condition shall exist in respect of any indebtedness owed by Applicant, [RIDER B] the effect of which is to cause (or permit the holder or owner of such indebtedness to cause) such indebtedness or any portion thereof, to become due prior to its stated maturity or prior to its regularly scheduled dates of Payment; or (g) If judgment for the payment of money in a principal amount in excess of $2,000,000 shall be rendered against Applicant and within thirty (30) days after the entry of said judgment it shall not have been discharged, or execution thereof shall not have been stayed pending an appeal; or (h) If any property ofApplicant which may be in, or come into, the possession or control of Bank or that of any third party acting for the Bank should be attached or distrained or should become subject at any time to any court order or other legal process. 8. Upon the happening of any one or more of the Events of Default referred to above in paragraph seven (7) then at the Bank's option the full amount of the Bank's obligation under the Credit, as well as any and all other amounts payable hereunder to Bank shall, to the extent not theretofore paid to Bank hereunder, thereupon become immediately due and payable from Applicant to Bank in full, without notice or demand of any kind. 9. Should Bank exercise its option to require immediate payment from Applicant pursuant to paragraph eight (8) above Bank shall further have full power and authority to sell assign and convey 5 6 RIDER A , and such failure is not cured to the Bank's satisfaction within fifteen (15) days after Applicant receives written notification of such failure from Bank; 6 7 RIDER B , having an aggregate principal amount at the time outstanding in excess of $5,000,000, 7 8 the whole of the property upon which the Bank has hereinbefore been given a security interest or lien or any part(s) thereof or any substitution(s) therefore or any additions thereto at public or private sale at the option of the Bank, either for cash or on credit or for future delivery without assumption of any credit risk, and without either demand, advertisement or notice of any kind, all of which are hereby waived. If any notification of intended disposition of any of such property is required by law, such notification shall be deemed reasonable and properly given if deposited in the United States mail, first class or certified postage prepaid, at least five (5) days before any such disposition, addressed to the Applicant at the address listed on the reverse side hereof or at the Applicant's address appearing on the records of the Bank. At any sale hereunder, the Bank may itself purchase the whole or any part of the property sold free from any right of redemption on the part of Applicant, all such rights being also hereby waived and released. In event of any sale or other disposition of any of the property aforesaid after deducting all costs or expenses of every kind for care, safekeeping, collection, sale, delivery or otherwise, the Bank may apply the residue of the proceeds of the sale or other disposition thereof to the payment or reduction, either in whole or in part, of all or any of Applicant's obligation and liabilities hereunder, whether then due or not due, and may return any excess to the Applicant, all without prejudice to the rights of the Bank as against the Applicant with respect to any and all obligations which may be or remain unpaid hereunder at any time(s). 10. If prior to Bank paying all or any portion of the Credit, Applicant should provide Bank with any collateral pursuant to paragraph five (5) above or should Applicant make any payment to Bank pursuant to paragraph eight (8) above, and the Beneficiary shall not thereafter draw under the Credit for all or part of the balance remaining unpaid thereon, then within ten (10) days after the termination of Bank's obligation under the Credit, Bank shall return to Applicant all collateral provided to Bank pursuant to paragraph five (5) above or pay to Applicant (without interest) all amounts paid to Bank pursuant to paragraph eight (8) above. 11. That, except as otherwise provided herein or to the extent otherwise specifically provided in item six (6) set forth on the reverse side hereof, the "Uniform Customs and Practice for Documentary Credits (1983 Revision) International Chamber of Commerce Publication No. 400" shall in all respects be deemed a part hereof as fully as if incorporated herein and shall apply to the Credit. 12. The Bank shall not be deemed to have waived or modified any of the Bank's rights hereunder, by course of conduct or otherwise, or under any other writing signed by the Applicant 8 9 unless such waiver or modification shall be in writing and signed by an officer of the Bank and then such waiver or modification shall be effective only for the period and under the terms and conditions as are specifically set forth therein. No delay or omission on the part of the Bank in exercising any right shall operate as a waiver or modification of such right or any other right. No waiver ofany Event of Default on one occasion shall operate as a waiver of any other Event of Default or of the same Event of Default on a future or different occasion. All the Bank's rights and remedies, whether evidenced hereby or by any other writing, shall be cumulative and may be exercised, from time to time, singularly, concurrently, or successively. If any paragraph or any part of this Application and Agreement shall be construed to be illegal or invalid, such paragraph or part thereof shall be considered separately from the remainder hereof and shall have no effect on the validity or legality of the remainder of this Application and Agreement. 13. Bank shall not be responsible for, nor shall Bank be under any obligation to verify (a) the truth, accuracy, or existence of any facts or information contained in any statement or document required to be presented with any draft drawn hereunder; or (b) the genuineness or authenticity of any such document or statement; or (c) the genuineness of any signature appearing on any such document or statement; or (d) whether any individual signing such document or statement is authorized to sign on behalf of the person or entity that is purporting to execute such document or statement. 14. Applicant agrees to indemnify and save Bank harmless (and to defend Bank if Bank so demands) from and against all loss, damages, costs, charges, expenses and attorneys fees arising from or in any way connected with the Credit. This indemnification shall include but shall not be limited to all loss, damages, costs, charges, expenses, and attorneys' fees incurred by Bank in any suit or court action seeking a court order or injunction prohibiting Bank from paying under the Credit even though Applicant may be a party seeking such court order or injunction. The indemnification contained in this paragraph shall not include any loss, damages, costs, charges, expenses, and attorneys fees incurred by Bank as a result of Bank's negligence. 15. If there be more than one Applicant, all undertakings, warranties, covenants, and agreements made by Applicant and all rights, powers, and authorities given to, or conferred on, the Bank shall be made or given both individually as well as jointly and severally. When used herein, the singular shall include the plural, and vice versa, where appropriate. 16. This Application and Agreement (a) shall be binding upon and 9 10 shall inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors, and assigns, (b) shall become effective upon its receipt by Bank, (c) shall govern the obligations of Applicant to Bank with respect to any Credit which Bank may determine, at its sole discretion, to issue hereunder, and (d) shall be governed and construed in accordance with the laws of the state of Georgia. 10 11 Attachment to J. M. Tull/Trust Co. Letter of Credit #5 "I am W. Gordon Kay, beneficiary under Trust Company Bank letter of credit number ____________________ . I hereby certify: (1) I am owed $______________ (not to exceed $421,289.65) under the Inland Steel Industries, Inc. Special Retirement Benefit Plan for Covered Employees (as Amended and Restated Effective as of October 1, 1993), and (2) I have requested payment but have not been paid such amount owed under such plan." #6 "It is the condition of this Letter of Credit that: (1) Applicant must be notified immediately by registered mail by Issuing Bank of any request to draw under this Letter of Credit, (2) It automatically expires after one draw against it, and (3) It is automatically extended for one year from the present or any future expiration date hereof, unless 30 days prior to any such date the Issuing Bank shall notify Applicant in writing by registered mail that it elects not to so renew this Letter of Credit." 11 EX-11 13 EXHIBIT 11 1 Exhibit 11 INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES Statement of Earnings Per Share of Common Stock
Dollars and Shares in Millions (except per share data) ------------------------------------- Years Ended December 31, ------------------------------------- 1993 1992 1991 ---- ---- ---- PRIMARY EARNINGS PER SHARE OF COMMON STOCK Average shares of common stock outstanding 35.5 32.8 30.9 ---- ---- ---- ---- ---- ---- Loss before cumulative effect of change in accounting principle $ (37.6) $ (159.4) $ (275.1) Cumulative effect of change in accounting principle - (656.2) - -------- -------- -------- Net loss (37.6) (815.6) (275.1) Dividends on preferred stock, net of tax benefit on dividends applicable to leveraged Series E Preferred Stock held by the ESOP 32.0 32.1 30.5 -------- -------- -------- Net loss applicable $ (69.6) $ (847.7) $ (305.6) -------- -------- -------- -------- -------- -------- Per Share of Common Stock: Before cumulative effect of change in accounting principle $ (1.96) $ (5.83) $ (9.88) Cumulative effect of change in accounting principle - (19.99) - -------- -------- -------- Net Loss $ (1.96) $ (25.82) $ (9.88) -------- -------- -------- -------- -------- -------- FULLY DILUTED EARNINGS PER SHARE OF COMMON STOCK Average shares of common stock outstanding 35.5 32.8 30.9 ---- ---- ---- ---- ---- ---- Loss before cumulative effect of change in accounting principle $ (37.6) $ (159.4) $ (275.1) Cumulative effect of change in accounting principle - (656.2) - -------- ------- -------- Net Loss $ (37.6) $ (815.6) $ (275.1) Dividends on antidilutive preferred stock, net of tax benefit on dividends applicable to leveraged Series E Preferred Stock held by the ESOP 32.0 32.1 30.5 -------- -------- -------- Net loss applicable $ (69.6) $ (847.7) $ (305.6) -------- -------- -------- -------- -------- -------- Per Share of Common Stock: Before cumulative effect of change in accounting principle $ (1.96) $ (5.83) $ (9.88) Cumulative effect of change in accounting principle - (19.99) - -------- -------- -------- Net Loss $ (1.96) $ (25.82) $ (9.88) -------- -------- -------- -------- -------- --------
Note - Series G Exchangeable Preferred Stock was issued in 1991. The assumed conversion of Series A, Series E and Series G Preferred Stock was antidilutive. EX-13 14 EXHIBIT 13 1 EXHIBIT 13
FINANCIAL REVIEW RESULTS OF OPERATIONS - -------------------------------------------------------------------------------------------------------------- Dollars in Millions (except per share data) 1993 1992 1991 - --------------------------------------------- --------------------------------------- Net sales $3,888.2 $3,494.3 $3,404.5 Operating profit (loss) $ 26.6 $ (173.4) $(300.9) Net loss $ (37.6) $ (815.6) $(275.1) Net loss per common share $ (1.96) $ (25.82) $ (9.88) - --------------------------------------------- ---------------------------------------
The Company's 1993 net loss of $37.6 million, or $1.96 per common share, was significantly less than the 1992 net loss of $815.6 million, or $25.82 per common share. Included in the 1992 loss is $656.2 million, or $19.99 per common share, related to a one-time charge to recognize the cumulative effect of adopting a new accounting standard, Financial Accounting Standards Board ("FASB") Statement No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." Even excluding the 1992 charge, 1993 results were significantly improved from the 1992 loss of $159.4 million, or $5.83 per common share. Net sales of $3.89 billion in 1993 were 11 percent higher than 1992 levels, primarily due to increased volume as average selling prices remained virtually unchanged at both of the Company's business segments. This compared with a slight increase in sales in 1992 over 1991 as higher volume was largely offset by declining prices. 2 Two primary factors that adversely impacted 1993 results, both at the Company's Integrated Steel Segment, were a $22.3 million charge for the early closure of coking operations and a scheduled outage associated with a mini-reline of its largest blast furnace which unfavorably impacted steel operations by approximately $30 million. Despite these factors, significant improvements in volume and continued cost reductions resulted in the Company posting a $27 million operating profit for the year, a $200 million improvement compared with 1992. In 1992, the Company experienced the largest net loss in its history due primarily to the adoption of FASB Statement No. 106 on retiree health care costs and the Company's election to recognize immediately, rather than amortize over 20 years, a $656 million after-tax transition obligation reflecting the aggregate amount that would have been accrued had the standard been in effect in prior years. This charge was reported on a separate line as a change in accounting principle on the Statement of Operations and did not impact the year's operating loss. However, operating results for 1993 and 1992, as compared with 1991, were penalized by approximately $43 million ($28 million after tax) and $63 million ($41 million after tax), respectively, from the incremental costs of the accrual method required by FASB Statement No. 106 versus the prior method of accounting. See Financial Review -- Accounting Matters for further details. In 1992, the Company also adopted FASB Statement No. 109, "Accounting for Income Taxes," which, at the time of adoption, had no material impact on results of operations or the financial position of the Company. However, without the adoption of this Statement, the Company would not have been able to reduce its 1993 and 1992 losses by credits for deferred tax benefits of $39 million and $463 million, respectively. See Financial Review -- Accounting Matters for further details. Excluding the effect of the charge for the early closure of coking operations in 1993, the effect in 1993 and 1992 of the adoption of FASB Statement No. 106, and a 1991 restructuring provision of $215 million ($165 million after tax), the Company's adjusted net income would have been $6 million in 1993 compared with net losses of $119 million and $110 million in 1992 and 1991, respectively. The 1992 loss was lessened by an after-tax gain of $15 million, or 44 cents per share, from the sale of a joint-venture interest. With I/N Tek and I/N Kote having reached the end of their learning curves and completion of major upgrades at the steelmaking operations, the Company's modernization program is complete. In addition, a new six-year labor contract at Inland Steel Company is in place. These factors, coupled with the Company's turnaround strategy launched in 1991 to improve performance by increasing revenues, reducing costs and enhancing asset utilization, are anticipated to provide the basis for continued improvement in 1994 operating results. To maintain financial flexibility, the Company sold 5.75 million new shares of common stock in 1993 and 4.3 million new shares during 1992. Average shares outstanding were 36 million in 1993, 33 million in 1992, and 31 million in 1991. Results per common share are reported after preferred stock dividends. The Company's Integrated Steel Segment accounted for 64 percent of its identifiable assets at year-end 1993, and during the year provided 53 percent of its sales. Sales of sheet, strip and plate in the Integrated Steel Segment accounted for 45 percent of consolidated net sales in 1993, 1992 and 1991. There was no other class of similar products of the Company accounting for 10 percent or more of consolidated net sales in any of such years.
