<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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 0-13787
INTERMET CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-1563873
- ---------------------------- --------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
5445 Corporate Drive, Suite 200, Troy, Michigan 48098
------------------------------------------------------
(Address of principal executive offices and zip code)
(810) 952-2500
--------------------------------------
(Registrant's telephone number, including area code)
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 [ ]
Shares outstanding of each of the issuer's classes of common stock at July 26,
1996: 25,094,374 shares of Common Stock, $0.10 par value share.
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Intermet Corporation
Interim Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
-----------------------------
(In thousands of dollars)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 34,880 $ 11,173
Accounts receivable:
Trade, less allowance for doubtful accounts of
$1,035 in 1996 and $1,267 in 1995 63,744 49,814
Other 4,140 5,298
-----------------------------
67,884 55,112
Inventories 29,679 29,155
Other current assets 2,396 7,632
-----------------------------
Total current assets 134,839 103,072
Property, plant and equipment, at cost 347,164 344,288
Less:
Foreign industrial development grants, net of
amortization (5,103) (5,469)
Accumulated depreciation and amortization (199,700) (189,625)
-----------------------------
Net property, plant and equipment 142,361 149,194
Other noncurrent assets 17,696 21,805
-----------------------------
$ 294,896 $274,071
=============================
</TABLE>
See accompanying notes
1
<PAGE> 3
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
---------------------------
(In thousands of dollars)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 36,167 $ 28,640
Income taxes 13,115 16,000
Accrued liabilities 43,082 43,949
Notes payable 240 13
Long-term debt due within one year 1,914 2,596
---------------------------
Total current liabilities 94,518 91,198
Noncurrent liabilities:
Long-term debt due after one year 31,867 32,675
Retirement benefits 45,284 43,621
Other noncurrent liabilities 3,328 5,712
---------------------------
Total noncurrent liabilities 80,479 82,008
Minority interest 2,837 2,837
Shareholders' equity:
Common stock 2,509 2,505
Capital in excess of par value 56,725 56,431
Retained earnings 56,749 37,125
Accumulated translation adjustments 2,820 3,765
Minimum pension liability adjustment (1,636) (1,636)
Unearned restricted stock (105) (162)
---------------------------
Total shareholders' equity 117,062 98,028
---------------------------
$294,896 $274,071
===========================
</TABLE>
See accompanying notes.
2
<PAGE> 4
Intermet Corporation
Interim Condensed Consolidated Statements of Income
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------ ------------------------------
JUNE 30, JULY 2, JUNE 30, JULY 2,
1996 1995 1996 1995
---------------------------------------------------------
(in thousands of dollars, except per share data)
<S> <C> <C> <C> <C>
Net sales $143,782 $149,035 $277,940 $302,313
Cost of sales 119,505 121,575 233,886 253,203
---------------------------------------------------------
Gross profit 24,277 27,460 44,054 49,110
Operating expenses:
Selling 882 1,055 1,763 2,371
General and administrative 3,637 6,925 7,885 13,352
---------------------------------------------------------
4,519 7,980 9,648 15,723
---------------------------------------------------------
Operating profit 19,758 19,480 34,406 33,387
Other income and expenses:
Interest income 276 34 447 64
Interest expense (660) (1,845) (1,439) (4,000)
Other, net (105) (49) (44) (110)
---------------------------------------------------------
(489) (1,860) (1,036) (4,046)
---------------------------------------------------------
Income before income taxes 19,269 17,620 33,370 29,341
Provision for income taxes 8,455 8,083 13,746 13,284
---------------------------------------------------------
Net Income $ 10,814 9,537 19,624 $ 16,057
=========================================================
Earnings per share $ 0.42 $ 0.39 $ 0.77 $ 0.65
=========================================================
</TABLE>
See accompanying notes.
3
<PAGE> 5
Intermet Corporation
Interim Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------------
JUNE 30, JULY 2,
1996 1995
------------------------------
(In thousands of dollars)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 19,624 $16,057
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 14,475 17,167
Other 58 (137)
Changes in assets and liabilities:
Accounts receivable (13,476) (7,252)
Inventories (840) 96
Accounts payable 7,829 (6,758)
Other assets and liabilities 3,395 17,166
------------------------------
Net cash provided by operating activities 31,065 36,339
INVESTMENT ACTIVITIES
Additions to property, plant and equipment (8,194) (8,893)
Other 44 1,069
------------------------------
Net cash used in investing activities (8,150) (7,824)
FINANCING ACTIVITIES
Net reduction in borrowings (1,047) (35,501)
Issuance of common stock 298 304
Other 2,026 -
------------------------------
Net cash provided by (used in) financing activities 1,277 (35,197)
Effect of exchange rate changes on cash and cash
equivalents (485) 330
------------------------------
Net increase (decrease) in cash and cash equivalents 23,707 (6,352)
Cash and cash equivalents at beginning of period 11,173 13,718
------------------------------
Cash and cash equivalents at end of period $ 34,880 $ 7,366
==============================
</TABLE>
See accompanying notes.
