ISPAT INLAND INC - 10-K Annual Report

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2003
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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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, 2003 OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File No. 1-2438

ISPAT INLAND INC.
(Exact name of registrant as specified in its charter)

DELAWARE 36-1262880
(State of Incorporation) (I.R.S. Employer Identification No.)

3210 WATLING STREET, EAST CHICAGO, INDIANA 46312
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (219) 399-1200

Registrant meets the conditions set forth in general instruction I(1)(a)
and (b) of Form 10-K and is therefore filing this form with the reduced
disclosure format.

Securities registered pursuant to Section 12(b) of the Act:

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 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 Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in any amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

The number of shares of Common Stock ($.01 par value) of the registrant
outstanding as of March 8, 2004 was 100, all of which shares were owned by Ispat
Inland Holdings, Inc. Consequently, the aggregate market value of voting and
non-voting Common Stock of the registrant held by non-affiliates is $0.

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PART I

ITEM 1. BUSINESS.

Ispat Inland Inc. together with its subsidiaries (the "Company"), a
Delaware corporation and an indirect wholly owned subsidiary of Ispat
International N.V. ("Ispat"), is an integrated domestic steel company. The
Company 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 an iron ore production joint venture and certain steel-finishing
joint ventures.

The Company has a single business segment, which comprises the operating
companies and divisions involved in the manufacturing of basic steel products
and in related raw materials operations.

On July 16, 1998, Ispat acquired Inland Steel Company (the "Predecessor
Company") from Inland Steel Industries, Inc. ("Industries") in accordance with
an Agreement and Plan of Merger ("Agreement"), dated as of May 27, 1998, amended
as of July 16, 1998 (the "Acquisition"). The Predecessor Company was renamed
Ispat Inland Inc. on September 1, 1998. Ispat paid $1,143.1 million, plus an
assumption of certain liabilities or obligations, to acquire the Predecessor
Company.

OPERATIONS

The Company is directly engaged in the production and sale of steel and
related products. Certain Company subsidiaries and affiliates are engaged in the
mining and pelletizing of iron ore and in the operation of a cold-rolling mill
and steel galvanizing lines. All raw steel made by the 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.

The Company has two divisions--the Flat Products division and the Bar
division. The Flat Products division manages the Company's iron ore operations,
conducts its ironmaking operations, and produces the major portion of its raw
steel. This division also manufactures and sells steel sheet, strip and certain
related semi-finished products for the automotive, steel service center,
appliance, office furniture and electrical motor markets. The Bar division
manufactures and sells special quality bars and certain related semi-finished
products to the automotive industry directly as well as through forgers and cold
finishers, and also sells to steel service centers and heavy equipment
manufacturers.

The Company and Nippon Steel Corporation ("NSC") are in joint ventures that
operate steel-finishing facilities near New Carlisle, Indiana. The total cost of
these two facilities, I/N Tek and I/N Kote, was approximately $1.1 billion. I/N
Tek, owned 60% by a wholly owned subsidiary of the Company and 40% by an
indirect wholly owned subsidiary of NSC, operates a cold-rolling mill. I/N Kote,
owned equally by a wholly owned subsidiary of the Company and by an indirect
wholly owned subsidiary of NSC, operates two galvanizing lines.

RAW STEEL PRODUCTION AND MILL SHIPMENTS

The following table shows, for the three years indicated, the Company's
production of raw steel and, based upon American Iron and Steel Institute data,
its share by percentage of total domestic raw steel production:

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* Net tons of 2,000 pounds.

** Based on preliminary data from the American Iron and Steel Institute.

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The annual raw steelmaking capacity of the Company is 6.0 million net tons.
The basic oxygen process accounted for 93% and 92% of raw steel production of
the Company in 2003 and 2002, respectively. The remainder of such production was
accounted for by the electric furnace process.

The total tonnage of steel mill products shipped by the Company for each of
the five years 1999 through 2003 was 5.3 million tons in 2003; 5.7 million tons
in 2002; 5.4 million tons in 2001; 5.6 million tons in 2000; and 5.8 million
tons in 1999. In 2003 and 2002, sheet, strip and certain related semi-finished
products accounted for 90% and 88%, respectively, of the total tonnage of steel
mill products shipped from the Indiana Harbor Works. Bar and certain related
semi-finished products accounted for 10% in 2003 and 12% in 2002.

In both 2003 and 2002, approximately 93%, of the shipments of the Flat
Products division and 85% of the shipments of the Bar division were to customers
in 20 mid-American states. Approximately 72% and 74%, respectively, of the
shipments of the Flat Products division and 73% and 75%, respectively, of the
shipments of the Bar division were to customers in a five-state area comprised
of Illinois, Indiana, Ohio, Michigan and Wisconsin in 2003 and 2002. Both
divisions compete in these geographical areas, principally on the basis of
price, service and quality, with the nation's largest producers of raw steel as
well as with foreign producers and with many smaller domestic mills.

The steel market is highly competitive with major integrated producers,
including the Company, facing competition from a variety of sources. Many steel
products compete with alternative materials such as plastics, aluminum,
ceramics, glass and concrete. Domestic steel producers have also been adversely
impacted by imports from foreign steel producers. Imports of steel products
accounted for 19.3% of the domestic market in 2003, down from 25.8% in 2002. The
issue surrounding unfairly traded imports aggravates market conditions, in
particular with respect to foreign government subsidies that are used to offset
operating losses by foreign producers. On March 5, 2002, as a result of an
investigation under Section 201 of U.S. trade laws, President Bush imposed
tariffs on imports into the United States of numerous steel products. These
remedies included 30% tariff rate increases for hot-rolled sheet, cold-rolled
sheet, coated sheet, and hot-rolled bar with the rates declining to 24% in year
two and 18% in year three. Several foreign supplying countries challenged the
President's action through the dispute resolution procedures of the World Trade
Organization, and on November 11, 2003 the World Trade Organization issued a
final adverse ruling on the Section 201 remedy. The European Union and Japan
announced that they would impose retaliatory tariffs on a wide range of products
if the United States did not repeal the Section 201 tariffs. Following the
issuance of a mid-term review of the Section 201 program, the President ended
the Section 201 program on December 4, 2003, stating that the domestic steel
industry's increased productivity, decreased production costs, and new labor
agreements demonstrate that the industry has made sufficient progress in its
restructuring efforts.

Twice, in 2000 and 2002, U.S. petitioners sought to have antidumping and
countervailing duties assessed against cold-rolled imports from 12 countries and
20 countries, respectively. Both times, the U.S. International Trade Commission
("ITC") issued negative final injury determinations, effectively terminating the
investigations. U.S. petitioners appealed the 2000 ITC decision to the U.S.
Court of International Trade ("CIT"), which remanded that decision to the ITC on
October 28, 2003. The ITC is expected to issue its revised findings by March 31,
2004. U.S. petitioners have appealed the 2002 ITC decision to the CIT, while
some of the respondents have raised on appeal issues relating to the final
tariff margin determinations of the U.S. Department of Commerce ("Commerce") in
that investigation. Also, in May of 2004, the U.S. government--Commerce and the
ITC--will begin a review of existing countervailing duty and antidumping orders
against hot-rolled carbon steel flat products from Brazil, Japan and Russia that
could result in the orders' termination.

Mini-mills provide significant competition in various product lines.
Mini-mills are relatively efficient, low-cost producers that manufacture steel
principally from scrap in electric furnaces and, at this time, generally have
lower capital, overhead, employment and environmental costs than the integrated
steel producers, including the Company. Mini-mills have been adding capacity and
expanding their product lines in recent years to produce larger structural
products and certain flat rolled products. Thin-slab casting technologies have
allowed mini-mills to enter certain sheet markets traditionally supplied by
integrated producers. Several mini-mills using this advanced technology are in
operation in the United States.

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For the three years indicated, shipments by market classification of steel
mill products produced by the Company at its Indiana Harbor Works are set forth
below. As shown in the table, a substantial portion of shipments by the Flat
Products division was to steel service centers and transportation-related
markets.

Some value-added steel processing operations for which the Company does not
have facilities are performed by outside processors, including joint ventures,
prior to shipment of certain products to the Company's customers. In each of
2003 and 2002, approximately 44% and 45%, respectively, of the products produced
by the Company were processed further through value-added services such as
electrogalvanizing, painting and slitting.

Approximately 78% of the finished steel shipped to customers during 2003
was transported by truck, with 20% transported by rail, and 2% shipped via barge
or other modes of transportation. A wholly owned truck transport subsidiary of
the Company was responsible for shipment of approximately 27% of the total
tonnage of products transported by truck in 2003.

Substantially all of the steel mill products produced by the Flat Products
division are marketed through its own selling organization, with offices located
in Chicago, Illinois; Southfield, Michigan; and Nashville, Tennessee.
Substantially all of the steel mill products produced by the Bar division are
marketed through its sales office in East Chicago, Indiana.

See "Product Classes" below for information relating to the percentage of
consolidated net sales accounted for by certain classes of similar products of
steel manufacturing operations.

RAW MATERIALS

The Company obtains iron ore pellets primarily from two iron ore
properties, in which the Company or a subsidiary of the Company have an
interest--the Empire Mine in Michigan and the Minorca Mine in Minnesota.

Effective December 31, 2002 the Company sold part of its interest in the
Empire Partnership to a subsidiary of Cleveland-Cliffs, Inc. thereby reducing
its interest in the Empire Mine from 40% to 21%. The Company will have the
option to sell its remaining interest in the Empire Partnership to a subsidiary
of Cleveland-Cliffs, Inc. at any time after December 31, 2007 at a price defined
in the sales agreement. For twelve years, the Company will purchase from
subsidiaries of Cleveland-Cliffs all of its pellet requirements beyond those
produced by the Minorca Mine. The price of the pellets is fixed for the first
two years and then, adjusted over the term of the agreement based on various
market index factors. In 1997, the Company sold its interest in the Wabush Mines
located in LaBrador and Quebec Canada to a subsidiary of Cleveland-Cliffs, Inc.
The Company may purchase iron ore from the Wabush Mine from time to time in
connection with the preceding Empire arrangement.

The following table shows (1) the iron ore pellets available to the Company
as of December 31, 2003 from properties of its subsidiary and through interests
in raw materials ventures; (2) 2003 and 2002 iron ore

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pellet production or purchases from such sources; and (3) the percentage of the
Company's iron ore requirements represented by production or purchases from such
sources in 2003 and 2002.

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(1) Requirements in excess of production are purchased or taken from stockpile.

(2) Net interest in proven reserves.

All of the Company's coal requirements are satisfied from independent
sources. In connection with the commencement of operations of the heat recovery
coke battery in 1998 and the associated energy facility discussed below (which
are not assets of the Company), the Company's coal fired generating station was
idled, thereby eliminating the Company's steam coal requirements.

The Company's other coal requirements are for the PCI Associates joint
venture, in which a subsidiary of the Company holds a 50% interest. The PCI
facility pulverizes coal for injection into the Company's blast furnaces. During
2003 and 2002, the PCI facility's coal needs were satisfied under short-term
contracts.

The Company, Sun Coal and Coke Company ("Sun"), and a unit of NIPSCO
Industries ("NIPSCO") jointly developed a heat recovery coke battery and an
associated energy recovery and flue-gas desulphurization facility, located on
land leased from the Company at its Indiana Harbor Works. Sun designed, built,
financed, and operates the cokemaking portion of the project. A unit of NIPSCO
designed, built and financed the portion of the project which cleans the coke
plant's flue gas and converts the flue gas heat into steam and electricity. Sun,
the NIPSCO unit and other third parties invested approximately $350 million in
the project which commenced operations in the first quarter of 1998. In 2003 the
flue gas desulphurization facility was sold by Nipsco to Private Energy LLC. The
Company has committed to take, for approximately 15 years, 1.2 million tons of
coke annually on a take-or-pay basis at prices determined by certain cost
factors, as well as energy produced by the facility, through a tolling
arrangement. The Company satisfied 61% of its 2003 total coke needs and 65% of
its 2002 total coke needs under such arrangement. The Company advanced $30
million during construction of the project, which is recorded as a deferred
asset on the balance sheet and will be credited against required cash payments
during the second half of the energy tolling arrangement. The remainder of the
Company's coke needs are supplied under short-term contracts through third party
purchases.

The Company sold all of its limestone and dolomite properties in 1990. The
Company entered into a long-term contract with the buyer of the properties to
purchase, subject to certain exceptions and at prices which approximate market,
the full amount of the annual limestone needs of the Company through 2002. The
Company has extended this arrangement at a fixed price through 2007.

Approximately 36% and 32% of the iron ore pellets and 97% of the limestone
received by the Company at its Indiana Harbor Works were transported by two of
the Company's three formerly owned ore carriers in 2003 and 2002, respectively
(the third carrier remains in reserve status). The Company's previously leased
ore carrier was returned to the lessor in March 1999. The Company's three
formerly owned ore carriers were sold to a third party during 1998. These ore
carriers are managed by the new owner, but their shipping services are retained
by the Company under a time-charter. Agreements have been made for the
transportation on the Great Lakes of the remainder of the Company's iron ore
pellet requirements.

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Approximately 50% and 49% of the Company's coke requirements were received
by conveyor belt from the heat recovery coke battery discussed above in 2003 and
in 2002, respectively. Of the remainder, in 2003, approximately 16.5% was
received in the Company's hopper cars, 8.5% in independent carrier-owned hopper
cars, 73% in independent carrier-owned barges, and 2% by truck. All of the
Company's coal requirements were received in independent carrier-owned hopper
cars.

See "Energy" below for further information relating to the use of coal in
the operations of the Company.

PRODUCT CLASSES

The following table sets forth the percentage of consolidated net sales,
for the three years indicated, contributed by each class of similar products of
the Company that accounted for 10% or more of consolidated net sales in such
time period. The data includes sales to affiliates of the Company.

Sales to Ryerson Tull, Inc. approximated 10% and 9% of consolidated net
sales during 2003 and 2002, respectively. No other customer, except I/N Kote,
accounted for more than 10% of the consolidated net sales of the Company during
the noted periods.

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, 2003, are set forth
below. Net capital additions during such period aggregated $280.7 million.

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(1) 1999 results do not reflect the revaluation of property, plant and equipment
performed as a result of the acquisition of the Company on July 16, 1998.

(2) 2002 includes the impairment charge of $44.3 (gross asset value) related to
the 2A Bloomer and 21" Bar Mill assets and the impairment charge of $4.7
(gross asset value) related to the flux equipment at the Empire Mine.

(3) 2003 includes $88.7 related to the No. 7 Blast Furnace reline and $4.9
related to the asset retirement obligation.

In July 1987, a wholly owned subsidiary of the Company formed a
partnership, I/N Tek, now known as I/N Tek LP, with an indirect wholly owned
subsidiary of NSC to construct, own, finance and operate a cold-rolling facility
with an annual capacity of 1,700,000 tons, of which approximately 40% is
cold-rolled substrate for I/N Kote (described below). The I/N Tek facility is
located near New Carlisle, Indiana. The 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.

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In September 1989, a wholly owned subsidiary of the Company formed a second
partnership, I/N Kote, now known as I/N Kote LP, 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 the
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 1,000,000 tons. The Company has guaranteed 50% of I/N Kote's term
financing. I/N Kote has contracted to acquire its cold-rolled steel substrate
from the Company, which supplies the substrate from the I/N Tek facility and the
Company's Indiana Harbor Works.

The amount budgeted for 2004 capital expenditures by the Company and its
subsidiaries is approximately $27 million. It is anticipated that capital
expenditures will be funded from cash generated by operations and borrowings
under financing arrangements. (See "Environment" below for a discussion of
capital expenditures for pollution control purposes included in the foregoing
amount.)

EMPLOYEES

The monthly average number of active employees of the Company and its
subsidiaries (including fleet and mining operations) was approximately 6,424 and
6,786 in 2003 and 2002, respectively. Within such entities, at year-end 2003,
approximately 5,130 were represented by unions, consisting of 4,624 represented
by United Steelworkers of America (of whom approximately 19 were on furlough or
indefinite layoff ), and 506 by other unions. At year-end 2002, approximately
5,518 employees were represented by unions, consisting of 5,037 by the United
Steelworkers of America (of whom approximately 26 were on furlough or indefinite
layoff), and 481 by other unions.

