ISPAT INLAND INC - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE PERIOD ENDED MARCH 31, 2005

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ______ TO ______

COMMISSION FILE NUMBER 1-2438
I.R.S. EMPLOYER IDENTIFICATION NUMBER 36-1262880

ISPAT INLAND INC.
(a Delaware Corporation)

3210 Watling Street
East Chicago, Indiana 46312
Telephone: (219) 399-1200

Registrant meets the conditions set forth in General Instruction H(1)(a) and (b)
of Form 10-Q and is therefore filing this Form with the reduced disclosure
format.

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _x_ No ___

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

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 180 shares of the Company's
Common Stock ($.01 par value per share) were outstanding as of May 13, 2005.

ISPAT INLAND INC. AND SUBSIDIARY COMPANIES
INDEX

PAGE NO.

PART I. FINANCIAL INFORMATION

ITEM 1. Condensed Consolidated Financial Statements (Unaudited)

Condensed Consolidated Statements of Operations for the Three Months
Ended March 31, 2005 and 2004 2

Condensed Consolidated Statements of Comprehensive Income for the Three
Months Ended March 31, 2005 and 2004 2

Condensed Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2005 and 2004 3

Condensed Consolidated Balance Sheets as of March 31, 2005 and
December 31, 2004 4

Notes to Condensed Consolidated Financial Statements 5 - 16

ITEM 2. Management's Narrative Analysis of Results of Operations 17 - 18

ITEM 4. Controls and Procedures 18

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings 19
ITEM 5. Other 19
ITEM 6. Exhibits and Reports on Form 8-K 19

1

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

ISPAT INLAND INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DOLLARS IN MILLIONS)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(DOLLARS IN MILLIONS)

See notes to unaudited condensed consolidated financial statements

2

ISPAT INLAND INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN MILLIONS)

See notes to unaudited condensed consolidated financial statements

3

ISPAT INLAND INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DOLLARS IN MILLIONS)

See notes to unaudited condensed consolidated financial statements

4

ISPAT INLAND INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The condensed consolidated financial statements of Ispat Inland Inc. (the
"Company") are unaudited, but in the opinion of management, contain all
adjustments necessary to present fairly the financial position and results of
operations and cash flows for the periods presented. All significant
intercompany accounts and transactions have been eliminated. These financial
statements should be read in conjunction with the financial statements and
related notes contained in the Annual Report on Form 10-K for the year ended
December 31, 2004.

The results of operations for the interim periods shown in this report are not
necessarily indicative of the results to be expected for a full year.

STOCK OPTION PLAN

In 1999, Mittal Steel Company N.V. ("Mittal"), formerly Ispat International N.V.
("Ispat"), established the Ispat International N.V. Global Stock Option Plan
(the "Ispat Plan"). Under the terms of the Ispat Plan, Mittal may grant options
to senior management of Mittal 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 Mittal stock on the date of grant, and an option's maximum term
is 10 years. Options are granted at the discretion of the Mittal 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
upon the death, disability or retirement of the participant. Prior to 2003, the
Company, which participates in the Ispat Plan, accounted for stock options under
the recognition and measurement provisions of Accounting Principles Board
("APB") No. 25, "Accounting for Stock Issued to Employees," and related
Interpretations.

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 2004 or during the three months ended March 31, 2005 and accordingly, no
compensation expense has been recognized in 2004 and the three months ended
March 31, 2005.

SFAS 148 also requires that if awards of stock-based employee compensation were
outstanding and accounted for under the intrinsic value method of APB No. 25 for
any period in which an income statement is presented, a tabular presentation is
required as follows:

5

ISPAT INLAND INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

RECENT ACCOUNTING PRONOUNCEMENTS

In May 2004, the FASB issued FASB Staff Position ("FSP") No. 106-2, "Accounting
and Disclosure Requirements Related to the Medicare Prescription Drug,
Improvement and Modernization Act of 2003." This FSP supersedes FSP No. 106-1,
"Accounting and Disclosure Requirements Related to the Medicare Prescription
Drug, Improvement and Modernization Act of 2003" which was issued by the FASB in
January 2004. FSP No. 106-2 provides specific guidance on accounting for the
effects of the Act for employers sponsoring post-retirement health care plans
that provide certain prescription drug benefits. Additionally, this guidance
allows companies who elected to follow the deferral provisions of FSP No. 106-1,
and whose prescription drug benefit plans are actuarially equivalent to the
benefit to be provided under Medicare Part D, to either reflect the effects of
the federal subsidy to be provided by the Act in their financial statements on a
prospective basis or a retroactive basis. On July 1, 2004, the Company adopted
the provisions of FSP No. 106-2, and applied these provisions on a retroactive
basis effective January 1, 2004.

