<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
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Commission File Number 0-17028
IRONTON IRON, INC.
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(Exact name of registrant as specified in its charter)
Ohio 31-117407
- ---------------------------- --------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
5445 Corporate Drive, Suite 200, Troy, Michigan 48098
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(Address of principal executive offices and zip code)
(810) 952-2500
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(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
4, 1996: 23,000 shares of Common Stock, no par value.
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Ironton Iron, Inc.
Interim Condensed Consolidated Balance Sheets
SEPTEMBER 30, DECEMBER 31,
1996 1995
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(In thousands of dollars)
Assets
Current assets:
Cash $ 385 $ 290
Accounts receivable:
Trade 5,587 6,128
Other 236 630
Inventories 1,798 1,765
Other current assets 66 42
------- -------
Total current assets 8,072 8,855
Property, plant and equipment:
Land 295 295
Building and improvements 5,202 5,125
Machinery and equipment 26,336 26,078
Construction in progress 1,981 1,369
------- -------
33,814 32,867
Less accumulated depreciation 16,366 13,707
------- -------
Net property, plant and equipment 17,448 19,160
Other noncurrent assets 13 26
------- -------
$25,533 $28,041
======= =======
See accompanying notes
2
<PAGE> 3
SEPTEMBER 30, DECEMBER 31,
1996 1995
-----------------------------------
(In thousands of dollars)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,122 $ 3,047
Accrued wages and benefits 962 857
Accrued workers' compensation 300 297
Other accrued liabilities 949 1,028
-------- --------
Total current liabilities 5,333 5,229
Due to affiliates 29,730 30,078
Redeemable preferred stock 3,242 3,155
Net shareholder's deficiency:
Common Stock 2,000 2,000
Additional paid-in capital 49,523 49,523
Accumulated deficit (64,295) (61,944)
-------- --------
Net shareholder's deficiency: (12,772) (10,421)
-------- --------
$ 25,533 $ 28,041
======== ========
See accompanying notes.
3
<PAGE> 4
Ironton Iron, Inc.
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 $ 12,266 $17,881 $ 44,479 $58,935
Cost of sales 13,439 17,013 44,617 53,866
-------- ------- -------- -------
Gross margin (1,173) 868 (138) 5,069
Corporate charges from parent
companies 598 706 1,790 2,473
-------- ------- -------- -------
Operating profit (loss) (1,771) 162 (1,928) 2,596
Interest expense (125) (299) (389) (1,137)
-------- ------- -------- -------
Income (loss) before income taxes (1,896) (137) (2,317) 1,459
Provision for income taxes -- -- -- --
-------- ------- -------- -------
Net Income (loss) ($1,896) ($137) ($2,317) 1,459
======== ======= ======== =======
</TABLE>
See accompanying notes.
4
<PAGE> 5
Ironton Iron, Inc.
Interim Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------------
SEPTEMBER 30, OCTOBER 1,
1996 1995
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(In thousands of dollars)
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) ($2,317) $ 1,459
Adjustments to reconcile net income (loss) to cash
used in operating activities:
Depreciation and amortization 2,765 2,840
Changes in assets and liabilities:
Accounts receivable 935 (618)
Inventories (33) (178)
Accounts payable and accrued liabilities 104 (1,006)
Other assets and liabilities (24) (45)
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Net cash provided by (used in) operating activities 1,430 2,452
INVESTMENT ACTIVITIES
Additions to property, plant and equipment (987) (1,991)
------- -------
Net cash used in investment activities (987) (1,991)
FINANCING ACTIVITIES
(Decrease) Increase due to affiliates (348) (1,099)
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Net cash provided by (used in) financing activities (348) (1,099)
------- -------
Net increase (decrease) in cash and cash equivalents 95 (638)
Cash at beginning of period 290 699
------- -------
Cash at end of period $ 385 $ 61
======= =======
</TABLE>
See accompanying notes.
5
<PAGE> 6
Ironton Iron, Inc.