INTEGRATED STEEL SEGMENT - ------------------------------------------------------------------------------------------------------------ Dollars and Tons in Millions 1993 1992 1991 - -------------------------------- ------------------------------------------------- Net sales $2,174.9 $1,909.4 $1,895.4 Operating loss $ (28.2) $ (200.6) $ (313.2) Net tons shipped 4.8 4.3 4.2 - -------------------------------- -------------------------------------------------
3 Inland Steel Company reported an operating loss of $28 million for 1993, the smallest loss since 1990, following operating losses of $201 million in 1992 and $313 million in 1991. The 1991 operating loss included a $205 million restructuring provision but was not affected by the incremental expense related to the adoption of FASB Statement No. 106 that negatively impacted 1993 and 1992 results by $39 million and $53 million, respectively. The 1993 financial results were further negatively affected by approximately $30 million due to the unfavorable impact on steel operations of the scheduled outage of the largest blast furnace at the Indiana Harbor Works for a mini-reline. In addition, there was a $22.3 million charge taken for the early closure of the Company's remaining cokemaking facilities due to their inability to meet environmental regulations and deteriorating operating performance. Partially offsetting these unfavorable items was a $24 million LIFO profit recognition due to inventory reductions. Net sales increased 14 percent in 1993 to $2.17 billion due almost entirely to an increase in shipments to 4.8 million tons. The average selling price for 1993 was virtually unchanged from 1992. In 1992, the slight increase in volume of 2 percent to 4.3 million tons was largely offset by lower selling prices resulting from the sale of steel to I/N Kote at a contractual price less than the cost of production, as discussed below. Inland Steel Company operated at 83 percent of its raw steelmaking capability in 1993, compared with 79 percent in 1992 and 74 percent in 1991. In 1992, a slower-than-expected shift in galvanized products to I/N Kote, as well as the initial recognition of interest and depreciation expense associated with the I/N Kote facility, added approximately $40 million to operating losses. Also, an outage of the No. 7 Blast Furnace reduced production by 140,000 tons, which increased the operating loss by nearly $30 million. These 1992 problems, coupled with an addition of $12 million to a reserve for environmental matters, more than offset the benefits of reduced costs and a $23 million gain on the sale of half of Inland's 25 percent interest in Walbridge Coatings. Inland Steel Company embarked in 1991 on a three-year turnaround program to significantly reduce its underlying cost base by year-end 1994. The 1991 restructuring charge of $205 million provided for the write-off of facilities, an environmental reserve and the cost of an estimated 25 percent reduction in the workforce. Employment has been reduced by approximately 2,300 people from the end of 1991 through year-end 1993, and an additional 1,200 jobs are expected to be eliminated by the end of 1994. The 1993 effect of this program represents a savings of approximately $140 million in employment costs and $10 million in decreased depreciation expense. However, the savings from reduced employment was partially offset by increased wages under the Company's labor agreements and increased medical benefit costs as the Company began to accrue in 1992 for postretirement medical benefits. By year-end 1992 and throughout 1993, I/N Tek was operating near capacity and producing consistently high-quality steels. In August 1993, I/N Kote was operating near design capacity and, by year-end 1993, had achieved product qualification at all major customers. Under the I/N Kote partnership agreement, Inland Steel Company 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. During 1993, Inland Steel Company's sales price approximated its cost of production, but was still significantly less than the market value for cold-rolled steel. Beginning in 1993, I/N Kote expenditures included principal payments and provision for return on equity to the partners. Therefore, Inland Steel Company's ability to realize a satisfactory price on its sales to I/N Kote depends on the facility achieving near capacity operations and obtaining appropriate pricing for its products. The Company's remaining cokemaking facilities were closed by year-end 1993. The Company determined that it was uneconomical to repair the coke batteries sufficiently to continue cost-effective operations that would comply with current environmental laws. To replace the Company-produced coke, Inland Steel Company entered into a long-term contract and other arrangements to purchase coke. In addition, Inland Steel Company and NIPSCO, a local utility, formed a joint venture which constructed and is operating a pulverized coal injection facility at the Indiana Harbor Works. This facility injects coal directly into the blast furnaces and is expected to reduce coke requirements by approximately 30 percent, or 600,000 tons a year, when fully operational. The joint venture commenced operations in the third quarter of 1993. 4
SERVICE CENTER SEGMENT - --------------------------------------------------------------------------------------------------------- Dollars and Tons in Millions 1993 1992 1991 - --------------------------------------- ----------------------------------------------------------- Net sales $1,893.3 $1,716.6 $1,655.9 Operating profit $ 56.4 $ 27.1 $ 16.2 Net tons shipped 2.08 1.87 1.74 Plants operated 56 56 56 - --------------------------------------- -----------------------------------------------------------
The Service Center Segment, known as Inland Materials Distribution Group ("IMDG"), continued to expand market share in 1993. In the past two years, operating profits rose 248 percent to $56 million. Excluding the incremental effect of FASB Statement No. 106, which affected 1993 and 1992, IMDG's operating profits were $60 million in 1993, $37 million in 1992 and $16 million in 1991. This two year increase has been accomplished, despite some reduction in prices, through increased volume. Net sales rose 10 percent in 1993 due almost entirely to an increase in volume as the average selling price per ton increased minimally. In 1992, the 4 percent increase in net sales resulted from a 7 percent increase in tonnage that was partially offset by a 3 percent decrease in average selling price per ton. Both of IMDG's businesses were profitable in 1993. The general line business, which supplies a wide range of metals as well as industrial plastics, was profitable in all four regions while expanding market share. The coil processing business was profitable in 1993 after recording a slight operating loss in 1992. LIQUIDITY AND FINANCING Cash and cash equivalents increased to $251 million at year-end 1993 from $138 million on December 31, 1992. Cash and cash equivalents on December 31, 1991 totaled $47 million. There was no short-term bank borrowing outstanding at year-end 1993 or at any time during 1993. During 1992, short-term bank borrowing averaged $13 million and peaked at $40 million in that year. In the 1993 fourth quarter, the Company sold 5.75 million shares of common stock, and is using the net proceeds of $179 million to reduce fixed charges of the Company and its subsidiaries. At year-end 1993, Inland Steel Company called the remaining $75 million principal amount of outstanding Series O, P, and Q First Mortgage Bonds for redemption on January 28, 1994. In January 1994, the Company announced that Inland Steel Company would purchase a currently leased caster facility. Under the terms of the purchase agreement, Inland Steel Company will pay $83 million for the lessor's equity interest in the No. 2 Basic Oxygen Furnace Shop caster facility that is leased from a subsidiary of General Electric Capital Corporation. In addition, in connection with such purchase, Inland Steel Company will record $63 million of debt. In the second quarter of 1993, Inland Steel Company refinanced $40 million of 9.75 percent and 10.0 percent coupon pollution control revenue bonds at an interest rate of 6.8 percent. In 1992, approximately $150 million and $100 million, respectively, was raised through the sale of the Company's 12.75% Notes and the Company's common stock. Cash availability as well as various covenants in subsidiary borrowing arrangements limited the cash that subsidiaries could transfer to the Company in the form of dividends and advances to approximately $225 million at year-end 1993. This amount is subject to change based on the financial performance of each subsidiary. An earnings coverage test in the indenture covering the Inland Steel Company First Mortgage Bonds precluded issuance of additional mortgage bonds in 1993. In addition, the Company's subsidiary borrowing arrangements, as well as both the Series T First 5 Mortgage Indenture and the indenture under which the 12.75% Notes were issued, contain covenants limiting financial flexibility and the Company's ability to issue additional debt. Certain covenants in the indenture relating to the 12.75% Notes also limit the Company's ability to declare and pay cash dividends. In 1989 the Company sold $185 million of its Series F Exchangeable Preferred Stock and agreed to repurchase an identical amount of Company common stock. By year-end 1993, $144 million had been spent to purchase 4.6 million shares. In December 1990, the Company suspended further open-market stock purchases under this agreement. The Company's subsidiaries continue to maintain committed credit facilities totaling $225 million. In the second quarter of 1993, one of these agreements, a $100 million credit facility arranged by a special-purpose subsidiary of Inland Steel Company, was extended to November 30, 1995. The credit facility is secured by receivables sold to this subsidiary by Inland Steel Company. The $100 million Ryerson unsecured revolving credit facility extends to March 31, 1995 and the $25 million Tull unsecured credit facility extends to December 15, 1994. The interest rates on borrowings under such credit agreements are, at the Company's option, based on Eurodollar, Certificate of Deposit, or Base (the greater of federal funds or prime) rates. At year-end, the highest interest rate option for borrowings under any of these credit agreements was the applicable prime rate plus .75 percent. In addition to the Company's credit facilities, a $55 million revolving credit agreement secured by inventories and receivables was established in 1993 for I/N Kote to provide for the joint venture's working capital needs, thus reducing the need for the partners to provide additional funds to I/N Kote for that purpose. The Company believes that its present cash position, augmented by its subsidiaries' credit facilities and the anticipated cash flow from operations provided by cost reductions and increased revenues, will provide sufficient liquidity to meet its scheduled debt retirements, pay preferred dividends, fund its capital program and meet any operating cash requirements that may arise for at least the next two years. The Company ended 1993 with long-term debt of $777 million. The average interest rate on this debt is approximately 10 percent. Due to a substantial decrease in stockholders' equity in 1992 primarily resulting from the adoption of FASB Statement No. 106, the ratio of long-term debt to total capitalization of 55 percent and 63 percent reported at year-end 1993 and 1992, respectively, was substantially higher than the 38 percent reported at year-end 1991. Including Series F Preferred Stock, the ratio of long-term debt and redeemable preferred stock to total capitalization was 69 percent at December 31, 1993 compared with 77 percent and 47 percent at year-end 1992 and 1991, respectively. In addition, Inland Steel Company guarantees its 50 percent share of I/N Kote borrowings, a PCI joint-venture loan, and a portion of the debt of the Empire Iron Mining partnership amounting to $258 million, $35 million, and $23 million, respectively, at year-end 1993. Because the Empire guarantee has not been invoked since its inception in 1978 and because of the current strong demand for steel products, the Company does not believe these guarantees will be called upon. The Company's debt ratings at year-end 1993 were unchanged from 1992 and were:
- --------------------------------------------------- Ratings at Year End 1993 - --------------------------------------------------- INLAND STEEL INDUSTRIES NOTES Moody's Ba3 Standard & Poor's B+ Duff & Phelps BB- - --------------------------------------------------- INLAND STEEL COMPANY FIRST MORTGAGE BONDS Moody's Ba3
6 Standard & Poor's BB- Duff & Phelps BB+ - -----------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES Dollars in Millions 1993 1992 1991 - -------------------------------- ------------------------------------------------- Capital expenditures Integrated Steel $ 86.1 $ 55.1 $ 124.7 Steel Service Centers 19.3 9.3 9.8 General corporate and other .2 - 5.7 - -------------------------------- ------------------------------------------------- Total capital expenditures $ 105.6 $ 64.4 $ 140.2 - -------------------------------- -------------------------------------------------
Capital expenditures of $106 million in 1993, although higher than the 30 year low experienced in 1992, remained below depreciation for the second straight year. With the completion of the mini-reline of the No. 7 Blast Furnace, all major facility upgrades are now complete. Exclusive of the caster lease buyout discussed earlier, anticipated capital expenditures in 1994 of $110 million will be slightly higher than 1993 but less than 1994 depreciation expense. These projects are expected to be funded by cash generated from operations and cash on hand at year-end 1993. EMPLOYMENT MATTERS Inland Steel Company and the United Steelworkers of America entered into a new labor agreement, effective August 1, 1993, covering wages and benefits through July 31, 1999. Among other things, the agreement provides a wage increase of $.50 per hour in 1995, a $500 bonus in each of 1993 and 1994 (totaling in each case approximately $4 million) and a potential bonus of up to $1,000 per employee (approximately $8 million in total) based on Inland Steel Company achieving $150 million of pre-tax income in 1995 (adjusted to exclude the incremental FASB Statement No. 106 costs and such bonus.) In addition, all active employees will receive an additional week of vacation in 1994 and in 1996. The agreement provides for a reopener on wages and certain benefits in 1996 with an arbitration provision to resolve unsettled issues, thereby precluding a work stoppage over the six-year contract term. The agreement also provides for election to the Company's Board of Directors of a union designee acceptable to the Board, restricts Inland Steel Company's ability to reduce the union workforce (generally limited to attrition and major facilities shutdowns), allows greater flexibility to institute work rule changes, and requires quarterly 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 for medical benefits. Due to expected reductions in the workforce, this contract is not anticipated to result in a net increase in employment cost for the next three years in spite of increased pension benefits, bonuses, and the scheduled wage increase. Average employment declined 6 percent during 1993 after declining 8 percent during each of the prior two years, reflecting continuing efforts by the Company to implement its cost-reduction program. As announced in 1991, the Company plans to reduce employment at its corporate headquarters and at Inland Steel Company by 25 percent from year-end 1991 to year-end 1994. Total employment costs in 1993 decreased 2 percent from 1992 while average employment cost per employee increased 5 percent. In 1992, total employment costs and average employment cost per employee increased 4 percent and 12 percent, respectively, as the Company 7 began to accrue for postretirement medical benefits and paid wage increases under its previous agreement with the Steelworkers' union. Had the Company not adopted FASB Statement No. 106, total employment costs would have decreased 3 percent in 1992 from 1991.
