<PAGE> 1
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 quarterly period ended March 31,
1997, or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 For the transition period from
to
Commission File No. 0-13787
INTERMET CORPORATION
(Exact name of registrant as specified in its charter)
GEORGIA 58-1563873
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5445 Corporate Drive, Suite 200, Troy, Michigan 48098
(Address of principal executive offices) (Zip code)
(248) 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 [ ]
At May 1, 1997 there were 25,213,374 shares of Common Stock, $0.10 par value,
outstanding.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Intermet Corporation
Interim Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------------------------
(Unaudited)
(in thousands of dollars)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 14,133 $ 23,485
Accounts receivable:
Trade, less allowance for doubtful accounts of
$1,175 in 1997 and $949 in 1996 110,649 87,049
Other 5,999 4,642
--------------------------
116,648 91,691
Inventories 55,349 56,047
Other current assets 8,430 18,071
--------------------------
Total current assets 194,560 189,294
Property, plant and equipment, at cost 437,087 436,704
Less:
Foreign industrial development grants, net of
amortization (4,341) (4,804)
Accumulated depreciation and amortization (212,601) (209,118)
--------------------------
Net property, plant and equipment 220,145 222,782
Goodwill, net of amortization 87,593 88,223
Other noncurrent assets 24,772 26,013
--------------------------
$ 527,070 $ 526,312
==========================
</TABLE>
See accompanying notes.
2
<PAGE> 3
Intermet Corporation
Interim Condensed Consolidated Balance Sheets
March 31, December 31,
1997 1996
-------------------------
(Unaudited)
(in thousands of dollars)
[S] [C] [C]
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 57,323 $ 54,721
Income taxes payable 9,148 15,198
Accrued liabilities 51,809 51,474
Accrued Sudbury acquisition costs 3,272 37,299
Long-term debt due within one year 2,218 12,676
--------------------------
Total current liabilities 123,770 171,368
Noncurrent liabilities:
Long-term debt due after one year 189,589 149,477
Retirement benefits 57,880 53,421
Other noncurrent liabilities 3,928 8,107
-------------------------
Total noncurrent liabilities 251,397 211,005
Minority interest 2,837 2,837
Shareholders' equity:
Common stock 2,521 2,517
Capital in excess of par value 58,620 57,308
Retained earnings 88,209 78,267
Accumulated translation adjustments 345 3,548
Minimum pension liability adjustment (485) (485)
Unearned restricted stock (144) (53)
-------------------------
Total shareholders' equity 149,066 141,102
-------------------------
$527,070 $526,312
=========================
See accompanying notes.
3
<PAGE> 4
Intermet Corporation
Interim Condensed Consolidated Statements of Income
Three months ended
March 31, March 31,
1997 1996
-----------------------
(Unaudited)
(in thousands of dollars,
except per share data)
[S] [C] [C]
Net sales $209,491 $134,158
Cost of sales 181,886 114,381
-----------------------
Gross profit 27,605 19,777
Operating expenses:
Selling 2,027 881
General and administrative 4,943 4,248
-----------------------
6,970 5,129
-----------------------
Operating profit 20,635 14,648
Other income and expenses:
Interest income 233 171
Interest expense (2,997) (779)
Other, net (163) 61
-----------------------
(2,927) (547)
-----------------------
Income before income taxes 17,708 14,101
Provision for income taxes 6,757 5,291
-----------------------
Net income $ 10,951 $ 8,810
=======================
Earnings per share $ 0.43 $ 0.35
=======================
See accompanying notes.
4
<PAGE> 5
Intermet Corporation
Interim Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three months ended
March 31, 1997 March 31, 1996
-------------------------------
(Unaudited)
(in thousands of dollars)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 10,951 $ 8,810
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 9,290 7,228
Other (644) 0
Changes in assets and liabilities:
Accounts receivable (25,927) (14,362)
Inventories 205 (1,234)
Accounts payable 2,889 2,518
Other assets and liabilities 5,972 1,258
-------------------------------
Net cash provided by operating activities 2,736 4,218
INVESTMENT ACTIVITIES
Additions to property, plant and equipment (7,871) (3,315)
Sudbury acquisition costs (34,027) 0
Other 901 0
-------------------------------
Net cash used in investing activities (40,997) (3,315)
FINANCING ACTIVITIES
Net increase (decrease) in borrowings 30,006 (667)
Issuance of common stock 332 203
Dividends paid (1,009) 0
Other 1,564 (43)
-------------------------------
Net cash provided by (used in) financing activities 30,893 (507)
Effect of exchange rate changes on cash and cash
equivalents (1,984) (823)
-------------------------------
Net decrease in cash and cash equivalents (9,352) (427)
Cash and cash equivalents at beginning of period 23,485 11,173
-------------------------------
Cash and cash equivalents at end of period $ 14,133 $ 10,746
===============================
</TABLE>
See accompanying notes.
5
<PAGE> 6
Intermet Corporation
Notes to Interim Condensed Consolidated Financial Statements
March 31, 1997 (Unaudited)
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of
Intermet Corporation ("Intermet") and its subsidiaries (collectively, the
"Company") 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
months ended March 31, 1997 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1997. For further information,
refer to the consolidated financial statements and footnotes thereto included
in the Company's annual report on Form 10-K for the year ended December 31,
1996.