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an amendment
of Accounting Research Bulletin (ARB) No. 43, Chapter 4." SFAS No. 151 amends
the guidance in ARB No. 43, Chapter 4, "Inventory Pricing" to clarify the
accounting for abnormal amounts of idle facility expense, freight handling
costs, and wasted material (spoilage). SFAS No. 151 requires that those items be
recognized as current-period charges regardless of whether they meet the
criterion of "so abnormal". In addition, SFAS No. 151 requires that allocation
of fixed production overhead to the costs of conversion be based on the normal
capacity of the production facilities. The provisions of SFAS No. 151 will be
effective for fiscal years beginning after June 15, 2005. The Company is
currently evaluating the provisions of SFAS No. 151 and does not believe that
its adoption will have a material impact on the Company's financial condition,
results of operations and cash flows.

In December 2004, the FASB issued SFAS No. 153, "Exchange of Nonmonetary Assets,
an amendment of APB Opinion No. 29," "Accounting for Nonmonetary Transaction."
SFAS No. 153 is based on the principle that exchange of nonmonetary assets
should be measured based on the fair market value of the assets exchanged. SFAS
No. 153 eliminates the exception of nonmonetary exchanges of similar productive
assets and replaces it with a general exception for exchanges of nonmonetary
assets that do not have commercial substance. SFAS No. 153 is effective for
nonmonetary asset exchanges in fiscal periods beginning after June 15, 2005. The
Company is currently evaluating the provision of SFAS No. 153 and does not
believe that its adoption will have a material impact on the Company's financial
condition, results of operations and cash flows.

In December 2004, the FASB issued SFAS No. 123 (revised 2004)(SFAS No. 123(R)),
"Share-Based Payment," SFAS No. 123(R) replaces SFAS No. 123, "Accounting for
Stock Issued to Employees," and supersedes APB Opinion No. 25, Accounting for
Stock Issued to Employees." SFAS 123(R) requires that compensation costs
relating to share-based payment transactions be recognized in the consolidated
financial statements. Compensation costs will be measured based on the fair
value of the equity or liability instruments issued. SFAS 123(R) is effective as
of the first annual reporting period that begins after June 15, 2005. The
Company is currently evaluating the provisions of SFAS 123(R) and has not yet
determined its impact on the Company's financial condition, results of
operations and cash flows.

In December 2004, the FASB staff issued FSP FAS 109-1 "Application of FASB
Statement No. 109, Accounting for Income Taxes, to the Tax Deduction on
Qualified Production Activities Provided by the American Jobs Creation Act of
2004." This FSP clarifies that the manufacturer's deduction provided for under
the American Jobs Creation Act of 2004 should be accounted for as a special
deduction in accordance with SFAS No. 109 and not as a tax rate reduction. The
Company has determined that FAS 109-1 will not have an immediate impact on its
financial condition, results of operations or cash flows. The Company's
realization of the benefit of FAS 109-1 is dependent on the utilization of its
Net Operating Loss Carryforwards.

6

ISPAT INLAND INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

In December 2004, the FASB staff issued FSP FAS 109-2 "Accounting and Disclosure
Guidance for the Foreign Earnings Repatriation Provision Within the American
Jobs Creation Act of 2004" to provide accounting and disclosure guidance for the
repatriation provisions included in the Act. The Act introduced a special
one-time dividends received deduction on the repatriation of certain foreign
earnings to a U.S. taxpayer. The Company has determined that FAS 109-2 will not
have an impact on its financial condition, results of operations or cash flows.

NOTE 2 - INVENTORIES

Inventories consist of the following:

NOTE 3 -DEBT

Short-term debt

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 $200 million (increased from $185 million in July 2004) 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 will
remit 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 March 31, 2005, based on the amount of eligible collateral, there was $84.3
million of additional availability under the line. Drawings under the line
included $100.0 million of loans and $15.7 million of letters of credit issued
for the purchase of commodities on the international market and as security
under various insurance and workers compensation coverages, and financial
security for an environmental consent decree. Average interest rates on this
facility during the first quarter of 2005 ranged from 3% to 5%.