The labor agreement between the Company and the United Steelworkers of
America terminated on July 31, 1999 and a new agreement was negotiated to be
effective August 1, 1999. This agreement covers wages and benefits through July
31, 2004. Among other things, this agreement provided wage increases of $.50 per
hour in 2000 and 2001, and provided for wage increases of $1.00 per hour in
2003. The agreement also contains provisions that the United Steelworkers will
cooperate with the Company to continuously improve the productivity of its
operations. At the expiration of the agreement, both parties have agreed to
negotiate a successor agreement without resorting to strikes or lockouts. The
successor agreement will be patterned on the agreements established at the time
by the other domestic integrated steel producers. Any disputes concerning
adoption of the pattern will be resolved through an arbitration process. In
consideration of the foregoing, the Company committed to invest in primary
steelmaking facilities at the Indiana Harbor Works. One additional holiday was
provided and retirement benefits were increased for active employees and certain
current retirees. Certain retiree healthcare obligations are secured through
certain trust and subordinated mortgage arrangements.

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 certain waste material and the remediation of containment. These include
various federal statutes regulating the discharge or release of materials to the
environment, including the Clean Air Act, Clean Water Act, Resource Conservation
and Recovery Act ("RCRA"), 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 sanctions and
could also result in suspension or cessation of operations, substantial
liabilities or require substantial capital expenditures. In addition, under
CERCLA the U.S. Environmental Protection Agency (the "EPA") has authority to
impose liability for site remediation on waste generators, past and present site
owners and operators, and transporters, regardless of fault or the legality of
the original disposal activity. Liability under CERCLA is strict and, under
certain circumstances, joint and several.

Capital spending for pollution control projects totaled $4 million in 2003
versus $6 million in 2002. Another $31 million (non-capital) was spent in 2003
to operate and maintain pollution control equipment

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compared to $33 million in the previous year. During the five years ended
December 31, 2003, the Company has spent $200 million to construct, operate and
maintain environmental control equipment at its various locations.

Capital spending for pollution control projects previously authorized and
presently under consideration will require expenditures of less than $1 million
in 2004. During the 2005 to 2008 period it is anticipated that the Company will
make annual capital expenditures of $2 million to $5 million on pollution
control projects. In addition, the Company will have ongoing annual expenditures
(non-capital) of $30 million to $35 million to operate and maintain air and
water pollution control facilities to comply with current federal, state and
local laws and regulations. Such environmental expenditures, are not expected to
be material to the business, financial position or results of operations of the
Company.

The Company is a party to a 1993 consent decree resolving an EPA lawsuit
under the Resource Conservation and Recovery Act (the "1993 Consent Decree")
which, among other things, requires the investigation and remediation of the
Indiana Harbor Works Site. It is expected that remediation of the site will
require significant expenditures over several years that may be material to our
business, financial position and results of operations. See "Legal Proceedings"
below for a more detailed discussion of the obligations arising under the 1993
Consent Decree, as well as a discussion of potential liability relating to our
status as one of a number of allegedly potentially responsible parties named in
connection with a natural resource damage claim allegedly related to the
operation of this Indiana Harbor Works Site.

The Company is a defendant in various environmental and other
administrative or judicial actions initiated by governmental agencies. Some of
these actions are described in more detail under "Legal Proceedings" below.
While it is not possible to predict the outcome of these matters, we do not
expect environmental expenditures, excluding amounts that may be required in
connection with an EPA consent decree that is described below, to materially
affect the Company's business, financial position or results of operations.

ENERGY

Coal, together with coke, all of which are purchased from independent
sources, accounted for approximately 71% of the energy consumed by the Company
at the Indiana Harbor Works in both 2003 and 2002.

Natural gas and fuel oil supplied approximately 22% of the energy
requirements of the Indiana Harbor Works in both 2003 and 2002, and are used
extensively by the Company at other facilities that it owns or in which it has
an interest. Utilization of the pulverized coal injection facility has reduced
natural gas and fuel oil consumption at the Indiana Harbor Works.

The Company both purchases and generates electricity to satisfy electrical
energy requirements at the Indiana Harbor Works. In 2003 and 2002, respectively,
the Company produced approximately 1% and 2% of its electrical energy
requirements at the Indiana Harbor Works. The purchase of electricity at the
Indiana Harbor Works is subject to curtailment under rules of the local utility
when necessary to maintain appropriate service for various classes of its
customers.

The Company leases land to Private Energy LLC upon which is built a
90-megawatt turbine generating facility that began operation in 1998. Pursuant
to a 15-year-toll-charge contract, the facility converts coke plant flue gas
into electricity and plant steam for use by the Company. In 2003 and 2002, this
facility produced 24% and 21%, respectively, of the purchased electricity
requirements at the Indiana Harbor Works. For additional information regarding
this facility, see the discussion under "Item 1. Business--Operations--Raw
Materials" on page 4 and 5 of this document.

The Company also leases land to Private Energy LLC for a 75-megawatt steam
turbine generating facility which began operation in 1996. Pursuant to a
15-year-toll-charge contract, the facility generates electricity for use by the
Company utilizing steam produced by burning waste blast furnace gas. In 2003 and
2002, this facility produced 17% and 19% respectively, of the purchased
electricity requirements of the Indiana Harbor Works.
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FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements concerning possible or
assumed future results of operations, financing plans, competitive position,
potential growth and future expenditures. Forward-looking statements include all
statements that are not historical facts and can be identified by the use of
forward-looking terminology such as the words "believe," "expect," "anticipate,"
"intend," "plan," "estimate" or similar expressions. Undue reliance should not
be placed on any forward-looking statements, which speak only as of their dates.
Actual results could differ materially from those projected in the
forward-looking statements as a result of many factors.

DISCLOSURE AND COMPLIANCE CODE

It is the Company's policy to provide full, fair, accurate, timely and
understandable disclosures in all reports and documents that the Company files
with or submits to the Securities and Exchange Commission, as well as in all
other public communications made by the Company. The Company has adopted a
revised Compliance Code summarizing the corporate policies and laws that apply
to all officers, directors and employees. Such Compliance Code serves as the
code of ethics for all officers and directors of the Company with respect to
disclosure matters. The Compliance Code is available to view on-line at
www.Ispat.com/ Inlandemployees. In furtherance of these policies, the officers
of the Company shall design, implement, and amend, as necessary, disclosure
controls, procedures and internal controls for financial reporting. All
officers, directors and employees shall comply with such controls and procedures
in order to promote full, fair, accurate, timely, and understandable disclosures
by the Company.

ITEM 2. PROPERTIES.

PROPERTIES RELATING TO OPERATIONS

STEEL PRODUCTION

All raw steel made by the 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 the Company in fee. The
basic production facilities of the 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. A continuous anneal line and
slitting equipment, are held by the Company under leasing arrangements. The
Company has granted the Pension Benefit Guaranty Corporation ("PBGC") a lien
upon the Caster Facility to secure the payment of future pension funding
obligations. Substantially all of the remaining property, plant and equipment at
the Indiana Harbor Works, other than the Caster Facility and leased equipment,
is subject to the lien of the First Mortgage of the Company dated April 1, 1928,
as amended and supplemented. The Indiana Harbor Works is also subject to a
second lien in favor of the United Steelworkers of America to secure a post
retirement health benefit. See "Operations--Raw Steel Production and Mill
Shipments" in Item 1 above for further information relating to capacity and
utilization of the Company's properties. The 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 the Company owns a 60%
interest, has constructed a 1.7 million ton annual capacity cold-rolling mill on
approximately 200 acres of land, which it owns in fee, located near New
Carlisle, Indiana. Substantially all the property, plant and equipment owned by
I/N Tek is subject to a lien securing related indebtedness. The I/N Tek facility
is adequate to serve the present and anticipated needs of the Company planned
for such facility.

I/N Kote, a partnership in which a subsidiary of the Company owns a 50%
interest, has constructed a 1 million 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

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is subject to a lien securing related indebtedness. The I/N Kote facility is
adequate to serve the present and anticipated needs of the Company planned for
such facility.

PCI Associates, a partnership in which a subsidiary of the Company owns a
50% interest, has constructed a pulverized coal injection facility on land
located within the Indiana Harbor Works. The Company leases PCI Associates the
land upon which the facility is located. A 50% undivided interest in
substantially all of the property, plant and equipment at the PCI facility is
subject to a long-term lease, with the balance of the PCI facility owned by PCI
Associates. The PCI facility is adequate to serve the present and anticipated
needs of the Company planned for such facility.

The Company also owns property at the Indiana Harbor Works used in
connection with its joint project with Sun and Private Energy LLC. For more
information regarding this project, see the discussion under "Item 1.
Business--Operations--Raw Materials" on page 4 and 5 of this document.

A subsidiary of the Company owns a fleet of 350 coal hopper cars (100-ton
capacity each) used in unit trains to move coal and coke to the Indiana Harbor
Works. The Company time-charters three vessels for the transportation of iron
ore and limestone on the Great Lakes. During 1998, the Company transferred
ownership of such vessels to a third party subject to a lien in favor of the
PBGC on the vessels to secure the payment of future pension funding obligations.
See "Operations--Raw Materials" in Item 1 above for further information relating
to utilization of the Company's transportation equipment. Such equipment is
adequate, when combined with purchases of transportation services from
independent sources, to meet the Company's present and anticipated
transportation needs.

The Company also owns and maintains research and development laboratories
in East Chicago, Indiana. Such facilities are adequate to serve the Company's
present and anticipated needs.

RAW MATERIALS PROPERTIES AND INTERESTS

Certain information relating to raw materials properties and interests of
the Company and its subsidiaries is set forth below. See "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 the Company's subsidiaries and of the
iron ore ventures in which the Company has an interest are as follows:

Effective December 31, 2002, the Company sold part of its interest in the
Empire Partnership to a subsidiary of Cleveland-Cliffs, Inc., thereby reducing
its interest in the Empire Mine from 40% to 21%. Certain related fluxing
equipment was also sold. Cleveland-Cliffs, Inc. has indemnified the Company for
liabilities associated with the mine. The Company will have the option to sell
its remaining interest in the Empire Partnership to a subsidiary of
Cleveland-Cliffs, Inc. at any time after December 31, 2007 at a price defined in
the sales agreement. In addition, for twelve years, the Company will purchase
from subsidiaries of Cleveland-Cliffs, Inc. all of its pellet requirements
beyond those produced by the Minorca Mine. The price of the pellets is fixed for
the first two years and then adjusted over the term of the agreement based on
various market index factors.

The Company, through a subsidiary, is the sole owner and operator of the
Minorca Mine. The Company has granted the PBGC a lien on the Minorca Mine
property to secure the payment of future pension funding obligations. The
Company also owns a 38% interest in the Butler Taconite project (permanently
closed in 1985) in Nashwauk, Minnesota.

10

The reserves at the Empire Mine and Minorca Mine are held under leases
expiring, or expected at current production rates to expire, between 2012 and
2040. The Company's share of the production capacity of its interests in such
iron ore properties, in combination with supply commitments undertaken by
subsidiaries of Cleveland-Cliffs, Inc., are 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.

OTHER PROPERTIES

The Company and one of its subsidiaries lease approximately 20% of the
space in the Inland Steel Building located at 30 West Monroe Street, Chicago,
Illinois. The Company's lease agreement expires December 31, 2006.

A subsidiary of the Company holds in fee a parcel of 7 acres of land in
Oakbrook Terrace, Illinois, which is for sale. The Company also holds in fee
approximately 300 acres of land adjacent to the I/N Tek and I/N Kote sites, this
land is available for future development. Approximately 1,060 acres of rural
land, which are held in fee at various locations in the north-central United
States by various raw materials ventures, are also for sale.

ITEM 3. LEGAL PROCEEDINGS

On June 10, 1993, the U.S. District Court for the Northern District of
Indiana entered a consent decree that resolved all matters raised by a lawsuit
filed by the EPA in 1990 (the "1993 EPA Consent Decree") against, among others,
Inland Steel Company (the "Predecessor Company"). The 1993 EPA Consent Decree
assessed a $3.5 million cash fine, requires the Company to undertake
environmentally beneficial projects costing $7 million at the Indiana Harbor
Works, and requires $19 million plus interest to be spent in remediating
sediment in portions of the Indiana Harbor Ship Canal and Indiana Harbor Turning
Basin. The Company has paid the fine and substantially completed the
environmentally beneficial projects. The Company's reserve for the remaining
environmental obligations under the 1993 EPA Consent Decree totaled $28.1
million as of December 31, 2003. The 1993 EPA Consent Decree also requires
remediation of the Company's Indiana Harbor Works site. The 1993 EPA Consent
Decree establishes a three-step process, each of which requires approval by the
EPA, consisting of: assessment of the site (including stabilization measures),
evaluation of remediation alternatives and remediation of the site. The Company
is presently assessing the nature and the extent of environmental contamination.
It is anticipated that this assessment will cost approximately $2 million to $4
million per year over the next several years. Until the first two steps are
completed, the remedial action to be implemented cannot be determined.
Therefore, the Company cannot reasonably estimate the cost of, or the time
required to satisfy, our obligations under the consent decree, but it is
expected that remediation of the site will require significant expenditures over
several years that may be material to the Company's business, financial position
and results of operations. Insurance coverage with respect to work required
under the 1993 EPA Consent Decree is not significant.

In October 1996, the Indiana Department of Environmental Management, as
lead administrative trustee, notified the Company and other potentially
responsible parties that the natural resource trustees (which also include the
Indiana Department of Natural Resources, the U.S. Department of the Interior,
the Fish and Wildlife Service and the National Park Service) intended to perform
a natural resource damage assessment on the Grand Calumet River and Indiana
Harbor Ship Canal Waterways. The notice stated that the Company has been
identified as a potentially responsible party due to alleged releases of
hazardous materials from its Indiana Harbor Works facility. Such assessment has
been substantially completed. The Company has been in negotiations with the
trustees, and, as a consequence of such negotiations, has established a reserve
of $8.7 million to cover anticipated liabilities in connection with this matter.
Until such time as the matter is finally resolved, it is not possible to
accurately predict, beyond the currently established reserve, the amount of the
Company's potential liability or whether this potential liability could
materially affect the Company's business, financial position and results of
operations.

11

The U.S. Comprehensive Environmental Response, Compensation, and Liability
Act, also known as Superfund, and analogous state laws can impose liability for
the entire cost of cleanup at a site upon current or former site owners or
operators or parties who sent hazardous materials to the site, regardless of
fault or the lawfulness of the activity that caused the contamination. The
Company is a potentially responsible party at several state and federal
Superfund sites. Except for the Four County Landfill described below, the
Company believes its liability at these sites is either de minimis or
substantially resolved. The Company could, however, incur additional costs or
liabilities at these sites based on new information, if additional cleanup is
required, private parties sue for personal injury or property damage, or other
responsible parties sue for reimbursement of costs incurred to clean up the
sites. The Company could also be named a potentially responsible party at other
sites if its hazardous materials or those of its predecessor were disposed of at
a site that later becomes a Superfund site.

The Company received a Special Notice of Potential Liability from the
Indiana Department of Environmental Management (IDEM) on February 18, 1992
relating to releases of hazardous substances from the Four County Landfill Site
in Fulton County, Indiana. The Company, along with other potentially responsible
parties (PRP's), has entered into two agreed orders with IDEM pursuant to which
the PRP's agreed to perform a remedial investigation and feasibility study for
the site, pay certain past and future IDEM costs and provide funds for operation
and maintenance necessary for stabilization of the First Operable Unit of the
site. The remedial investigation and feasibility study work is complete. In a
letter dated June 2, 2003, IDEM advised the PRP's for the First Operable Unit
that all terms of the Agreed Order for the First Operable Unit had been
completed and that the Order was terminated, subject to the Reservation of
Rights. Under the terms of the PRP agreement, the Company had an approximate
7.2% share ($49,000), which amount has been paid.

In July 2001, IDEM selected the remedy for the Second Operable Unit at the
Four County Landfill. The Company is a member of a group that negotiated with
IDEM to resolve any liability for the Second Operable Unit. IDEM has estimated
the costs for the Second Operable Unit to be approximately $1,000,000, with an
additional contingent remedy estimated to cost approximately $2,100,000, to be
implemented only if the selected remedy is deemed to be inadequate. IDEM has a
trust account holding approximately $800,000 for use in the implementation of
the First and the Second Operable Unit remedies. In 2003, the PRP Group entered
into another Agreed Order pursuant to which the PRP Group agreed to pay $320,000
in exchange for a release from the cost of the Second Operable Unit. The
Company's share of that payment was $22,202. The Agreed Order is final and the
payment has been made.

