<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, 1998, 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 48098-2683
(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 April 24, 1998 there were 25,590,624 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,
1998 1997
---------------- ------------
(Unaudited)
(in thousands of dollars)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 6,066 $ 7,022
Accounts receivable:
Trade, less allowance for doubtful accounts of $1,736
in 1998 and $2,125 in 1997 106,901 92,871
Other 12,000 7,549
-------- --------
118,901 100,420
Inventories 58,387 61,164
Other current assets 27,662 24,676
-------- --------
Total current assets 211,016 193,282
Property, plant and equipment, at cost 455,779 471,981
Less:
Foreign industrial development grants, net of
amortization 5,316 5,638
Accumulated depreciation and amortization 223,171 224,444
-------- --------
Net property, plant and equipment 227,292 241,899
Goodwill, net of amortization 89,601 86,014
Other noncurrent assets 21,405 17,610
-------- --------
$549,314 $538,805
======== ========
</TABLE>
2
<PAGE> 3
Intermet Corporation
Interim Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------------- ---------------
(Unaudited)
(in thousands of dollars)
<S> <C> <C>
Liabilities and shareholders' equity
Current liabilities:
Notes payable $ 3,319 $ 9,087
Accounts payable 56,226 59,173
Income taxes payable 15,137 8,635
Accrued liabilities 52,846 48,521
Long term debt due within one year 9,632 10,538
--------- ---------
Total current liabilities 137,160 135,954
Noncurrent liabilities:
Long term debt due after one year 165,143 167,295
Retirement benefits 50,319 49,013
Other noncurrent liabilities 6,286 8,778
--------- ---------
Total noncurrent liabilities 221,748 225,086
Minority interest 1,688 2,337
Shareholders' equity:
Common stock 2,560 2,526
Capital in excess of par value 61,248 58,176
Retained earnings 124,493 114,242
Accumulated other comprehensive income 484 561
Unearned restricted stock (67) (77)
--------- ---------
Total shareholders' equity 188,718 175,428
--------- ---------
$ 549,314 $ 538,805
========= =========
</TABLE>
See accompanying notes.
3
<PAGE> 4
Intermet Corporation
Interim Condensed Consolidated Statements of Income
<TABLE>
<CAPTION>
Three months ended
March 31, March 31,
1998 1997
------------- ----------
(Unaudited)
(in thousands of dollars,
except per share data)
<S> <C> <C>
Net sales $ 224,033 $ 209,491
Cost of sales 194,058 181,886
--------- ---------
Gross profit 29,975 27,605
Operating expenses:
Selling 2,604 2,027
General and administrative 5,197 5,459
--------- ---------
7,801 7,486
--------- ---------
Operating profit 22,174 20,119
Other income and expenses:
Interest income 50 233
Interest expense (3,422) (2,997)
Other, net 768 353
--------- ---------
(2,604) (2,411)
--------- ---------
Income before income taxes and minority
interest 19,570 17,708
Provision for income taxes 8,606 6,757
--------- ---------
Income before minority interest 10,964 10,951
Minority interest in loss of subsidiary 307 --
========= =========
Net income $ 11,271 $ 10,951
========= =========
Income per common share - Basic $ 0.44 $ 0.43
========= =========
Income per common share - Diluted $ 0.43 $ 0.43
========= =========
</TABLE>
See accompanying notes.
4
<PAGE> 5
Intermet Corporation
Interim Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three months ended
March 31, 1998 March 31, 1997
---------------- ----------------
(Unaudited)
(in thousands of dollars)
<S> <C> <C>
Operating activities:
Net income $ 11,271 $ 10,951
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation and amortization 9,959 9,290
Other, including net gain on disposal of fixed assets (574) (644)
Changes in operating assets and liabilities excluding the effects of
acquisitions and dispositions:
Accounts receivable (19,096) (25,927)
Inventories 2,544 205
Accounts payable and accrued liabilities 3,766 2,889
Other assets and liabilities 2,882 5,972
-------- --------
Net cash provided by operating activities 10,752 2,736
Investing activities:
Additions to property, plant and equipment (7,565) (7,871)
Sudbury acquisition (95) (34,027)
Proceeds from disposal of fixed assets 1,395 901
Other (612) --
-------- --------
Net cash used in investing activities (6,877) (40,997)
Financing activities:
Net (decrease) increase in revolving credit facility (1,000) 40,600
Reduction in debt (1,188) (10,594)
Net decrease in notes payable (5,657) --
Issuance of common stock 3,106 332
Dividends paid (1,020) (1,009)
Other -- 1,564
-------- --------
Net cash (used in) provided by financing activities (5,759) 30,893
Effect of exchange rate changes on cash and cash equivalents 928 (1,984)
-------- --------
Net decrease in cash and cash equivalents (956) (9,352)
Cash and cash equivalents at beginning of period 7,022 23,485
-------- --------
Cash and cash equivalents at end of period $ 6,066 $ 14,133
======== ========
</TABLE>
See accompanying notes.