The Company also has a four-year approximately $175 million committed revolving
credit facility secured by its inventory, spare parts, mobile equipment and the
Company's ownership interest in IIASC (the "Inventory-Backed Revolver"),
extending to April of 2007. Provisions of this agreement prohibit or limit the
Company's ability to incur debt, repay debt, make investments, sell assets,
create liens, engage in transactions with or repay loans from affiliates, engage
in mergers and consolidations and pay dividends and other restricted payments.
At March 31, 2005, there were no drawings under the line and, based on the
amount of eligible collateral, there was $173.9 million of availability under
the line. Average interest rates on this facility during the first quarter of
2005 ranged from 5% to 6%.

7

ISPAT INLAND INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)

NOTE 3 -DEBT (CONT.)

Long-term debt

On March 25, 2004, a newly created subsidiary of Ispat Inland, L.P. (the
"Borrower") issued $800 million principal amount of senior secured notes: $150
million of floating rate notes bearing interest at LIBOR plus 6.75% due April 1,
2010 and $650 million of fixed rate notes bearing interest at 9.75% (issued at
99.212% to yield 9.875%) due April 1, 2014 (the "Senior Secured Notes"). Also on
March 25, 2004, the Company issued $800 million principal amount of First
Mortgage Bonds (Series Y, in a principal amount of $150 million, and Series Z,
in a principal amount of $650 million) to Ispat Inland Finance, LLC, an indirect
subsidiary of the Borrower which, in turn, pledged them to the trustee for the
Senior Secured Notes as security. The $775.5 million net proceeds from the
offering were used to retire the entire $661.5 million outstanding under the
Credit Agreement dated July 16, 1998 with a syndicate of financial institutions
for which Credit Suisse First Boston was the agent, and repay the entire balance
then outstanding of $105 million under the inventory revolving credit facility,
with the remainder of the proceeds used to reduce the amount outstanding under
the receivables revolving credit facility.

The Senior Secured Notes are also secured by a second position lien on the
inventory of the Company. As further credit enhancement, the Senior Notes are
fully and unconditionally guaranteed by the Company, certain subsidiaries of the
Company, Mittal and certain other affiliates of the Borrower. At March 31, 2005
and December 31, 2004, the Company had an outstanding balance of $569.5 million
and $569.4 million, respectively, for the Senior Secured Notes in its Condensed
Consolidated Balance Sheets.

The Company is obligated to pay interest on the Series Y First Mortgage Bonds at
the rate paid on the floating rate Senior Secured Notes, plus 1/2 of 1% per
annum and on the Series Z First Mortgage Bonds at a rate of 10.25%. The First
Mortgage Bonds are solely obligations of the Company and have not been
guaranteed or assumed by or, otherwise, become the obligation of Mittal 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 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 $1,500 million on
December 31, 2004.

The terms of the Senior Secured Notes place certain limitations on the ability
of the Company and the Company's subsidiaries to, among other things, (i) incur
additional indebtedness, (ii) pay dividends or make other distributions or
repurchase or redeem stock, (iii) make investments, (iv) sell assets, (v) incur
liens, (vi) enter into agreements restricting their subsidiaries' ability to pay
dividends, (vii) enter into transactions with affiliates, (viii) engage in
certain businesses and (ix) consolidate, merge or sell all or substantially all
of its or their assets. The indenture under which the Senior Secured Notes were
issued also contains limitations on the ability of the Borrower and the
guarantors, other than Mittal and those that are not subsidiaries of the Company
to, among other things, engage in business activities, other than performing
their obligations under the indenture, incur additional indebtedness, and pay
dividends. Such indenture also contains limited covenants that are applicable to
Mittal. These limitations are subject to a number of exceptions and
qualifications. The Company and Borrower were in compliance with all covenants
on March 31, 2005.

At March 31, 2005, restrictions in the indenture for the Senior Secured Notes
and the Inventory-Backed Revolver on paying dividends or making other
distributions to shareholders and the repurchase or redemption of stock limited
such payments to $291 million.

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

In December 2004, Mittal purchased $256 million of the Company's capital stock.
Later that month, with the proceeds from the sale of stock, the Company redeemed
$227.5 million principal amount of its Series Z Bonds from an affiliate, which
in turn used the proceeds to redeem $227.5 million principal amount of its 9.75%
Senior Secured Notes due 2014, at a redemption price equal to 109.75% of the
outstanding principal amount redeemed, plus accrued

8

ISPAT INLAND INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)

NOTE 3 -DEBT (CONT.)

and unpaid interest. The Company recognized a $22.2 million loss on this early
redemption. After giving effect to this redemption, $422.5 million principal
amount of the Company's Series Z Bonds and of the affiliate's 9.75% Senior
Secured Notes remain outstanding.