In July 2001, the United States Environmental Protection Agency (EPA) filed
suit against the Company and other PRP's, seeking recovery of past response
costs which it alleged it has expended at the Four County Landfill Site. On
February 6, 2003, a Consent Decree was issued by the U.S. District Court of
Northern Indiana, which resolved the EPA's cost recovery suit. As a result of
that Consent Decree, the Company has been required to pay approximately $13,000
in past response costs to the EPA.

On July 2, 2002, the Company received a notice of violation ("NOV") issued
by the US Environmental Protection Agency against the Company, Indiana Harbor
Coke Company, L.P. ("IHCC") and Cokenergy, Inc., alleging violations of air
quality and permitting regulations for emissions from the Heat Recovery Coal
Carbonization facility which is operated by IHCC. An amended NOV stating similar
allegations was issued on August 8, 2002. Although the Company currently
believes that its liability with respect to this matter will be minimal, the
Company could be found liable for violations and this potential liability could
materially affect the business, financial position and results of operations of
the Company.

On September 15, 2003, the Company entered into a settlement agreement with
Ryerson Tull, Inc. pursuant to which Ryerson Tull paid the Company $21 million
to release Ryerson Tull from various environmental and other indemnification
obligations arising out of the sale by Ryerson Tull of the Company to Ispat in
1998. The $21 million received from Ryerson Tull was paid into the Company
Pension Plan, and went to reduce the amount of a Ryerson Tull guaranty and
letter of credit that Ryerson Tull had provided to the Pension Benefit Guaranty
Corporation ("PBGC") to guarantee $50 million of the Company's Pension Plan
obligations. The Company also agreed with Ryerson Tull to, among other things,
make specified monthly

12

contributions to the Company's Pension Plan totaling $29 million over the
twelve-month period beginning January 2004, thereby eliminating, by the end of
such year, the obligation of Ryerson Tull to provide the continuing guaranty and
letter of credit to the PBGC, which guaranty/letter of credit the Company had
previously committed to take all necessary action to eliminate. In addition, the
Company committed to reimburse Ryerson Tull for the cost of the letter credit to
the PBGC, and to share with Ryerson Tull one-third of any proceeds which the
Company might receive in the future in connection with a certain environmental
insurance policy.

In addition to the foregoing, the Company is a party to a number of legal
proceedings arising in the ordinary course of its business. The Company does not
believe that the adverse determination of any such pending routine litigation,
either individually or in the aggregate, will have a material adverse effect on
its business, financial condition, results of operations, cash flows or
prospects.

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.

The Company meets the conditions set forth in General Instruction I(1)(a)
and (b) of Form 10-K and is therefore omitting, pursuant to General Instruction
I(2), the information called for by this Item.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.

The Company is an indirect wholly owned subsidiary of Ispat. Common stock
dividends of $7 million and $0 million were declared and paid during 2003 and
2002, respectively. In connection with the acquisition, an affiliate of the
Company entered into a credit agreement dated July 16, 1998, as amended (the
"Credit Agreement") for a $860 million senior secured term credit facility. The
terms of the Credit Agreement restrict the payment of dividends and other
Restricted Payments (as defined in the Credit Agreement). At December 31, 2003,
no additional dividends or other Restricted Payments, other than certain
specifically allowed types of Restricted Payments, including dividends on the
preferred stock held by an affiliate, could have been paid. The Company has no
Common Stock which is owned by non-affiliates.

ITEM 6. SELECTED FINANCIAL DATA.

The Company meets the conditions set forth in General Instruction I(2)(a)
and (b) of Form 10-K and is therefore omitting, pursuant to General Instruction
I(2), the information called for by this Item.

ITEM 7. MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS.

The Company reported a net loss of $52.6 million in 2003 as compared with a
net loss of $7.1 million in 2002.

The following table summarizes selected earnings and other data:

Steel shipments in 2003 of 5,299,692 tons decreased by 6.3% from 2002
shipments of 5,653,673 tons due to lower production levels resulting from the #7
Blast Furnace reline and generally softer market conditions.

Sales decreased by 3.5% to $2,222.9 million in 2003 from $2,303.4 million
in 2002. The reduction in sales volume decreased sales revenue by 6.3% while
higher selling prices increased sales revenue by 2.8%. Average

13

selling prices per ton increased to $419 per ton in 2003 from $407 per ton in
2002. This increase was due primarily to an improvement in contact prices which
more than offset a deterioration in spot market prices.

Our results for 2002 were negatively impacted by two impairment charges
totaling $62.0 million. We recognized the impairment of our idled 2A Bloomer and
21" Bar Mill facilities, resulting in an asset write-off of $23.0 million. We
also recognized the write-off of the assets associated with the Empire Mine of
$39.0 million. Effective December 31, 2002, we sold part of our interest in the
Empire Partnership to a subsidiary of Cleveland-Cliffs Inc. thereby reducing our
interest in the Empire Mine from 40% to 21%. We also sold our related fluxing
equipment. Cleveland-Cliffs has indemnified us for all liabilities associated
with the mine. We have the option to sell our remaining interest in the Empire
Partnership to a subsidiary of Cleveland-Cliffs any time after December 31, 2007
for a purchase price defined in the sales agreement. Separately, we entered into
a 12-year sales agreement to purchase from subsidiaries of Cleveland-Cliffs all
of our pellet requirement beyond those provided by the Minorca Mine.

The cost of goods sold increased to $2,103.1 million in 2003 compared to
$2,082.1 million in 2002.

The operating cost per ton increased 4.6% to $420 per ton in 2003 from $402
per ton in 2002. Based on management's estimates, the No. 7 Blast Furnace reline
adversely impacted operating cost on a year over year basis by approximately $53
million. The lower sales and operating volume in 2003 resulted in higher
operating cost per ton reflecting the absorption of fixed costs. Additionally,
higher costs were incurred for increases in natural gas and scrap prices and
pension expenses. The asset impairment charges noted above, negatively impacted
operating cost in 2002 by $11 per ton.

Selling, general, and administrative expenses in 2003 of $27.0 million
decreased 2.9% from $27.8 million in the prior period due to lower employment
costs and rental expenses.

Depreciation expense in 2003 decreased 2.1% to $97.0 million from $99.1
million in the prior year, reflecting the retirement of fully depreciated
assets.

Operating income in 2003 decreased by $37.2 million to a loss of $4.2
million, from a profit of $33.0 million in 2002. The lower sales volume and
higher costs noted above, more than offset the $62 million asset impairment
charge recognized in 2002.

Other (income) expense, net of $8.6 million of income in 2003, decreased by
$21.8 million from $30.4 million of income in 2002. In 2003, we purchased $2.9
million of our debt at a discount from face value resulting in a gain on early
extinguishment of debt of $1.0 million. During 2002, we purchased $40.0 million
of our debt at a discount from face value resulting in a gain on early
extinguishment of debt of $30.7 million. The year 2003 also included $10.7
million associated with the $21.0 million settlement agreement with Ryerson
Tull.

On September 15, 2003, the Company entered into a settlement agreement with
Ryerson Tull under which, among other things, Ryerson Tull paid the Company
$21.0 million to release Ryerson Tull from various environmental and other
indemnification obligations arising out of the sale by Ryerson Tull of the
Company to Ispat. The $21.0 million received from Ryerson Tull was paid into the
Company Pension Plan and went to reduce the amount of the Ryerson Tull
guaranty/letter of credit. The Company also agreed with Ryerson Tull to, among
other things, make specified monthly contributions to the Company's Pension Plan
totaling $29.0 million over the twelve-month period beginning January 2004,
thereby eliminating, by the end of such year, the obligation of Ryerson Tull to
provide a continuing guaranty and letter of credit to the PBGC in connection
with the Company's Pension Plan, which guaranty/letter of credit the Company had
previously committed to take all necessary action to eliminate. In addition, the
Company committed to reimburse Ryerson Tull for the cost of the letter of credit
to the PBGC, and to share with Ryerson Tull one-third of any proceeds which the
Company might receive in the future in connection with a certain environmental
insurance policy.

Interest expense of $70.9 million in 2003 decreased by $6.1 million from
$77.0 million in 2002 due to a reduction in interest rates that was partially
offset by an increase in debt.

14

OUTLOOK FOR 2004

In 2004, the Company expects to benefit from stronger demand, improved
steel prices and higher operating levels following the successful reline of the
No. 7 Blast Furnace which was completed early in the fourth quarter of 2003.
Improved market conditions are being driven by a recovery in the US economy as
well as increased global demand for steel, particularly the unprecedented growth
in China. Given the higher global demand for steel and the lower value of the
dollar, we do not anticipate any increases in import levels for 2004.

The increased global demand for steel has resulted in significant upward
price movements for key commodity inputs such as iron ore, scrap, coke and coal.
The Company's iron ore requirements will be met through production from our
wholly owned Minorca Mine and a long term purchase contract. A majority of our
coke requirements also are satisfied under a long term purchase contract. These
price increases will adversely impact our operating costs, however, our internal
resources and negotiated commitments should enable us to avoid any material
decrease in steel production resulting from shortfalls in raw materials.

Additionally, pension expenses for 2004 will be higher due to a further
decrease in interest rates during 2003. The Company anticipates contributing
$111.5 million to its pension fund in 2004.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company had $1,322.3 million of long-term debt (including debt due
within one year) outstanding at December 31, 2003. Of this amount, $901.5
million is floating rate debt with a fair value of $822.1 million at December
31, 2003. The remaining $420.8 million of fixed rate debt had a fair value of
$364.9 million. Assuming a hypothetical 10% decrease in interest rates at
December 31, 2003, the fair value of this fixed rate debt would be estimated to
be $374.1 million. Fair market values are based upon market prices or current
borrowing rates with similar rates and maturities.

A 10% increase or decrease in the cost of the Company's variable rate debt
at December 31, 2003 would result in a change in pretax interest expense of $3.9
million, based upon borrowings outstanding at December 31, 2003.

The Company utilizes derivative commodity instruments not for trading
purposes but to hedge exposure to fluctuations in the costs of natural gas and
certain nonferrous metal commodities. A hypothetical 10% decrease in commodity
prices for open derivative commodity instruments as of December 31, 2003 would
reduce pre-tax income by $0.6 million.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The consolidated financial statements (including the financial statement
schedules listed under Item 14(a)1 of this report) of the Company called for by
this Item, together with the Independent Auditors' Report dated February 23,
2004 are set forth on pages F-2 to F-39 inclusive, of this Report on Form 10-K,
and are hereby incorporated by reference into this Item. Financial statement
schedules not included in this Report on Form 10-K have been omitted because
they are not applicable or because the information called for is shown in the
consolidated financial statements or notes thereto.

Unaudited consolidated quarterly sales and earnings information of the
Company for the years ended December 31, 2003, 2002 and 2001 is set forth in
Note 22 of Notes to Consolidated Financial Statements (see F-38), which is
hereby incorporated by reference into this Item.

15

ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The Company meets the conditions set forth in General Instruction I(1)(a)
and (b) of Form 10-K and is therefore omitting, pursuant to General Instruction
I(2), the information called for by this Item.

ITEM 11. EXECUTIVE COMPENSATION.

The Company meets the conditions set forth in General Instruction I(1)(a)
and (b) of Form 10-K and is therefore omitting, pursuant to General Instruction
I(2), the information called for by this Item.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The Company meets the conditions set forth in General Instruction I(1)(a)
and (b) of Form 10-K and is therefore omitting, pursuant to General Instruction
I(2), the information called for by this Item.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The Company meets the conditions set forth in General Instruction I(1)(a)
and (b) of Form 10-K and is therefore omitting, pursuant to General Instruction
I(2), the information called for by this Item.

ITEM 14. DISCLOSURE CONTROLS AND PROCEDURES.

Within the 90-day period prior to the filing of this report, evaluations
were carried out under the supervision and with the participation of the
Company's management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rule 13a-15 under the Securities Exchange
Act of 1934). Based upon those evaluations, the Chief Executive Officer and
Chief Financial Officer concluded that the design and operation of these
disclosure controls and procedures were effective to ensure that information
required to be disclosed by the Company in reports that it files or submits
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported, as of the end of the period in which the Company's periodic reports
are being prepared.

There have been no changes in the Company's internal control over financial
reporting that occurred during the Company's most recent fiscal quarter (the
Company's fourth fiscal quarter in the case of the annual report) that has
materially affected, or is reasonably likely to materially affect the Company's
internal control over financial reporting.

ITEM 15. AUDIT COMMITTEE FINANCIAL EXPERT.

Because our financial statements are consolidated with those of our parent
company, Ispat, the common stock of which is traded publicly on the New York
Stock Exchange, and because we do not have a class of publicly traded equity
securities, we are not required to have an audit committee. We have determined
that it is not necessary for our Company to have an audit committee or an audit
committee financial expert. When appropriate, we rely on the significant
experience of members of the Board of Directors of our parent company. Ispat's
audit committee reviews our financial statements as part of its review of the
consolidated financial statements of Ispat.

The Board of Directors of our parent Company, Ispat has determined that Mr.
Narayanan Vaghul, Chairman of Audit Committee is an "audit committee financial
expert". Mr. Vaghul and each of the other

16

members of Ispat's Audit Committee is an "independent director" as defined in
the New York Stock Exchange's listing rules.

ITEM 16. PRINCIPAL ACCOUNTING FEES.

Deloitte & Touche LLP ("Deloitte & Touche") served as the Company's
independent auditors for 2003 and 2002.

AUDIT FEES

Deloitte & Touche's fees for professional services rendered in connection
with the audit of financial statements included in the Company's Form 10-K and
review of financial statements included in the Company's Forms 10-Q and all
other SEC regulatory filings were $959,000 for 2003 and $950,000 for 2002.

AUDIT-RELATED FEES

Deloitte & Touche's fees for audit related services were $126,000 for 2003
and $120,000 for 2002. These services were rendered in connection with audits of
the Company's employee benefit plans.

TAX FEES

Deloitte & Touche's fees for tax compliance, tax advice, and tax planning
totaled $573,000 for 2003 and $592,000 for 2002.

Fees for tax compliance services were $450,000 and $395,000 in 2003 and
2002, respectively. Tax compliance services are services rendered based upon
facts already in existence or transactions that have already occurred to
document, compute, and obtain government approval for amounts to be included in
tax filings and consisted of: (i) federal, state and local income tax return
assistance, (ii) computation of fixed asset basis, (iii) assistance with the
review of the federal and state income tax provisions and (iv) assistance with
federal, state, and local notices from taxing authorities.

Fees for tax planning and advice services totaled $123,000 and $197,000 in
2003 and 2002, respectively. Tax planning and advice are services rendered with
respect to proposed transactions or that alter a transaction to obtain a
particular tax result. Such services consisted of: (i) tax advice and assistance
with federal and state audits and appeals, (ii) tax advice and assistance
related to fixed asset basis, (iii) assistance with tax return filings in
certain foreign jurisdictions, (iv) tax advice and consultation relating to
financial statements and tax forecasting, (v) tax advice and consultation
relating to accumulated earnings and profits to determine the treatment of
distributions to shareholders, (vi) tax advice and consultation relating to
state sales and use tax issues, (vii) tax advice and consultation relating to
other miscellaneous issues including employment taxes, bonus depreciation,
employee fringe benefits, and international assignment advisory services.

ALL OTHER FEES

No other fees were charged by Deloitte & Touche to the Company other than
those referenced above.

PART IV

ITEM 17. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(A) DOCUMENTS FILED AS A PART OF THIS REPORT.

1. CONSOLIDATED FINANCIAL STATEMENTS. The consolidated financial
statements listed below are set forth on pages F-2 to F-39 inclusive, of
this Report and are incorporated by reference in Item 8 of this Annual
Report on Form 10-K.