5
<PAGE> 6
Intermet Corporation
Notes to Interim Condensed Consolidated Financial Statements
March 31, 1998 (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, 1998 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1998. 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, 1997.
Inventories
Inventories consist of the following (in thousands of dollars):
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------- ------------
<S> <C> <C>
Finished goods $12,003 $13,852
Work in process 15,686 13,897
Raw materials 10,672 11,533
Supplies and patterns 20,026 21,882
------- -------
$58,387 $61,164
======= =======
</TABLE>
Property, Plant and Equipment
Property, plant and equipment consist of the following (in thousands of
dollars):
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------- ------------
<S> <C> <C>
Land $ 4,199 $ 4,783
Buildings and improvements 84,583 89,215
Machinery and equipment 353,660 357,745
Construction in progress 13,337 20,238
-------- --------
$455,779 $471,981
======== ========
</TABLE>
6
<PAGE> 7
Intermet Corporation
Notes to Interim Condensed Consolidated Financial Statements (continued)
March 31, 1998 (Unaudited)
1. Summary of Significant Accounting Policies (continued)
Intangible Assets
Intangible assets consist principally of costs in excess of net assets acquired
of $89,601,000 and $86,014,000 (net of accumulated amortization of $5,056,000
and $4,392,000) at March 31, 1998 and December 31, 1997, respectively. Such
costs are being amortized using the straight-line method over periods ranging
from ten to forty years.
Income per Common Share
Net income per common share amounts were previously based on the weighted
average number of shares outstanding during the period, after giving effect to
the exercise of options and assuming the repurchase, at fair market value, of
shares using the proceeds from such exercise, unless the effect was
antidilutive. In February 1997, the Financial Accounting Standards Board
("FASB") issued Statement No. 128, "Earnings per Share", which was adopted by
the Company on December 31, 1997. Under the new requirements for calculating
basic earnings per share, the dilutive effect of stock options are excluded.
Fully diluted EPS has not changed significantly but has been renamed diluted
EPS. Earnings per share for all prior periods have been restated to reflect the
new accounting standard.
Reclassification
Certain amounts previously reported in the 1997 financial statements and notes
thereto have been reclassified to conform to the 1998 presentation.
2. Debt
Long term debt consists of the following (in thousands of dollars):
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------- ------------
<S> <C> <C>
Intermet $144,000 $150,000
Subsidiaries 30,775 27,833
-------- --------
Total long-term debt 174,775 177,833
Less amounts due within one year 9,632 10,538
-------- --------
Long-term debt due after one year $165,143 $167,295
======== ========
</TABLE>
7
<PAGE> 8
INTERMET CORPORATION
Notes to Interim Condensed Consolidated Financial Statements (continued)
March 31, 1998 (Unaudited)
3. Comprehensive Income
During 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income", which
the Company adopted as of January 1, 1998. Statement 130 establishes new rules
for reporting and display of comprehensive income and its components. However,
the adoption of this Statement had no impact on the Company's net income or
shareholders' equity. Statement 130 requires these items, which include foreign
currency translation adjustment and minimum pension liability adjustment, to be
combined and reported as accumulated other comprehensive income. Prior to
adoption, these items were reported separately in shareholders' equity. In
addition, the Statement requires net income and other comprehensive income to
be included as components of total comprehensive income, as displayed in the
table below.
<TABLE>
<CAPTION>
Three months ended
------------------
March 31, March 31,
1998 1997
--------- ---------
(in thousands of dollars)
<S> <C> <C>
Net income $11,271 $10,951
Other comprehensive loss:
Foreign currency translation adjustment (77) (1,668)
Minimum pension liability adjustment - -
------- -------
Total other comprehensive loss (77) (1,668)
------- -------
Total comprehensive income $11,194 $ 9,283
======= =======
</TABLE>
Prior year financial statements have been reclassified to conform to the
requirements of Statement 130.
4. Environmental and Legal Matters.
The Company is 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.
8
<PAGE> 9
Intermet Corporation
Notes to Interim Condensed Consolidated Financial Statements (continued)
March 31, 1998 (Unaudited)
5. Earnings per Share
Basic earnings per share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding for the
period. The dilutive earnings per share calculation reflects the assumed
exercise of stock options.