Maturities of debt obligations (excluding amounts outstanding under the
revolving credit facilities at March 31, 2005) are: $0 million in 2005, $5.1
million in 2006, $59.8 million in 2007, $0 million in 2008, $0 million in 2009
and $707.7 million thereafter.

Interest cost incurred by the Company totaled $20.3 million and $20.5 million
for the quarter ended March 31, 2005 and 2004, respectively. Included in these
totals is capitalized interest of $0.2 million and $0 million for the three
months ended March 31, 2005 and 2004, respectively.

NOTE 4 - EQUITY

Common Stock

On March 31, 2005 and December 31, 2004, the Company had 1,000 shares authorized
of common stock, $.01 par value ("Common Stock"), of which 180 shares were
issued, outstanding and owned by a wholly owned subsidiary of Mittal.

Cumulative Preferred Stock

On March 31, 2005 and December 31, 2004, 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 Mittal. The
Preferred Stock has liquidation preference over the Common Stock. At March 31,
2005, dividends in arrears on the Preferred Stock were $2.2 million.

NOTE 5 - 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 with
the exception of non-represented salaried employees hired after December 31,
2002, which are not covered by this plan. 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.

The net periodic benefit cost was as follows:

9

ISPAT INLAND INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)

NOTE 5 - RETIREMENT BENEFITS (CONT.)

BENEFITS OTHER THAN PENSION 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.

The net periodic benefit cost was as follows:

NOTE 6 - RELATED PARTY TRANSACTIONS

The Company was charged $2.5 million by Mittal for the three months ended March
31, 2005 and 2004, for management, financial and legal services provided to the
Company. The company charged Mittal $0.8 million and $0.6 million for operating
and technical services for the three months ended March 31, 2005 and 2004,
respectively.

The Company purchased $32.1 million and $16.7 million of inventory from
subsidiaries of Mittal during the three months ended March 31, 2005 and 2004,
respectively. The Company sold $2.7 million and $1.6 million of inventory to
subsidiaries of Mittal for the three months ended March 31, 2005 and 2004,
respectively.

I/N Tek is a joint venture which owns and operates a cold-rolling facility and
is 60% owned by a wholly-owned subsidiary of the Company. Under a tolling
arrangement between the Company and I/N Tek, the Company was charged $38.7
million and $36.8 million for such tolling services for the three months ended
March 31, 2005 and 2004, respectively.

I/N Kote is a joint venture that owns and operates an electrogalvanizing line
and hot-dip galvanizing line which is 50% owned by a wholly-owned subsidiary of
the Company. The Company recorded sales of cold rolled steel to I/N Kote of
$100.0 million and $84.9 million for the three months ended March 31, 2005 and
2004, respectively.

The Company's long-term debt due to a related company of $569.5 million and
$809.6 million as of March 31, 2005 and December 31, 2004, respectively,
comprises $569.5 million and $569.4 million, respectively, payable to Ispat
Inland Finance, LLC and $0 million and $240.2 million, respectively, of advances
from Mittal and other subsidiaries of Mittal. Under certain debt agreements,
these advances could not be repaid until the Company's leverage fell to
specified levels and sufficient cumulative earnings had been achieved. Interest
expense related to debt from Ispat Inland Finance, LLC was $14.4 million and
$9.7 million for the three months ended March 31, 2005 and 2004, respectively.
The accrued interest on the long-term debt payable to Ispat Inland Finance, LLC
was $25.2 million and $14.5 million at March 31, 2005 and December 31, 2004,
respectively. This debt arose in connection with the financing of the
acquisition of the Company and March 2004 refinancing. The advances from Mittal
and its other subsidiaries were to mature on June 30, 2014. Interest on each
advance is charged at a fixed rate. Rates in effect at March 31, 2005 range from
2.9% to 5.6%. Interest expense related to the advances from Mittal and its other

10

ISPAT INLAND INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)

NOTE 6 - RELATED PARTY TRANSACTIONS (CONT.)

subsidiaries was $0.2 million and $2.7 million for the three months ended March
31, 2005 and 2004, respectively. The accrued interest on the advances from
Mittal and other subsidiaries of Mittal was $0 million and $5.8 million at March
31, 2005 and December 31, 2004, respectively. The interest on the advances is
payable on their anniversary dates; if the Company does not pay the interest
when due, it is then added to the principal amount outstanding on the advance.