Independent Auditors' Report dated February 23, 2004

17

Consolidated Statements of Operations and Consolidated Statements
of Comprehensive Loss for the years ended December 31, 2003, 2002 and
2001

Consolidated Statements of Cash Flows for the years ended December
31, 2003, 2002 and 2001

Consolidated Balance Sheets at December 31, 2003 and 2002

Consolidated Statements of Stockholders' (Deficit) Equity for the
years ended December 31, 2003, 2002 and 2001

Notes to Consolidated Financial Statements

Financial Statement Schedule II (Valuation and Qualifying Accounts)
for the years ended December 31, 2003, 2002 and 2001

2. EXHIBITS. The exhibits required to be filed by Item 601 of
Regulation S-K are listed in the "Exhibit Index," which is attached hereto
and incorporated by reference herein.

(B) REPORTS ON FORM 8-K.

No reports on Form 8-K were filed by the Company during the quarter
ended December 31, 2003.

18

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
F-1

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Ispat Inland Inc.
East Chicago, Indiana

We have audited the accompanying consolidated balance sheets of Ispat Inland
Inc. and its subsidiaries (the "Company") as of December 31, 2003 and 2002, and
the related consolidated statements of operations, comprehensive loss,
stockholders' (deficit) equity and cash flows for each of the three years in the
period ended December 31, 2003. Our audits also included the financial statement
schedule II as of December 31, 2003, 2002, and 2001 and for the years then
ended. These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statements and financial statement schedule based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards 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. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Ispat Inland Inc. and its
subsidiaries at December 31, 2003 and 2002, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 2003, in conformity with accounting principles generally accepted in the
United States of America. Also, in our opinion, such financial statement
schedule as of December 31, 2003, 2002, and 2001 and for the years then ended,
when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.

As discussed in Note 2 to the consolidated financial statements, effective
January 1, 2003, the Company changed its method of accounting for asset
retirement obligations upon adoption of Statement of Financial Accounting
Standards No. 143 "Accounting for Asset Retirement Obligations".

/s/ DELOITTE & TOUCHE LLP

Chicago, Illinois
February 23, 2004

- --------------------------------------------------------------------------------
F-2

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Millions)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Dollars in Millions)

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------
F-3

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------
F-4

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

CONSOLIDATED BALANCE SHEETS
(Dollars in Millions--Except per share data)

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------
F-5

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
(Dollars in Millions)

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------
F-6

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions except share and per share data)

NOTE 1. NATURE OF OPERATIONS

Ispat Inland Inc. together with its subsidiaries (the "Company"), a Delaware
corporation and an indirect wholly owned subsidiary of Ispat International N.V.
("Ispat"), is an integrated domestic steel company. The Company produces and
sells a wide range of steels, of which approximately 99% consists of carbon and
high-strength low-alloy steel grades. It is also a participant in certain iron
ore production and steel-finishing joint ventures.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation Policy

The consolidated financial statements include the accounts of the Company and
all its majority-owned subsidiaries which require consolidation. Intercompany
transactions have been eliminated in consolidation.

Cash Equivalents

Cash equivalents are highly liquid, short-term investments purchased with
original maturities of three months or less when acquired.

Inventory Valuation

Inventories are carried at the lower of cost or market. Cost is principally
determined on a first-in, first-out ("FIFO") method. Costs include the purchase
costs of raw materials, conversion costs, and an allocation of fixed and
variable production overhead.

Accounting for Equity Investments

The Company's investments in less than majority-owned companies, joint ventures
and partnerships, and the Company's majority interest in the I/N Tek (See Note
13) partnership are accounted for under the equity method.

Property, Plant and Equipment

Property, plant and equipment are stated at cost and depreciated using the
straight line method over the useful lives of the related assets, ranging from
25 to 45 years for buildings and 4 to 23.5 years (the vast majority of lives are
from 20 to 23.5 years) for machinery and equipment. Major improvements which add
to productive capacity or extend the life of an asset are capitalized while
repairs and maintenance are charged to expense as incurred. Property, plant and
equipment under construction are recorded as construction in progress until they
are ready for their intended use; thereafter they are transferred to the related
category of property, plant and equipment and depreciated over their estimated
useful lives. Interest during construction is capitalized to property, plant and
equipment under construction until the assets are ready for their intended use.
Gains and losses on retirement or disposal of assets are determined as the
difference between net disposal proceeds and carrying amount and reflected in
the statement of income. The carrying amount for long-lived assets is reviewed
whenever events or changes in circumstances indicate that an impairment may have
occurred.

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F-7

ISPAT INLAND INC.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

Deferred Financing Costs

Deferred financing costs are amortized over the expected terms of the related
debt.

Stock Option Plan

In 1999, Ispat established the Ispat International N.V. Global Stock Option Plan
(the "Ispat Plan") which is described more fully in Note 7. Awards under the
Company's plans vest over three years. Prior to 2003, the Company, which
participates in the Ispat Plan, accounted for stock options under the
recognition and measurement provisions of APB No. 25, "Accounting for Stock
Issued to Employees," and related Interpretations. No stock-based employee
compensation cost is reflected in 2001 and 2002 net income, as all options
granted under those plans had an exercise price equal to the market value of the
underlying common stock on the date of grant.

Effective January 1, 2003, the Company adopted the fair value recognition
provisions of Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), prospectively to all
employee awards granted, modified, or settled after January 1, 2003. This
prospective adoption of the fair value provisions of SFAS 123 is in accordance
with the transitional provisions of SFAS No. 148, "Accounting for Stock-Based
Compensation" ("SFAS 148") issued in December 2002 for recognizing compensation
cost of stock options. There were no stock options granted, modified or settled
during 2003 and accordingly, no compensation expense has been recognized in
2003.

SFAS 148 also requires that if awards of stock-based employee compensation were
outstanding and accounted for under the intrinsic value method of Opinion 25 for
any period in which an income statement is presented, a tabular presentation is
required as follows:

Revenue Recognition

Revenue is recognized when the earnings process is complete and the risks and
rewards of ownership have passed to the customer, which generally occurs upon
shipment of finished product. Provisions for discounts to customers are recorded
based on terms of sale in the same period the related sales are recorded. The
Company records estimated reductions to revenue for customer programs and
incentive offerings. The Company records all amounts billed to a customer in a
sales transaction related to shipping and handling as revenues. All costs
related to shipping and handling are included in cost of goods sold.

- --------------------------------------------------------------------------------
F-8

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

Income Taxes

The provision for income taxes includes income taxes currently payable or
receivable and those deferred. Under SFAS No. 109, "Accounting for Income
Taxes", deferred tax assets and liabilities are recognized for the future tax
consequences of temporary differences between the financial statement carrying
amounts of assets and liabilities and their respective tax bases. Deferred tax
assets are also recognized for the estimated future effects of tax loss
carry-forwards. Deferred tax assets and liabilities are measured using enacted
rates in effect for the year in which the differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of
changes in tax rates is recognized in the statement of operations in the period
in which the enactment date changes. Deferred tax assets are reduced through the
establishment of a valuation allowance at such time as, based on available
evidence, it is more likely than not that the deferred tax assets will not be
realized.

Derivatives

Derivative financial instruments are utilized to manage exposure to fluctuations
in cost of natural gas and specific nonferrous metals used in the production
process. SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", requires companies to recognize all of its derivative instruments
as either assets or liabilities on the balance sheet at fair value. The fair
values of derivative financial instruments reflect the amounts the Company would
receive on settlement of favorable contracts or be required to pay to terminate
unfavorable contracts at the reporting dates thereby taking into account the
current unrealized gains or losses on open contracts. The fair value of
derivative contracts is determined using pricing models, which take into account
market prices and contractual prices of the underlying instruments, as well as
time value, yield curve, and volatility factors underlying the positions. For
derivative instruments not designated as hedging instruments, both holding and
unrealized gains or losses are recognized currently in earnings as part of the
cost of the underlying product during the period of change.

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the consolidated
financial statements and related notes to financial statements. Actual results
may differ from such estimates.

Impairment of Long-Lived Assets

When changes in circumstance indicate the carrying amount of certain long-lived
assets may not be recoverable, the assets will be evaluated for impairment. If
the forecasted undiscounted future cash flows are less than the carrying amount
of the assets, an impairment charge to reduce the carrying value of the assets
to fair value will be recognized in the current period (See Note 17).

Recent Accounting Pronouncements

The Financial Accounting Standards Board ("FASB") has issued SFAS No. 143,
"Accounting for Asset Retirement Obligations", which is effective for all fiscal
years beginning after June 15, 2002. SFAS No. 143 addresses financial accounting
and reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. SFAS No. 143
requires the fair value of liabilities for asset retirement obligations to be
recognized in the period in which the obligations are incurred if a reasonable
estimate of fair value can be made. The associated

- --------------------------------------------------------------------------------
F-9

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

asset retirement costs are capitalized as part of the carrying amount of the
long-lived asset. The impact of adopting SFAS No. 143 on January 1, 2003, the
effective date, is an increase in assets and liabilities of $3.8 and $6.3,
respectively. A charge of $1.6 (net of tax of $0.9) is reflected on the
Consolidated Statement of Operations as of January 1, 2003 as a Cumulative
Effect of change in Accounting Principle (See Note 18).

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections".
Among other items, this statement rescinds SFAS No. 4, "Reporting Gains and
Losses from Extinguishment of Debt", and an amendment of that Statement, SFAS
No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements".
Upon adoption of SFAS No. 145, any gain or loss on extinguishments of debt that
was classified as an extraordinary item in prior periods presented that does not
meet the criteria in APB Opinion No. 30, "Reporting the Results of
Operations--Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for
classification as an extraordinary item shall be reclassified. The Company
adopted the provisions of SFAS No. 145 as of January 1, 2003 and reclassified
$30.0 and $4.8 of extraordinary gains for the years ended December 31, 2002 and
2001, respectively, to the "Other income, net" line item in accordance with SFAS
No. 145.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure: An amendment of FASB Statement No. 123".
This Statement amends SFAS No. 123, "Accounting for Stock-Based Compensation",
to provide alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. In
addition, this Statement amends the disclosure requirement of SFAS No. 123 to
require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. The disclosure provisions of SFAS
No. 148 are applicable for fiscal years ending after December 15, 2002. As of
December 31, 2002, the Company adopted the disclosure provision of SFAS No. 148.

In November 2002, the FASB issued Financial Interpretation No. 45 ("FIN 45"),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN 45 requires certain
guarantees to be recorded at fair value and requires a guarantor to make
significant new disclosures, even when the likelihood of making any payments
under the guarantee is remote. Generally, FIN 45 applies to certain types of
financial guarantees that contingently require the guarantor to make payments to
the guaranteed party based on changes in an underlying that is related to an
asset, a liability, or an equity security of the guaranteed party; performance
guarantees involving contracts which require the guarantor to make payments to
the guaranteed party based on another entity's failure to perform under an
obligating agreement; indemnification agreements that contingently require the
guarantor to make payments to an indemnified party based on changes in an
underlying that is related to an asset, a liability, or an equity security of
the indemnified party; or indirect guarantees of the indebtedness of others. The
initial recognition and initial measurement provisions of FIN 45 are applicable
on a prospective basis to guarantees issued or modified after December 31, 2002.
Disclosure requirements under FIN 45 are effective for financial statements for
periods ending after December 15, 2002 and are applicable to all guarantees
issued by the guarantor subject to FIN 45's scope, including guarantees issued
prior to FIN 45. The Company does not expect that FIN 45 will have a material
effect on its financial condition, results of operations or cash flows.

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F-10

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

In December 2003, the FASB issued Interpretation No. 46 (revised December 2003)
("FIN 46R"), "Consolidation of Variable Interest Entities", with the objective
of exempting certain entities from the requirements of Interpretation No. 46
(FIN 46). A variable interest entity is a corporation, partnership, trust, or
any other legal structure used for business purposes that either (a) does not
have equity investors with voting rights, or (b) has equity investors that do
not provide sufficient financial resources for the entity to support its
activities. Historically, entities generally were not consolidated unless the
entity was controlled through voting interests. FIN 46 changed that by requiring
a variable interest entity to be consolidated by a company if that company is
subject to a majority of the risk of loss from the variable interest entity's
activities or entitled to receive a majority of the entity's residual returns or
both. A company that consolidates a variable interest entity is called the
"primary beneficiary" of that entity. FIN 46 also required disclosures about
variable interest entities that a company is not required to consolidate but in
which it has a significant variable interest. Special provisions apply to
enterprises that have fully or partially applied FIN 46 prior to issuance of FIN
46R. Otherwise, application of FIN 46R (or FIN 46) is required in financial
statements of public entities that have interests in variable interest entities
or potential variable interest entities commonly referred to as special-purpose
entities for periods ending after December 15, 2003. Application by public
entities for all other types of entities is required in financial statements for
periods ending after March 15, 2004. The Company has determined that FIN 46 will
not have an impact on its financial condition, results of operations or cash
flows.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement No 133 on
Derivative Instruments and Hedging Activities". This Statement amends Statement
No. 133 for decisions made (1) as part of the Derivatives Implementation Group
process that effectively required amendments to Statement No. 133, (2) in
connection with other Board projects dealing with financial instruments, and (3)
in connection with implementation issues raised in relation to the application
of the definition of a derivative, in particular, the meaning of an initial net
investment that is smaller than would be required for other types of contracts
that would be expected to have a similar response to changes in market factors,
the meaning of underlying, and the characteristics of a derivative that contains
financing components. The changes in this Statement improve financial reporting
by requiring that contracts with comparable characteristics be accounted for
similarly. This Statement is effective for contracts entered into or modified
after June 30, 2003, with certain exceptions, and for hedging relationships
designated after June 30, 2003. The Company has determined that the adoption of
SFAS No. 149 did not have an impact on its financial condition, results of
operations or cash flows.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity". The Statement
improves the accounting for certain financial instruments that, under previous
guidance, issuers could account for as equity. The new Statement requires that
those instruments be classified as liabilities in statements of financial
position. Most of the guidance in SFAS No. 150 is effective for all financial
instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after June 15,
2003. The Company has determined that the adoption of SFAS No. 150 did not have
an impact on its financial condition, results of operations or cash flows.

In May 2003, the Financial Accounting Standards Board Emerging Issues Task Force
("EITF") reached a consensus on EITF 01-8 "Determining Whether an Arrangement
Contains a Lease," relating to new requirements on identifying leases contained
in contracts or other arrangements that sell or purchase products or services.
The evaluation of whether an arrangement contains a lease within the scope of
SFAS No. 13 "Accounting for Leases," should be based on the evaluation of
whether an arrangement

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F-11

ISPAT INLAND INC.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

conveys the right to use property, plant and equipment. This may result in a
difference in the timing of revenue recognition. The consensus requires sellers
to report the revenue from the leasing component of the arrangement as leasing
or rental income rather than revenue from product sales or services. Purchaser's
arrangements which previously would have been considered service or supply
contracts, but are now considered leases, could affect the timing of their
expense recognition and the classification of assets and liabilities on their
balance sheet as well as require footnote disclosure of lease terms and future
minimum lease commitments. This consensus is effective prospectively for
contracts entered into or significantly modified after July 1, 2003. Based on
arrangements in place today, adoption of EITF 01-8 did not have an impact on the
company's financial condition, results of operations or cash flows.

In December 2003, the FASB issued SFAS No. 132 (revised December 2003) (SFAS No.
132R), "Employers' Disclosures about Pensions and Other Postretirement Benefits"
to revise employers' disclosures about pension plans and other postretirement
benefit plans. It does not change the measurement or recognition of those plans
required by FASB Statements No. 87, "Employers' Accounting for Pensions", No.
88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits", and No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions". This Statement retains the
disclosure requirements contained in SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits", which it replaces. Additional
disclosures include information describing the types of plan assets, investment
strategy, measurement date(s), plan obligations, cash flows, and components of
net periodic benefit cost recognized during interim periods. SFAS No. 132R is
effective for financial statements with fiscal years ending after December 15,
2003. The interim-period disclosures required by this Statement are effective
for interim periods beginning after December 15, 2003. As of December 31, 2003,
the Company has adopted the disclosure requirements of SFAS No. 132R.

FASB Staff Position ("FSP") No. 106-1, "Accounting and Disclosure Requirements
Related to the Medicare Prescription Drug, Improvement and Modernization Act of
2003," was issued by the FASB in January 2004. This FSP provides companies with
initial guidance on recognizing the effects of the prescription drug provisions
of the Medicare Act. As allowed by the FSP, the Company has elected to defer
recognition until further guidance is issued by the FASB. See Note 8, Retirement
Benefits for more information on this FSP.

