<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 September 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 November
5, 1996: 25,127,374 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>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------ ------------
(In thousands of dollars)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 34,426 $ 11,173
Accounts receivable:
Trade, less allowance for doubtful accounts of
$1,028 in 1996 and $1,267 in 1995 65,757 49,814
Other 4,101 5,298
--------- ---------
69,858 55,112
Inventories 30,580 29,155
Other current assets 3,929 7,632
--------- ---------
Total current assets 138,793 103,072
Property, plant and equipment, at cost 348,902 344,288
Less:
Foreign industrial development grants, net of
amortization (5,001) (5,469)
Accumulated depreciation and amortization (205,097) (189,625)
--------- ---------
Net property, plant and equipment 138,804 149,194
Other noncurrent assets 17,210 21,805
--------- ---------
$ 294,807 $ 274,071
========= =========
</TABLE>
See accompanying notes
1
<PAGE> 3
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(In thousands of dollars)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 32,366 $ 28,640
Income taxes 17,343 16,000
Accrued liabilities 37,150 43,949
Notes payable 217 13
Long-term debt due within one year 1,881 2,596
-------- --------
Total current liabilities 88,957 91,198
Noncurrent liabilities:
Long-term debt due after one year 31,631 32,675
Retirement benefits 45,572 43,621
Other noncurrent liabilities 2,987 5,712
-------- --------
Total noncurrent liabilities 80,190 82,008
Minority interest 2,837 2,837
Shareholders' equity:
Common stock 2,513 2,505
Capital in excess of par value 57,029 56,431
Retained earnings 62,530 37,125
Accumulated translation adjustments 2,464 3,765
Minimum pension liability adjustment (1,636) (1,636)
Unearned restricted stock (77) (162)
-------- --------
Total shareholders' equity 122,823 98,028
-------- --------
$294,807 $274,071
======== ========
</TABLE>
See accompanying notes.
2
<PAGE> 4
Intermet Corporation
Interim Condensed Consolidated Statements of Income
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------- -------------------------
SEPTEMBER 30, OCTOBER 1, SEPTEMBER 30, OCTOBER 1,
1996 1995 1996 1995
------------- ---------- ------------- ----------
(in thousands of dollars, except per share data)
<S> <C> <C> <C> <C>
Net sales $130,279 $117,331 $408,219 $419,644
Cost of sales 112,449 104,604 346,335 357,807
-------- -------- -------- --------
Gross profit 17,830 12,727 61,884 61,837
Operating expenses:
Selling 988 1,047 2,751 3,418
General and administrative 4,570 4,263 12,455 17,615
-------- -------- -------- --------
5,558 5,310 15,206 21,033
-------- -------- -------- --------
Operating profit 12,272 7,417 46,678 40,804
Other income and expenses:
Interest income 409 117 856 181
Interest expense (702) (1,399) (2,141) (5,399)
Other, net 11 105 (33) (5)
-------- -------- -------- --------
(282) (1,177) (1,318) (5,223)
-------- -------- -------- --------
Income before income taxes 11,990 6,240 45,360 35,581
Provision for income taxes 5,204 2,863 18,950 16,147
-------- -------- -------- --------
Net Income $ 6,786 $ 3,377 $ 26,410 $ 19,434
======== ======== ======== ========
Earnings per share $ 0.27 $ 0.14 $ 1.04 $ 0.78
======== ======== ======== ========
</TABLE>
See accompanying notes.
3
<PAGE> 5
Intermet Corporation
Interim Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------------
SEPTEMBER 30, OCTOBER 1,
1996 1995
-------------- ----------
(In thousands of dollars)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 26,410 $ 19,434
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 21,680 25,075
Other 68 (314)
Changes in assets and liabilities:
Accounts receivable (15,612) (63)
Inventories (1,780) 4,025
Accounts payable 4,051 (7,495)
Other assets and liabilities 2,862 15,248
-------- --------
Net cash provided by operating activities 37,679 55,910
INVESTMENT ACTIVITIES
Additions to property, plant and equipment (15,359) (16,720)
Proceeds from sales of property, plant & equipment 3,516 4,496
Other 0 (176)
-------- --------
Net cash used in investing activities (11,843) (12,400)
FINANCING ACTIVITIES
Net reduction in borrowings (1,325) (43,789)
Issuance of common stock 606 507
Dividends paid (1,005) 0
Other 0 (316)
-------- --------
Net cash provided by (used in) financing activities (1,724) (43,598)
Effect of exchange rate changes on cash and cash
equivalents (859) 1,017
-------- --------
Net increase (decrease) in cash and cash equivalents 23,253 929
Cash and cash equivalents at beginning of period 11,173 13,718
-------- --------
Cash and cash equivalents at end of period $ 34,426 $ 14,647
======== ========
</TABLE>
See accompanying notes.
4
<PAGE> 6
Intermet Corporation
Notes to Interim Condensed Consolidated Financial Statements
September 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 nine month periods ended
October 1, 1995 and September 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):
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
Finished goods $ 5,578 $ 5,616
Work in process 4,611 3,989
Raw materials 4,534 3,975
Supplies and patterns 15,857 15,575
------- -------
$30,580 $29,155
======= =======
3. Property, plant and equipment consist of the following
(in thousands of dollars):
SEPTEMBER 30, DECEMBER 31,
1996 1995
-------- --------
Land $ 3,471 $ 3,585
Buildings and improvements 76,069 77,649
Machinery and equipment 253,487 254,140
Construction in progress 15,875 8,914
-------- --------
$348,902 $344,288
======== ========
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):
SEPTEMBER 30, DECEMBER 31,
1996 1995
---------- -----------
Intermet $25,000 $25,000
Subsidiaries 8,512 10,271
------- -------
Total long-term debt 33,512 35,271
Less amounts due within one year 1,881 2,596
------- -------
Long-term debt due after one year $31,631 $32,675
======= =======
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 September 30, 1996. The
Company does not expect to receive the consent decree from the State in
1996 which would move the payment to 1997. 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 third quarter.