On January 6, 2005, the Company repaid the advances from Mittal and its other
subsidiaries. The total amount of the repayment was $246.2 million which
included principal payments of $240.2 million and interest payments of $6.0
million (includes $0.2 million of interest expense for January 2005).

The Company's note receivable from a related company of $17.0 million and $15.8
million at March 31, 2005 and December 31, 2004, respectively is due from Ispat
Inland, L.P. Interest income on this receivable was $0.4 million and $0.1
million for the three months ended March 31, 2005 and 2004, respectively.
Amounts relate to costs associated with the financing of the acquisition of the
Company by Mittal, costs incurred in relation to settlement of an interest rate
collar and costs associated with the March 2004 refinancing. Payment is due on
April 2, 2014 unless Ispat Inland, L.P. chooses to prepay.

The Company's payable to related companies of $36.2 million and $25.9 million at
March 31, 2005 and December 31, 2004, respectively, consists of trade and other
related party expenses. The Company's receivable from related companies of $4.7
million and $6.5 million at March 31, 2005 and December 31, 2004, respectively,
consists of trade and other related party receivables.

NOTE 7 - COMMITMENTS AND CONTINGENCIES

At March 31, 2005 and December 31, 2004, the Company guarantees $33.3 million
and $40.7 million, respectively, of long-term debt attributable to I/N Kote, 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 its 50% share of the remaining principal
balance, the Company also guarantees any outstanding interest due, both of which
bear interest 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 March 31, 2005.

On July 16, 1998, the Company entered into an agreement (the "Agreement") with
the Pension Benefit Guaranty Corporation (the "PBGC") to provide certain
financial assurances with respect to the Company's Pension Plan. In accordance
with the Agreement, the Company provided the PBGC a $160 million letter of
credit which expired on July 9, 2003, and has made certain specified
contributions to its Pension Plan. 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 million
letter of credit. The letter of credit was allowed to expire, and in its place,
the Company agreed to make contributions to its Pension Plan of $160 million
over the next two years and 50% of excess cash flows ($147.3 million for 2004 is
to be paid in 2005) as defined in its agreement with the PBGC. Under the
agreement, the Company contributed $50 million in July 2003 and $82.5 million in
2004 and is required to contribute an additional $27.5 million in 2005, of which
$13.7 was contributed in the first quarter of 2005. Additionally, the Company
pledged $160 million of non-interest bearing First Mortgage Bonds to the PBGC as
security until the remaining $110 million has been contributed to the Pension
Plan and certain tests have been met.

Under the Agreement, Ryerson Tull Inc., the former parent of the Company, also
provided to the PBGC a $50 million 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,

11

ISPAT INLAND INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)

NOTE 7 - COMMITMENTS AND CONTINGENCIES (CONT.)

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 Mittal. The $21 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 agreed to make specified
monthly contributions to its Pension Plan totaling $29 million 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. Of the $111.5 million of contributions made to the
Company's pension plan during the year ended December 31, 2004, $29.0 million
reduced the amount of, and by September 15, 2004, eliminated the Ryerson Tull
guaranty/letter of credit. 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.

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. The actual purchases
of coke under this agreement were 0.3 million and 0.3 million tons at a cost of
$56.8 million and $42.3 million for the three months ended March 31, 2005 and
March 31, 2004, respectively. 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 million during construction of the project, which would have been credited
against required cash payments during the second half of the energy tolling
arrangement. During the fourth quarter of 2004, an agreement was reached to
allow the third party to pay the Company a deposit repayment equal to $53.7
million. Upon receipt of these funds, the deferred asset was eliminated and a
corresponding gain of $1.2 million was recognized by the Company. As of March
31, 2005 and December 31, 2004, the estimated minimum tolling charges remaining
over the life of this agreement were approximately $246 million and $254
million, respectively.