Reclassifications

Certain reclassifications have been made to the prior years' financial
statements to conform to the 2003 classifications.

- --------------------------------------------------------------------------------
F-12

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

NOTE 3. INVENTORIES

Inventories consist of the following:

NOTE 4. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment consists of the following:

NOTE 5. DEBT

Short-term debt consists of the following:

In October 2003, the Company entered into a promissory note with Primary Energy
Steel LLC for $15. The note is due in July 2004, and interest is at a fixed rate
of 10%. If certain events defined as "Events of Default" in the agreement should
occur, the note and accrued interest would be due immediately.

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F-13

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

Long-term debt consists of the following:

In connection with the financing of the acquisition of Ispat Inland, an
affiliate of the Company and wholly owned indirect subsidiary of Ispat, Ispat
Inland, L.P. (the "Borrower"), entered into a Credit Agreement dated July 16,
1998, as amended (the "Credit Agreement") for a senior secured term credit
facility and letter of credit with a syndicate of financial institutions for
whom Credit Suisse First Boston is the agent (the "Agent"). The Credit Agreement
consists of a $350 Tranche B Term Loan due July 16, 2005 (the "Tranche B Loan"),
a $350 Tranche C Term Loan due July 16, 2006 (the "Tranche C Loan" and together
with the Tranche B Loan, the "Term Loans") and a $160 letter of credit that
expired on July 9, 2003 (the "LC" and together with the Term Loans, the
"Facilities"). The LC was provided in favor of the Pension Benefit Guarantee
Corporation ("PBGC") pursuant to a preliminary agreement the Company entered
into with the PBGC in 1998 that was subsequently formalized in 2000 (the "PBGC
Agreement") to provide certain financial assurances with respect to the
Company's pension plan obligations. In July 2003, the Company reached an
agreement with the PBGC

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F-14

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

regarding alternative security for the maturing letter of credit. The LC was
allowed to expire, and in its place, the Company agreed to contribute $160 over
the next two years and pay 50% of excess cash flows as defined in our agreement
with the PBGC to our pension plan. The Company contributed $50 in July of 2003,
and is required to contribute $82.5 in 2004 and $27.5 in 2005. Outside of this
Agreement, the Company also contributed $21 in September 2003. Additionally, the
Company pledged $160 of non-interest bearing First Mortgage Bonds to the PBGC as
security until the remaining $110 has been contributed to the pension plan and
certain tests have been met. Each of the Tranche B Loan and Tranche C Loan has
scheduled principal repayments of $0.875 per quarter until maturity.

On July 16, 1998, the Company issued $875 of First Mortgage Bonds as security
both for the Facilities and for an interest rate hedge (not as defined under
SFAS No. 133) which expired on October 16, 2003 owned by the Borrower as
required under the Credit Agreement (the "Hedge"). Series U, in a principal
amount of $700, was issued to an indirect subsidiary of the Borrower which, in
turn, pledged the Bonds to the Agent for the benefit of the Term Loan lenders.
Series V, in a principal amount of $160, was issued to the Agent for the benefit
of the LC lenders. This series was retired during the quarter ended September
30, 2003 once the LC expired. Series W, in a principal amount of $15, was issued
to the Agent for the benefit of the counterparty to the Hedge.

As a further credit enhancement under the Credit Agreement, the Facilities are
fully and unconditionally guaranteed for as long as the obligations are
outstanding by the Company, certain subsidiaries of the Company and Ispat. The
Company could be required to perform under the guarantee if an event of default
as defined in the Credit Agreement occurs under the Facilities. Additionally, in
April 2003, the security package was further enhanced by the addition of a
second position in the Company's inventory, spare parts, mobile equipment and
ownership interest in IIASC. At December 31, 2003 and 2002, the Company recorded
$661.5 and $668.5, respectively for the Term Loans in its Consolidated Balance
Sheet.

Borrowings under the Term Loans bear interest at a rate per annum equal to, at
the Borrower's option: (1) the higher of (a) the Agent's prime rate or (b) the
rate which is 1/2 of 1% in excess of the Federal Funds effective rate (together
the "Base Rate"), plus 2.75% or (2) the LIBO Rate (as defined in the Credit
Agreement) plus 3.75%. The fee for the LC was 4.00% of the LC amount per annum
(the "LC Fee"). The spread over the LIBO Rate and Base Rate will be reduced if
the Company's Consolidated Leverage Ratio (as defined in the Credit Agreement)
falls to specified levels.

In October 1998, the Borrower entered into the Hedge required under the Credit
Agreement. The Hedge consisted of a five-year interest rate collar which expired
on October 16, 2003. The Hedge was based on LIBOR with a floor of 4.50% and a
ceiling of 6.26% on a notional amount of $450 (see Note 12).

The Company is obligated to pay interest on the Series U First Mortgage Bonds at
the rate paid by the Borrower to the Term Loan lenders without regard to the
interest rate collar, plus 1/2 of 1% per annum and on the Series V First
Mortgage Bonds at a rate equal to the LC Fee. The rate of interest paid by the
Company on the Series U First Mortgage Bonds to the Borrower, a related company,
was 5.1% and 5.6% for the years ended December 31, 2003 and 2002, respectively.

With the exception of Series U, V and W, the First Mortgage Bonds are the
obligation solely of the Company and have not been guaranteed or assumed by or,
otherwise, become the obligation of Ispat or any of its other subsidiaries. Each
series of First Mortgage Bonds issued by the Company is limited to the principal
amount outstanding, with the Pollution Control Series 1977 Bonds and the Series
R First Mortgage Bonds subject to a sinking fund. A substantial portion of the
property, plant and

- --------------------------------------------------------------------------------
F-15

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

equipment owned by the Company at its Indiana Harbor Works is subject to the
lien of the First Mortgage. This property had a book value of approximately
$1,600 on December 31, 2003 and 2002. This property is also subject to a
subordinate lien in favor of the United Steelworkers of America to secure a post
retirement health benefit.

The Credit Agreement restricts the payment of dividends and other Restricted
Payments (as defined in the Credit Agreement) to 50% of Consolidated Net Income
(as defined in the Credit Agreement) plus certain specifically allowed types of
Restricted Payments. At December 31, 2003 and 2002, no dividends or other
Restricted Payments, in addition to those specifically allowed, which included
dividends on the preferred stock held by a subsidiary of the Borrower, could
have been paid.

The Company must also maintain a minimum Consolidated EBITDA (as defined in the
Credit Agreement). The Company was in compliance with this covenant at December
31, 2003. The Credit Agreement also contains other covenants that, among other
things, prohibit or limit the ability of the Company or the Borrower to incur
indebtedness, create liens, engage in transactions with affiliates, sell assets
and engage in mergers and consolidations. Any loans from Ispat (see "Ispat
International Advances" Note 10) cannot be repaid until the Company's leverage
falls to specified levels.

Ispat Inland Administrative Service Company ("IIASC"), a wholly owned subsidiary
of the Company established to provide a supplemental source of funds to the
Company, has a $185 committed revolving credit facility with a group of banks,
extending to November of 2005. The Company has agreed to sell substantially all
of its receivables to IIASC to secure this facility. Provisions of the credit
agreement limit or prohibit the Company from merging, consolidating, or selling
its assets and require IIASC to meet minimum net worth and leverage ratio tests.
Under terms of the secured revolving credit agreement, based on the level of the
leverage ratio and net worth calculations of the Company, beginning early in
2002, the trustee retained initial control over cash lockbox receipts. On a
daily basis, the trustee remits the remaining cash to the Company after first
using the receipts to make any payments prescribed by the secured revolving
credit agreement. This change in practice has no impact on cash available to the
Company under the facility. At December 31, 2003, based on the amount of
eligible collateral, there was $10 additional availability under the line.
Drawings under the line included $150 of loans and $20 of letters of credit
issued for the purchase of commodities on the international market and as
security under various insurance and workers compensation coverages.

On April 30, 2003, the Company replaced its $120 inventory-backed credit
facility with a four-year approximately $175 committed revolving credit facility
secured by its inventory, spare parts, mobile equipment and the Company's
ownership interest in IIASC. Provisions of this agreement prohibit or limit our
ability to incur debt, repay debt, make investments, sell assets, create liens,
engage in transactions with affiliates, engage in mergers and consolidations and
pay dividends and other restricted payments. At December 31, 2003, based on the
amount of eligible collateral, there was $21 of availability under the line.
Additionally, an extra $10 of borrowing is available for any two consecutive
days to meet temporary cash needs.

At December 31, 2003 and 2002, the amount outstanding under both the IIASC and
III revolving credit facilities were shown as a long term obligation. The
Company has both the ability and intent to refinance these obligations as they
mature under the respective credit agreements. The average interest rates on
these facilities during 2003 ranged from 2% to 4% and $150 of the outstanding
balance is repayable in 2005 and $90 in 2007, when the credit facilities
terminate.

- --------------------------------------------------------------------------------
F-16

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

In the fourth quarter of 2003, the Company resold $6.2 of its Pollution Control
Series 15 and $8.6 of its Pollution Control Series 13 for $9.7. The discount
will be amortized over the remaining life of the bonds.

In the first quarter of 2003, the Company purchased $0.1 of its Pollution
Control Series 1977, $0.9 of its Pollution Control Series 1993, and $1.0 of its
Pollution Control Series 1995 Bonds at discounts from face value. As a result of
this early redemption, the Company recognized a pretax gain of $0.8. In the
second quarter of 2003, the Company purchased $0.1 of its Pollution Control
Series 1993 Bonds at a discount from face value. As a result of this early
redemption, the Company recognized a pretax gain of $0.1. In the fourth quarter
of 2003, the Company purchased $0.8 of its Pollution Control Series 1977 Bonds
at a discount from face value. As a result of this early redemption, the Company
recognized a pretax gain of $0.1.

In the first quarter of 2002, the Company purchased $14.3 of its Pollution
Control Series 1993, $0.8 of its Pollution Control Series 1977, $3.8 of its
Pollution Control Series 1995 and $0.9 of its Series R Bonds at discounts from
face value. As a result of these early redemptions, the Company recognized a
pre-tax gain of $14.5. In the second quarter of 2002, the Company purchased $0.2
of its Series R Bonds, $0.6 of its Pollution Control Series 1977, $1.4 of its
Pollution Control Series 1993, $0.8 of its Pollution Control Series 1995, $8.6
of its Pollution Control Series 13, and $6.2 of its Pollution Control Series 15
at discounts from face value. As a result of these early redemptions, the
Company recognized a pre-tax gain of $15.4. In the fourth quarter of 2002, the
Company purchased $2.0 of its Series R Bonds, $0.3 of its Pollution Control
Series 1977 and $0.1 of its Pollution Control Series 1993 at discounts from face
value. As a result of these early redemptions, the Company recognized a pre-tax
gain of $0.8.

In the second quarter of 2001, the Company purchased $11.7 of its Series R Bonds
at a discount from face value. As a result of this early redemption, the Company
recognized a pre-tax gain of $4.8. In the fourth quarter of 2001, the Company
purchased $1.2 of its Pollution Control Series 1977 at a discount from face
value. As a result of this early redemption, the Company recognized a pre-tax
gain of $0.2.

Series R First Mortgage Bonds have one last remaining sinking fund payment of
$3.6 due in January of 2006. Pollution Control Series 1977 Bonds require annual
payments of $1.5 to a sinking fund which is used to repurchase bonds in the
market or at par.

Maturities of long-term debt obligations (excluding Ispat International
advances) are: $7.0 in 2004, $482.2 in 2005, $328.8 in 2006, $149.8 in 2007,
$0.0 in 2008 and $138.7 thereafter.

Interest cost incurred by the Company totaled $73.0, $77.9 and $95.9 for the
years ended December 31, 2003, 2002 and 2001, respectively. Included in these
totals is capitalized interest of $2.1, $0.9 and $1.5 for the years ended
December 31, 2003, 2002 and 2001, respectively.

NOTE 6. EQUITY

Common Stock

On December 31, 2003 and 2002, the Company had 1,000 shares authorized of common
stock, $.01 par value ("Common Stock"), of which 100 shares were issued,
outstanding and owned by a wholly owned subsidiary of Ispat.

- --------------------------------------------------------------------------------
F-17

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

Cumulative Preferred Stock

On December 31, 2003 and 2002, the Company had 100 shares authorized, issued and
outstanding of Series A 8% Cumulative Preferred Stock, $.01 par value
("Preferred Stock"), which is owned by a wholly owned subsidiary of Ispat. The
Preferred Stock has liquidation preference over the Common Stock.

NOTE 7. STOCK OPTION PLANS

In 1999, the Company adopted a stock option plan, the Ispat Plan. Under the
terms of the Ispat International N.V. Global Stock Option Plan, Ispat may grant
options to senior management of Ispat and its affiliates for up to 6,000,000
shares of common stock. The exercise price of each option equals not less than
the fair market value of Ispat stock on the date of grant, with a maximum term
of 10 years. Options are granted at the discretion of the Ispat Board of
Director's Plan Administration Committee or its delegate. The options vest
either ratably upon each of the first three anniversaries of the grant date, or,
in total, upon the death, disability or retirement of the participant.

Prior to 2003, the Company had chosen to account for stock-based compensation
using the intrinsic value method prescribed in APB No. 25, "Accounting for Stock
Issued to Employees," and related Interpretations. Accordingly, compensation
cost for stock options is measured as the excess, if any, of the quoted market
price of Ispat stock at the date of the grant over the amount an employee must
pay to acquire the stock. As indicated above, all options were granted at an
exercise price equal to or greater than the fair market value on the date of
grant and accordingly, no compensation expense has been recognized in these
financial statements pursuant to APB 25. The Company has decided to expense
stock-based compensation under the fair value recognition provisions of SFAS 123
prospectively for all employee awards granted, modified or settled after January
1, 2003. (See Note 2).

There were no options issued in 2001 or 2003. The weighted average fair value at
the date of grant for options granted during 2002 was $1.82 and was estimated
using the Binomial Option Pricing Model with the following weighted-average
assumptions used:

- --------------------------------------------------------------------------------
F-18

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

The status of the Ispat Plan with respect to the Company is summarized below:

The weighted average remaining life of options outstanding and options
exercisable at December 31, 2003 is 7.0 years and 6.7 years, respectively.

NOTE 8. RETIREMENT BENEFITS

Pensions

The Ispat Inland Inc. Pension Plan and Pension Trust is a non-contributory
defined benefit pension plan covering substantially all of its employees.
Benefits for most non-represented employees are determined under a "Cash
Balance" formula as an account balance which grows as a result of interest
credits and of allocations based on a percent of pay. Benefits for other
non-represented salaried employees are determined as a monthly benefit at
retirement depending on final pay and service. Benefits for wage and salaried
employees represented by the United Steelworkers of America are determined as a
monthly benefit at retirement based on a fixed rate and service.

In December 2003, the FASB issued SFAS No. 132 (revised 2003), "Employers'
Disclosures about Pensions and Other Postretirement Benefits." This revised
standard applies to public entities' U.S. plans for fiscal years ending after
December 15, 2003, except for the disclosure of expected future benefit
payments, which becomes effective for fiscal years ending after June 15, 2004.

- --------------------------------------------------------------------------------
F-19

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

The weighted-average asset allocations for the Ispat Inland Inc. Pension Plan at
November 30, 2003, and 2002, by asset category are as follows:

The investment objectives for the Ispat Inland Inc. Pension Plan are defined in
the Statement of Investment Policy dated December 1, 2000. The objectives stated
therein are as follows:

A.Investments of the Trust Fund are made solely in the interest of the
participants and beneficiaries of the Ispat Inland Inc. Pension Plan and
for the exclusive purposes of providing benefits to such participants and
their beneficiaries and defraying the reasonable expenses of
administering the Plans and the Trust.

B.The investment objectives shall be to: 1) provide long-term growth (in
the form of income and/or capital appreciation) in Trust assets so as to
maximize the amounts available to provide benefits to Plan participants
and their beneficiaries and 2) maintain adequate liquidity in the Trust's
assets to permit timely payment of all benefits to such participants and
their beneficiaries. In carrying out these objectives, short-term
fluctuations in the value of the Trust's assets shall be considered
secondary to long-term investment results.