- ------------------------------------------------------------------------------------------------------------ EMPLOYEES - ------------------------------------------------------------------------------------------------------------ (monthly average receiving pay) 1993 1992 1991 - ----------------------------------------------- --------------------------------------------------- Integrated Steel 10,857 11,847 13,038 Steel Service Centers 5,157 5,168 5,392 Headquarters and other 138 166 170 - ----------------------------------------------- --------------------------------------------------- Total 16,152 17,181 18,600 - ----------------------------------------------- ---------------------------------------------------
CONSOLIDATED EMPLOYMENT COSTS* Dollars in Millions (except averages) 1993 1992 1991 - ----------------------------------------------- --------------------------------------------------- Direct compensation $665.0 $ 682.3 $ 697.5 - ----------------------------------------------- --------------------------------------------------- Employee benefits Group insurance costs 77.1 64.4 85.8 Postretirement benefits other than pensions 95.7** 111.0** 44.3 Pension costs (credits) (4.6) (9.2) (18.8) Social security and unemployment compensation taxes 54.6 53.9 55.6 Workers' compensation expense 10.8 12.0 14.3 Thrift Plan costs 9.7 10.5 12.7 Cost of supplemental unemployment benefit plans 6.5 8.5 7.6 Industry welfare and retirement funds 3.2 2.5 2.7 All other 6.9 4.8 5.7 - ----------------------------------------------- --------------------------------------------------- Total cost of employee benefits 259.9 258.4 209.9 - ----------------------------------------------- --------------------------------------------------- Total employment costs $ 924.9 $ 940.7 $ 907.4 - ----------------------------------------------- --------------------------------------------------- Average employment cost $57,265 $54,750 $48,785 per employee - ----------------------------------------------- ---------------------------------------------------
*This table does not include the additional costs due to workforce reductions included in the 1991 restructuring provision. **Includes incremental non-cash costs resulting from adoption of FASB Statement No. 106. 8 PENSIONS At year-end 1993, the market value of Inland Steel Industries Pension Plan assets totaled $1,794 million, a $108 million increase during the year. Liabilities also rose because of the increased pension benefits provided in the new labor agreement with the United Steelworkers and the requirement for financial reporting purposes, that the calculation of Plan liabilities be based on the current yield on high grade fixed income obligations, which are presently at a 20 year low. As a result, Pension Plan liabilities of $2,077 million exceeded assets at year-end 1993. However, under ERISA funding guidelines, which take a longer term view in determining the interest rate to use in valuing liabilities, the Pension Plan continues to be adequately funded. The Company will report a pension cost in 1994 of approximately $34 million, as compared with a credit of $5 million in 1993. This is the first reported pension cost since 1985. The annualized return earned in the Pension Plan's diversified portfolio for the past ten years exceeded 14 percent annually and in 1993 the Plan earned a 16.2 percent return. Pension benefits of $146 million were paid to 15,748 retirees and their beneficiaries in 1993, compared with $143 million paid to 15,642 retirees in 1992. ACCOUNTING MATTERS FASB Statement No. 106 requires that the cost of retiree medical and life insurance benefits be accrued during the working years of each employee. Previously, retiree medical benefits were expensed as incurred after an employee's retirement. Adoption of this standard in 1992 did not and will not affect cash flow as liabilities for health care and life insurance benefits are not pre-funded and cash payments will continue to be made as claims are submitted. The net present value of the unfunded benefits liability as of December 31, 1993, calculated in accordance with that Statement was approximately $1.0 billion. The expense provision for these benefits for 1993 was $96 million, which was $43 million more than the cash benefit payments for the year. The unfunded liability will continue to grow, since accrual-basis costs are expected to exceed cash benefit payments for several more years. The reported year-end benefits liability and postretirement benefits cost for the year reflect changes made during the year incorporating the favorable effects of the new United Steelworkers of America labor contract and revised actuarial assumptions incorporating more current information regarding claim costs and census data, partially offset by a reduction in the discount rate used to calculate the benefits liability. (See Note 10 to the consolidated financial statements for further details). FASB Statement No. 109 requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. At December 31, 1993, the Company had a net deferred tax asset of $473 million of which $445 million relates to the temporary difference arising from the adoption of FASB Statement No. 106. While the Company believes it is more likely than not that taxable income generated through future profitable operations will be sufficient to realize all deferred tax assets, a secondary source of future taxable income could result from tax planning strategies, including the Company's option of changing from the LIFO method of accounting for inventories to the FIFO method (such change would have resulted in approximately $350 million of additional taxable income as of year-end 1993 which would serve to offset approximately $120 million of deferred tax assets) and selection of different tax depreciation methods. After assuming such change in accounting for inventories, the Company would need to recognize approximately $1.0 billion of taxable income over the 15-year net operating loss carryforward period and the period in which the temporary difference related to the FASB Statement No. 106 obligation will reverse, in order to fully realize its net deferred tax asset. The Company believes that it is more likely than not that it will achieve such taxable income level. (See Note 11 to the consolidated financial statements for further details regarding this net deferred tax asset.) ENVIRONMENTAL ISSUES Inland Steel Company has significantly reduced discharges of air and water pollutants at its Indiana Harbor Works complex in East Chicago, Indiana in recent years and is committed to operating its facilities in an environmentally acceptable manner. On June 10, 1993, the U.S. District Court for the Northern District of Indiana entered a consent decree that resolved all matters raised by a lawsuit filed by the EPA in 1990. The consent decree includes a $3.5 million cash fine, environmentally beneficial projects at the Indiana Harbor Works through 1997 costing approximately $7 million, and sediment remediation of portions of the Indiana Harbor Ship Canal 9 and Indiana Harbor Turning Basin estimated to cost approximately $19 million over the next several years. The fine and estimated remediation costs were provided for in 1991 and 1992. After payment of the fine, the Company's reserve for environmental liabilities, including those in connection with the consent decree, totaled $19 million. The consent decree also defines procedures for remediation at Inland Steel Company's Indiana Harbor Works. The procedures defined establish essentially a three-step process, each step of which requires agreement of the EPA before progressing to the next step in the process, consisting of: assessment of the site, evaluation of corrective measures for remediating the site, and implementation of the remediation plan according to the agreed-upon procedures. The Company is presently assessing the extent of environmental contamination. The Company anticipates that this assessment will cost approximately $1 million to $2 million per year and take another three to five years to complete. Because neither the nature and extent of the contamination nor the corrective actions can be determined until the assessment of environmental contamination and evaluation of corrective measures is completed, the Company cannot presently reasonably estimate the costs of or the time required to complete such corrective actions. Such corrective actions may, however, require significant expenditures over the next several years that may be material to the 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 1993, down from $11 million in 1992. Another $44 million was spent in 1993 to operate and maintain such equipment, versus $46 million a year earlier. During the five years ended December 31, 1993, the Company has spent $302 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 $20 million in 1994 and $13 million in 1995. It is anticipated that the Company will make annual capital expenditures of $5 million to $10 million in each of the three years following. In addition the Company will have ongoing annual expenditures of $40 million to $50 million for the operation of air and water pollution control facilities to comply with current Federal, state and local laws and regulations. Due to the inability to predict the costs of corrective action that may be required under the Resource Conservation and Recovery Act and the consent decree in the 1990 EPA lawsuit, the Company cannot predict the amount of additional environmental expenditures that will be required. Such additional environmental expenditures, excluding amounts that may be required in connection with the consent decree in the 1990 EPA lawsuit, however, are not expected to be material to the results of operations or financial position of Inland Steel Company. INTERNATIONAL TRADE ISSUES Domestic steel producers face significant competition from foreign producers and have been adversely affected by imports. Imports of steel mill products accounted for approximately 19 percent of the domestic market in 1993, down from the 1984 peak of 26 percent. Many foreign steel producers are owned, controlled or subsidized by their governments. In 1992, the Company and certain domestic steel producers filed unfair trade petitions against foreign producers of certain bar, rod and flat-rolled steel products. During 1993, the International Trade Commission ("ITC") upheld final subsidy and dumping margins on essentially all of the bar and rod products and about half of the flat-rolled products, in each case based on the tonnage of the products against which claims were brought. Appeals of the adverse ITC decisions have been filed in the U.S. Court of International Trade or similar jurisdictional bodies, and foreign producers have appealed certain of the findings against them. These appeals are pending and decisions are not expected before September 1994. It is not certain how the ITC actions and the appeals will impact imports of steel products into the United States or the price of such steel products. On December 15, 1993, President Clinton notified the U.S. Congress of his intent to enter into agreements resulting from the Uruguay Round of multilateral trade negotiations under the General Agreement on Tariffs and Trade. The key provisions applicable to domestic steel producers include an agreement to eliminate steel tariffs in major industrial markets, including the United States, over a period of 10 years commencing July 1995, and agreements regarding various subsidy and dumping practices as well as dispute settlement procedures. Legislation must be enacted in order to implement the Uruguay Round agreements. Until that process is completed, it will not be possible to assess the extent to which existing U.S. laws against unfair trade practices may be weakened. 10
SUMMARY BY QUARTER (Unaudited) Dollars in Millions (except per share data) - ----------------------------------------------------------------------------------------------------------------------------- Per Common Share -------------------------------------------- Market Price ------------------------------ Net Gross Profit Income (Loss) Net Income Net Income Sales (Loss) Before Taxes (Loss) (Loss) High Low Close - ----------------------------------------------------------------------------------------------------------------------------- 1993 First Quarter $ 941.5 $ 27.5 $ (47.5) $ (31.4) $ (1.12) $24 3/4 $20 $22 Second Quarter 996.4 72.8 (3.8) (2.5) (.30) 29 1/8 21 1/2 28 3/4 Third Quarter 972.0 84.0 9.0 17.0 .25 30 1/4 24 3/4 28 1/8 Fourth Quarter 978.3 63.3 (31.3)* (20.7)* (.79)* 35 28 33 1/8 ----------------------------------------------------------------------------------------------------------------------------- Year $3,888.2 $ 247.6 $ (73.6) $ (37.6) $ (1.96) $35 $20 $33 1/8 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- 1992 First Quarter $ 895.9 $ 15.4 $ (56.3) $(694.0)** $(22.68)** $26 $21 1/8 $22 5/8 Second Quarter 909.4 37.2 (12.6) (8.5) (.53) 27 21 1/4 26 Third Quarter 858.6 4.6 (67.5) (45.4) (1.56) 26 1/4 18 1/8 18 1/2 Fourth Quarter*** 830.4 (50.9) (122.2) (67.7) (2.15) 23 3/8 16 1/4 22 5/8 - ----------------------------------------------------------------------------------------------------------------------------- Year $3,494.3 $ 6.3 $(258.6) $(815.6) $(25.82)**** $27 $16 1/4 $22 5/8 - ----------------------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------------------
* Includes facility shutdown provision of $22.3 million, $14.7 million after tax or $.41 per share. ** Includes $(656.2) million, $(21.20) per share, related to the cumulative effect of the change in accounting for postretirement benefits other than pensions. See notes to consolidated financial statements. *** Lower average selling prices at the Integrated Steel Segment resulted in a significantly lower gross profit. Such lower gross profit margin was the primary factor for the increased net loss. **** Per share amounts for the quarters do not total to the amount reported for the year, as per share amounts are computed independently for each quarter and the year based on respective weighted average common shares outstanding. Includes $(656.2) million, $(19.99) per share, related to the cumulative effect of the change in accounting for postretirement benefits other than pensions. 11 ELEVEN-YEAR SUMMARY OF SELECTED FINANCIAL DATA AND OPERATING RESULTS Inland Steel Industries, Inc. and Subsidiary Companies