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 was fixed
for the first two years and starting in 2005, will be 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 "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 ("Sediment
Remediation"). 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 $28.3
million and $28.2 million as of March 31, 2005 and December 31, 2004,
respectively. Future payments under the sediment remediation portion of the 1993
EPA Consent are substantially fixed. The 1993 EPA Consent Decree also requires
remediation of the Company's Indiana Harbor Works site ("the "Corrective
Action") which is a distinct and separate responsibility under the Consent
Decree. The 1993 EPA Consent Decree establishes a three-step process for the
Corrective Action, 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. Assessments
under the 1993 EPA Consent Decree have been ongoing since the decree was entered
and no significant new environmental exposures have been identified. 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, its obligations under the corrective action, but it is
expected that remediation of the site will require significant expenditures over
several years that may be material to the Company's financial position, results
of operations and cash flows. Insurance coverage with respect to work required
under the 1993 EPA Consent Decree is not significant.

12

ISPAT INLAND INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)

NOTE 7 - COMMITMENTS AND CONTINGENCIES (CONT.)

Capital spending for pollution control projects previously authorized and
presently under consideration will require expenditures of approximately $3
million in 2005 and $7 million in 2006. During the 2007 to 2009 period, it is
anticipated that the Company will make annual capital expenditures of $2 million
to $6 million on pollution control projects. In addition, the Company will have
ongoing annual expenditures (non-capital) of $35 million to $40 million 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, or as referenced below, to materially affect the Company's
financial position, results of operations and cash flows. Corrective actions
relating to the EPA consent decree will require significant expenditures over
the next several years that may be material to the financial position, results
of operations and cash flows of the Company. At March 31, 2005 and December 31,
2004, the Company's reserves for environmental liabilities totaled $37.0 million
and $36.9 million, respectively, $22.3 million and $22.1 million of which is
related to the sediment remediation under the 1993 EPA Consent Decree.

In October 1996, the Company was identified as a potentially responsible party
due to alleged releases of hazardous substances from its Indiana Harbor Works
facility and was notified of the NRDA trustees intent to perform an
environmental assessment on the Grand Calumet River and Indiana Harbor Canal
System. A consent decree has been negotiated, which was issued as a final order
of the court in January 2005, and became effective April 1, 2005. Under the
decree, the Company is to pay approximately $8.7 million in total. In the first
year the Company is to pay approximately $1.6 million, and also pay $1.6 million
in each of the subsequent four years, plus interest. Additionally, the Company
has incurred approximately $0.4 million in costs related to this matter, payable
within 30 days of the effective date of the consent decree. Under the terms of
the consent decree, the Company has, through the issuance of a Letter of Credit,
provided Financial Assurance to the NRDA trustees of its ability to provide the
$7.9 million Restoration Costs portion of the $8.7 million. The Company has
established a reserve of $8.7 million for liabilities in connection with these
matters. The Company is engaged in ongoing negotiations with the EPA regarding a
similar dollar reduction in the separate environmental reserve established for
EPA Consent Decree. It is the Company's position that the Sediment Remediation
and the NRDA decree address remediation of the same waterways. Management
believes that the required future payments related to these matters are
substantially fixed, and, accordingly, does not believe that reasonably possible
losses, if any, in excess of the amounts accrued will have a material effect on
the Company's financial position, results of operations and cash flows.

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 as may be referenced herein, 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.

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
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.

13

ISPAT INLAND INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)

NOTE 7 - COMMITMENTS AND CONTINGENCIES (CONT.)

In January 2005 the Company received a Third Party Complaint by Alcoa
Incorporated alleging that the Company is liable as successor to the interests
of Hillside Mining Co., a company that the Company acquired in 1943, operated
until the late 1940s and then sold the assets of in the early 1950s. It is
alleged that since Hillside was operating in the area at the same time as Alcoa,
if Alcoa is found to be liable in the original suit that was filed against it by
approximately 340 individuals who live in the Rosiclare area of southern
Illinois, then the Company should also be found liable, and there should be an
allocation to the Company of the amount that would be owed to the original
Plaintiffs. Those original Plaintiffs are alleging that the mining and
processing operations allowed the release of fluorspar, manganese, lead and
other heavy metal contaminants, causing unspecified personal injury and property
damage. The Company has also been identified as a potentially responsible party
by the Illinois EPA in connection with this matter. The Company has requested
further information from the Illinois EPA regarding their potential claim. Until
such time as this matter is further developed, management is not able to
estimate reasonably possible losses, or a range of such losses, the amounts of
which may be material in relation to the Company's financial position, results
of operations and cash flows. The Company intends to defend itself fully in
these matters.

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 $22.9 million and
$22.0 million at March 31, 2005 and December 31, 2004, respectively.