C.The Trust Fund shall be invested with the care, skill, prudence and
diligence under the circumstances prevailing from time to time that a
prudent man acting in a like capacity and familiar with such matters
would use in the investment of a fund of like character and with like
aims.

D.The investments of the Trust Fund shall be diversified so as to minimize
the risk of large losses, unless under the circumstances it is clearly
prudent not to do so.

The Finance and Retirement Committee of the Board of Directors has general
supervisory authority over the Trust Fund. The Committee has established the
following asset allocation targets:

Equity Securities......................................... 63%
Fixed Income (including cash)............................. 23%
Real Estate............................................... 5%
Other..................................................... 9%
----
Total..................................................... 100%

The Policy provides for broad ranges around these targets to reduce rebalancing
trading cost and facilitate the management of the Trust Fund. Investment risk is
monitored by the Company on an ongoing basis, in part through the use of
quarterly investment portfolio reviews, compliance reporting by investment
managers, and periodic asset/liability studies and reviews of the Plan's funded
status.

- --------------------------------------------------------------------------------
F-20

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

Futures contracts are used to obtain equity exposure for a portion of the cash
held in the Trust. The notional value of futures contracts as of November 30,
2003 and 2002 were $47.6 and $64.1, respectively.

The Company uses a long-term rate of return assumption of 9.5%. This assumption
is viewed in a long-term context and is evaluated annually. The expected return
assumption is supported by the asset allocation of the Trust and the historical
long-term return on Trust assets.

The Company expects to contribute $111.5 to the Trust in 2004. These
contributions are to be made pursuant to an agreement between the Company and
the PBGC and another agreement between the Company and Ryerson Tull, Inc.. There
are no ERISA minimum funding requirements due in 2004.

Reconciliation of the pension benefit obligation and plan assets from December
1, 2002 and 2001 through the measurement dates of November 30, 2003 and 2002 was
as follows:

- --------------------------------------------------------------------------------
F-21

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

The unfunded status of the pension plan is as follows:

The accumulated benefit obligation ("ABO") for the defined benefit pension plans
was $2,553.0 and $2,312.3 at December 31, 2003 and 2002, respectively.

The following weighted average assumptions were used in accounting for the
pension plan:

The net periodic benefit cost was as follows:

Savings Plan

The Company also sponsors a savings plan through which eligible salaried
employees may elect to save a portion of their salary, and the Company matches
the first five percent of each participant's salary contributed, subject to
certain IRS limitations. Compensation expense related to this plan amounted to
$3.9, $4.0, and $4.6 respectively, for the years ended December 31, 2003, 2002,
and 2001.

- --------------------------------------------------------------------------------
F-22

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

Benefits Other than Pension and Savings Plan

Substantially all of the Company's employees are covered under postretirement
life insurance and medical benefit plans that require deductible and
co-insurance payments from retirees. The postretirement life insurance benefit
formula used in the determination of postretirement benefit cost is primarily
based on applicable annual earnings at retirement for salaried employees and
specific amounts for hourly employees. The Company does not prefund any of these
postretirement benefits. Effective January 1, 1994, a Voluntary Employee Benefit
Association Trust (the "Trust") was established for payment of health care
benefits made to United Steelworkers of America retirees. Funding of the Trust
is made as claims are submitted for payment.

On December 8, 2003, the Medicare Act was signed into law. The Medicare Act
introduced a prescription drug benefit under Medicare (Medicare Part D), as well
as a federal subsidy to sponsors of retiree health care benefit plans that
provide a benefit that is at least actuarially equivalent to Medicare Part D. In
January 2004, the FASB issued FSP No. 106-1, "Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug, Improvement and
Modernization Act of 2003." This FSP provides companies with initial guidance on
recognizing the effects of the prescription drug provisions of the Medicare Act.
As allowed by the FSP, the Company elected to defer recognition until further
guidance is issued by the FASB. As such, any measurement of the accumulated
postretirement benefit obligations or net periodic postretirement benefit cost
in the 2003 financial statements and accompanying footnotes do not reflect the
effects of the Medicare Act. Upon issuance of further guidance, the Company may
be required to change previously reported information.

Reconciliation of the postretirement benefit obligation follows:

- --------------------------------------------------------------------------------
F-23

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

The unfunded status of the postretirement benefit obligation is as follows:

The following weighted average assumptions were used in accounting for the
postretirement benefit plan:

The net periodic benefit cost was as follows:

An increase of 1% in the health care cost trend rate would increase the benefit
obligation by $111.3 and the annual net periodic cost by $8.9. A 1% decrease
would reduce the benefit obligation by $99.2 and the annual net periodic cost by
$7.8.

For purposes of measuring the expected cost of benefits covered by the plan for
next year, a weighted average health care trend rate of 4.50% was assumed for
2004 and the years thereafter.

- --------------------------------------------------------------------------------
F-24

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

NOTE 9. INCOME TAXES

The benefit for income taxes, before cumulative effect of change in accounting
principle, consists of the following:

Total income taxes, before cumulative effect of change in accounting principle,
reflected in the Consolidated Statement of Operations differ from the amounts
computed by applying the statutory federal corporate tax rate as follows:

- --------------------------------------------------------------------------------
F-25

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

Deferred tax assets and liabilities arise from the impact of temporary
differences between the amount of assets and liabilities recognized for
financial reporting purposes and such amounts recognized for tax purposes and
resulted from the following:

At December 31, 2003, the Company had regular tax net operating loss
carryforwards for federal tax purposes expiring as follows:

At December 31, 2003, the Company had Alternative Minimum Tax ("AMT") net
operating loss carryforwards of $258.1, which unless utilized, will expire in
2021 ($128.3) and 2023 ($129.8).

In order to fully recognize the deferred tax asset recorded as of December 31,
2003, the Company will need to generate taxable income of approximately $1,200
during the next 20 years to utilize its

- --------------------------------------------------------------------------------
F-26

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

temporary differences and net operating loss carryforwards before they expire.
Based on estimates of projected future taxable income, the Company believes that
it is more likely than not that the deferred tax asset recorded at December 31,
2003 will be realized in future periods. Accordingly, no valuation allowance has
been established. In estimating levels of future taxable income, the Company has
considered historical results of operations in recent years as well as recent
developments in the industry in which it operates. If future taxable income is
less than the amount that has been assumed in determining the deferred tax
asset, then a valuation reserve will be required, with a corresponding charge
against income.

In the normal course of business, the Company's tax returns are subjected to
examination by various taxing jurisdictions. The Company's 1998 through 2000 tax
returns are currently under examination. The Company believes that the outcomes
of these examinations will not have a material adverse impact on the Company's
financial position, results of operations or cash flows.

NOTE 10. RELATED PARTY TRANSACTIONS

The Company was charged $5.4, $2.1, and $2.7 by Ispat for the years ended
December 31, 2003, 2002 and 2001, respectively, for management, financial and
legal services provided to the Company. The Company was also charged $0.7, $1.4
and $1.1 by Ispat North America Holding Inc. for corporate expense allocation
for the years ended December 31, 2003, 2002 and 2001, respectively. The Company
charged Ispat $2.3, $1.6 and $1.0 for operating and technical services for the
years ended December 31, 2003, 2002 and 2001, respectively.

The Company purchased $57.1, $141.0 and $49.2 of inventory from subsidiaries of
Ispat for the years ended December 31, 2003, 2002 and 2001, respectively. The
Company sold $6.1, $7.9 and $5.7 of inventory to subsidiaries of Ispat for the
years ended December 31, 2003, 2002 and 2001, respectively.

The Company's long-term debt due to a related company of $877.3 and $824.3 as of
December 31, 2003 and 2002, respectively, comprises $661.5 and $668.5 payable to
Ispat Inland Finance LLC, a wholly owned subsidiary of the Borrower and Ispat
and of $215.8 and $155.8 advances from Ispat and its other subsidiaries.
Interest expense related to Ispat Inland Finance LLC debt was $37.0, $41.6, and
$56.5 for the years ended December 31, 2003, 2002 and 2001, respectively. This
debt arose in connection with the financing of the acquisition of the Company
(See Note 5). The advances from Ispat and its other subsidiaries have terms of
five years. Interest on each advance is charged at a fixed rate. Rates in effect
at December 31, 2003 range from 2.9% to 5.6%. At December 31, 2003 the Company
has both the ability and intent to refinance the unpaid interest as the
obligations mature, therefore it has been shown as long-term. Interest expense
related to the advances from Ispat and its other subsidiaries was $8.9, $8.1 and
$5.4 for the years ended December 31, 2003, 2002 and 2001, respectively.

The Company's note receivable from a related company of $5.6 and $6.1 as of
December 31, 2003 and 2002, respectively, is due from Ispat Inland, L.P.
Interest income on this receivable was $0.5, $0.4, and $0.3 for the years ended
December 31, 2003, 2002 and 2001, respectively. Amounts relate to costs
associated with the financing of the acquisition of the Company by Ispat and
costs incurred in relation to settlement of the interest collar (See Note 12).
Payment is due on July 16, 2006 unless Ispat Inland, L.P. chooses to prepay.

The Company's payable to related companies of $5.4 and $7.8 at December 31, 2003
and 2002, respectively, consists of trade and other intercompany expenses. The
Company's receivable from

- --------------------------------------------------------------------------------
F-27

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

related companies of $4.9 and $8.0 at December 31, 2003 and 2002, respectively,
consists of trade and other intercompany receivables.

NOTE 11. COMMITMENTS AND CONTINGENCIES

At December 31, 2003, the Company guarantees $54.5 of long-term debt
attributable to I/N Kote (See Note 14), one of its equity investments. Since the
Company accounts for its investment in I/N Kote under the equity method, the
debt which matures on January 12, 2007 is not recorded in the Company's
consolidated balance sheet. The Company's guarantee could be invoked in an event
of default as defined in the provisions of the I/N Kote loan agreement. In
addition to III Kote Inc.'s 50% share of the remaining principal balance, the
Company also guarantees any outstanding interest due, both of which bear
interest when in default at a rate equal to the higher of (1) the prescribed
borrowing rate on the loan, or (2) the Bank's (Mizuho Corporate Bank Limited)
prime rate, plus 2%. If the Company performed on its guarantee, it would
continue to own its share of I/N Kote, subject to the security interest of the
Bank in the assets of I/N Kote. The terms of the guarantee require the Company
to maintain a minimum tangible net worth (as defined). The Company was in
compliance with this test as of December 31, 2003.

On July 16, 1998, the Company entered into an agreement (the "Agreement") with
the Pension Benefit Guaranty Corporation ("PBGC") to provide certain financial
assurances with respect to the Company's Pension Plan. In accordance with this
Agreement, the Company provided the PBGC a $160 letter of credit which expired
on July 9, 2003, and had made $242 of contributions to the Pension Trust through
June 30, 2003, including $54.5 in the first quarter of 2003. In addition, the
Company granted to the PBGC a first priority lien on selected assets. In July
2003, the Company reached an agreement with the PBGC regarding alternative
security for the $160 letter of credit. The letter of credit was allowed to
expire, and in its place, the Company agreed to contribute $160 over the next
two years and pay 50% of excess cash flows as defined in our agreement with the
PBGC to our Pension Plan. The Company contributed $50 in July 2003, and is
required to contribute $82.5 in 2004 and $27.5 in 2005. Outside of this
Agreement, the Company also contributed $21 in September 2003. Additionally, the
Company pledged $160 of non-interest bearing First Mortgage Bonds to the PBGC as
security until the remaining $110 has been contributed to the Pension Plan and
certain tests have been met.

Also, under the Agreement, Ryerson Tull Inc., the former parent of the Company,
provided to the PBGC a $50 guarantee of the Company's pension plan obligations,
later issuing a letter of credit to secure this guarantee. The Company committed
to take all necessary action to replace the guaranty/letter of credit by July
16, 2003, but was unable to do so, and therefore the guaranty and letter of
credit continued in place. Separately, on September 15, 2003, the Company
entered into a settlement agreement with Ryerson Tull under which, among other
things, Ryerson Tull paid the Company $21 to release Ryerson Tull from various
environmental and other indemnification obligations arising out of the sale by
Ryerson Tull of the Company to Ispat. The $21 received from Ryerson Tull was
paid into the Company Pension Plan and went to reduce the amount of the Ryerson
Tull guaranty/letter of credit. The Company has agreed to make specified monthly
contributions to its Pension Plan totaling $29 over the twelve-month period
beginning January 2004, thereby eliminating any remaining guaranty/letter of
credit obligations of Ryerson Tull with respect to the Company's Pension Plan.
In addition, the Company committed to reimburse Ryerson Tull for the cost of the
letter of credit to the PBGC, and to share with Ryerson Tull one-third of any
proceeds which the Company might receive in the future in connection with a
certain environmental insurance policy.

- --------------------------------------------------------------------------------
F-28

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

In 1998, the Company entered into an agreement with a third party to purchase
1.2 million tons of coke annually for approximately 15 years on a take-or-pay
basis at prices determined by certain cost factors from a heat recovery coke
battery facility located on land leased from the Company. Under a separate
tolling agreement with another third party, the Company has committed to pay
tolling charges over approximately 15 years to desulphurize flue gas from the
coke battery and to convert the heat output from the coke battery to electrical
power and steam. The Company advanced $30 during construction of the project,
which is recorded as a deferred asset on the balance sheet and will be credited
against required cash payments during the second half of the energy tolling
arrangement. As of December 31, 2003 and 2002, the estimated minimum tolling
charges remaining over the life of this agreement were approximately $199 and
$225, respectively.

The Company sold all of its limestone and dolomite properties in 1990. The
Company entered into a long-term contract with the buyer of the properties to
purchase, subject to certain exceptions and at prices which approximate market,
the full amount of the annual limestone needs of the Company through 2002. The
Company has extended this arrangement at a fixed price through 2007.

In 2002, the Company entered into an agreement with Cleveland-Cliffs, Inc. to
purchase from subsidiaries of Cleveland-Cliffs, Inc. all of its pellet
requirements beyond those produced by the Minorca Mine (a wholly owned
subsidiary of the Company) for twelve years. The price of the pellets is fixed
for the first two years and then, adjusted over the term of the agreement based
on various market index factors.

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") against, among others, Ispat Inland Inc.
The Consent Decree assessed a $3.5 cash fine, required $7 in environmentally
beneficial projects at the Indiana Harbor Works, and required that $19, plus
interest, be spent in assessing and remediating sediment in portions of the
Indiana Harbor Ship Canal and Indiana Harbor Turning Basin ("Sediment
Remediation"). In addition, the Consent Decree required remediation of the
Company's Indiana Harbor Works (the "Corrective Action"). The Corrective Action
liability is a distinct and separate responsibility under the Consent Decree.
The Consent Decree establishes a three-step process for the Corrective Action,
each of which requires approval by the EPA, consisting of: (1) assessment of the
site in two separate phases (including stabilization measures), (2) evaluation
of remediation alternatives and (3) remediation of the site where required. The
Company is presently working on the assessment step of the Corrective Action. At
the completion of the second phase of assessments, the Company will be able to
estimate the required Corrective Action cleanup costs. The Company currently
expects to expend $2 to $4 per year over the next several years to perform the
required Assessments. The Company paid the $3.5 fine on July 9, 1993 and
recognized the fine in the early 1990s prior to Ispat's acquisition In addition,
pursuant to the Consent Decree, the Company completed $14, more than the
required $7, in environmentally beneficial projects at the Indiana Harbor Works.
The environmentally beneficial projects consisted of the installation of sludge
dewatering and sludge briquetting and recycling equipment which have allowed the
re-use of these former waste products into the process. The required
environmentally beneficial projects have been fully completed and no additional
beneficial projects are required. The Sediment Remediation is currently in the
assessment phase. The Company's reserve for the remaining environmental
obligations under the Consent Decree totaled $28.1 as of December 31, 2003,
reflecting the $19 plus interest for the Sediment Remediation liabilities, and
amounts for the Corrective Action assessments. Until the first two steps are
completed, the remedial action to be implemented cannot be determined.
Therefore, the Company cannot reasonably estimate the cost of or the time
required to satisfy its Corrective Action

- --------------------------------------------------------------------------------
F-29

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

obligations under the Consent Decree. It is expected that assessment and
remediation of the site will require significant expenditures over several years
that may be material to the Company's business, financial position and results
of operations. Insurance coverage with respect to work required under the
Consent Decree is not significant.

