<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 June 30, 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 Number 0-17028
IRONTON IRON, INC.
(Exact name of registrant as specified in its charter)
OHIO 31-1117407
(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 July 31, 1997 there were 23,000 shares of Common Stock, no par value,
outstanding.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Ironton Iron, Inc.
Interim Condensed Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-----------------------------------
(Unaudited)
(in thousands of dollars)
<S> <C> <C>
Assets
Current assets:
Cash $91 $53
Accounts receivable:
Trade, less allowance for doubtful accounts of
$74 in 1997 and $300 in 1996 6,641 3,886
Other 263 407
Inventories 2,941 2,283
Other current assets 62 64
--------------------------------
Total current assets 9,998 6,693
Property, plant and equipment:
Land 295 295
Building and improvements 5,280 5,280
Machinery and equipment 27,344 27,344
Construction in progress 2,102 783
--------------------------------
35,021 33,702
Less accumulated depreciation 18,459 16,809
--------------------------------
Net property, plant and equipment 16,562 16,893
Other noncurrent assets 22 11
--------------------------------
$26,582 $23,597
================================
</TABLE>
See accompanying notes.
2
<PAGE> 3
Ironton Iron, Inc.
Interim Condensed Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-----------------------------------
(Unaudited)
(in thousands of dollars)
<S> <C> <C>
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $4,047 $3,505
Accrued wages and benefits 977 1,009
Accrued workers' compensation 572 642
Other accrued liabilities 912 910
--------------------------------
Total current liabilities 6,508 6,066
Due to affiliates 36,829 31,302
Redeemable preferred stock 3,330 3,272
Net shareholder's deficiency:
Common stock 2,000 2,000
Additional paid-in capital 49,523 49,523
Accumulated deficit (71,608) (68,566)
--------------------------------
Net shareholder's deficiency: (20,085) (17,043)
--------------------------------
$26,582 $23,597
================================
</TABLE>
See accompanying notes.
3
<PAGE> 4
Ironton Iron, Inc.
Interim Condensed Statements of Income
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
------------------------------------------
(Unaudited)
(in thousands of dollars)
<S> <C> <C> <C> <C>
Net sales $13,395 $16,897 $25,901 $32,213
Cost of sales 13,960 16,074 27,784 31,178
------------------------------------------
Gross margin (565) 823 (1,883) 1,035
Corporate charges from parent 372 596 865 1,192
------------------------------------------
Operating profit (loss) (937) 227 (2,748) (157)
Interest expense 128 144 236 264
------------------------------------------
Income (loss) before income taxes (1,065) 83 (2,984) (421)
Provision for income taxes - - - -
------------------------------------------
Net income (loss) ($1,065) $83 ($2,984) ($421)
==========================================
</TABLE>
See accompanying notes.
4
<PAGE> 5
Ironton Iron, Inc.
Interim Condensed Statements of Cash Flows
<TABLE>
<CAPTION>
Six months ended
June 30, June 30,
1997 1996
------------------------------
(Unaudited)
(in thousands of dollars)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss ($2,984) ($421)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization 1,384 1,850
Changes in assets and liabilities:
Accounts receivable (2,610) (1,093)
Inventories (658) 82
Accounts payable and accrued liabilities 560 1,229
Other assets and liabilities (99) (23)
-----------------------------
Net cash (used in) provided by operating activities (4,407) 1,624
INVESTMENT ACTIVITIES
Additions to property, plant and equipment (693) (279)
Other (370) -
-----------------------------
Net cash used in investment activities (1,063) (279)
FINANCING ACTIVITIES
Increase (decrease) due to affiliates 5,509 (1,486)
-----------------------------
Net cash provided by (used in ) financing activities 5,509 (1,486)
-----------------------------
Net increase (decrease) in cash and cash equivalents 39 (141)
Cash at beginning of period 52 290
-----------------------------
Cash at end of period $91 $149
=============================
</TABLE>
See accompanying notes.
5
<PAGE> 6
Ironton Iron, Inc.
Notes to Interim Condensed Financial Statements
June 30, 1997 (Unaudited)
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements of Ironton Iron, Inc.
("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
and six months ended June 30, 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 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):
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------- --------------
<S> <C> <C>
Finished goods $153 $572
Work in process 885 640
Raw materials 1,074 456
Supplies and patterns 829 615
--------- ------------
$2,941 $2,283
========= ============
</TABLE>
Income (Loss) Per Common Share
Because all common stock of the Company is owned by Intermet Corporation
("Intermet"), no income or loss per common share information is included
herein.