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 Primary Energy Steel 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
Primary Energy Steel 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 NiSource, Inc. 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.

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 million, 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 March 31,
2005, the Company's cumulative cost reduction due to such tax credits totaled
$191.7 million. The current carrying amount of this indemnification is $0
million.

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 of the
Company.

14

ISPAT INLAND INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)

NOTE 8 - 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 beyond two years. At March 31, 2005 and December 31, 2004, the Company
had entered into contracts for these commodities for notional amounts of $75.2
million and $108.8 million, respectively which had fair values of $18.9 million
(asset) and $0.7 million (liability), respectively. For the three months ended
March 31, 2005 and 2004, the Company recorded gains of $19.6 million and $2.6
million, respectively, for changes in the fair value of derivative instruments
not designated as a hedge (as defined by SFAS No. 133).

NOTE 9 - ASSET RETIREMENT OBLIGATIONS

The Company adopted the provisions of SFAS No. 143 as of 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, has 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. 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, 2004, the estimated total future
reclamation costs are $18.2 million.

Changes in the liability for asset retirement obligations during the first
quarter of 2005 and 2004 consisted of the following (Dollars in Millions):

2005 2004
---- ----

Balance as of January 1 $7.5 $7.0
Accretion expense 0.1 0.1
Liabilities settled - -
---- ----
Balance as of March 31 $7.6 $7.1
==== ====

NOTE 10 - RESEARCH AND DEVELOPMENT COSTS

Research and development costs are expensed as incurred. Total research and
development costs for the three months ended March 31, 2005 and 2004 were $3.7
million and $3.1 million, respectively.

NOTE 11 - PROPERTY TAX LIABILITY

For the quarter ended March 31, 2004, the Company recorded a favorable
adjustment to cost of goods sold of $35.0 million due to a change in estimate
for property taxes for the years 2002 and 2003. This adjustment was the result
of a reassessment of real property and the release of the published tax rate for
2002 for Lake County, Indiana.

NOTE 12 - WORKFORCE REDUCTION

For the quarter ended March 31, 2004, the Company recorded charges of $4.0
million for severance and termination benefit costs related to involuntary
workforce reductions of approximately 130 salaried non-represented employees.
The Company's remaining accrual for the workforce reductions totaled $0.1
million and $0.1 million as of March 31, 2005 and December 31, 2004,
respectively, and is included in "Accrued expenses and other liabilities" in the
Condensed Consolidated Balance Sheets. Cash payments during the first quarter of
2004 were $3.2 million.

15

ISPAT INLAND INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)

NOTE 13 - SALES OF POLLUTION ALLOWANCES

During the first quarter 2004, the Company sold 2,168 tons of Nitrous Oxide
("NOx") allowances for $6.7 million which was recorded in "Other Expense
(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.

16

ITEM 2.

MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Comparison of First Quarter 2005 to First Quarter 2004

Steel shipments in the first quarter of 2005 of 1,340,224 tons decreased by
92,484 tons, or 6.5%, from the first quarter 2004 shipments of 1,432,708 tons
due to weaker market demand. Decreases occurred primarily in cold rolled,
coated, and bar products, and was partially offset by an increase in hot rolled
product sales.

Sales revenue increased by 35.9% to $904.3 million in the first quarter of 2005
from $665.6 million in the first quarter of 2004. The average selling price per
ton increased by 45.2% to $675 per ton in the first quarter of 2005 from $465
per ton in the comparable 2004 period. The increase in the average selling price
per ton is the result of higher contract prices and the implementation of a
pricing mechanism designed to offset escalation in the prices and associated
freight for certain input commodities such as coke, scrap and iron ore. The
higher percentage of hot rolled product in the mix had a modest adverse impact
on the net realized prices in the first quarter of 2005 compared to the first
quarter of 2004.

In the first quarter of 2005, the cost of goods sold increased to $639.1 million
from $551.7 million in the first quarter of 2004. Included in the first quarter
2004 cost is a credit of $35.0 million due to a change in the accounting
estimate for property taxes for the years 2002 and 2003. Indiana's Legislature
passed a law in 2001 which changed real property assessment from replacement
cost less depreciation to market value. Additionally, the law required an
independent reassessment of real property for Lake County where our 1,900 acre
Indiana Harbor Facility is located. The 2002 reassessment of real property was
not completed until the end of February, 2004. The first quarter of 2004 also
included a charge of approximately $4.0 million for severance costs resulting
from an 8% salaried workforce reduction. Compared to the first quarter of 2004,
input costs dramatically increased for scrap, coke, coal, alloys, fluxes, power
and natural gas. Labor costs were higher in the first quarter of 2005 as
compared to the first quarter of 2004 due to increased employee profit sharing
and pension expense. The lower sales and operating volume in the first quarter
of 2005 also resulted in a cost increase on a per ton basis due to the
absorption of fixed costs.