It is anticipated that the Company will make capital expenditures of $2 to $5
annually in each of the next five years for the construction, and have ongoing
annual expenditures (non-capital) of $30 to $35 to operate and maintain 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 will 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, 2003 and 2002,
the Company's reserves for environmental liabilities totaled $37 and $28,
respectively, $22 and $22, respectively, of which is related to the sediment
remediation under the 1993 EPA Consent Decree.

The Company maintains reserves for costs related to various facilities that were
shut down in prior years. These reserves primarily include postretirement
benefits and other healthcare costs for employees of the closed facilities. The
Company has shutdown reserves totaling $28.0 and $23.0 as of December 31, 2003
and 2002, respectively. The reserves are classified in Other Accrued Expenses
and Other Long-term Obligations in the Consolidated Balance Sheets.

The Company and its subsidiaries have various operating leases for which the
minimum lease payments are $13.8 in 2004, $11.9 in 2005, $3.7 in 2006, $0.5 in
2007, $0.1 in 2008 and $0.1 thereafter. Rental expense for the years ended
December 31, 2003, 2002 and 2001 was $24.8, $22.8, and $24.7, respectively.

The total amount of firm commitments of the Company and its subsidiaries to
contractors and suppliers in connection with construction projects primarily
related to additions to property, plant and equipment, was $1.6 at December 31,
2003 and $6.9 at December 31, 2002.

In 1993, the Company established a partnership, PCI Associates, with a
subsidiary of NIPSCO, Inc to lease from General Electric Capital Corporation
certain equipment located at the Indiana Harbor Works relating to the injection
of pulverized coal into the Company's blast furnaces. The term of the lease is
18 years from the lease closing date, August 31, 1993. In 2003, NIPSCO sold its
portion of PCI Associates to Private Energy LLC. Upon the failure of PCI
Associates, the Indiana General Partnership, to pay certain amounts due or to
perform certain duties under the PCI lease or the insolvency of any of the
Private Energy LLC parties or of the Company partner, the Company will be
required, so long as it is the operator of the facility, to reimburse the lessor
for certain amounts due, or to perform such actions, under the lease relating to
its operations. The guaranteed amounts and duties do not pertain to the base
rents due under the lease, which are the responsibility of the Private Energy
LLC subsidiary. The Company could be responsible for its percentage of the
liabilities, costs or expenses associated with specified misrepresentations or
covenant breaches, discounted at 10%. The Company cannot reasonably estimate the
amounts which could be due under this guarantee, however, it is not likely that
resulting payment obligations in connection with any such arrangements could
materially affect the financial condition or results of operations of the
Company. The Company has not recognized any liability associated with this
guarantee.

- --------------------------------------------------------------------------------
F-30

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

The Company and an independent, unaffiliated producer of raw materials are
parties to a long-term supply agreement under which the Company was obligated to
fund an escrow account to indemnify said producer of raw materials for the
continuing availability of certain tax credits under the US Tax code, which
credits extend until January 1, 2008. Contributions to the escrow were
determined by the agreement and the funds were restricted from Company use while
in the escrow. The Company received full recovery of $39.1, the escrowed amount,
in April of 2001. No further contributions to the escrow are required at this
time as the Company believes the likelihood of the specific contingency
occurring is remote. If there is any loss, disallowance or reduction in the
allowable tax credits applicable to the raw materials previously sold to the
Company, the Company is required to repay the independent, unaffiliated producer
the amount by which the cost of the raw materials was decreased as a result of
such tax credits, subject to certain adjustments, plus interest. As of December
31, 2003, the Company's cumulative cost reduction due to such tax credits
totaled $156.5. The current carrying amount of this indemnification is $0.

The office of the United States Attorney for the Middle District of Louisiana
("the U.S. Attorney") had informed the Company that it was a target of a federal
criminal grand jury investigation and one of several defendants in a civil qui
tam lawsuit filed by a private individual on behalf of the government, alleging
violations of the False Claims Act, 31 U.S.C. Section 3729, et seq. The
investigation and the lawsuit related to the sale of polymer coated steel by the
Company to a culvert fabricator for use in federal and state highway
construction projects in Louisiana. Since being notified of the lawsuit and
investigation, Ispat and the Company have provided their complete cooperation
with investigators. On January 17, 2001, to fully resolve this matter, the
Company agreed to a settlement of $15.5 million, which is half of the total
settlement among the United States, the state of Louisiana, the regulators, and
the defendants.

The settlement was approved by the U.S. District Court in Baton Rouge, Louisiana
and paid by the Company in January 2001. All the allegations by the U.S.
Attorney related to events that occurred prior to the May 27, 1998 execution of
the Merger Agreement among Ispat, the Company, Inland Merger Sub, Inc. and
Inland Steel Industries, Inc. (the predecessor company to Ryerson Tull, Inc.),
as amended. On May 29, 2001, the Company settled a number of disputes with
Ryerson Tull, Inc. that had arisen under the May 27, 1998 Merger Agreement, as
amended. The settled disputes included the Company's claim against Ryerson Tull
for indemnification in connection with the resolution of the federal lawsuit and
investigation, but excluded environmental claims, for which the Company was able
to make claims until July 2003. Pursuant to the May 29, 2001 settlement, Ryerson
Tull paid $7.5 to the Company and the parties released certain claims each had
against the other.

In October 1996, the Indiana Department of Environmental Management, as lead
administrative trustee, notified the Company and other potentially responsible
parties that the natural resource trustees (which also include the Indiana
Department of Natural Resources, the U.S. Department of the Interior, the Fish
and Wildlife Service and the National Park Service) intended to perform a
natural resource damage assessment on the Grand Calumet River and Indiana Harbor
Ship Canal Waterways. The notice stated that the Company has been identified as
a potentially responsible party due to alleged releases of hazardous materials
from its Indiana Harbor Works facility. Such assessment has been substantially
completed. The Company has been in negotiations with the trustees, and, as a
consequence of such negotiations, has established a reserve of $8.7 to cover
anticipated liabilities in connection with this matter. Until such time as the
matter is finally resolved, it is not possible to accurately predict, beyond the
currently established reserve, the amount of the Company's potential

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F-31

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

liability or whether this potential liability could materially affect the
Company's business, financial position and results of operations.

The U.S. Comprehensive Environmental Response, Compensation, and Liability Act,
also known as Superfund, and analogous state laws can impose liability for the
entire cost of cleanup at a site upon current or former site owners or operators
or parties who sent hazardous materials to the site, regardless of fault or the
lawfulness of the activity that caused the contamination. The Company is a
potentially responsible party at several state and federal Superfund sites.
Except for the Four County Landfill described below, the Company believes its
liability at these sites is either de minimis or substantially resolved. The
Company could, however, incur additional costs or liabilities at these sites
based on new information, if additional cleanup is required, private parties sue
for personal injury or property damage, or other responsible parties sue for
reimbursement of costs incurred to clean up the sites. The Company could also be
named a potentially responsible party at other sites if its hazardous materials
or those of its predecessor were disposed of at a site that later becomes a
Superfund site.

The Company received a Special Notice of Potential Liability from the Indiana
Department of Environmental Management (IDEM) on February 18, 1992 relating to
releases of hazardous substances from the Four County Landfill Site in Fulton
County, Indiana. The Company, along with other potentially responsible parties
(PRP's), has entered into two agreed orders with IDEM pursuant to which the
PRP's agreed to perform a remedial investigation and feasibility study for the
site, pay certain past and future IDEM costs and provide funds for operation and
maintenance necessary for stabilization of the First Operable Unit of the site.
The remedial investigation and feasibility study work is complete. In a letter
dated June 2, 2003, IDEM advised the PRP's for the First Operable Unit that all
terms of the Agreed Order for the First Operable Unit had been completed and
that the Order was terminated, subject to the Reservation of Rights. Under the
terms of the PRP agreement, the Company had an approximate 7.2% share, which
amount has been paid.

In July 2001, IDEM selected the remedy for the Second Operable Unit at the Four
County Landfill. The Company is a member of a group that is negotiating with
IDEM to resolve any liability for the Second Operable Unit as well as remaining
obligations with regard to the First Operable Unit. IDEM has estimated the costs
for the Second Operable Unit to be approximately $1.0, with an additional
contingent remedy estimated to cost approximately $2.1, to be implemented only
if the selected remedy is deemed to be inadequate. IDEM has a trust account
holding approximately $0.8 for use in the implementation of the First and the
Second Operable Unit remedies. In 2003, the PRP Group entered into another
Agreed Order pursuant to which the PRP Group agreed to pay $0.3 in exchange for
a release from the cost of the Second Operable Unit. The Company's share of that
payment was minimal. The Agreed Order is final and the payment has been made.

In July 2001, the United States Environmental Protection Agency (EPA) filed suit
against the Company and other PRP's, seeking recovery of past response costs
which it alleged it has expended at the Four County Landfill Site. On February
6, 2003, a Consent Decree was issued by the U.S. District Court of Northern
Indiana, which resolved the EPA's cost recovery suit. As a result of that
Consent Decree, the Company has been required to pay a minimal amount in past
response costs to the EPA.

On July 2, 2002, the Company received a notice of violation ("NOV") issued by
the US Environmental Protection Agency against the Company, Indiana Harbor Coke
Company, L.P. ("IHCC") and Cokenergy, Inc., alleging violations of air quality
and permitting regulations for emissions from the Heat Recovery Coal
Carbonization facility which is owned and operated by IHCC. An amended NOV
stating similar allegations was issued on August 8, 2002. Although the Company

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F-32

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

currently believes that its liability with respect to this matter will be
minimal, the Company could be found liable for violations and this potential
liability could materially affect the business, financial position and results
of operations of the Company.

In addition to the foregoing, the Company is a party to a number of legal
proceedings arising in the ordinary course of our business. The Company does not
believe that the adverse determination of any such pending routine litigation,
either individually or in the aggregate, will have a material adverse effect on
the financial condition, results of operations or cash flows of the Company.

NOTE 12. DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value.

Derivatives

The Company uses futures and swap contracts to manage fluctuations in the cost
of natural gas and certain nonferrous metals, primarily zinc which is used in
the coating of steel. Timing of these transactions corresponds to the expected
need for the underlying physical commodity and is intended as a hedge (not as
defined by SFAS No. 133) against the cost volatility of these commodities. The
counterparties to these contracts are internationally recognized companies which
are not considered a credit risk by the Company. Contracts generally do not
extend out beyond two years. At December 31, 2003 and 2002, the Company had
entered into contracts for these commodities for notional amounts of $6.0 and
$14.9, respectively, which had fair values of $0.2 and $1.6, respectively. For
the twelve months ended December 31, 2003, 2002 and 2001, the Company recorded a
gain of $1.4, $1.2 and a loss of $2.8, respectively, for changes in the fair
value of derivative instruments not designated as a hedge (as defined by SFAS
No. 133). Under terms of the futures and swap contracts, the Company had
approximately $0.3 and $0.9 on deposit with counterparties at December 31, 2003
and 2002, respectively, that was classified as an other asset on the balance
sheet.

A portion of the floating rate debt used in connection with the financing of the
acquisition of the Company was hedged by the Borrower through the use of an
interest collar that expired on October 16, 2003 (see Note 5 and Note 10). Due
to the decline in interest rates during fiscal year 2002, the fair value of the
collar represented a derivative liability to the Borrower of approximately $13.7
at December 31, 2002.

Long-term debt

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 $1,187 and $916 at December 31, 2003 and
2002, respectively, as compared with the carrying value of $1,322 and $1,249 in
the balance sheets at December 31, 2003 and 2002, respectively.

NOTE 13. I/N TEK AND I/N KOTE JOINT VENTURES

I/N Tek, a general partnership formed for a joint venture between the Company
and Nippon Steel Corporation ("NSC"), owns and operates a cold-rolling facility.
I/N Tek is 60% owned by a wholly owned subsidiary of the Company and 40% owned
by an indirect wholly owned subsidiary of NSC. The Company has rights to the
productive capacity of the facility, except in certain limited

- --------------------------------------------------------------------------------
F-33

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

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, the Company was charged $136.9, $141.6 and $142.8 for such tolling
services for the years ended December 31, 2003, 2002 and 2001, respectively.

The Company and NSC also own and operate another joint venture which consists of
a 500,000 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% by a wholly owned subsidiary of the Company and
50% by an indirect wholly owned subsidiary of NSC. The Company and NSC each has
guaranteed the share of long-term financing attributable to their respective
subsidiary's interest in the partnership. I/N Kote had $109 and $134 outstanding
under its long-term financing agreement at December 31, 2003 and 2002,
respectively. I/N Kote is required to buy all of its cold rolled steel from the
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% after operating and financing costs. This
price may be subject to an adjustment ("return on sales adjustment" or "ROS
adjustment") if the Company's return on sales ("ROS") differs from I/N Kote's
ROS, as defined in the Substrate Supply Agreement. The Company recorded sales of
cold rolled steel to I/N Kote of $343.0, $348.8, and $309.7 for the years ended
December 31, 2003, 2002 and 2001, respectively. Prices of cold rolled steel sold
by the Company to I/N Kote are determined pursuant to the terms of the joint
venture agreement and are based, in part, on operating costs of the partnership.
In 2003, 2002 and 2001, the Company sold cold rolled steel to I/N Kote at prices
that exceeded the Company's production costs but were less than the market
prices for cold rolled steel products. The Company sells all I/N Kote products
that are distributed in North America. The Company receives a 1% sales
commission on I/N Kote sales for which it earned $4.9, $5.2, and $4.9 for the
years ended December 31, 2003, 2002 and 2001, respectively.

During 2003, 2002 and 2001, certain conditions (as defined in the Substrate
Supply Agreement) were met resulting in ROS adjustment being realized by the
Company. The Company's consolidated financial statements reflect a net
adjustment of approximately $6.8, $1.6 and $20.6 for the years ended December
31, 2003, 2002 and 2001, respectively. The adjustment increases the aggregate
substrate price for 2003, 2002 and 2001 which results in the Company's return on
sales being equal to the return on sales of I/N Kote. As the ROS is essentially
funded by the joint venture partners, to the extent the ROS exceeds the return
of capital and annual equity return of the partners, the partners are required
to contribute additional capital through cash payments. Therefore, the Company
recorded a payable to I/N Kote of approximately $1.1 to fund their portion of
the 2003 ROS in 2004. As further outlined in the Substrate Supply Agreement, the
component of any ROS adjustment which results in negative ROS for I/N Kote will
be returned to the Company and NSC in an amount prescribed by a formula in the
Substrate Supply Agreement if the Company's ROS is greater than I/N Kote's ROS
in subsequent years.

During the development of the I/N Tek and I/N Kote joint ventures and to meet
ongoing capital needs, the Company has loaned money to the joint ventures. These
partner loans are included in "Investments in and advances to joint ventures" in
the balance sheet. The outstanding balance of the I/N Tek partner loans was
$17.0 and $17.8 at December 31, 2003 and 2002, respectively. The Company
recorded interest income related to the I/N Tek loans of $1.1, $1.1, and $1.3
for the years ended December 31, 2003, 2002 and 2001, respectively. The
outstanding balance of the I/N Kote partner loans was $27.4 and $33.7 at
December 31, 2003 and 2002, respectively. The Company recorded interest income
on the I/N Kote loans of $0.8, $1.2 and $3.3 for the years ended December 31,
2003,

- --------------------------------------------------------------------------------
F-34

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

2002 and 2001, respectively. In the fourth quarter of 2002, the terms of each of
the I/N Tek and I/N Kote partnerships were extended through December 31, 2021.

Related to the I/N Tek and I/N Kote joint ventures, the Company owned common
stock of NSC. The NSC stock was sold during the first quarter of 2001 at a loss
of $0.5. Fair value was determined based on quoted market price. Differences
between recorded value and fair value were recorded net of tax to Other
Comprehensive Income.