<TABLE>
<CAPTION>
Three months ended
------------------------------
March 31, March 31,
1998 1997
------------- -------------
(in thousands, except per
share data)
<S> <C> <C>
Numerator:
Net income $ 11,271 $ 10,951
Denominator:
Denominator for basic earnings per
share - weighted average shares 25,404 25,178
Effect of dilutive securities:
Employee stock options 548 501
------------- -------------
Denominator for diluted earnings per
share - adjusted weighted average
shares and assumed conversions 25,952 25,679
============= =============
Basic earnings per share $0.44 $0.43
============= =============
Diluted earnings per share $0.43 $0.43
============= =============
</TABLE>
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Material Changes in Financial Condition
For the first three months of 1998, net cash provided by operating activities
was $10.8 million. Accounts receivable increased $19.1 million from December 31,
1997, as sales during March 1998 were higher than those of December 1997,
excluding IWESA, due to the traditional holiday shutdown. Depreciation and
amortization expense was $10.0 million. The Company's investing activities for
the first three months of 1998 used cash of $6.9 million. This includes
additions to property, plant and equipment of $7.6 million. In addition, the
Company received $1.4 million of proceeds on the sale of fixed assets. Financing
activities used cash of $5.8 million for the year to date at March 31, 1998. A
portion of the cash generated from operations was used to reduce bank borrowings
$7.8 million from the end of 1997. The Company received $3.1 million from the
exercise of stock options.
Cash and cash equivalents decreased to $6.1 million at March 31, 1998 from $7.0
million at December 31, 1997. The Company declared a cash dividend of $0.04 per
share ($1.0 million in aggregate) for the holders of record on March 2, 1998.
Material Changes in Results of Operations
SALES. Sales in the first quarter of 1998 were $224.0 million compared to $209.5
million during the same period in 1997. Domestic foundry sales during the three
months ended March 31, 1998 were approximately $6.5 million (or 4.9%) higher
than sales for the same period in 1997. This is a result of an increase in
domestic vehicle sales, primarily light trucks and sport utility vehicles,
including; Ford PHN131, Mercedes SUV and Dodge Durango programs. Sales at
machining operations increased $7.4 million for the first quarter of 1998 over
the same period in 1997. This is due primarily to the inclusion of IWESA, which
was accounted for under the equity method in 1997 but is consolidated for the
first quarter of 1998. European foundry sales were up 22.4% for the first
quarter for 1998 versus the same period for 1997 as a result of an improved
vehicle market. However, the negative effect of changes in the exchange rates on
sales was $2.5 million (or 9.1%) for first quarter of 1998 compared to exchange
rates for the same period in 1997.
GROSS PROFIT. Gross profit for the quarter ended March 31, 1998 was $30.0
million, an increase of $2.4 million from that of the same period in 1997. Gross
profit as a percentage of sales for the three months ended March 31, 1998 and
1997 were 13.4% and 13.2%, respectively. Without the highly leveraged IWESA
operations, gross profit as a percentage of sales would be almost 0.9% higher.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of sales were 3.5% and 3.6% for the
three months ended March 31, 1998 and 1997, respectively.
INTEREST EXPENSE. Interest expense increased to $3.4 million from $3.0 million
for the period ended March 31, 1998 versus that period in 1997.
10
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not aware of any material pending or threatened legal proceedings
to which the Company is a party or of which any of its property is the subject.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None
ITEM 5. OTHER INFORMATION
In February 1997, the Company announced an agreement in principle to purchase a
50% ownership interest in POLCAST Sp. z o.o. In April 1998, the Company
terminated all negotiations relating to this purchase.
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
27.1 Financial Data Schedule.
(b) The Company filed no reports on Form 8-K during the three months ended March
31, 1998.
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/ Walter T. Knollenberg
----------------------------------
Walter T. Knollenberg
Corporate Controller
(Principal Accounting Officer)
Date: April 24, 1998
12
<PAGE> 13
Exhibits Index
Exhibit Number Description of Exhibit
27.1 Financial Data Schedule.
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 6,066
<SECURITIES> 0
<RECEIVABLES> 120,637
<ALLOWANCES> 1,736
<INVENTORY> 58,387
<CURRENT-ASSETS> 211,016
<PP&E> 455,779
<DEPRECIATION> 228,487
<TOTAL-ASSETS> 549,314
<CURRENT-LIABILITIES> 137,160
<BONDS> 0
0
0
<COMMON> 2,560
<OTHER-SE> 186,158
<TOTAL-LIABILITY-AND-EQUITY> 549,314
<SALES> 224,033
<TOTAL-REVENUES> 224,033
<CGS> 194,058
<TOTAL-COSTS> 201,859
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,422
<INCOME-PRETAX> 19,570
<INCOME-TAX> 8,606
<INCOME-CONTINUING> 11,271
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,271
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0.43
</TABLE>