Selling and general administrative expenses of $9.4 million in the first quarter
of 2005 increased $.2 million from $9.2 million in the first quarter of 2004.

Depreciation expense increased by $.2 million to $25.3 million in the first
quarter of 2005 from $25.1 million in the first quarter of 2004.

Operating income in the first quarter of 2005 increased by $150.9 million to
$230.5 million from $79.6 million in 2004. Increases in selling prices were
partially offset by the property tax reassessment credit which was a benefit in
2004, a substantial increase in input costs, increased pension expense and
higher employee profit sharing.

Other (income) expense, net of $1.1million of income in the first quarter of
2005 decreased by $6.3 million from an income of $7.4 million in the first
quarter of 2004 due to the sale of pollution credits in the first quarter of
2004. The Company sold 2,168 tons of Nitrous Oxide allowances for $6.7 million,
which were part of an overall bank of emission allowances and credits owned by
the Company. Generally, these rights arose from actions taken by the Company or
the state to reduce the emission of air pollutants.

Interest expense of $20.1 million in the current quarter decreased 2.4% from
$20.6 million in the year ago quarter.

The effective tax rate increased to 39.6% in the current quarter from 36.3% in
the year ago quarter.

The cash balance at March 31, 2005 was $33.0 million, and $258.2 million was
available under the two credit facilities, for a total liquidity of
approximately $291 million. During the first quarter, the Company utilized net
cash of $146.5 million for financing activities. On January 6, 2005, the Company
repaid the advances from Mittal Steel Company N.V. and its other subsidiaries.
The total amount of the repayment was $246.2 million, which included

17

principal payments of $240.2 million and interest payments of $6.0 million. As
of the end of the quarter, the Company had $100 million outstanding under its
existing credit facilities.

Cash generated by operations is our primary source of cash and, as such, future
operations will have a significant impact on our cash balances and liquidity.
The principal factors affecting our cash generated by operations are average net
realized prices, levels of steel shipments, and our operating costs.

For the quarter ended March 31, 2005, net cash inflows from operations totaled
$99.4 million, which is net of pension contributions of $13.7 million. Cash
outflows from operations in the first quarter of 2004 were $43.7 million, which
included $31.5 million of pension contributions.

Changes in working capital, components of receivables, inventories and accounts
payable, utilized cash of $134.3 million in the first quarter of 2005, including
$78.7 million for increased receivables, $31.0 million for decreased accounts
payable and $24.6 million for increased inventories. In the first quarter of
2004, changes in working capital utilized $78.3 million of cash, including $63.3
million for increased receivables and $27.3 million for increased inventories.

Cash outflows for investing activities, which consist primarily of capital
expenditures, offset by distributions from joint ventures, were $.6 million in
the first quarter of 2005. In the first quarter of 2004, cash inflows for
investing activities were $6.0 million. Capital expenditures were $10.3 million
and $1.8 million for the first quarter of 2005 and 2004, respectively. Net
distributions from joint ventures were $9.7 million and $7.7 million for the
first quarter of 2005 and 2004, respectively.

OUTLOOK

The Company anticipates lower shipments and net realizing prices in the second
quarter of 2005 due to continued market softness. As a result, profit in the
second quarter is estimated to be lower than the first quarter of 2005

ITEM 4. CONTROLS AND PROCEDURES

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(e) under the
Securities Exchange Act of 1934) as of the end of the period covered by this
report. 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. No significant changes have been made in
our internal controls or in other factors that could significantly affect these
controls subsequent to the date of the evaluations.

18

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Part 1, Item 1, Note 7 Commitments and Contingencies, for a description of
legal proceedings.

19

ITEM 5. OTHER

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) 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.

None

20

SIGNATURE

Pursuant to the requirements 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/ Michael G. Rippey
---------------------
Michael G. Rippey
Executive Vice President-Commercial
and Chief Financial Officer
Principal Financial Officer
Principal Accounting Officer
and Director

Date: May 13, 2005
------------

INDEX TO EXHIBITS