4
<PAGE> 6
Intermet Corporation
Notes to Interim Condensed Consolidated Financial Statements
June 30, 1996
1. The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three month and six month periods ended July
2, 1995 and June 30, 1996 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1996. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Registrant Company and Subsidiaries' annual report
on Form 10-K for the year ended December 31, 1995.
2. Inventories consist of the following (in thousands of dollars):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
---------------------------
<S> <C> <C>
Finished goods $ 6,692 $ 5,616
Work in process 4,164 3,989
Raw materials 3,897 3,975
Supplies and patterns 14,926 15,575
---------------------------
$29,679 $29,155
===========================
</TABLE>
3. Property, plant and equipment consist of the following (in thousands of
dollars):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
---------------------------
<S> <C> <C>
Land $ 3,549 $ 3,585
Buildings and improvements 76,359 77,649
Machinery and equipment 252,473 254,140
Construction in progress 14,783 8,914
---------------------------
$347,164 $344,288
===========================
</TABLE>
5
<PAGE> 7
Intermet Corporation
Notes to Interim Condensed Consolidated Financial Statements (continued)
4. Long-term debt consists of the following (in thousands of dollars):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
-------------------------
<S> <C> <C>
Intermet $25,000 $25,000
Subsidiaries 8,781 10,271
-----------------------
Total long-term debt 33,781 35,271
Less amounts due within one year 1,739 2,596
-----------------------
Long-term debt due after one year $32,042 $32,675
=======================
</TABLE>
5. In March 1994, the Company entered negotiations with the Ohio Attorney
General's office concerning past violations of Ohio water pollution laws
and regulations at the Ironton foundry. In November 1995, the Company
agreed to pay the State of Ohio the determined fine of $285,000 to settle
this and all other water discharge violations at Ironton. The Company has
accrued this liability at December 31, 1995 and June 30, 1996 and expects
to pay this in 1996 on receipt of the State decree. In addition, the
Company has submitted a plan to the Ohio EPA to bring its facility into
compliance with all applicable air emission requirements, after that
agency had advised management of several violations of air pollution
regulations. It is not known whether the agency will eventually demand
the payment of civil penalties for these past violations.
The Company is also engaged in various legal proceedings and other
matters incidental to its normal business activities.
The Company does not believe any of these above mentioned proceedings or
matters are material in relation to the Company's consolidated financial
position or results of operations.
6
<PAGE> 8
Item 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Material Changes in Financial Condition
The Company's financial position continued to improve during the first half of
the year. Although first half sales declined over 8 percent from prior year
levels, net earnings increased more than 22 percent. Cash and cash equivalents
increased to almost $35 million at the end of June, 1996. Long-term debt
remained steady at $34 million, down from $72 million at the end of the second
quarter 1995. The Company reinstated a quarterly cash dividend of $0.04 per
share, payable September 30, 1996 to shareholders of record as of September 1,
1996.
In the first half of 1996 and 1995 the Company charged a total of $1.0 million
and $2.5 million, respectively, against reserves established in 1993 and 1994
for restructuring, severance and retirement pay and related benefit costs.
This activity will continue throughout the balance of the year.
Material Changes in Results of Operations
Sales in the second quarter declined more than $5 million (4%) from the second
quarter 1995, but excluding acquisitions and divestitures, sales increased more
than 1% from 1995. June year-to-date sales declined more than $24 million (8%)
from the first half of 1995. First half sales were also impacted as a result of
1995 divestitures ($23 million). Quarterly sales fluctuations were comparable
to those of the domestic and European auto companies. Auto and truck
production for the domestic manufacturers was down almost 12% in the first
quarter, up more than 6% in the second quarter and down for the first half in
total. European sales at Columbus Neunkirchen remained strong, but were
negatively impacted by exchange rates compared to last year.
Gross profit improved to 16.9% of sales from 14.7% in the first quarter 1996,
although down from second quarter 1995 gross profit of 18.4%. Second quarter
1996 included additional material price increases and selling price pressures
compared to 1995, while second quarter 1995 included favorable prior year
pricing recoveries. Margins in Europe and the major domestic foundries were
improved from prior year, while Alexander City incurred significant startup
costs as a result of greater than expected new product introductions.
Operating expenses were down more than $3.5 million and $6.1 million for the
three and six month periods ended June 30, 1996 from comparable 1995 periods as
a result of reorganizing and manpower reductions.
Interest expense declined significantly in the second quarter ($1.4 million)
and first half periods ($2.9 million) from 1995 as a result of much lower debt
levels, $34 million in 1996 compared to $72 million in 1995, and reduced
borrowing costs associated with refinancing. Capital expenditures were $8.2
million for the first half, including $4.9 million for the second quarter.