6
<PAGE> 7
Ironton Iron, Inc.
Notes to Interim Condensed Financial Statements (continued)
June 30, 1997 (Unaudited)
2. 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.
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 reimburse the Attorney General's
Office $13,000 for the costs of investigating this case. These costs were paid
in July 1997. The Company expects to pay $272,103 in civil penalties in August
1997. These amounts have been fully accrued since 1995.
3. Changes in Accounting Estimates
The Company has a production line consisting of many fixed assets with
differing useful lives, all depreciated using the straight line method. On
February 1, 1997, the Company reevaluated the service lives of substantially
all of the fixed assets of this production line and extended them an additional
three years. This change in accounting estimate decreases monthly depreciation
expense by $82,000 per month.
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 continued to deteriorate since the fourth
quarter of 1995. Cash used in operations during the six months ended June 30,
1997 was $4.4 million, despite an increase in sales for the six months
ended June 30, 1997 of $3.6 million over the six months ended December 31,
1996. Sales during the last half of 1996 were lower due to plant shutdowns
during the holidays. The principle reason cash flow for the Company was
positive through June 30, 1997 was that the increase in amounts due to
affiliates (funding from Intermet) was higher than the sum ($5.5 million) of
cash used in operating activities and additions to property, plant and
equipment. The Company remains dependent on Intermet for continued financial
support.
Material Changes in Results of Operations
SALES. Sales in the three and six months ended June 30, 1997 were $13.4
million and $25.9 million, down from $16.9 million and $32.2 million for the
same period in 1996. The major sales decline is due to the phase-out of the
Ford F-150 I-beam on the dry sand process line that began in the fourth quarter
1995 following a model change. The Company has secured additional 1999 model
year business for the dry sand and Spo process lines which is expected to
increase capacity utilization by mid 1998.
7
<PAGE> 8
GROSS PROFIT. Gross margin for the second quarter of 1997 was negative 4.2%
compared to a positive gross margin of 4.9% for the second quarter of 1996.
Gross margins for the six months ended June 30, 1997 and June 30, 1996 were
negative 7.3% and positive 3.2%, respectively. These decreases occurred 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 sales
volume, the Company incurred losses of approximately $1.1 million and $3.0
million for the three and six month periods ended June 30, 1997, respectively,
versus a profit of approximately $0.8 million and loss of $0.4 million for the
same periods in 1996. Cumulative losses since 1988, when the Company was
acquired by Intermet, are approximately $71.6 million.
INCOME TAXES. 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 June 30, 1997 which are fully
reserved. As such, the Company has no tax provision for the first six months
of 1997.
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, except as set forth below.
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.
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 reimburse the Attorney General's
Office $13,000 for the costs of investigating this case. These costs were paid
in July 1997. The Company expects to pay $272,103 in civil penalties in August
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 SECURITY HOLDERS
On April 24, 1997 Intermet, the sole common shareholder of the Company, elected
Doretha J. Christoph to serve as a Director of the Company by written consent.
All shares held by Intermet were voted in favor of such election. The other
continuing Directors of the Company are John Doddridge and C. James Peterson.
ITEM 5. OTHER INFORMATION
None
8
<PAGE> 9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibit is filed with this Report pursuant to Item 601 of
Regulation S-K:
Exhibit Number Description of Exhibit
27.1 Financial Data Schedule.
(b) No reports on Form 8-K were filed by the Company for the three months
ended June 30, 1997.
9
<PAGE> 10
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.
IRONTON IRON, INC.
By: /s/ Doretha J. Christoph
------------------------
Doretha J. Christoph
Secretary and Treasurer
(Principal Financial Officer)
Date: August 12, 1997
10
<PAGE> 11
Exhibits Index
Exhibit Number Description of Exhibit
27.1 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 91
<SECURITIES> 0
<RECEIVABLES> 6,715
<ALLOWANCES> 74
<INVENTORY> 2,941
<CURRENT-ASSETS> 9,998
<PP&E> 35,021
<DEPRECIATION> 18,459
<TOTAL-ASSETS> 26,582
<CURRENT-LIABILITIES> 6,508
<BONDS> 0
0
0
<COMMON> 2,000
<OTHER-SE> (22,085)
<TOTAL-LIABILITY-AND-EQUITY> 26,582
<SALES> 25,901
<TOTAL-REVENUES> 25,901
<CGS> 27,784
<TOTAL-COSTS> 28,649
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 236
<INCOME-PRETAX> (2,984)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,984)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,984)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