1993 1992 1991 1990 1989 1988 - --------------------------------------------------------------------------------------------------------------------------------- Dollars in Millions Results Net sales $3,888.2 $3,494.3 $3,404.5 $3,870.4 $4,146.7 $4,068.0 of Depreciation 131.8 129.6 118.2 119.7 131.2 134.8 Operations Interest expense 78.0 54.9 46.8 38.7 38.4 46.2 Rent expense 73.7 75.5 81.8 85.5 79.9 72.3 Continuing business segments: Income (loss) before income taxes (73.6) (258.6) (381.1) (36.7) 175.6 364.6 Income taxes 36.0Cr. 99.2Cr. 106.0Cr. 16.1Cr. 55.9 115.8 Income (loss) (37.6) (159.4) (275.1) (20.6) 119.7 248.8 Net income (loss) (37.6) (815.6) (275.1) (20.6) 119.7 262.1 - --------------------------------------------------------------------------------------------------------------------------------- Shares in Thousands Data Average number of shares 35,540 32,828 30,943 32,195 35,581 33,623 Applicable Income (loss) per share to Common Continuing business Stock segments $ (1.96) $ (5.83) $ (9.88) $ (1.41) $ 3.15 $ 6.99 Net income (loss) (1.96) (25.82) (9.88) (1.41) 3.15 7.39 Dividends per share -- -- .15 1.40 1.40 .75 Stockholders' equity per share 7.79 6.01 31.10 41.27 43.00 42.50 Stockholders of record 16,000 18,000 18,000 19,000 23,000 24,000 Shares traded (average daily volume) 134.2 97.3 89.3 95.7 199.5 170.0 - --------------------------------------------------------------------------------------------------------------------------------- Dollars in Millions Changes in Cash provided from (used Financial for) operations $ 112.0 $ (21.4) $ 25.0 $ 189.1 $ 240.2 $ 531.8 Position Capital expenditures 105.6 64.4 140.2 268.1 197.2 136.5 Investments in and advances to joint ventures, net 1.9 6.3 24.9 49.8 15.5 73.6 Acquisitions -- -- -- -- 28.2 50.2 Dividends declared on common stock -- -- 4.6 45.3 50.1 25.2 Dividends declared on preferred stock 32.0 32.1 31.1 27.1 6.9 13.8 Financing Long-term debt (net of retirements) (96.6) 108.9 73.1 114.0 (17.8) (43.2) Preferred stock sold -- -- 72.8 -- 185.0 -- Common stock sold 178.7 97.9 -- -- -- -- Net change in liquidity 112.8 90.6 (11.2) (179.1) (67.9) (124.2) - --------------------------------------------------------------------------------------------------------------------------------- Dollars in Millions Financial Working capital $ 496.4 $ 441.0 $ 322.8 $ 395.9 $ 703.0 $ 719.8 Position Property (net) 1,507.7 1,548.8 1,635.0 1,708.3 1,569.8 1,493.9 at Year End Total assets 3,435.8 3,146.5 2,697.8 2,934.8 3,008.5 2,925.0 Long-term debt 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 -- Other temporary equity 40.8 49.9 53.0 54.9 181.3 -- Stockholders' equity 397.6 271.4 1,009.4 1,234.0 1,313.8 1,559.4 Unused credit facilities 225 225 225 325 325 225 - --------------------------------------------------------------------------------------------------------------------------------- Financial Net income (loss) as a % of Ratios sales (1.0)% (23.3)% (8.1)% (.5%) 2.9% 6.4% Long-term debt to total capitalization 55.5% 63.3% 38.0% 31.9% 25.6% 27.6% Long-term debt and redeemable preferred to total capitalization 68.7% 76.7% 47.2% 40.5% 33.8% 27.6% Return on stockholders' equity loss loss loss loss 9.1% 16.8% - --------------------------------------------------------------------------------------------------------------------------------- Dollars and Tons in Millions Production and Tons of raw steel produced 5.0 4.7 4.7 5.3 5.6 6.1 Employment Tons of steel mill shipments 4.8 4.3 4.2 4.7 4.9 5.0 Statistics Average number of employees 16,152 17,181 18,600 20,154 20,715 20,639 Total employment costs $ 924.9 $ 940.7 $ 907.4 $ 979.0 $ 964.3 $ 945.8 -------------------------------------------------------------------------------------------------------------------- 1987 1986 1985 1984 1983 - ------------------------------------------------------------------------------------------------------------------- Dollars in Millions Results Net sales $3,453.2 $3,173.2 $2,999.4 $3,135.0 $2.748.9 of Depreciation 123.4 124.0 119.7 124.5 119.9 Operations Interest expense 62.8 71.6 64.9 62.3 65.3 Rent expense 68.9 55.2 33.7 28.2 23.8 Continuing business segments: Income (loss) before income taxes 97.5 36.7 (147.5) (36.5) (183.1) Income taxes 14.2Cr. 1.9 .1Cr. 6.1 67.6Cr. Income (loss) 111.7 34.8 (147.4) (42.6) (115.5) Net income (loss) 145.0 19.3 (178.4) (41.4) (116.9) - ------------------------------------------------------------------------------------------------------------------- Shares in Thousands Data Average number of shares 31,854 28,479 25,266 25.054 24,727 Applicable Income (loss) per share to Common Continuing business Stock segments $ 3.09 $ .95 $ (6.14) $ (2.02) $ (4.70) Net income (loss) 4.14 .40 (7.37) (1.97) (4.76) Dividends per share -- -- .375 .50 .50 Stockholders' equity per share 36.15 32.85 34.20 42.14 44.90 Stockholders of record 26,000 29,000 33,000 38,000 42,000 Shares traded (average daily volume) 178.9 78.6 55.2 61.1 87.4 - ------------------------------------------------------------------------------------------------------------------- Dollars in Millions Changes in Cash provided from (used Financial for) operations $ 169.1 $ 129.1 N/A N/A N/A Position Capital expenditures 128.0 124.8 $ 174.8 $ 185.1 $ 103.1 Investments in and advances to joint ventures, net 10.5 9.0 7.8 2.3 -- Acquisitions -- 96.4 -- -- -- Dividends declared on common stock -- -- 9.5 12.5 12.4 Dividends declared on preferred stock 13.9 7.8 7.8 8.1 .8 Financing Long-term debt (net of retirements) (160.9) (122.5) 87.8 46.6 29.0 Preferred stock sold 96.6 -- -- 72.8 -- Common stock sold 83.7 85.2 -- -- 56.9 Net change in liquidity 71.7 157.2 (70.1) 24.0 (56.6) - ------------------------------------------------------------------------------------------------------------------- Dollars in Millions Financial Working capital $ 625.0 $ 428.0 $ 268.0 $ 339.5 $ 232.7 Position Property (net) 1,488.1 1,552.4 1,745.2 1,730.8 1,712.2 at Year End Total assets 2,651.4 2,526.6 2,631.5 2,607.7 2,626.4 Long-term debt 638.7 799.6 922.1 834.3 787.7 Redeemable preferred stock -- -- -- -- -- Other temporary equity -- -- -- -- -- Stockholders' equity 1,391.5 1,067.7 958.4 1,147.2 1,131.3 Unused credit facilities 225 150 135 228 190 - ------------------------------------------------------------------------------------------------------------------- Financial Net income (loss) as a % of Ratios sales 4.2% .6% (5.9)% (1.3)% (4.3)% Long-term debt to total capitalization 31.5% 42.8% 49.0% 42.1% 41.0% Long-term debt and redeemable preferred to total capitalization 31.5% 42.8% 49.0% 42.1% 41.0% Return on stockholders' equity 10.4% 1.8% loss loss loss - ------------------------------------------------------------------------------------------------------------------- Dollars and Tons in Millions Production and Tons of raw steel produced 5.5 5.7 6.1 6.5 6.3 Employment Tons of steel mill shipments 4.9 4.9 4.7 5.0 4.8 Statistics Average number of employees 20,740 22,668 24,413 26,921 28,700 Total employment costs $ 878.4 $ 918.6 $ 988.5 $1,006.7 $1,084.4 - -------------------------------------------------------------------------------------------------------------------
Cr. = Credit 12 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 and line officers and a task force of accounting management which monitors 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. 13 REPORT OF INDEPENDENT ACCOUNTANTS Price Waterhouse [LOGO] TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF INLAND STEEL INDUSTRIES, INC. In our opinion, the consolidated financial statements on pages 27 through 41 present fairly, in all material respects, the financial position of Inland Steel Industries, Inc. and Subsidiary Companies at December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, 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. As discussed in Notes 10 and 11 to the consolidated financial statements, in 1992 the Company changed its method of accounting for postretirement benefits other than pensions and for income taxes. /s/ Price Waterhouse --------------------- Price Waterhouse Chicago, Illinois February 23, 1994 14 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 20 percent or more but less than majority-owned companies, joint ventures and partnerships, and the Company's majority interest in the I/N Tek partnership, are accounted for under the equity method. PER SHARE RESULTS Primary per share results are based on the weighted average number of common shares outstanding and take into account the dividend requirements of preferred stock, net of tax benefits related to leveraged Employee Stock Ownership Plan ("ESOP") shares, and the dilutive effect of outstanding stock options. The outstanding preferred shares have the potential of necessitating presentation of fully diluted earnings per share, in addition to the primary per share results, reflecting 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. Fully diluted earnings per common share would also reflect 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. 15 BENEFITS FOR RETIRED EMPLOYEES Pension benefits are provided by the Company to substantially all employees under a trusteed non-contributory plan. Life insurance and certain medical benefits are provided for substantially all retired employees. The estimated costs of pension, medical, and life insurance benefits are determined annually by consulting actuaries. With the adoption of Financial Accounting Standards Board ("FASB") Statement No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," effective January 1, 1992, the cost of health-care benefits for retirees, previously recognized as incurred, is being accrued during their term of employment (see Note 10). Pensions are funded in accordance with ERISA requirements in a trust established under the plan. Costs for retired employee medical benefits and life insurance are funded when claims are submitted. CASH EQUIVALENTS Cash equivalents reflected in the Statement of Cash Flows are highly liquid, short-term investments with maturities of three months or less that are an integral part of the Company's cash management portfolio. The carrying amount of cash equivalents approximates fair value because of the short maturity of those instruments. INCOME TAXES Effective January 1, 1992, the Company adopted FASB Statement No. 109, "Accounting for Income Taxes." Previously, the Company accounted for income taxes under Accounting Principles Board ("APB") Opinion No. 11. 16
CONSOLIDATED STATEMENTS OF OPERATIONS AND REINVESTED EARNINGS Inland Steel Industries, Inc. and Subsidiary Companies Dollars in Millions (except per share data) Year Ended December 31 1993 1992 1991 --------------------------------------------------------------------- -------------------------------------- Consolidated NET SALE $3,882.2 $3,494.3 $3,404.5 Statement of --------------------------------------------------------------------- -------------------------------------- Operations OPERATING COSTS AND EXPENSES: Cost of goods sold (excluding depreciation) 3,457.8 3,305.8 3,124.4 Selling, general and administrative expenses 190.0 193.9 200.0 Depreciation 131.2 128.9 117.6 State, local and miscellaneous taxes 60.3 61.6 58.4 Facility shutdown and restructuring provisions (Note 9) 22.3 -- 205.0 Gain on sale of partial interest in joint venture (Note 13) -- (22.5) -- --------------------------------------------------------------------- -------------------------------------- Total 3,861.6 3,667.7 3,705.4 --------------------------------------------------------------------- -------------------------------------- OPERATING PROFIT (LOSS) 26.6 (173.4) (300.9) OTHER EXPENSE: General corporate expense, net of income terms 22.2 30.3 23.4 Interest and other expense on debt 78.0 54.9 46.8 Corporate restructuring provision (Note 9) -- -- 10.0 --------------------------------------------------------------------- -------------------------------------- LOSS BEFORE INCOME TAXES (73.6) (258.6) (381.1) --------------------------------------------------------------------- -------------------------------------- PROVISIONS FOR INCOME TAXES (Note 11): Current taxes 2.8 .9 12.3Cr. Deferred taxes 38.8Cr. 100.1Cr. 93.7Cr. --------------------------------------------------------------------- -------------------------------------- Total 36.0Cr. 99.2Cr. 106.0Cr. --------------------------------------------------------------------- -------------------------------------- LOSS BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (37.6) (159.4) (275.1) CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (Note 10) -- (656.2) -- --------------------------------------------------------------------- -------------------------------------- NET LOSS (37.6) (815.6) (275.1) Dividend requirements for preferred stock (net of tax benefits related to leveraged ESOP shares) 32.0 32.1 30.5 --------------------------------------------------------------------- -------------------------------------- Net loss applicable to common stock $ (69.6) $ (847.7) $(305.6) --------------------------------------------------------------------- -------------------------------------- PER SHARE OF COMMON STOCK: Before cumulative effect of change in accounting principle $ (1.96) $(5.83) $ (9.88) Cumulative effect of change in accounting principle -- (19.99) -- --------------------------------------------------------------------- -------------------------------------- NET LOSS $ (1.96) $ (25.82) $ (9.88) --------------------------------------------------------------------- -------------------------------------- 1993 1992 1991 --------------------------------------------------------------------- -------------------------------------- Consolidated Earnings reinvested in the business (accumulated deficit) Statement at beginning of year $ (302.3) $ 545.4 $ 856.2 of Reinvested Net loss for the year Earnings (37.6) (815.6) (275.1) Dividends declared: Common ($.15 per share in 1991) -- -- (4.6) Preferred (Notes 4 and 6) (32.0) (32.1) (31.1) --------------------------------------------------------------------- -------------------------------------- Earnings reinvested in the business (accumulated deficit) at end of year $ (371.9) $ (302.3) $ 545.4 --------------------------------------------------------------------- --------------------------------------
See Notes to Consolidated Financial Statements 17
CONSOLIDATED STATEMENTS OF CASH FLOWS Inland Steel Industries, Inc. and Subsidiary Companies Increase (Decrease) in Cash 1993 1992 1991 Dollars in Millions Years Ended December 31 - ---------------------------------------------------------------------------- ------------------------------------ Operating NET LOSS $(37.6) $(815.6) $(275.1) Activities ------------------------------------------------------------- ------------------------------------ ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH PROVIDED FROM (USED FOR) OPERATING ACTIVITIES: Depreciation 131.8 129.6 118.2 Facility shutdown and restructuring provisions 18.9 -- 212.4 Deferred income taxes (36.8) (455.7) (93.7) Deferred employee benefit cost, including cumulative 38.1 1,066.7 (14.3) effect of change in accounting principle Stock issued for coverage of employee benefit plan expense 19.1 13.4 14.0 Gain on sale of partial interest in joint venture -- (22.5) -- Change in: Receivables (46.4) (27.1) 53.8 Inventories (4.2) 5.6 72.1 Accounts payable 34.0 22.8 (74.0) Accrued salaries and wages 1.6 (1.8) (6.7) Other accrued liabilities 4.9 30.0 4.0 Other deferred items (11.4) 33.2 14.3 ------------------------------------------------------------- ------------------------------------ NET ADJUSTMENTS 149.6 794.2 300.1 ------------------------------------------------------------- ------------------------------------ NET CASH PROVIDED FROM (USED FOR) OPERATING ACTIVITIES 112.0 (21.4) 25.0 - ----------------------------------------------------------------------------- ------------------------------------ Investing Capital expenditures (105.6) (64.4) (140.2) Activities Investments in and advances to joint ventures, net (1.9) (6.3) (24.9) Proceeds from sales of assets 6.5 28.1 13.9 ------------------------------------------------------------- ------------------------------------ NET CASH USED FOR INVESTING ACTIVITIES (101.0) (42.6) (151.2) - ----------------------------------------------------------------------------- ------------------------------------ Financing Sale of common stock 178.7 97.9 -- Activities Sale of preferred stock -- -- 72.8 Long-term debt issued 46.8 145.4 121.4 Long-term debt retired (78.5) (49.4) (39.3) Dividends paid (35.7) (35.8) (37.6) Acquisition of treasury stock (9.5) (3.5) (2.3) ------------------------------------------------------------- ------------------------------------ NET CASH PROVIDED FROM FINANCING ACTIVITIES 101.8 154.6 115.0 - ----------------------------------------------------------------------------- ------------------------------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 112.8 90.6 (11.2) Cash and equivalents--beginning of year 137.7 47.1 58.3 ------------------------------------------------------------- ------------------------------------ Cash and equivalents--end of year $250.5 $137.7 $47.1 ------------------------------------------------------------- ------------------------------------ - ----------------------------------------------------------------------------- ------------------------------------ Supplemental Cash paid (received) during the year for: Disclosures Interest (net of amount capitalized) $ 76.0 $ 53.1 $40.4 Income taxes, net 1.9 (12.3) (12.5) ------------------------------------------------------------- ------------------------------------
See Notes to Consolidated Financial Statements 18