Operating cash flow has remained positive through the third quarter and
generated a $23 million net increase in cash and cash equivalents as of
September 30, 1996 for the nine month period. Capital expenditures totaled
$7.2 million for the third quarter 1996 and $15.4 million year-to-date. The
rate of expenditures increased in the third quarter as expected, primarily as a
result of the expansion at Alexander City, a new Columbus Neunkirchen brake
program and normal summer shutdown projects.
Cash and cash equivalents remained steady at $34 million and long-term debt
declined to $32 million at September 30, 1996. The Company declared a cash
dividend of $0.04 per share, payable December 30, 1996 to shareholders of
record as of December 1, 1996.
The Company purchased a minority interest in IWESA GmbH for $2.6 million (4.0
million DM) effective November 1, 1996. The Company also purchased a newly
issued share from IWESA for $0.3 million (0.4 million DM), bringing its share
interest to 49% and contributed $3.9 million (6.0 million DM) to the capital
reserves of IWESA in support of new capital expansion projects. IWESA is a
precision machining and engineering company located in Saarbrucken, Germany,
producing parts for the commercial motor vehicle and industrial markets. Major
customers include Mercedes Benz, Knorr, Opel, ZF, Kolbenschmidt, Robert Bosch,
and Perrot.
Material Changes in Results of Operations
SALES. Sales in the third quarter, 1996 increased almost $13 million or 11%
from the third quarter 1995. Excluding acquisitions and divestitures, sales
increased more than 15% from the comparable period in 1995 as a result of an
improved domestic and European automotive market. Sales of domestic truck,
sport-utility and minivan products remained strong in the period, while the
passenger car market remained relatively flat. Sales at all domestic locations
were up from prior year with the exception of Ironton, which was impacted by a
model change. Columbus Neunkirchen (Germany) sales were again negatively
affected by exchange rates compared to 1995, although overall sales remained
strong and Neunkirchen reported year-over-year increases in U.S. Dollars. Nine
month sales in 1996 are down less than 3% from 1995, primarily as a result of
fourth quarter 1995 divestitures.
GROSS PROFIT. Gross profit for the third quarter of 1996 improved to $17.8
million from $12.7 million in third quarter 1995, while year-to-date gross
profit improved to $61.9 million from $61.8 million in 1995. Gross profit as a
percentage of sales improved to 13.7% in the third quarter of 1996 from 10.9%
in the third quarter of 1995. The improved margins are the result of higher
volumes and continued cost reduction efforts at domestic and European
locations. Third quarter 1995 results were negatively impacted by the PBM
divestiture, while both third quarter
7
<PAGE> 9
1996 and nine month 1996 results were affected by startup costs at the new
Alexander City aluminum casting operation and reduced volume at Ironton.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses as a
percentage of sales decreased from 4.5% in the third quarter 1995 to 4.3% in
the third quarter 1996 and from 5.0% for the nine month period in 1995 to 3.7%
for the nine month period in 1996. Absolute expenses in the third quarter
increased $0.2 million from 1995, but declined $5.8 million or 28% on a
year-to-date basis.
INTEREST EXPENSE. Interest expense declined $0.9 million in the third quarter
and $3.9 million year-to-date as a result of lower debt levels and reduced
borrowing costs associated with refinancing. The Company is in the process of
re-negotiating its current credit arrangements.
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 three quarters of 1996 continues through the fourth quarter, the Company
expects to reduce the deferred tax valuation allowance at or near year end.
8
<PAGE> 10
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
Item 4. Submission of Matters to a Vote of Securities Holders
-----------------------------------------------------
None
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 September 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: November 11, 1996
11
<PAGE> 13
EXHIBIT INDEX
Exhibit
Number Description
------- ----------------------------------------
11.1 Computation of Earnings per Common Share
27.1 Financial Data Schedule
12
<PAGE> 1
EXHIBIT 11.1
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------------- ----------------------------
SEPTEMBER 30, OCTOBER 1, SEPTEMBER 30, OCTOBER 1,
1996 1995 1996 1995
---------------------------- ----------------------------
(in thousands of dollars, except per share amounts)
<S> <C> <C> <C> <C>
Net income $ 6,786 $ 3,377 $26,410 $19,434
Weighted average number of shares outstanding 25,120 24,726 25,088 24,684
Dilutive effect of outstanding options 307 221 384 126
------- ------- ------- -------
Weighted average number of shares and
equivalent shares outstanding 25,427 24,948 25,472 24,810
------- ------- ------- -------
Earnings per share $0.27 $0.14 $1.04 $0.78
======= ======= ======= =======
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 34,426
<SECURITIES> 0
<RECEIVABLES> 66,785
<ALLOWANCES> 1,028
<INVENTORY> 30,580
<CURRENT-ASSETS> 138,793
<PP&E> 348,902
<DEPRECIATION> 205,097
<TOTAL-ASSETS> 294,807
<CURRENT-LIABILITIES> 88,957
<BONDS> 0
0
0
<COMMON> 2,513
<OTHER-SE> 120,310
<TOTAL-LIABILITY-AND-EQUITY> 294,807
<SALES> 408,219
<TOTAL-REVENUES> 408,219
<CGS> 346,335
<TOTAL-COSTS> 361,541
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,141
<INCOME-PRETAX> 45,360
<INCOME-TAX> 18,950
<INCOME-CONTINUING> 26,410
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,410
<EPS-PRIMARY> 1.04
<EPS-DILUTED> 1.04
</TABLE>