Inventories
Inventories consist of the following (in thousands of dollars):
March 31, December 31,
1997 1996
------------ ------------
Finished goods $ 12,377 $ 13,530
Work in process 13,335 13,408
Raw materials 9,570 11,679
Supplies and patterns 20,067 17,430
-------- --------
$ 55,349 $ 56,047
======== ========
Property, Plant and Equipment
Property, plant and equipment consist of the following (in thousands of
dollars):
March 31, December 31,
1997 1996
------------ ------------
Land $ 5,077 $ 5,260
Buildings and improvements 87,486 88,459
Machinery and equipment 332,151 335,003
Construction in progress 12,373 7,982
-------- --------
$437,087 $436,704
======== ========
6
<PAGE> 7
Intermet Corporation
Notes to Interim Condensed Consolidated Financial Statements (continued)
March 31, 1997 (Unaudited)
Intangible Assets
Intangible assets consist principally of costs in excess of net assets
acquired of $87,593,000 and $88,223,000 (net of accumulated amortization of
$2,467,000 and $1,837,000) at March 31, 1997 and December 31, 1996,
respectively. Such costs are being amortized using the straight-line method
over periods ranging from ten to forty years.
Income (Loss) Per Common Share
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share", which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior periods.
Under the new requirements for calculating primary earnings per share, the
dilutive effect of stock options will be excluded. Earnings per share and fully
diluted earnings per share for the first quarter ended March 31, 1997 and March
31, 1996, as calculated pursuant to Statement No. 128, do not differ from the
reported amounts.
2. Debt
Long term debt consists of the following (in thousands of dollars):
March 31, December 31,
1997 1996
------------ ------------
Intermet $184,000 $143,400
Subsidiaries 7,807 18,753
-------- --------
Total long-term debt 191,807 162,153
Less amounts due within one year 2,218 12,676
-------- --------
Long-term debt due after one year $189,589 $149,477
======== ========
7
<PAGE> 8
Intermet Corporation
Notes to Interim Condensed Consolidated Financial Statements (continued)
March 31, 1997 (Unaudited)
3. Environmental and Legal Matters
The Company has entered into a consent order with the Office of the Ohio
Attorney General, which was filed in Ohio State Court, with respect to certain
past violations of Ohio water pollution laws and regulations by the Company's
Ironton, Ohio foundry. The Attorney General's Office advised the Company that
it could avoid litigation with respect to such violations by entering into this
consent order. The consent order decrees that the Company will reimburse the
Attorney General's Office $13,000 in May 1997 for the costs of investigating
this case. The Company will also pay $272,103 in civil penalties in June
1997. These amounts have been fully accrued since 1995.
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 the above mentioned proceedings or matters
are material in relation to the Company's consolidated financial position or
results of operations.
4. Acquisitions and Dispositions
In December, 1996, the Company acquired for cash substantially all of the
outstanding stock of Sudbury, Inc. ("Sudbury") for $182,434,000, including
costs of $5,277,000 directly related to the acquisition. The accompanying
balance sheet includes as a current liability, remaining accrued acquisition
costs of approximately $3,272,000. The transaction has been accounted for as
a purchase and, accordingly, the purchase price has been allocated to the
assets purchased and the liabilities assumed based upon their fair values at
the date of acquisition. The excess of the purchase price over the fair
values of tangible net assets acquired was $82,598,000 and has been recorded
as goodwill, which is being amortized on a straight-line basis over 40 years.
Sudbury, Inc. and its subsidiaries manufacture high-quality industrial
products. The products are used primarily in the automotive, appliance and
construction markets providing iron, aluminum and zinc castings; applications
of custom coatings; cranes, truck bodies and related equipment; and precision
machined components.
The following represents the unaudited pro forma consolidated results of
operations for the Company for the three months ended March 31, 1996,
assuming the acquisition described above occurred on January 1, 1996 (in
thousands of dollars, except for per share data):
Three months
ended
March 31, 1996
--------------
Net sales $209,357
Net income 9,490
Income per common share $ 0.38
8
<PAGE> 9
Intermet Corporation
Notes to Interim Condensed Consolidated Financial Statements (continued)
March 31, 1997 (Unaudited)
These pro forma results are presented for comparative purposes only. They are
not necessarily indicative of what would have occurred had the acquisitions
actually transpired on January 1, 1996, or of future results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Material Changes in Financial Condition
Net cash provided by operating activities is positive for the first quarter of
1997 but is $1.5 million less than the operating cash flow for the same period
in 1996. This difference is due primarily to an increase in accounts
receivable caused by increased sales. The Company's investing activities
include a $34.0 million payment for costs related to the Sudbury acquisition.
Most of the increase in borrowings was used to finance these acquisition costs.
Capital expenditures totaled $7.9 million for the first quarter 1997.