CONSOLIDATED BALANCE SHEET Inland Steel Industries, Inc. and Subsidiary Companies Dollars in Millions At December 31 1993 1992 - -------------------------------------------------------------------------------------------- ---------------------- Assets CURRENT ASSETS: Cash and cash equivalents $ 250.5 $ 137.7 Receivables less provision for allowances, claims and doubtful accounts of $28.2 and $23.2, respectively 427.3 380.9 Inventories (Note 1) 376.9 372.7 Deferred income taxes (Note 11) 44.2 35.2 ------------------------------------------------------------------------- ---------------------- Total current assets 1,098.9 926.5 INVESTMENTS AND ADVANCES (see details on next page) 221.0 212.6 PROPERTY, PLANT AND EQUIPMENT, AT COST, LESS ACCUMULATED DEPRECIATION (see details on next page) 1,507.7 1,548.8 DEFERRED INCOME TAXES (Note 11) 428.4 396.9 INTANGIBLE PENSION ASSET (Note 10) 122.1 -- EXCESS OF COST OVER NET ASSETS ACQUIRED 26.4 27.7 DEFERRED CHARGES AND OTHER ASSETS 31.3 34.0 ------------------------------------------------------------------------- ---------------------- Total assets $ 3,435.8 $ 3,146.5 ------------------------------------------------------------------------- ---------------------- Liabilities CURRENT LIABILITIES: Accounts payable $ 300.9 $ 266.9 Accrued liabilities: Salaries, wages and commissions 75.7 74.1 Federal income taxes 2.7 5.0 Taxes, other than Federal income taxes 75.6 68.7 Interest on debt 13.0 14.3 Terminated facilities costs and other (Note 9) 35.8 23.0 Long-term debt due within one year (Note 3) 98.8 33.5 ------------------------------------------------------------------------- ---------------------- Total current liabilities 602.5 485.5 LONG-TERM DEBT (see details on next page and Note 3) 777.1 873.7 ALLOWANCE FOR TERMINATED FACILITIES COSTS AND OTHER (Note 9) 36.1 43.2 DEFERRED EMPLOYEE BENEFITS (Note 10) 1,371.1 1,211.0 DEFERRED INCOME 25.6 26.8 ------------------------------------------------------------------------- ---------------------- Total liabilities 2,812.4 2,640.2 - -------------------------------------------------------------------------------------------- ---------------------- Temporary Equity REDEEMABLE PREFERRED STOCK, Series F, $1.00 par value, 185,000 shares issued and outstanding, redeemable at $1,000 per share (Note 4) 185.0 185.0 COMMON STOCK REPURCHASE COMMITMENT (Note 4) 40.8 49.9 - -------------------------------------------------------------------------------------------- ---------------------- Stockholders' PREFERRED STOCK, $1.00 par value, 15,000,000 shares authorized for all Equity series including Series F, aggregate liquidation value of $230.6 in 1993 and $231.6 in 1992 (Notes 5 and 6) 4.7 4.7 COMMON STOCK, $1.00 par value; authorized--100,000,000 shares; issued--47,854,208 shares for 1993 and 42,104,208 shares for 1992 (Notes 6 through 8) 47.9 42.1 CAPITAL IN EXCESS OF PAR VALUE (Note 6) 1,106.4 945.0 ACCUMULATED DEFICIT (371.9) (302.3) UNEARNED COMPENSATION--ESOP (Note 5) (112.2) (122.2) COMMON STOCK REPURCHASE COMMITMENT (Note 4) (40.8) (49.9) TREASURY STOCK AT COST--Common stock of 6,767,139 shares in 1993 and 6,857,020 shares in 1992 (236.5) (246.0) ------------------------------------------------------------------------- ---------------------- Total stockholder's equity 397.6 271.4 ------------------------------------------------------------------------- ---------------------- Total liabilities, temporary equity, and stockholders' equity $ 3,435.8 $ 3,146.5 ------------------------------------------------------------------------- ----------------------
See Notes to Consolidated Financial Statements 19
SCHEDULES TO CONSOLIDATED FINANCIAL STATEMENTS Inland Steel Industries, Inc. and Subsidiary Companies Dollars in Millions At December 31 1993 1992 - --------------------------------------------------------------------------------------------- ---------------------- Investments Steel processing joint ventures $ 168.2 $ 142.5 and Advances Raw material joint ventures 37.5 34.2 Common stock of Nippon Steel Corporation held for investment, net of valuation allowances of $5.1 and $5.8, respectively 9.5 8.8 Other investments and advances 5.8 27.1 -------------------------------------------------------------------------- ---------------------- Total $ 221.0 $ 212.6 -------------------------------------------------------------------------- ---------------------- - --------------------------------------------------------------------------------------------- ---------------------- Property, Plant Land, land improvements and mineral properties $ 156.5 $ 155.9 and Equipment Buildings, machinery and equipment 3,749.0 3,786.0 Transportation equipment 135.1 136.7 Property under capital leases--primarily machinery and equipment 43.1 44.2 -------------------------------------------------------------------------- ---------------------- Total 4,083.7 4,122.8 Less-- Accumulated depreciation 2,432.1 2,433.3 Accumulated depreciation--capital leases 35.5 34.5 Allowance for retirements and terminated facilities (Note 9) 108.4 106.2 -------------------------------------------------------------------------- ---------------------- Net $ 1,507.7 $ 1,548.8 -------------------------------------------------------------------------- ---------------------- - --------------------------------------------------------------------------------------------- ---------------------- Long-Term Debt INLAND STEEL INDUSTRIES, INC. Guaranteed ESOP notes, 7.96%, 8.43% and 8.80% due through July 2, 2004 $ 123.6 $ 131.2 Notes, 12 3/4% due December 15, 2002 150.0 150.0 -------------------------------------------------------------------------- ---------------------- Total Inland Steel Industries, Inc. 273.6 281.2 INLAND STEEL COMPANY First Mortgage Bonds: Series O, 8 3/4% due July 15, 1995 -- 10.0 Series P, 8 7/8% due April 15, 1999 -- 22.5 Series Q, 9 1/2% due September 1, 2000 -- 42.8 Series R, 7.9% due January 15, 2007 87.9 93.1 Series T, 12% due December 1, 1998 125.0 125.0 Pollution Control Series 1977, 5 3/4% due February 1, 2007 26.5 26.5 Pollution Control Series 1978, 6 1/2% due May 15, 2008 52.0 52.0 Pollution Control Series 1980B, 9 3/4% due October 1, 2000 -- 25.0 Pollution Control Series 1980C, 10% due October 1, 2010 -- 5.0 Pollution Control Series 1982A, 10% due December 1, 2012 -- 10.0 Pollution Control Series 1982B, 10 3/4% due October 1, 2012 17.0 17.0 Pollution Control Series 1993, 6.8% due June 1, 2013 40.0 -- -------------------------------------------------------------------------- ---------------------- Total First Mortgage Bonds 348.4 428.9 Obligations for Industrial Development Revenue Bonds: Pollution Control Projects No. 3 and No. 4 at rates ranging from 6 1/4% to 8 1/8% due through June 1, 2005 32.0 34.0 Pollution Control Project No. 9, 10% due November 1, 2001 38.0 38.0 Obligations under capital leases including Pollution Control Projects No. 1 and No. 2--primarily at rates ranging from 5.9% to 12.6%, due through August 1, 1998 20.7 26.0 No. 2 BOF Shop Caster Project Debt, 9.4% and 11 1/4%, due through May 7, 2001 36.2 39.8 -------------------------------------------------------------------------- ---------------------- Total Inland Steel Company 475.3 566.7 JOSEPH T. RYERSON & SON, INC. Obligation for Industrial Revenue Bond with floating rate, set weekly based on 13-week Treasury bills, due November 1, 2007 7.0 7.0 Other long-term debt 10 1/4% due through November 30, 1997 1.7 1.9 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 8.8 2.6 Senior Notes, 9.43% due through July 29, 1997 10.7 14.3 -------------------------------------------------------------------------- ---------------------- Total long-term debt $ 777.1 $ 873.7 - --------------------------------------------------------------------------------------------- ----------------------
See Notes to Consolidated Financial Statements 20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: INVENTORIES Inventories were classified on December 31 as follows:
- ------------------------------------------------------------------------------------------------------------------------- Dollars in Millions 1993 1992 - --------------------------------------------------------------- ------------------------------- In process and finished products: Integrated Steel Operations $ 55.6 $67.0 Steel Service Center Operations 276.3 259.5 - --------------------------------------------------------------- ------------------------------- 331.9 326.5 - --------------------------------------------------------------- ------------------------------- Raw materials and supplies: Iron ore 25.3 23.4 Scrap and other raw materials 7.8 9.3 Supplies 11.9 13.5 - --------------------------------------------------------------- ------------------------------- 45.0 46.2 - --------------------------------------------------------------- ------------------------------- Total $376.9 $372.7 - --------------------------------------------------------------- ------------------------------- - --------------------------------------------------------------- -------------------------------
During 1993, various inventory quantities were reduced, resulting in liquidations of LIFO inventory quantities carried at lower costs prevailing in prior years as compared with the current year costs. The effect of these liquidations on continuing operations was to decrease cost of goods sold by $24.1 million in 1993. The effect on cost of goods sold of LIFO liquidations in 1992 and 1991 was not material. Replacement costs for the LIFO inventories exceeded LIFO values by approximately $348 million and $380 million on December 31, 1993 and 1992, respectively. NOTE 2: BORROWING ARRANGEMENTS On December 31, 1993, the Company's subsidiaries had available unused credit facilities totaling $225 million. Each facility requires compliance with various financial covenants including minimum net worth and leverage ratios. A $100 million unsecured credit agreement between Joseph T. Ryerson & Son, Inc. and a group of banks provides a revolving credit facility to March 31, 1995. A special-purpose subsidiary of Inland Steel Company has a $100 million revolving credit facility, which extends to November 30, 1995, with the same banks as the Ryerson agreement. Inland Steel Company has agreed to sell substantially all of its receivables to this special-purpose subsidiary and these receivables are used to secure this facility. J.M. Tull Metals Company, Inc. has a $25 million unsecured revolving credit agreement with other banks, which extends to December 15, 1994. 21 Cash availability as well as various covenants in subsidiary borrowing arrangements limited the cash that subsidiaries could transfer to the Company in the form of dividends and advances to $225 million at year-end 1993. This amount is subject to change during 1994 based on the financial performance of each subsidiary. NOTE 3: LONG-TERM DEBT Each series of First Mortgage Bonds issued by Inland Steel Company is limited to the principal amount outstanding and, with the exception of the Pollution Control Series 1982 Bonds, the Pollution Control Series 1993 Bonds, and the Series T First Mortgage Bonds, is subject to a sinking fund. Substantially all 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, 1993. In June 1993, the Company, through its Inland Steel Company subsidiary, refinanced $40 million of pollution control revenue bonds at an interest rate of 6.8 percent. The weighted average percentage rate of the refunded bonds was 9.9 percent. At year-end 1993 all remaining outstanding Series O, P, and Q First Mortgage Bonds were called to be redeemed on January 28, 1994. Accordingly, the outstanding principal amount of $75.1 million at December 31, 1993 has been classified as a current liability. Prior to the redemption of the Series O, P and Q First Mortgage Bonds, under terms of the First Mortgage, Inland Steel Company was prohibited, when its reinvested earnings were less than $187.1 million, from paying dividends on its common stock (other than stock dividends) to the Company. At year-end 1993, the accumulated deficit of Inland Steel Company was $1.0 billion. In December 1992, Inland Steel Industries issued $150 million principal amount of unsecured 12 3/4% Notes due December 15, 2002. The Notes are obligations solely of the Company and not of any of its subsidiaries. Net proceeds of the offering were added to the general funds of the Company for general corporate purposes. The Notes, which are not entitled to the benefit of any sinking fund, are not subject to redemption prior to December 15, 1997. In December 1991, Inland Steel Company issued $125 million principal amount of First Mortgage 12% Bonds, Series T, due December 1, 1998. Net proceeds of the offering were added to the general funds of Inland Steel Company for general corporate purposes, allowing its special-purpose subsidiary to repay its short-term bank borrowing. The Bonds are not subject to redemption prior to their maturity. Both the First Mortgage Indenture under which the Series T Bonds were issued and the Indenture under which the Notes were issued contain covenants limiting, among other things, the creation of additional indebtedness; the declaration and payment of dividends and distributions on the Company's capital stock; as well as mergers, consolidations, retirement of certain debt, and the sales or purchases of certain assets. The outstanding borrowing of the Company's ESOP is recorded as a liability of the Company because the Company has committed to make payments (dividends and supplemental contributions) to the ESOP Trust sufficient to service the ESOP debt. See Note 5 for additional information on the ESOP debt. Maturities of long-term debt and capitalized lease obligations due within five years are: $98.8 million in 1994, $28.9 million in 1995, $31.8 million in 1996, $33.6 million in 1997, and $162.2 million in 1998. See Note 14 regarding commitments and contingencies for other scheduled payments. Interest cost incurred by the Company totaled $80.9 million in 1993, $65.1 million in 1992, and $60.3 million in 1991. Included in these totals is capitalized interest of $2.9 million in 1993, $10.2 million in 1992, and $13.5 million in 1991. 22 The estimated fair value of the Company's long-term debt (including current portions thereof) using quoted market prices of Company debt securities recently traded and market-based prices of similar securities for those securities not recently traded was $929 million, as compared with the carrying value of $876 million included in the balance sheet, at year-end 1993. NOTE 4: REDEEMABLE PREFERRED STOCK In December 1989, the Company sold 185,000 shares of the Company's Series F Exchangeable Preferred Stock, $1.00 par value per share ("Series F Preferred Stock"), for $185 million to NS Finance III, Inc., an indirect wholly owned subsidiary of Nippon Steel Corporation ("NSC"). The preferred stock entitles the holder to cumulative annual dividends of 9.48 percent (based on the purchase price of the stock) payable quarterly; to certain preferences including preference in the payment of dividends and in liquidation over holders of the Company's Series E Preferred Stock and common stock; and to 30.604 votes per share, which number may be adjusted from time to time upon the occurrence of certain events. The voting power is 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 Series F Preferred Stock 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. Any accrued but unpaid dividends bear interest at the annual rate of 11.48 percent, compounded quarterly. The preferred stock is exchangeable at the option of the Company and with the consent of NSC for the Company's 10.23% Subordinated Voting Note. The Series F Preferred Stock or the Subordinated Voting Note is required to be redeemed in two stages, consisting of $85 million on December 18, 1996, and the remaining $100 million on December 17, 1999, plus, in each instance, accrued and unpaid dividends thereon. 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 $144 million (amounting to 4.6 million shares) has been repurchased. As of December 31, 1993, the amount representing the remaining repurchase commitment of $41 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 $22 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 preferred stock. 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. The Company has agreed not to create issues of stock senior to the Series F Preferred Stock. So long as the purchaser and permitted transferees beneficially own at least $100 million of preferred stock or $100 million aggregate principal amount of the subordinated notes, 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. The Company believes that it is not practical to estimate a fair market value different from the carrying value of this security 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 ability to convert to voting debt, 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. 