<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 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
(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 8, 1997 there were 23,000 shares of Common Stock, no par value,
outstanding.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Ironton Iron, Inc.
Interim Condensed Balance Sheets
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
---------------------------------
<S> <C> <C>
(Unaudited)
(in thousands of dollars)
Assets
Current assets:
Cash $ 66 $ 53
Accounts receivable:
Trade, less allowance for doubtful accounts of
$96 in 1997 and $300 in 1996 5,647 3,886
Other 348 407
Inventories 2,118 2,283
Other current assets 67 64
---------------------------------
Total current assets 8,246 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 1,178 783
---------------------------------
34,097 33,702
Less accumulated depreciation 17,545 16,809
---------------------------------
Net property, plant and equipment 16,552 16,893
Other noncurrent assets 10 11
---------------------------------
$24,808 $23,597
=================================
</TABLE>
See accompanying notes.
2
<PAGE> 3
Ironton Iron, Inc.
Interim Condensed Balance Sheets
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
---------------------------------
<S> <C> <C>
(Unaudited)
(in thousands of dollars)
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 3,517 $ 3,505
Accrued wages and benefits 1,205 1,009
Accrued workers' compensation 589 642
Other accrued liabilities 1,091 910
--------------------------------
Total current liabilities 6,402 6,066
Due to affiliates 34,096 31,302
Redeemable preferred stock 3,301 3,272
Net shareholder's deficiency:
Common stock 2,000 2,000
Additional paid-in capital 49,523 49,523
Accumulated deficit (70,514) (68,566)
--------------------------------
Net shareholder's deficiency: (18,991) (17,043)
--------------------------------
$ 24,808 $ 23,597
================================
</TABLE>
See accompanying notes.
3
<PAGE> 4
Ironton Iron, Inc.
Interim Condensed Statements of Income
<TABLE>
<CAPTION>
Three months ended
March 31, 1997 March 31, 1996
------------------------------
(Unaudited)
(in thousands of dollars)
<S> <C> <C>
Net sales $ 12,506 $15,316
Cost of sales 13,824 15,104
-----------------------------
Gross margin (1,318) 212
Corporate charges from parent 493 596
-----------------------------
Operating loss (1,811) (384)
Interest expense (108) (120)
-----------------------------
Loss before income taxes (1,919) (504)
Provision for income taxes -- --
-----------------------------
Net loss ($1,919) ($504)
=============================
</TABLE>
See accompanying notes.
4
<PAGE> 5
Ironton Iron, Inc.
Interim Condensed 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 loss ($1,919) ($504)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization 737 923
Changes in assets and liabilities:
Accounts receivable (1,702) (1,223)
Inventories 165 (54)
Accounts payable and accrued liabilities 336 1,149
Other assets and liabilities (3) (22)
-----------------------------
Net cash (used in) provided by operating activities (2,386) 269
INVESTMENT ACTIVITIES
Additions to property, plant and equipment (395) (52)
-----------------------------
Net cash used in investment activities (395) (52)
FINANCING ACTIVITIES
Increase (decrease) due to affiliates 2,794 (402)
-----------------------------
Net cash provided by (used in ) financing activities 2,794 (402)
-----------------------------
Net increase (decrease) in cash and cash equivalents 13 (185)
Cash at beginning of period 53 290
-----------------------------
Cash at end of period $ 66 $ 105
=============================
</TABLE>
See accompanying notes.
5
<PAGE> 6
Ironton Iron, Inc.
Notes to Interim Condensed Financial Statements
March 31, 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
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 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>
March 31, 1997 December 31, 1996
-------------- -----------------
<S> <C> <C>
Finished goods $ 105 $ 572
Work in process 942 640
Raw materials 325 456
Supplies and patterns 746 615
-------------- -----------------
$2,118 $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)
March 31, 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 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.
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 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 despite an increase in sales for the three months ended March
31, 1997 of $2.5 million over the fourth quarter of 1996. Sales during the
fourth quarter of 1996 were lower due to plant shutdowns during the holidays.
Cash flow for the Company has been positive through March 31, 1997 as the
increase in amounts due to affiliates was higher than cash used in operating
activities and additions to property, plant and equipment aggregated. The
Company remains dependent on Intermet for continued financial support.
Material Changes in Results of Operations
Sales in the three months ended March 31, 1997 were $12.5 million, down from
$15.3 million for the same period in 1996. 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. The Company has secured
additional business for the dry sand process line which is expected to start in
late 1997 and mid 1998, which will provide additional volume for the Company.
7
<PAGE> 8
Gross margins for the first quarter of 1997 were negative 11% compared to a
positive gross margin of 1.4% for the first quarter of 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 sales volume, the
Company incurred a loss of $1.9 million for the three month period ended March
31, 1997 versus a loss of $0.5 million for the same period in 1996. Cumulative
losses since 1988, when the Company was acquired by Intermet, are approximately
$70.5 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 March 31, 1997 which are fully
reserved. As such, the Company has no tax provision for the first quarter 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 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 SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
8
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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 March 31, 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 and Accounting Officer)
Date: May 9, 1997
10
<PAGE> 11
Exhibits Index
Exhibit Number Description of Exhibit
27.1 Financial Data Schedule.
11
<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> 66
<SECURITIES> 0
<RECEIVABLES> 6,091
<ALLOWANCES> 96
<INVENTORY> 2,118
<CURRENT-ASSETS> 8,246
<PP&E> 34,097
<DEPRECIATION> 17,545
<TOTAL-ASSETS> 24,808
<CURRENT-LIABILITIES> 6,402
<BONDS> 0
0
0
<COMMON> 2,000
<OTHER-SE> (20,991)
<TOTAL-LIABILITY-AND-EQUITY> 24,808
<SALES> 12,506
<TOTAL-REVENUES> 12,506
<CGS> 13,824
<TOTAL-COSTS> 14,317
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 108
<INCOME-PRETAX> (1,919)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,919)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,919)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