Notes to Interim Condensed 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 $ 594 $ 146
Work in process 446 526
Raw materials 211 490
Supplies and patterns 547 603
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$1,798 $1,765
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3. Because all common stock of the Company is owned by Intermet Corporation,
no income or loss per common share information is included herein.
6
<PAGE> 7
Ironton Iron, Inc.
Notes to Interim Condensed Financial Statements
September 30, 1996
4. In March 1994, the Company entered negotiations with the Ohio
Attorney General's office concerning past violations of Ohio water
pollution laws and regulations. In November 1995, the Company agreed
to pay the State of Ohio $285,000 to settle this and all other water
discharge violations. 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 court 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. However,
management believes that such penalties, if any, will not be
material to the financial condition of the Company.
7
<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 condition has deteriorated since the fourth quarter,
1995 due to a much lower sales level. Third quarter sales were down 31% from
1995 and September year-to-date sales are down 25% from the comparable period
in 1995. Cash flow for the Company has been positive through September as a
result of favorable working capital reductions and modest capital expenditures.
The Company remains dependent on its parent company, Intermet Corporation, for
continued financial support.
Material Changes in Results of Operations
Sales in the third quarter 1996 were $12.3 million, down from $17.9 million in
the third quarter 1995. Year-to-date sales in 1996 totaled $44.5 million
compared to $58.9 million through third quarter 1995. The major sales decline
is due to the phase-out of the Ford I-beam on the dry sand process line that
began in the fourth quarter 1995 following a model change. Future production
for this product will be comparable to recent production levels. The Company
has secured additional business for the dry sand process line which is expected
to start in mid-1997 will provide additional volume for the Company.
The Company successfully negotiated a new labor agreement with the bargaining
unit in late September, 1996, expiring January 31, 2000. The old agreement was
scheduled to expire the end of January, 1997.
Gross margins declined from 8.6% for the first three quarters of 1995 to nil
for the same period in 1996 as a result of the severe volume decline.
Corporate charges have declined due to lower costs incurred by the parent
company. As a result of the very low volume for the year and especially the
third quarter, the Company incurred a loss of $(1.9) for the quarter and $(2.3)
million year-to-date. Cumulative losses since 1988, when the Company was
acquired by Intermet, are approximately $(64) million.
The Company's income tax provisions are calculated and reported as if the
Company filed a separate federal income tax return. The Company has net
operating loss carryforwards available at September 30, 1996 which are fully
reserved. As such, the Company has no tax provision in 1996.
8
<PAGE> 9
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
of Ohio water pollution laws and regulations. The Attorney General's
office has advised the Company that it could avoid litigation with
respect to such violations by entering into a consent order. The parties
have tentatively agreed to a penalty of $285,000 and documentation to
effectuate the settlement is being prepared.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibit is filed as a part of this report:
Exhibit 27 - Financial Data Schedule
(b) No reports on Form 8-K were filed by the Company for the
quarter ended September 30, 1996.
9
<PAGE> 10
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.
IRONTON IRON, INC.
By:/s/Doretha J. Christoph
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Doretha J. Christoph
Vice President of Finance
(Principal Financial Officer)
Date: November 11, 1996
10
<PAGE> 11
Exhibit Index
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<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<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> 385
<SECURITIES> 0
<RECEIVABLES> 5,789
<ALLOWANCES> 202
<INVENTORY> 1,798
<CURRENT-ASSETS> 8,072
<PP&E> 33,814
<DEPRECIATION> (16,366)
<TOTAL-ASSETS> 25,533
<CURRENT-LIABILITIES> 5,333
<BONDS> 0
0
3,242
<COMMON> 2,000
<OTHER-SE> (14,772)
<TOTAL-LIABILITY-AND-EQUITY> 25,533
<SALES> 44,479
<TOTAL-REVENUES> 44,479
<CGS> 44,617
<TOTAL-COSTS> 44,617
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 389
<INCOME-PRETAX> (2,317)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,317)
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