23 See Note 12 regarding other related party transactions. NOTE 5: EMPLOYEE STOCK OWNERSHIP PLAN In July 1989, the Board of Directors amended the Inland Steel Industries Thrift Plan for salaried employees to include an ESOP. The ESOP Trust purchased 3,086,800 newly issued shares of Series E Preferred Stock from the Company with the proceeds of loans totaling $150 million. The ESOP notes are payable in semi-annual installments through July 2004 and are guaranteed by Joseph T. Ryerson & Son, Inc., a wholly owned subsidiary of the Company. Interest expense is recognized by the Company as it is incurred by the ESOP Trust. Compensation expense recognition is equal to the original stated value of the shares of Series E Preferred Stock allocated to the participants during the period. Dividends on the Series E Preferred Stock are recorded as declared and dividends on unallocated leveraged shares (shares purchased by the ESOP Trust in July 1989) serve to reduce expense recognized by the Company. Interest expense incurred by the ESOP Trust totaled $11.3 million, $11.9 million and $12.4 million in 1993, 1992 and 1991, respectively. In 1993, the ESOP Trust received $10.6 million in dividends and $8.1 million in contributions from the Company to make required principal and interest payments. For 1992, the ESOP Trust received $10.7 million in dividends and $8.0 million in contributions from the Company to make such required payments. In 1991, the Company paid $10.8 million in dividends and provided $2.3 million in contributions. NOTE 6: CAPITAL STOCK On December 31, 1993, 11,317,153 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 fourth quarter of 1993, the Company sold 5.75 million shares of new-issue common stock, $1 par value per share, in a public offering. The net proceeds of the offering totaled approximately $179 million. In the third quarter of 1992, the Company sold 4.3 million shares of new-issue common stock, $1 par value per share, in a public offering. The net proceeds of the offering totaled approximately $98 million. The indenture relating to the Industries 12 3/4% Notes prohibits the Company from declaring or paying cash dividends on the Company common stock under certain conditions. At year-end 1993, up to $67 million of common dividends could have been paid under terms of the indenture. The Series A $2.40 Cumulative Convertible Preferred Stock, $1.00 par value per share ("Series A Preferred Stock"), is convertible into common stock at the rate of one share of common stock for each share of Series A Preferred Stock and is redeemable, at the Company's option, at $44 per share plus any accrued and unpaid dividends. Each such share is entitled to one vote and generally votes together with holders of common stock as one class. Shares of Series E Preferred Stock, $1.00 par value per share, entitle the holder to cumulative annual dividends of $3.523 per share, payable semi-annually, and to 1.25 votes per share. Shares of Series E Preferred Stock are convertible into the Company's common stock on a one-for-one basis. From time to time, the Company elects to provide additional shares of Series E Preferred Stock to the ESOP Trust to cover employee matching requirements not covered by the release of shares through scheduled principal and interest payments by the ESOP Trust on its outstanding notes (see Note 5). 24 In March 1991, the Company sold 1.5 million shares of Series G $4.625 Cumulative Convertible Exchangeable Preferred Stock, $1.00 par value per share ("Series G Preferred Stock"), in a public offering. Each share of Series G Preferred Stock is convertible, at the option of the holder, into 1.802 shares of Company common stock. The Series G Preferred Stock may be exchanged, at the Company's option, on any dividend payment date for the Company's 9 1/4% Convertible Subordinated Debentures due May 1, 2016, at a rate of $50.00 principal amount of the Debentures for each share of Series G Preferred Stock. The shares are redeemable at the Company's option beginning May 1, 1994, at a price (plus accrued and unpaid dividends) which declines in annual increments from $53.2375 for the one-year period commencing May 1, 1994, to $50.00 beginning May 1, 2001. Net proceeds from the sale approximated $73 million. The following table details changes in capital accounts:
- ------------------------------------------------------------------------------------------------------------------------------------ Common Stock Treasury Stock Preferred Stock Capital in ------------ -------------- ------------------------------------------- Excess of Par Value Series A Series E Series G --------- Shares in Thousands and -------- -------- -------- Dollars in Millions Shares Dollars Shares Dollars Shares Dollars Shares Dollars Shares Dollars Dollars - ---------------------------------------------------------------------------------------------------------------------------------- Balance at January 1, 1991 37,804 $37.8 (6,918) $(253.9) 97 $.1 3,083 $3.1 -- $ -- $ 785.4 Acquisition of treasury stock -- -- (99) (2.3) -- -- -- -- -- -- -- Issued under employee benefit plans -- -- 185 7.8 -- -- 86 -- -- -- .5 Redemption of Series E Preferred Stock -- -- -- -- -- -- (22) -- -- -- (1.1) Issuance of Series G Preferred Stock -- -- -- -- -- -- -- -- 1,500 1.5 70.9 Other changes -- -- (15) (.3) -- -- -- -- -- -- .2 - ---------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1991 37,804 37.8 (6,847) (248.7) 97 .1 3,147 3.1 1,500 1.5 855.9 Acquisition of treasury stock -- -- (150) (3.5) -- -- -- -- -- -- -- Issued under employee benefit plans -- -- 144 6.1 -- -- 19 -- -- -- (2.1) Redemption of Series E Preferred Stock -- -- -- -- -- -- (31) -- -- -- (1.5) Issuance of Common Stock 4,300 4.3 -- -- -- -- -- -- -- -- 93.4 Other changes -- -- (4) .1 -- -- -- -- -- -- (.7) - ---------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1992 42,104 42.1 (6,857) (246.0) 97 .1 3,135 3.1 1,500 1.5 945.0 Acquisition of treasury stock -- -- (341) (9.5) -- -- -- -- -- -- -- Issued under employee benefit plans -- -- 440 19.3 -- -- 39 -- -- -- (7.5) Redemption of Series E Preferred Stock -- -- -- -- -- -- (59) -- -- -- (2.8) Issuance of Common Stock 5,750 5.8 -- -- -- -- -- -- -- -- 172.9 Other Changes -- -- (9) (.3) -- -- -- -- -- -- (1.2) - ---------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1993 47,854 $47.9 (6,767) $(236.5) 97 $.1 3,115 $3.1 1,500 $1.5 $1,106.4 - ----------------------------------------------------------------------------------------------------------------------------------
NOTE 7: STOCK OPTION PLANS The Inland 1992 Incentive Stock Plan, approved by stockholders on April 22, 1992, provides for the issuance, pursuant to options and other awards, of 2.2 million shares of common stock to officers and other key employees. Options remain outstanding and exercisable under the Inland 1988 and 1984 Incentive Stock Plans; however, no further options may be granted under these plans. Under the various plans, the per share option exercise price may not be less than 100 percent of the fair market value per share on the date of grant. During 1993, options were granted to 235 executives under the 1992 Plan and a total of 891,224 shares was available for future grants under that Plan as of December 31, 1993. The following summarizes the status of options under the plans for the periods indicated: 25
---------------------------------------------------------------------------- Option Exercise Number of Price or Range Shares Per Share ------------------------------------ ---------------------------- Options (granted and unexercised) at December 31, 1990 1,196,145 $15.31 - $39.75 Granted 619,200 19.75 - 21.38 Exercised -- Cancelled or expired (68,000) 21.38 - 39.75 Surrendered (SAR Exercise) (250) 15.31 ---------------------------------------------------------------------------- Options (granted and unexercised) at December 31, 1991 (985,295 exercisable) 1,747,095 15.31 - 39.75 Granted 655,450 22.31 - 25.50 Exercised (600) 18.75 Cancelled or expired (48,450) 18.75 - 39.75 Surrendered (SAR Exercise) (8,000) 15.31 - 25.38 ---------------------------------------------------------------------------- Options (granted and unexercised) at December 31, 1992 (1,316,530 exercisable) 2,345,495 15.31 - 39.75 Granted 575,200 26.13 Exercised (231,953) 21.38 - 33.75 Cancelled or expired (198,911) 21.38 - 39.75 Surrendered (SAR Exercise) (20,675) 15.31 - 25.38 ---------------------------------------------------------------------------- Options (granted and unexercised) at December 31, 1993 (1,425,909 exercisable) 2,469,156 15.31 - 39.75 ------------------------------------ ---------------------------- ------------------------------------ ----------------------------
Options outstanding on December 31, 1993, under the 1984 Plan have expiration dates ranging from June 26, 1994 to September 22, 1997, with a weighted average exercise price per share of $29.78. Options outstanding under the 1988 Plan have expiration dates ranging from July 26, 1998 to November 26, 2001, with a weighted average exercise price per share of $31.94. Options outstanding under the 1992 Plan have expiration dates ranging from June 23, 2002 to May 25, 2003, with a weighted average exercise price per share of $25.78. On December 31, 1993, there were 72 holders of options granted under the 1984 Plan, 217 holders of options granted under the 1988 Plan, and 273 holders of options granted under the 1992 Plan. Stock appreciation rights have also been granted with respect to 176,800 shares subject to outstanding options under the plans at the rate of one stock appreciation right ("SAR") for each share subject to option. Upon exercise of an SAR, the holder is entitled to receive the excess of the fair market value of the shares for which the SAR is exercised over the related option exercise price. The holder may elect to receive payment in stock, or in a combination of stock and cash. An SAR is exercisable only upon surrender of the related option and only to the extent that the related option is exercisable. No SAR has been granted since 1990. Following is a summary of SAR activity: 26
--------------------------------------------------------------- Number Shares Average of Rights of Stock Exercise Exercised Issued Price Cash Paid --------------------------------------------------------------- 1991 250 40 $22.63 $ 1,000 1992 8,000 1,070 $23.66 $ 4,000 1993 20,675 2,794 $29.47 $84,000 --------------------------------------------------------------- ---------------------------------------------------------------
SAR compensation expense recorded by the Company was not material for any of the three years. The 1992 Plan also provides, as did the 1988 and 1984 Plans, for the granting of restricted stock and performance awards to officers and other key employees. During 1993, restricted stock awards totaling 122,000 shares were granted to 33 executives, and no performance awards were granted. Also during 1993, 7,052 shares of previously granted restricted stock awards vested, while 4,000 shares were forfeited. During 1992, restricted stock awards totaling 3,810 shares were granted to one executive, and no performance awards were granted. The final performance period for awards granted prior to 1992 ended December 31, 1992. As the performance criteria for such performance period were not met, the remaining 95,436 shares subject to performance awards were cancelled. Also during 1992, 75,657 shares of previously granted restricted awards vested, while 1,143 shares were forfeited. During 1991, restricted stock awards totaling 13,216 shares were granted to four executives and three performance awards totaling 39,000 shares were granted under the 1988 Plan. One existing performance award was amended to increase by 3,000 the total number of shares subject to such award. Also during 1991, 23,327 shares of previously granted restricted stock awards vested, while 37,045 shares (including dividend-equivalent shares) subject to performance awards and 8,586 shares of restricted stock were forfeited. NOTE 8: STOCKHOLDER RIGHTS PLAN Pursuant to a stockholder rights plan, on November 25, 1987, the Board of Directors declared a dividend distribution, payable to stockholders of record on December 18, 1987, of one preferred stock purchase right (a "Right") for each outstanding share of the Company's common stock. The rights plan was amended by the Board on May 24, 1989. The Rights will expire 10 years after issuance, and will become exercisable only if a person or group becomes the beneficial owner of 20 percent or more of the common stock (a "20 percent holder"), commences a tender or exchange offer which would result in the offeror beneficially owning 20 percent or more of the common stock, or is determined by the Board to beneficially own at least 10 percent of the common stock and either intends to cause the Company to take certain actions not in the best long-term interests of the Company and its stockholders or is reasonably likely, through such beneficial ownership, to cause a material adverse impact on the business or prospects of the Company and its stockholders (an "Adverse Person"). Each Right will entitle stockholders to buy one newly issued unit of one one-hundredth of a share of Series D Junior Participating Preferred Stock at an exercise price of $90, subject to certain antidilution adjustments. The Company will generally be entitled to redeem the Rights at $.05 per Right at any time prior to 15 days after a public announcement of the existence of a 20 percent holder. If a person or group accumulates 20 percent or more of the common stock (except pursuant to an offer for all outstanding shares of common stock which the independent Continuing Directors determine to be fair to and otherwise in the best interests of the Company and its stockholders), or a merger takes place with a 20 percent holder where the Company is the surviving corporation and its common stock is unchanged, or a 20 percent holder engages in certain self-dealing transactions, or the Board determines that a person or group is an Adverse Person, each Right (other than Rights held by such 20 percent holder and certain related parties which become void) will represent the right to purchase, at the exercise price, common stock (or, in certain circumstances, a combination 27 of securities and/or assets) having a value of twice the exercise price. In addition, if, following the public announcement of the existence of a 20 percent holder, the Company is acquired in a merger or other business combination transaction, except a merger or other business combination transaction that takes place after the consummation of an offer for all outstanding shares of common stock that the independent Continuing Directors have determined to be fair, or a sale of 50 percent or more of the Company's assets or earning power is made to a third party, each Right (unless previously voided) will represent the right to purchase, at the exercise price, common stock of the acquiring entity having a value of twice the exercise price at the time. NOTE 9: PROVISIONS FOR RESTRUCTURING In 1993, the Company recorded a facility shutdown provision of $22.3 million which covered costs associated with the earlier than planned closure of Inland Steel Company's cokemaking facilities. Of the amount provided, $7.7 million relates to the write-off of assets with the remainder provided for various expenditures associated with the shutdown of the facility, including personnel costs. In 1991, the Company recorded restructuring provisions aggregating $215 million, of which $205 million pertained to the Indiana Harbor steelmaking complex of Inland Steel Company and $10 million was applicable to the Company's corporate office. The provisions cover writedowns of uneconomic facilities, principally cokemaking batteries, the ingot mold foundry, and selected older facilities expected to be shut down, as well as provisions for environmental matters and workforce reductions (consisting principally of added pension and other employee benefit costs). In 1992, as the specific identification of the continuing status of pension liabilities associated with the shutdown provisions is not feasible, these liabilities were transferred from the restructuring reserve to the general pension liabilities of the Company. At December 31, 1993, the Company had restructuring reserves, excluding pension-related liabilities, totaling $149.7 million. Comparable reserves at December 31, 1992 and 1991 were $141.3 million and $137.5 million, respectively. NOTE 10: RETIREMENT BENEFITS PENSIONS The Company has a non-contributory defined benefit pension plan which covers substantially all Company employees, retirees and their beneficiaries. Benefits provided participants of the plan are based on final pay and years of service for all salaried employees and certain wage employees, and years of service and a fixed rate for all other wage employees, including members of the United Steelworkers union. The Company's funding policy is to contribute annually the amount necessary to satisfy the ERISA funding standards. No funding has been required since 1984. The assumptions used to determine the plan's funded status are as follows:
------------------------------------------------------------------------------------------------------------ 1993 1992 ------------------------------------------------------------------------------------------------------------ Discount (settlement) rate 7.25% 8.6% Rate of compensation increase 5.0% 5.0% Rate of return on plan assets 9.5% 9.5% ------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------