Cash and cash equivalents decreased to $14.1 million at March 31, 1997 from
$23.5 million at December 31, 1996. The Company declared a cash dividend of
$0.04 per share ($1.0 million in aggregate) for the holders of record on March
1, 1997.
Material Changes in Results of Operations
SALES. Sales in the first quarter of 1997 were $75.3 million (or 56%) higher
than those for the same period in 1996. This increase relates primarily to the
acquisition of Sudbury in late December 1996. Domestic sales during the three
months ended March 31, 1997, without regard to Sudbury, were approximately $3.0
million (or 2%) higher than during the same period in 1996. Sales at most
domestic locations were up from the prior year with the exception of those
impacted by phase-out and model changeover. Sales at Wagner Castings (part of
the December 1996 Sudbury acquisition) for the first quarter of 1997 decreased
approximately $4.0 million from levels for the same period in 1996. This
decrease is a result of Wagner Casting's decision to withdraw from the
malleable iron production business. Sales of domestic truck, sport-utility and
minivan products remained strong in the period, while the passenger car market
remained relatively flat. Columbus Neunkirchen (Germany) sales during the first
quarter of 1997 were up slightly from the same period in 1996, but were
negatively affected by exchange rates, resulting in an 11% decrease in sales
compared to the first quarter of 1996.
GROSS PROFIT. Gross profit for the three months ended March 31, 1997 increased
$7.8 million from the same period in 1996. This improvement, which is due to
the acquisition of Sudbury, was partially offset by decreases in gross profit
at certain other Intermet locations. Gross profit as a percentage of sales
were 13.2% and 14.7% for the quarters ended March 31, 1997 and 1996,
respectively. This decrease is due primarily to continued high development
costs at the lost foam aluminum plant and the unbalanced workload at some
domestic foundries. In addition, the Sudbury subsidiaries in the aggregate
generate lower margins than pre-acquisition Intermet subsidiaries as a whole.
9
<PAGE> 10
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of sales decreased from 3.8% in the
first quarter 1996 to 3.3% in the first quarter 1997. This decrease occurred
because sales increased with the acquisition of Sudbury without a significant
increase in selling, general and administrative expense.
INTEREST EXPENSE. Interest expense increased to $3.0 million for the three
months ended March 31, 1997 from $0.8 million for the same period in 1996. This
increase relates primarily to the acquisition of Sudbury.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company has entered into a consent order with the Office of the Ohio
Attorney General, which was filed in Ohio State Court, with respect to certain
past violations of Ohio water pollution laws and regulations by the Company's
Ironton, Ohio foundry. The Attorney General's Office advised the Company that
it could avoid litigation with respect to such violations by entering into this
consent order. The consent order decrees that the Company will reimburse the
Attorney General's Office $13,000 in May 1997 for the costs of investigating
this case. The Company will also pay $272,103 in civil penalties in June
1997. These amounts have been fully accrued since 1995.
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
10
<PAGE> 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed with this Report pursuant to Item 601 of
Regulation S-K:
Exhibit Number Description of Exhibit
11.1 Computation of Earnings per Common Share.
27.1 Financial Data Schedule.
(b) The following current reports on Form 8-K were filed by the Company
during the three months ended March 31, 1997:
Form 8-K of the Company, File No. 0-13787, having an event date of
December 21, 1996, and related Form 8-K/A.
11
<PAGE> 12
SIGNATURES
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.
INTERMET CORPORATION
By: /s/ Doretha J. Christoph
------------------------
Doretha J. Christoph
Vice President - Finance, Chief Financial
Officer and Secretary
(Principal Financial Officer)
Date: May 9, 1997
12
<PAGE> 13
Exhibits Index
Exhibit Number Description of Exhibit
11.1 Computation of Earnings per Common Share.
27.1 Financial Data Schedule.
13
<PAGE> 1
EXHIBIT 11.1
<TABLE>
<CAPTION>
Three months ended
March 31, March 31,
1997 1996
--------------------------
(in thousands of dollars,
except per share amounts)
<S> <C> <C>
Net income $10,951 $ 8,810
Weighted average number of shares outstanding 25,186 25,050
Add dilutive effect of outstanding warrants and
options 497 325
--------------------------
Weighted average number of shares and
equivalent shares outstanding 25,683 25,375
--------------------------
Income per share $ 0.43 $ 0.35
==========================
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 14,133
<SECURITIES> 0
<RECEIVABLES> 117,823
<ALLOWANCES> 1,175
<INVENTORY> 55,349
<CURRENT-ASSETS> 194,560
<PP&E> 437,087
<DEPRECIATION> 212,601
<TOTAL-ASSETS> 527,070
<CURRENT-LIABILITIES> 123,770
<BONDS> 0
0
0
<COMMON> 2,521
<OTHER-SE> 146,545
<TOTAL-LIABILITY-AND-EQUITY> 527,070
<SALES> 209,491
<TOTAL-REVENUES> 209,491
<CGS> 181,886
<TOTAL-COSTS> 188,856
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,997
<INCOME-PRETAX> 17,708
<INCOME-TAX> 6,757
<INCOME-CONTINUING> 10,951
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,951
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.43
</TABLE>
