<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 September 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 October 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>
September 30, December 31,
1997 1996
-------------------------------------
(Unaudited)
(in thousands of dollars)
<S> <C> <C>
Assets
Current assets:
Cash $ 57 $ 53
Accounts receivable:
Trade, less allowance for doubtful accounts of
$0 in 1997 and $300 in 1996 5,517 3,886
Other 216 407
Inventories 3,205 2,283
Other current assets 162 64
-------------------------------------
Total current assets 9,157 6,693
Property, plant and equipment:
Land 295 295
Building and improvements 5,280 5,280
Machinery and equipment 27,966 27,344
Construction in progress 1,932 783
-------------------------------------
35,473 33,702
Less accumulated depreciation 19,109 16,809
-------------------------------------
Net property, plant and equipment 16,364 16,893
Other noncurrent assets 23 11
-------------------------------------
$ 25,544 $ 23,597
=====================================
</TABLE>
See accompanying notes.
2
<PAGE> 3
Ironton Iron, Inc.
Interim Condensed Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
-------------------------------------
(Unaudited)
(in thousands of dollars)
<S> <C> <C>
Liabilities and shareholders' deficiency
Current liabilities:
Accounts payable $ 3,519 $ 3,505
Accrued wages and benefits 941 1,009
Accrued workers' compensation 398 642
Other accrued liabilities 2,138 910
-------------------------------------
Total current liabilities 6,996 6,066
Due to affiliates 36,631 31,302
Redeemable preferred stock 3,359 3,272
Net shareholder's deficiency:
Common stock 2,000 2,000
Additional paid-in capital 49,523 49,523
Accumulated deficit (72,965) (68,566)
-------------------------------------
Net shareholder's deficiency: (21,442) (17,043)
-------------------------------------
$ 25,544 $ 23,597
=====================================
</TABLE>
See accompanying notes.
3
<PAGE> 4
Ironton Iron, Inc.
Interim Condensed Statements of Income
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30, September 30, September 30,
1997 1996 1997 1996
--------------------------------------------------------------------------
(Unaudited)
(in thousands of dollars)
<S> <C> <C> <C> <C>
Net sales $ 12,531 $ 12,266 $ 38,432 $ 44,479
Cost of sales 13,330 13,439 41,094 44,617
--------------------------------------------------------------------------
Gross margin (799) (1,713) (2,662) (138)
Corporate charges from parent 416 598 1,281 1,790
--------------------------------------------------------------------------
Operating profit (loss) (1,215) (1,771) (3,943) (1,928)
Interest expense 133 125 369 389
--------------------------------------------------------------------------
Income (loss) before income taxes (1,348) (1,896) (4,312) (2,317)
Provision for income taxes - - - -
--------------------------------------------------------------------------
Net income (loss) ($1,348) ($1,896) ($4,312) ($2,317)
==========================================================================
</TABLE>
See accompanying notes.
4
<PAGE> 5
Ironton Iron, Inc.
Interim Condensed Statements of Cash Flows
<TABLE>
<CAPTION>
Nine months ended
September 30, September 30,
1997 1996
------------------------------------
(Unaudited)
(in thousands of dollars)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss ($4,312) ($2,317)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization 2,036 2,765
Changes in assets and liabilities:
Accounts receivable (1,439) 935
Inventories (922) (33)
Accounts payable and accrued liabilities 32 104
Other assets and liabilities 859 (24)
------------------------------------
Net cash (used in) provided by operating activities (3,746) 1,430
INVESTMENT ACTIVITIES
Additions to property, plant and equipment (1,149) (987)
Other (369) -
------------------------------------
Net cash used in investment activities (1,518) (987)
FINANCING ACTIVITIES
Increase (decrease) due to affiliates 5,269 (348)
------------------------------------
Net cash provided by (used in ) financing activities 5,269 (348)
------------------------------------
Net increase in cash and cash equivalents 5 95
Cash at beginning of period 52 290
------------------------------------
Cash at end of period $ 57 $ 385
====================================
</TABLE>
See accompanying notes.
5
<PAGE> 6
Ironton Iron, Inc.
Notes to Interim Condensed Financial Statements
September 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 nine
months ended September 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):
September 30, December 31,
1997 1996
----------------- -----------------
Finished goods $72 $572
Work in process 768 640
Raw materials 478 456
Supplies and patterns 1,887 615
----------------- -----------------
$3,205 $2,283
================= =================
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)
September 30, 1997 (Unaudited)
2. Environmental and Legal Matters
The Company 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 decreed 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 paid $272,103 in civil penalties in August 1997. These amounts were
fully accrued in 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 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 nine months ended September
30, 1997 was $3.7 million versus cash generated by operations during the nine
months ended September 30, 1996 of $1.4 million. The principle reason cash flow
for the Company was slightly positive through September 30, 1997 was that the
increase in amounts due to affiliates (funding from Intermet) was higher than
the sum ($5.3 million) of cash used in operating activities, additions to
property, plant and equipment and other investing activities. The Company
remains dependent on Intermet for continued financial support.
Material Changes in Results of Operations
SALES. Sales in the three and nine months ended September 30, 1997 were $12.5
million and $38.4 million, and $12.3 million and $44.5 million for the same
period in 1996. The major sales decline for the nine month period 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 third quarter of 1997 was negative 6.4%
compared to a negative gross margin of 9.6% for the third quarter of 1996. Gross
margins for the nine months ended September 30, 1997 and September 30, 1996 were
negative 6.9% and 0.3%, respectively. These decreases occurred as a result of
the underutilized capacity caused by 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 $1.3 million and $4.3 million for the three and nine month periods
ended September 30, 1997, respectively, versus losses of approximately $1.9
million and $2.3 million for the same periods in 1996. Cumulative losses since
1988, when the Company was acquired by Intermet, are approximately $73.0
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 September 30, 1997 which are fully
reserved. As such, the Company has no tax provision for the first nine 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 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 decreed 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 paid $272,103 in civil penalties in August 1997. These amounts were
fully accrued in 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
<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
September 30, 1997.
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: November 3, 1997
9
<PAGE> 10
Exhibits Index
Exhibit Number Description of Exhibit
27.1 Financial Data Schedule.
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 57
<SECURITIES> 0
<RECEIVABLES> 5,517
<ALLOWANCES> 0
<INVENTORY> 3,205
<CURRENT-ASSETS> 9,157
<PP&E> 35,473
<DEPRECIATION> 19,109
<TOTAL-ASSETS> 25,544
<CURRENT-LIABILITIES> 6,996
<BONDS> 0
0
0
<COMMON> 2,000
<OTHER-SE> (23,442)
<TOTAL-LIABILITY-AND-EQUITY> 25,544
<SALES> 38,432
<TOTAL-REVENUES> 38,432
<CGS> 41,094
<TOTAL-COSTS> 42,375
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 369
<INCOME-PRETAX> (4,312)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,312)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,312)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