28 The funded status of the plan as of December 31, 1993 and 1992 was as follows:
--------------------------------------------------------------------------------- December 31 -------------------- Dollars in Millions 1993 1992 -------------------------------------------- -------------------- Fair value of plan assets Equities $1,011 $ 943 Bonds 354 458 Real estate 136 137 Cash equivalents and accrued interest 293 148 -------------------------------------------- -------------------- 1,794 1,686 -------------------------------------------- -------------------- Actuarial present value of benefits for service rendered to date: Accumulated Benefit Obligation based on compensation to date, including vested benefits of $1,808 and $1,433 for 1993 and 1992, respectively 1,960 1,534 Additional benefits based on estimated future compensation levels 117 82 -------------------------------------------- -------------------- Projected Benefit Obligation 2,077 1,616 -------------------------------------------- -------------------- Plan Assets in excess (shortfall) of Projected Benefit Obligation $ (283) $ 70 -------------------------------------------- -------------------- -------------------------------------------- --------------------
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 pension cost reflected in the Company's balance sheet on December 31, 1993 and 1992, can be reconciled to the excess or shortfall of plan assets as shown below:
---------------------------------------------------------------------------- December 31 -------------------- Dollars in Millions 1993 1992 ---------------------------------------------------------------------------- Accrued pension cost $(166) $(50) Unrecognized transition asset 139 162 Unrecognized net gain (loss) (237) 9 Unrecognized prior service cost (141) (51) Adjustment required to recognize minimum liability 122 -- ---------------------------------------------------------------------------- Plan assets in excess (shortfall) of Projected Benefit Obligation $(283) $ 70 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
The additional minimum pension liability represents 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. 29 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 credit for 1993 and 1992 is composed of the components set forth in the table below:
---------------------------------------------------------------------------- Dollars in Millions 1993 1992 ---------------------------------------------------------------------------- Service cost -- present value of benefits earned during year $ 27 $ 27 Interest on service cost and Projected Benefit Obligation 139 134 Actual return on plan assets (256) (151) Net amortization and deferral 85 (19) ---------------------------------------------------------------------------- Total pension credit $ (5) $ (9) ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
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 did not prefund any of these postretirement benefits in 1993. Effective January 1, 1994, a Voluntary Employee Benefit Association Trust was established for payment of health care benefits made to Inland Steel Company United Steelworkers of America ("USWA") retirees. Funding of the Trust will be made as claims are submitted for payment. The Company adopted FASB Statement No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," effective January 1, 1992. FASB Statement No. 106 requires accrual accounting for all postretirement benefits other than pensions. The Company must be fully accrued for these postretirement benefits by the date each employee attains full eligibility for such benefits. In conjunction with the adoption of FASB Statement No. 106, the Company elected to immediately recognize the accumulated postretirement benefit obligation for current and future retirees (the "transition obligation"). Prior to the adoption of FASB Statement No. 106, the cost of medical benefits for retired employees was expensed as incurred. For 1993, the accrued expense for benefits other than pensions recorded in accordance with FASB Statement No. 106 exceeded the expense that would have been recorded under the prior accounting methods by $43 million, $28 million after tax or $.80 per share. For 1992, the incremental expense was $63 million, $41 million after tax or $1.24 per share. The amount of net periodic postretirement benefit cost for 1993 and 1992 is composed of the following:
---------------------------------------------------------------------------- Dollars in Millions 1993 1992 ---------------------------------------------------------------------------- Service cost $15 $ 15 Interest cost 85 96 Net amortization and deferral (4) -- ---------------------------------------------------------------------------- Total net periodic postretirement cost $96 $111 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
30 The following table sets forth components of the accumulated postretirement benefit obligation:
---------------------------------------------------------------------------- December 31 -------------------- Dollars in Millions 1993 1992 ---------------------------------------------------------------------------- Accumulated postretirement benefit obligation attributable to: Retirees $ 552 $ 580 Fully eligible plan participants 212 234 Other active plan participants 280 313 ---------------------------------------------------------------------------- Accumulated postretirement benefit obligation 1,044 1,127 Unrecognized net gain 73 -- Unrecognized prior service credit 76 24 ---------------------------------------------------------------------------- Accrued postretirement benefit obligation $1,193 $1,151 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
Any net gain or loss in excess of 10 percent of the accumulated postretirement benefit obligation will be amortized over the remaining service period of active plan participants. In 1993, in connection with Inland Steel Company's new labor agreement with the USWA, the postretirement medical benefit plan covering union employees was amended, effective August 1, 1993, to provide for employee co-payments and increased deductibles. As a result of these plan amendments, the Company remeasured its postretirement benefit obligation under FASB Statement No. 106, as of August 1, 1993. This remeasurement incorporated the effect of the union contract changes as well as the effects of changes in actuarial assumptions to reflect more current information regarding claim costs, census data and interest rate factors. The net effect of these changes was to reduce net periodic postretirement benefit cost for 1993 by $12 million and to reduce the accumulated postretirement benefit obligation as of August 1, 1993 by $146 million. The assumptions used to determine the plan's accumulated post-retirement benefit obligation are as follows:
--------------------------------------------------------------------------------------------- 1992 1993 -------------------------------------------- December 31 August 1 December 31 ----------------------------- -------------------------------------------- Discount rate 9.0% 7.35% 7.25% Rate of compensation increase 5.0% 5.0% 5.0% Medical cost trend rate 9%-5% 7%-5% 7%-5% Year ultimate rate reached 1997 1996 1996 ----------------------------- --------------------------------------------
A one percentage point increase in the assumed health care cost trend rates for each future year increases annual net periodic postretirement benefit cost and the accumulated postretirement benefit obligation as of December 31, 1993 by $14 million and $131 million, respectively. POSTEMPLOYMENT BENEFITS In November 1992, the FASB issued Statement No. 112, "Employers' Accounting for Postemployment Benefits." Adoption of the new Standard, which is required by the first quarter of 1994, is not anticipated to have a material impact on results of operations or the financial position of the Company. 31 NOTE 11: INCOME TAXES The Company adopted FASB Statement No. 109, "Accounting for Income Taxes," effective January 1, 1992. The cumulative effect of prior years at the date of adoption was not material to the results of operations or the financial position of the Company. Through December 31, 1991, income taxes were accounted for under APB Opinion No. 11. The elements of the provisions for income taxes for each of the three years indicated below were as follows:
--------------------------------------------------------------------------------------------- Dollars in Millions Years Ended December 31 1993 1992 1991 -------------------------------- ----------------------------------------- Current income taxes: Federal $ -- $ -- $ 10.5Cr. State and foreign 2.8 .9 1.8Cr. -------------------------------- ----------------------------------------- 2.8 .9 12.3Cr. Deferred income taxes 38.8Cr. 100.1Cr. 93.7Cr. -------------------------------- ----------------------------------------- Total tax benefit $ 36.0Cr. $ 99.2Cr. $106.0Cr. -------------------------------- ----------------------------------------- -------------------------------- -----------------------------------------
Cr.=Credit In accordance with FASB Statement No. 109, the Company adjusted its deferred tax assets and liabilities for the effect of the change in the corporate Federal income tax rate from 34 to 35 percent, effective January 1, 1993. A credit to income of $11 million, which includes the effect of the rate change on deferred tax asset and liability balances as of January 1, 1993 as well as the effect on 1993 tax benefits recorded by the Company prior to the enactment date of August 10, 1993, was recorded in the third quarter of 1993. The components of the deferred income tax assets and liabilities arising under FASB Statement No. 109 were as follows: 32
--------------------------------------------------------------------------------- December 31 ------------------- Dollars in Millions 1993 1992 ---------------------------------------------- ------------------- Deferred tax assets (excluding postretirement benefits other than pensions): Net operating loss and tax credit carryforwards $354 $306 Restructuring and termination reserves 95 84 Other deductible temporary differences 104 101 Less valuation allowances (9) (13) ---------------------------------------------- ------------------- 544 478 ---------------------------------------------- ------------------- Deferred tax liabilities: Fixed asset basis difference 430 386 Other taxable temporary differences 86 75 ---------------------------------------------- ------------------- 516 461 ---------------------------------------------- ------------------- Net deferred asset (excluding postretirement benefits other than pensions) 28 17 FASB Statement No. 106 impact (postretirement benefits other than pensions) 445 415 ---------------------------------------------- ------------------- Net deferred asset $473 $432 ---------------------------------------------- ------------------- ---------------------------------------------- -------------------
For tax purposes, the Company had available, at December 31, 1993, net operating loss ("NOL") carryforwards for regular Federal income tax purposes of approximately $923 million which will expire as follows: $72 million in year 2000, $130 million in year 2005, $313 million in year 2006, $280 million in year 2007, and $128 million in year 2008. The Company also had investment tax credit and other general business credit carryforwards for tax purposes of approximately $18 million, which expire during the years 1994 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 minimum tax credit carryforwards for tax purposes of approximately $13 million, which may be used indefinitely to reduce regular Federal income taxes. The Company believes that it is more likely than not that the $923 million of NOL carryforwards will be utilized prior to their expiration. This belief is based upon the factors discussed below. The NOL carryforwards and existing deductible temporary differences (excluding those relating to FASB Statement No. 106) are substantially offset by existing taxable temporary differences reversing within the carryforward period. Furthermore, any such recorded tax benefits which would not be so offset are expected to be realized by achieving future profitable operations based on the following: First, the Company launched a turnaround strategy to improve performance by implementing a cost reduction program and enhancing asset utilization. This resulted in a $215 million restructuring provision in 1991 to write off uneconomic facilities and provide for future workforce reductions at the Inland Steel Company and the Company. Second, in 1992 Inland Steel Company completed a major plant and equipment investment program that amounted to approximately $1.3 billion since 1988. This included the joint ventures of I/N Tek and I/N Kote and major upgrades to facilities in the flat products and bar business. As expected, these facility upgrades resulted in significant start-up costs and disruptions to operations that negatively impacted financial results. By year-end 1993, 33 all facilities except the 12-inch Bar Mill reached their design capabilities. This major investment program also shifts the product mix to higher value-added products which historically have not experienced significant price volatility. Consequently, the Company is now positioned with modern facilities that will enhance its ability to generate taxable profits. Finally, 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 1986-1989 the Company utilized approximately $600 million of NOL carryforwards). 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 (Note 10). This adoption resulted in a $415 million deferred tax asset at December 31, 1992, and future annual charges under FASB Statement No. 106 are expected to continue to exceed deductible amounts for many years. Thereafter, even if the Company should have a tax loss in any year in which the deductible amount would exceed the financial statement expense, the tax law provides for a 15-year carryforward period of that loss. Because of the extremely long period that is available to realize these future tax benefits, a valuation allowance for this deferred tax asset is not necessary. While not affecting the determination of deferred income taxes for financial reporting purposes, at December 31, 1993, the Company had available for AMT purposes approximately $290 million of NOL carryforwards which will expire as follows: $122 million in year 2006 and $168 million in year 2007. The deferred income tax benefit of $93.7 million for 1991 arose from the release of deferred tax liabilities as a result of the operating loss in that year. Timing differences between tax and financial reporting purposes for that year were composed primarily of the excess of tax over book depreciation and provisions for restructuring. Total income taxes reflected in the Consolidated Statement of Operations differ from the amounts computed by applying the Federal corporate rate as follows:
--------------------------------------------------------------------------------------------- Dollars in Millions Years Ended December 31 1993 1992 1991 ------------------------------------ ----------------------------------------- Federal income tax benefit computed at statutory tax rate of 35% in 1993, and 34% in 1992 and 1991 $25.8Cr. $87.9Cr. $129.6Cr. Additional taxes or credits from: State and local income taxes, net of Federal income tax effect 3.6 1.7Cr. 1.2Cr. Percentage depletion 2.2Cr. 4.1Cr. 2.9Cr. Adjustment of taxes of prior years -- 7.2Cr. -- Change in Federal statutory rate 10.6Cr. -- -- Loss for which no tax benefit was recognized -- -- 26.6 All other, net 1.0Cr. 1.7 1.1 ------------------------------------ ----------------------------------------- Total income tax benefit $36.0Cr. $ 99.2Cr. $106.0Cr. ------------------------------------ ----------------------------------------- ------------------------------------ -----------------------------------------