7
<PAGE> 9
Capital expenditures have been lower than expected year-to-date, but are
expected to increase in the third quarter. A major expansion was initiated at
Alexander City in the second quarter, a recently acquired aluminum foundry.
At December 31, 1995, the Company had recorded a deferred tax valuation
allowance of $26,332,000. If the Company's positive earnings trend of the
first half of 1996 continues through the remainder of the year, the Company
expects to significantly reduce the deferred tax valuation allowance at or
near yearend.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company has entered into negotiations with the Office of the Ohio
Attorney General with respect to certain past violations by the
Company's Ironton, Ohio foundry of Ohio water pollution laws and
regulations. The Attorney General's Office advised the Company that
they could avoid litigation with respect to such violations by
entering into a consent order. In November 1995 the Company agreed to
pay the State of Ohio a fine of $285,000 to settle the water
pollution matter. The parties have agreed to the language of the
consent decree, and the Company is waiting for the office of Attorney
General to file the decree in Ohio State Court. On receipt of the
decree, the fee will be paid by the Company.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
8
<PAGE> 10
Item 4. Submission of Matters to a Vote of Securities Holders
The Annual Meeting of Shareholders was held on April 11, 1996. The
following persons were nominated and elected to serve on the Board of
Directors until the next annual meeting and until their successors are
elected and qualified:
Voted For Withheld
John Doddridge 20,681,015 2,227,926
Vernon R. Alden 20,779,164 2,129,777
J. Frank Broyles 20,776,986 2,141,955
J. Patrick Crecine 20,782,164 2,126,777
Anton Dorfmueller, Jr. 20,687,264 2,221,677
John B. Ellis 20,775,724 2,133,217
Wilfred E. Gross , Jr. 20,783,318 2,125,623
A. Wayne Hardy 20,628,425 2,280,516
George W. Mathews, Jr. 20,779,485 2,129,456
Harold C. McKenzie, Jr. 20,786,703 2,122,238
J. Mason Reynolds 20,785,873 2,123,068
Curtis W. Tarr 20,690,140 2,218,801
In addition, the shareholders approved the appointment of Ernst & Young,
LLP as the Company's independent auditors for 1996. Vote totals were as
follows:
Appointment
of
Auditors
-----------
Voting for 22,876,946
Voting against 7,275
Abstentions 24,720
A total of 2,141,433 shares were not voted.
Item 5. Other Information
None
9
<PAGE> 11
Item 6. Exhibits and Reports on Form 8-K
(a) The following Exhibits are filed as of part of this report:
Exhibit
Number Description
------- ----------------------------------------
11.1 Computation of Earnings per Common Share
27.1 Financial Data Schedule
(b) No reports on Form 8-K were filed by the company for the
quarter ended June 30, 1996
10
<PAGE> 12
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERMET CORPORATION
By: /s/Doretha J. Christoph
-----------------------------
Doretha J. Christoph
Vice-President Finance
(Principal Financial Officer)
DATE: August 8, 1996
11
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- ----------------------------------------
<S> <C>
11.1 Computation of Earnings per Common Share
27.1 Financial Data Schedule
</TABLE>
12
<PAGE> 1
EXHIBIT 11.1
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------- ----------------------
JUNE 30, JULY 2, JUNE 30, JULY 2,
1996 1995 1996 1995
---------------------- ----------------------
(in thousands of dollars, except per share amounts)
<S> <C> <C> <C> <C>
Net income $10,814 $ 9,537 $19,624 $16,057
Weighted average number of shares outstanding 25,089 24,674 25,071 24,663
Dilutive effect of outstanding options 486 101 412 76
---------------------- ----------------------
Weighted average number of shares and equivalent
shares outstanding 25,575 24,775 25,483 24,739
---------------------- ----------------------
Earnings per share $ 0.42 $ 0.39 $ 0.77 $ 0.65
====================== ======================
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 34,880
<SECURITIES> 0
<RECEIVABLES> 64,779
<ALLOWANCES> 1,035
<INVENTORY> 29,679
<CURRENT-ASSETS> 134,839
<PP&E> 347,164
<DEPRECIATION> 199,700
<TOTAL-ASSETS> 294,896
<CURRENT-LIABILITIES> 94,343
<BONDS> 0
0
0
<COMMON> 2,509
<OTHER-SE> 114,553
<TOTAL-LIABILITY-AND-EQUITY> 294,896
<SALES> 277,940
<TOTAL-REVENUES> 277,940
<CGS> 233,886
<TOTAL-COSTS> 243,534
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,439
<INCOME-PRETAX> 33,370
<INCOME-TAX> 13,746
<INCOME-CONTINUING> 19,624
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,624
<EPS-PRIMARY> 0.77
<EPS-DILUTED> 0.77
</TABLE>