NOTE 14. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

The Company's investments in unconsolidated joint ventures accounted for by the
equity method consist primarily of its 60% interest in I/N Tek, 50% interest in
I/N Kote, 50% interest in PCI Associates and 21% interest in the Empire Iron
Mining Partnership ("Empire")(See Note 17). I/N Tek and I/N Kote are joint
ventures with NSC (see Note 13). 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 is an iron ore mining and
pelletizing venture owned in various percentages by the Company and an Iron Ore
manufacturer. As of December 31, 2003, 2002 and 2001, the Company included
additional minimum pension liabilities relating to the unconsolidated joint
ventures in the amount of $6.7, $4.8 and $8.9, respectively (net of tax effects
of $3.8, $2.7 and $5.0 respectively) in Accumulated Other Comprehensive Loss on
the Consolidated Balance Sheet.

Following is a summary of combined financial information of the Company's
unconsolidated joint ventures:

- ------------
(A) Excludes the results of operations and Financial Position of Empire
Investment as in connection with the 2002 sale of 19% of its partnership
interest, the Company will no longer be allocated income or loss from
Empire as of January 1, 2003. (See Note 17)

NOTE 15. WORKFORCE REDUCTION

For the year ended December 31, 2001, the Company recorded charges of $18.2 for
severance and termination benefit cost related to voluntary and involuntary
workforce reductions of approximately

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F-35

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

250 salaried non-represented employees. All obligations were paid and the
remaining liability was reversed prior to December 31, 2002.

NOTE 16. SALE OF POLLUTION ALLOWANCES

In December of 2001, the Company sold 1,368 tons of Nitrous Oxide ("NOx")
allowances to a utility company for $18.1 which was recorded in "Other Income,
net". NOx allowances sold were part of an overall bank of emission allowances
and credits (collectively, "rights") owned by the Company. Generally, these
rights arose from actions taken by the Company or the state to reduce the
emission of air pollutants. As the Company evaluates its future development
plans and contemporaneous environmental regulation, it may from time to time,
determine that additional rights are surplus to its operations. If determined to
be surplus, the Company will seek to liquidate these surplus assets.

NOTE 17. IMPAIRMENT OF ASSETS

As outlined in SFAS No. 144, an impairment loss shall be recognized when the
carrying amount of a long-lived asset is not recoverable and exceeds its fair
value. The carrying amount of a long-lived asset is not recoverable if it
exceeds the expected sum of the undiscounted cash flows over its remaining
useful life. Based on this criteria, in the fourth quarter of 2002 the Company
concluded that 2A Bloomer and 21" Rolling Mill were impaired.

In the Fourth Quarter of 2001, the Company temporarily idled its 2A Bloomer and
21" Rolling Mill due to deteriorating market conditions. The market had not
sufficiently improved and could become even more onerous with the announced
purchase of a competitor's facility previously idled due to the prior owner's
bankruptcy. Employing a present value technique to determine the fair value of
these assets, the Company recorded an impairment charge of $23 at December 31,
2002.

In addition, the Company evaluated its investment in Empire Mine, which is
accounted for under the equity method, in accordance with Accounting Principles
Board (APB) No. 18, "The Equity Method of Accounting for Investments in Common
Stock". APB No. 18 requires that a loss in value of the investment that is other
than a temporary decline should be recognized in the same manner as a loss in
value of other long-lived assets. During the fourth quarter of 2002, the Company
identified conditions, including projected operating losses due to increasing
costs and a reduction in iron ore reserves, indicating that a permanent loss in
the value of the investment had occurred. As a result, the Company recorded a
$39 impairment charge for its Empire Mine investment and related fluxing
equipment. To determine the fair value of its Empire investment, the Company
considered the sale of a partial ownership interest in the Empire Mine in
conjunction with a separate 12 year Purchase agreement which were concluded on
December 31, 2002.

NOTE 18. ASSET RETIREMENT OBLIGATIONS

The Company adopted the provisions of SFAS No. 143 on January 1, 2003. Based on
analysis the Company has performed, it has been determined that the only asset
for which an asset retirement obligation must be recorded is the Company's
Minorca Mine. The Minorca Mine, through the Environmental Impact Statement (EIS)
process, does have a reclamation plan on file with the state of Minnesota. Each
year the Minorca Mine is required by the Minnesota Department of Natural
Resources (MDNR) to submit an annual mining and reclamation summary for the year
just completed and to provide mining and reclamation plans for the coming year.
When possible the Minorca Mine reclaims abandoned areas on a yearly basis. By
doing this, the mine keeps up with the reclamation to avoid a huge cost at the
end of the mine life. Each fall the MDNR conducts a field review of prior

- --------------------------------------------------------------------------------
F-36

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

reclamation work, to point out deficiencies that need to be corrected. A
complete environmental site assessment was done in 1996. The Minnesota Pollution
Control Agency conducted a multi-media inspection of the entire property with no
violations. Currently, Ispat Inland Mining Company is in compliance with all
environmental standards and therefore, the Company expects little or no
environmental remediation at the time of closure of the mine. As of December 31,
2003, the estimated total future reclamation costs are $18.2.

The impact to the Company of adopting SFAS 143 was an increase in assets of $3.8
and an increase in liabilities of $6.3.

Changes in the liability for asset retirement obligations during 2003 consisted
of the following:

Balance as of January 1, 2003............................... $6.6
Liabilities incurred........................................ 0.4
----
Balance as of December 31, 2003............................. $7.0
====

The actual and pro forma asset retirement obligation liability balances as if
SFAS No. 143 had been adopted on January 1, 2001 (instead of January 1, 2003)
were as follows:

The pro forma effect of this change, as if SFAS No. 132 had been adopted on
January 1, 2001, would be to decrease net income by $0.4 for each of the years
ended December 31, 2002 and 2001.

NOTE 19. RESEARCH AND DEVELOPMENT COSTS

Research and development costs are expensed as incurred. Total research and
development costs for the years ended December 31, 2003, 2002 and 2001 were
$11.4, $11.6 and $12.9, respectively.

NOTE 20. BUSINESS SEGMENTS AND CONCENTRATION OF RISKS

The Company and its subsidiaries operate in a single business segment, which
comprises the operating companies and divisions involved in the manufacturing of
basic steel products and related raw material operations.

The Company both produces and sells a wide range of steels, of which
approximately 99% consists of carbon and high-strength low-alloy steel grades.
For the years ended December 31, 2003, 2002 and 2001, approximately 72%, 74%,
and 73% of the sales were to customers in five mid-American states,
respectively, and 93%, 93%, and 90% were to customers in 20 mid-American states.
Over half the sales are to the steel service center and transportation
(including automotive) markets.

For the years ended December 31, 2003, 2002 and 2001, Flat Products sales were
$1,985.4, $2,008.8 and $1,742.0 and Bar Products sales were $237.5, $294.6 and
$342.1, respectively.

Sales to Ryerson Tull, Inc. approximated 10%, 9%, and 10% of consolidated net
sales in the years ended December 31, 2003, 2002 and 2001. No other customer,
except I/N Kote (see Note 13), accounted for more than 10% of the consolidated
net sales of the Company during the noted periods.

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F-37

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in Millions except share and per share data)

As of December 31, 2003 approximately 73% of the active workforce was
represented by the United Steelworkers of America ("USWA"). The existing labor
contract between the USWA and the Company expires July 31, 2004.

NOTE 21. SUBSEQUENT EVENTS

In January 2004, the Company announced a further workforce reduction of
approximately 130 salaried non-represented employees.

In February 2004, the Company sold Nitrous Oxide ("NOx") allowances for $5.
These allowances were part of an overall bank of emission allowances and credits
(collectively, "rights") owned by the Company. Generally, these rights arose
from actions taken by the Company or the state to reduce the emission of air
pollutants.

NOTE 22. CONSOLIDATED QUARTERLY SALES AND EARNINGS (UNAUDITED)

- ------------

(1) Quarter results include impairment charges of $62 (see Note 17).

(2) Net loss for the quarter includes $18 of income due to the sale of
pollution allowances (see Note 16).

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F-38

ISPAT INLAND INC.
- --------------------------------------------------------------------------------

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(Dollars in Millions except share and per share data)

- ------------

NOTES:

(A) Workforce reduction costs.

- ------------

NOTES:

(B) Additions primarily relate to liability recorded upon adoption of SFAS 143
on January 1, 2003.

- --------------------------------------------------------------------------------
F-39

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.

ISPAT INLAND INC.

By: /s/ LOUIS L. SCHORSCH
------------------------------------
Louis L. Schorsch
President and Chief Executive
Officer
(Principal Executive Officer)

March 8, 2004

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.

By: /s/ MARC R. JESKE
------------------------------------
Marc R. Jeske
Attorney-in-fact

March 8, 2004

INDEX TO EXHIBITS

2.(i) Agreement and Plan of Merger, dated May 27, 1998, among
Ispat International N.V., Inland Merger Sub, Inc., Inland
Steel Industries, Inc. and Inland Steel Company. (Filed as
Exhibit 2.1 to the Company's Current Report on Form 8-K
filed on June 9, 1998, and incorporated by reference
herein.)

2.(ii) Amendment to Agreement and Plan of Merger, dated July 16,
1998, between Ispat International N.V., Inland Steel
Industries, Inc., Inland Merger Sub, Inc. and Inland Steel
Company. (Filed as Exhibit 2.2 to Inland Steel Industries,
Inc. Current Report on Form 8-K filed on July 20, 1998, and
incorporated by reference herein.)

3.A Copy of Restated Certificate of Incorporation of the
Company. (Filed as Exhibit 3.(i) to the Company's Quarterly
Report for the quarter ended September 30, 1998, and
incorporated by reference herein.)

3.B Copy of By-Laws, as amended, of the Company. (Filed as
Exhibit 3.(ii) to the Company's Quarterly Report for the
quarter ended June 30, 1998, and incorporated by reference
herein.)

3.C Corrected Certificate of the Designations, Powers,
Preferences and Relative, Participating or Other Rights, and
the Qualifications, Limitations or Restrictions thereof, of
Series A 8% Preferred Stock of Ispat Inland Inc., filed
January 3, 2000. (Filed as Exhibit 3.C to the Company's
Annual Report on Form 10-K for the year ended December 31,
1999, and incorporated by reference herein.)

4.A Copy of First Mortgage Indenture, dated April 1, 1928,
between the Company (the "Steel Company") and First Trust
and Savings Bank and Melvin A. Traylor, as Trustees, and of
supplemental indentures thereto, to and including the
Thirty-Fifth Supplemental Indenture, incorporated by
reference from the following Exhibits: (i) Exhibits B-1(a),
B-1(b), B-1(c),B-1(d) and B-1(e), filed with Steel Company's
Registration Statement on Form A-2 (No. 2-1855); (ii)
Exhibits D-1(f) and D-1(g), filed with Steel Company's
Registration Statement on Form E-1 (No. 2-2182); (iii)
Exhibit B-1(h), filed with Steel Company's Current Report on
Form 8-K dated 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) andB-1(k), filed with
Steel Company's Current Report on Form 8-K for the month of
April, 1940; (vi) Exhibit B-2, filed with Steel Company's
Registration Statement on Form A-2 (No. 2-4357); (vii)
Exhibit B-1(l), filed with Steel Company's Current Report on
Form 8-K for the month of January, 1945; (viii) Exhibit 1,
filed with Steel Company's Current Report on Form 8-K for
the month of November, 1946; (ix) Exhibit 1, filed with
Steel Company's Current Report on Form 8-K for the months of
July and August, 1948; (x) Exhibits B and C, filed with
Steel Company's Current Report on Form 8-K for the month of
March, 1952; (xi) Exhibit A, filed with Steel Company's
Current Report on Form 8-K for the month of July, 1956;
(xii) Exhibit A, filed with Steel Company's Current Report
on Form 8-K for the month of July, 1957; (xiii) Exhibit B,
filed with Steel Company's Current Report on Form 8-K for
the month of January, 1959; (xiv) the Exhibit filed with
Steel Company's Current Report on Form 8-K for the month of
December, 1967; (xv) the Exhibit filed with Steel Company's
Current Report on Form 8-K for the month of April, 1969;
(xvi) the Exhibit filed with Steel Company's Current Report
on Form 8-K for the month of July, 1970; (xvii) the Exhibit
filed with the amendment on Form 8 to Steel Company's
Current Report on Form 8-K for the month of April, 1974;
(xviii) Exhibit B, filed with Steel Company's Current Report
on Form 8-K for the month of September, 1975; (xix) Exhibit
B, filed with Steel Company's Current Report on Form 8-K for
the month of January, 1977; (xx) Exhibit C, filed with Steel
Company's Current Report on Form 8-K for the month of
February, 1977; (xxi) Exhibit B, filed with Steel Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1978; (xxii) Exhibit B, filed with Steel Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1980;
(xxiii) Exhibit 4-D, filed with Steel Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1980; (xxiv) Exhibit 4-D, filed with Steel Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1982; (xxv) Exhibit 4-E, filed with Steel Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1983; (xxvi) Exhibit 4(i) filed with the Steel Company's
Registration Statement on Form S-2 (No. 33-43393); (xxvii)
Exhibit 4 filed with Steel Company's Current Report on Form
8-K dated June 23, 1993; (xxviii) Exhibit 4.C filed with
Steel Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995; (xxix) Exhibit 4.C filed with
Steel Company's Quarterly Report on Form 10-Q for the
quarter Ended September 30, 1995, and (xxx) Exhibit 4.C
filed with Steel Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996.

i

4.B Copy of consolidated reprint of First Mortgage Indenture,
dated April 1, 1928, between the 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.)

4.C Copy of Thirty-Sixth Supplemental Indenture dated as of July
16, 1998 from Inland Steel Company to First National Bank
and John G. Finely as Trustees to the First Mortgage
Indenture dated April 1, 1928, between Inland Steel Company
and First Trust and Savings Bank and Melvin A. Taylor, as
Trustees (filed as Exhibit 4.C to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1998, and incorporated by reference herein.

10.A Credit Agreement dated as of July 16, 1998, among Ispat
Inland L.P., Inland Steel Company, Burnham Trucking Company,
Inc., Incoal Company and Credit Suisse First Boston. (Filed
as Exhibit 10 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1998, and
incorporated by reference herein.)

10.B Amendment No. 1 dated as of September 30, 1999, to the
Credit Agreement dated as of July 16, 1998, among Ispat
Inland, L.P., Ispat Inland Inc. (Formerly named Inland Steel
Company), Burnham Trucking Company, Inc., Incoal Company and
Credit Suisse First Boston. (Filed as Exhibit 10.A to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1999, and incorporated as reference herein.)

10.C Amendment No. 2 dated as of March 30, 2001, to the Credit
Agreement dated as of July 16, 1998 (as amended as of
September 30, 1999), among Ispat Inland, L.P., Ispat Inland
Inc. (Formerly named Inland Steel Company), Burnham Trucking
Company, Inc., Incoal Company and Credit Suisse First Boston
(Filed as Exhibit 10.C to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 2002, and
incorporated by reference herein.)

10.D Amendment No. 3 dated as of March 1, 2002, to the Credit
Agreement dated as of July 16, 1998 (as amended as of
September 30, 1999 and March 30, 2001), among Ispat Inland,
L.P., Ispat Inland Inc. (Formerly named Inland Steel
Company), Burnham Trucking Company, Inc., Incoal Company and
Credit Suisse First Boston (Filed as Exhibit 10.D to the
Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2002, and incorporated by reference herein.)

10.E Amendment No. 4 dated as of March 5, 2003, to the Credit
Agreement dated as of July 16, 1998 (as amended as of
September 30, 1999, March 30, 2001 and March 1, 2002), among
Ispat Inland, L.P., Ispat Inland Inc. (Formerly named Inland
Steel Company), Burnham Trucking Company, Inc., Incoal
Company and Credit Suisse First Boston......................

16 Letter dated August 25, 1998 from Pricewaterhouse Coopers
LLP regarding change in certifying accountant. (Filed
Exhibit 16.1 to the Company's Current Report on Form 8-K
filed on August 28, 1998, and incorporated by reference
herein).

24 Powers of Attorney..........................................

31 Certifications of Louis L. Schorsch, President and Chief
Executive Officer and Michael G. Rippey, Executive Vice
President and Chief Financial Officer of Ispat Inland Inc.
Pursuant to Sarbanes-Oxley Act Section 302..................

32 Certifications of Louis L. Schorsch, President & Chief
Executive Officer and Michael G. Rippey, Executive Vice
President and Chief Financial Officer of Ispat Inland Inc.
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002...............