Cr.=Credit 34 NOTE 12: RELATED PARTY TRANSACTIONS-- NIPPON STEEL CORPORATION Following is a summary of the Company's relationships with NSC, whose indirect wholly owned subsidiary became the holder of all of the Company's outstanding Series F Preferred Stock on December 18, 1989 (see Note 4). I/N Tek, a general partnership formed for a joint venture between the Company and NSC, owns and operates a cold-rolling facility that commenced operations in early 1990. 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. The cost of the facility was $525 million, of which $111.6 million was contributed by the subsidiary of Inland Steel Company and $74.4 million by the subsidiary of NSC, with the balance borrowed by I/N Tek from three Japanese trading companies. 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 $141.2 million, $122.6 million and $95.0 million in 1993, 1992 and 1991, respectively, for such tolling services. NSC has the right to purchase up to 400,000 tons of cold-rolled steel from Inland Steel Company in each year at market-based negotiated prices, up to half of which may be steel processed by I/N Tek. Purchases of Inland Steel Company products by a subsidiary of NSC aggregated $157.8 million, $123.0 million and $100.6 million during 1993, 1992 and 1991, respectively. At year-end 1993 and 1992, a subsidiary of NSC owed the Company $8.2 million and $7.1 million, respectively, related to these purchases. The Company and NSC also own and operate another joint venture which consists of a 400,000 ton electrogalvanizing line and a 500,000 ton hot-dip galvanizing line adjacent to the I/N Tek facility. I/N Kote, the general partnership formed for this joint venture, is owned 50 percent by a wholly owned subsidiary of Inland Steel Company and 50 percent by an indirect wholly owned subsidiary of NSC. The facility commenced operations in the fourth quarter of 1991 and became fully operational in the third quarter of 1992, with the total cost of the project being $554 million. Permanent financing for the project, as well as for capitalized interest and a portion of the working capital, was provided by third-party long-term financing, by capital contributions of the two partners of $60 million each and by subordinated partner loans of $30 million each. 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 $516 million outstanding under its long-term financing agreement at December 31, 1993. Additional working capital requirements were met by partner loans and by third-party credit arrangements. I/N Kote is required to buy all of its cold-rolled steel from Inland Steel Company, which is required to furnish such cold-rolled steel at a price that results in an annual return on equity to the partners of I/N Kote, depending upon operating levels, of up to 10 percent after operating and financing costs; this price is subject to an upward adjustment if Inland Steel Company's return on sales is less than I/N Kote's return on sales. Purchases of Inland Steel Company cold-rolled steel by I/N Kote aggregated $191.7 million in 1993 and $99.3 million in 1992. At year-end 1993, I/N Kote owed the Company $35.5 million 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. During 1993, Inland Steel Company sold cold-rolled steel to I/N Kote at a price that approximated its cost of production compared with 1992 when such sales were at less than its cost of production. I/N Kote also provides tolling services to Inland Steel Company for which it was charged $29.1 million in 1993. Inland Steel Company sells all I/N Kote products that are distributed in North America. The Company and NSC have entered into various agreements pursuant to which NSC has provided technical services and licenses of proprietary steel technology with respect to specific Company research and engineering projects. Pursuant to such agreements, Inland Steel Company incurred costs of $3.7 million, $4.1 million and $7.0 million for technical services and related administrative costs for services provided during 1993, 1992 and 1991, respectively. 35 At midyear 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 1993, based on the year-end quoted market price and exchange rate, was $6.7 million. NOTE 13: 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, 40 percent interest in the Empire Iron Mining Partnership, 12 1/2 percent interest (25 percent interest in 1991) in Walbridge Electrogalvanizing Company, and 13 3/4 percent interest in Wabush Mines. I/N Tek and I/N Kote are joint ventures with NSC (see Note 12). 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. Empire and Wabush are iron ore mining and pelletizing ventures owned in various percentages primarily by U.S. and Canadian steel companies. On June 30, 1992, the Company, through subsidiaries, sold one-half of its interest in Walbridge, resulting in a $22.5 million pre-tax gain. Walbridge is a venture that coats cold-rolled steel in which Inland has the right to 25 percent of the productive capacity (50 percent at year-end 1991). Following is a summary of combined financial information of the Company's unconsolidated joint ventures:
--------------------------------------------------------------------------------------------- Dollars in Millions 1993 1992 1991 --------------------------------- ----------------------------------------- Results of Operations for the years ended December 31: Gross revenue $ 956.7 $ 740.8 $ 595.4 Costs and expenses 945.1 748.3 586.8 --------------------------------- ----------------------------------------- Net income (loss) $ 11.6 $ (7.5) $ 8.6 --------------------------------- ----------------------------------------- --------------------------------- ----------------------------------------- Financial Position at December 31: Current assets $ 279.7 $ 203.2 $ 137.3 Total assets 1,925.9 1,949.9 1,875.8 Current liabilities 241.6 174.0 145.0 Total liabilities 1,545.5 1,511.7 1,428.4 Net assets 380.4 438.2 447.4 --------------------------------- ----------------------------------------- --------------------------------- -----------------------------------------
NOTE 14: COMMITMENTS AND CONTINGENCIES Inland Steel Company guarantees payment of principal and interest on its 40 percent share of the long-term debt of Empire Iron Mining Partnership requiring principal payments of approximately $7.6 million annually through 1996. At year-end 1993, Inland Steel Company also guaranteed $34.5 million of long-term debt attributable to a subsidiary's interest in PCI Associates. As part of the agreement covering the 1990 sale of the Inland Lime & Stone Company division assets, Inland Steel Company agreed, subject to certain exceptions, to purchase, at prices which approximate market, the full amount of its annual limestone needs or one million gross tons, whichever is greater, through 2002. The Company and its subsidiaries have various operating leases for which future minimum lease payments are estimated to total $370.6 million through 2018, including approximately $60.7 million in 1994, $53.6 million in 1995, $48.2 million in 1996, $46.0 million in 1997, and $41.9 million in 1998. Included in the above amounts 36 is a total of $154 million, approximately $20 million per year, related to the lease of a caster facility that the Company plans to buy-out in 1994. Upon completion of the transaction, the total and five year estimates provided should be reduced accordingly. The Company will also record additional long-term debt of approximately $63 million as part of the transaction, the interest and principal of which will be paid on through 2001. In addition, at year-end 1993, the Company guaranteed the lease and loans related to this caster facility, which are partially secured by a surety bond, currently in the amount of $62 million. It is anticipated that the Company will make expenditures of $20 million in 1994, $13 million in 1995, and $5 million to $10 million annually in each of the three years thereafter for the construction, and have ongoing annual expenditures of $40 million to $50 million for the operation, of air and water pollution control facilities to comply with current Federal, state and local laws and regulations. The Company is involved in various environmental and other administrative or judicial actions initiated by governmental agencies. While it is not possible to predict the results of these matters, the Company does not expect 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, 1993, the Company's reserves for environmental liabilities totaled $19 million 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 $15 million at year-end 1993. NOTE 15: BUSINESS SEGMENTS AND CONCENTRATION OF CREDIT RISK The Company operates in two business segments, Integrated Steel and Steel Service Centers. Integrated Steel operations include the manufacture of steel mill products and the mining and processing of iron ore. Integrated Steel produces and sells a wide range of steels, of which approximately 99 percent consists of carbon and high-strength low-alloy steel grades. Approximately 76 percent of this segment's sales were to customers in five mid-American states, and 93 percent were to customers in 20 mid-American states. Over half the sales are to the steel service center and transportation (including automotive) markets. The Steel Service Center 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, the intangible pension asset, 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. 37
INFORMATION ABOUT BUSINESS SEGMENTS -------------------------------------------------------------------------------------------- Dollars in Millions Years Ended December 31 1993 1992 1991 ---------------------------------- ----------------------------------------- NET SALES Integrated Steel Operations: Sales to unaffiliated customers $2,001.3 $1,787.3 $1,757.9 Intersegment sales 173.6 122.1 137.5 ---------------------------------- ----------------------------------------- 2,174.9 1,909.4 1,895.4 ---------------------------------- ----------------------------------------- Steel Service Center operations; Sales to unaffiliated customers 1,882.5 1,707.0 1,645.6 Intersegment sales 10.8 9.6 10.3 ---------------------------------- ----------------------------------------- 1,893.3 1,716.6 1,655.9 ---------------------------------- ----------------------------------------- Eliminations and adjustments (180.0) (131.7) (146.8) ---------------------------------- ----------------------------------------- Total net sales $3,888.2 $3,494.3 $3,404.5 ---------------------------------- ----------------------------------------- OPERATING PROFIT (LOSS) Integrated Steel Operations $ (28.2) $(200.6) $(313.2) Steel Service Center Operations 56.4 27.1 16.2 Eliminations and adjustments (1.6) .1 (3.9) ---------------------------------- ----------------------------------------- Total operating profit (loss) $ 26.6 $(173.4) $(300.9) ---------------------------------- ----------------------------------------- IDENTIFIABLE ASSETS Integrated Steel Operations $2,201.2 $2,212.3 $1,868.7 Steel Service Center Operations 788.3 742.9 750.3 ---------------------------------- ----------------------------------------- 2,989.5 2,955.2 2,619.0 General corporate and other 446.3 191.3 78.8 ---------------------------------- ----------------------------------------- Total assets on December 31 $3,435.8 $3,146.5 $2,697.8 ---------------------------------- ----------------------------------------- DEPRECIATION Integrated Steel Operations $ 111.1 $ 110.2 $ 98.7 Steel Service Center Operations 19.2 18.7 18.4 ---------------------------------- ----------------------------------------- 130.3 128.9 117.1 General corporate and other 1.5 .7 1.1 ---------------------------------- ----------------------------------------- Total depreciation $ 131.8 $ 129.6 $ 118.2 ---------------------------------- ----------------------------------------- CAPITAL EXPENDITURES Integrated Steel Operations $ 86.1 $ 55.1 $ 124.7 Steel Service Center Operations 19.3 9.3 9.8 ---------------------------------- ----------------------------------------- 105.4 64.4 134.5 General corporate and other .2 -- 5.7 ---------------------------------- ----------------------------------------- Total capital expenditures $ 105.6 $ 64.4 $ 140.2 ---------------------------------- ----------------------------------------- ---------------------------------- -----------------------------------------
EX-21 15 EXHIBIT 21 1 EXHIBIT 21 SUBSIDIARIES OF INLAND STEEL INDUSTRIES, INC. The subsidiaries of Inland Steel Industries, Inc. (other than certain subsidiaries which, considered in the aggregate as a single subsidiary, do not constitute a significant subsidiary), each of which is incorporated in the State of Delaware (except as noted below) and each of which is wholly owned, either by Inland Steel Industries, Inc. or by one of its wholly owned subsidiaries, are as follows: Inland Steel Company Inland Steel Mining Company Inland Steel Administrative Service Company (formerly known as Inland Steel Finance Company) Inland Materials Distribution Group, Inc. (formerly known as Inland Steel Services Holding, Inc.) Joseph T. Ryerson & Son, Inc. J. M. Tull Metals Company, Inc. (a Georgia corporation) EX-24 16 EXHIBIT 24 1 Exhibit 24 INLAND STEEL INDUSTRIES, INC. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do hereby nominate, constitute and appoint Robert J. Darnall, Earl L. Mason, Jay E. Dittus and David B. Anderson, 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, 1993, 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 19th day of January, 1994. /s/ A. Robert Abboud -------------------- A. Robert Abboud 2 INLAND STEEL INDUSTRIES, INC. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do hereby nominate, constitute and appoint Robert J. Darnall, Earl L. Mason, Jay E. Dittus and David B. Anderson, 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, 1993, 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 19th day of January, 1994. /s/ James W. Cozad ------------------- James W. Cozad 3 INLAND STEEL INDUSTRIES, INC. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do hereby nominate, constitute and appoint Robert J. Darnall, Earl L. Mason, Jay E. Dittus and David B. Anderson, 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, 1993, 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, 1994. /s/ James A. Henderson ------------------------ James A. Henderson 4 INLAND STEEL INDUSTRIES, INC. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do hereby nominate, constitute and appoint Robert J. Darnall, Earl L. Mason, Jay E. Dittus and David B. Anderson, 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, 1993, 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, 1994. /s/ Emerson Kampen ------------------- Emerson Kampen 5 INLAND STEEL INDUSTRIES, INC. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do hereby nominate, constitute and appoint Robert J. Darnall, Earl L. Mason, Jay E. Dittus and David B. Anderson, 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, 1993, 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 31st day of January, 1994. /s/ Robert B. McKersie ----------------------- Robert B. McKersie 6 INLAND STEEL INDUSTRIES, INC. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do hereby nominate, constitute and appoint Robert J. Darnall, Earl L. Mason, Jay E. Dittus and David B. Anderson, 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, 1993, 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, 1994. /s/ Donald S. Perkins ---------------------- Donald S. Perkins 7 INLAND STEEL INDUSTRIES, INC. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do hereby nominate, constitute and appoint Robert J. Darnall, Earl L. Mason, Jay E. Dittus and David B. Anderson, 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, 1993, 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, 1994. /s/ Joshua I. Smith -------------------- Joshua I. Smith 8 INLAND STEEL INDUSTRIES, INC. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do hereby nominate, constitute and appoint Robert J. Darnall, Earl L. Mason, Jay E. Dittus and David B. Anderson, 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, 1993, 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 18th day of January, 1994. /s/ Nancy H. Teeters --------------------- Nancy H. Teeters 9 INLAND STEEL INDUSTRIES, INC. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do hereby nominate, constitute and appoint Robert J. Darnall, Earl L. Mason, Jay E. Dittus and David B. Anderson, 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, 1993, 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, 1994. /s/ Raymond C. Tower -------------------- Raymond C. Tower 10 INLAND STEEL INDUSTRIES, INC. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director and(or) officer of Inland Steel Industries, Inc., a Delaware corporation, do hereby nominate, constitute and appoint Robert J. Darnall, Earl L. Mason, Jay E. Dittus and David B. Anderson, 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, 1993, 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, 1994. /s/ Arnold R. Weber -------------------- Arnold R. Weber -----END PRIVACY-ENHANCED MESSAGE-----