<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal year ended December 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 48098-2683
(Address of principal executive offices) (Zip code)
(248) 952-2500
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None Not applicable
Securities registered pursuant to Section 12(g) of the Act:
Series A Cumulative Preferred Stock*
(Title of Class)
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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
---
As of March 10, 1998 none of the registrant's Common Stock was held by
non-affiliates of the registrant; therefore, the aggregate market value of the
registrant's voting stock held by non-affiliates of the registrant was $0.
Twenty three thousand shares of the registrant's Common Stock were outstanding
as of March 10, 1998.
*Registered as a result of the reclassification of the registrant's Common
Stock, no par value, into Series A Cumulative Preferred Stock, pursuant to an
amendment to the registrant's Articles of Incorporation filed on October 30,
1988, described in the registrant's Form 8 to its Registration Statement on Form
10, dated November 3, 1988, previously filed with the Commission. See Item 1,
"Business--General."
<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL
In July 1984, Ironton Iron, Inc. (the "Company") was incorporated under the laws
of the State of Ohio. The Company operates a foundry in Ironton, Ohio which
manufactures ductile iron castings for the transportation industry.
In October 1988, Intermet Foundries, Inc. ("IFI"), a Georgia corporation and
wholly-owned subsidiary of Intermet Corporation ("Intermet"), acquired through a
recapitalization, all of the outstanding Common Stock of the Company. In
connection with the recapitalization, IFI paid $2 million for newly-issued
Common Stock of the Company and refinanced approximately $2.1 million of the
Company's debt. Also, the Company issued a new class of Series A Cumulative
Preferred Stock to the former holders of the Company's Common Stock in exchange
for all of their common shares. On March 31, 1996, IFI was merged into
Intermet.
The Company has sustained operating losses since it was acquired in 1988 with
the exception of 1995, when it generated net income of $793,000. As of December
31, 1997, the Company had incurred cumulative losses of approximately $75.7
million. A significant portion of the losses were incurred in 1992 and 1993
when the Company added a new production line at the same time it was adding a
second shift on its existing production line. The Company remains dependent on
Intermet for financial support.
PRODUCTS, MARKETS AND SALES
The Company markets its products principally to original equipment manufacturers
and their suppliers in the automotive industry. The following table sets forth
information regarding sales by the Company:
<TABLE>
<CAPTION>
% of total sales
year ended December 31,
----------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Automotive 82% 80% 78%
Rail Car 12 10 14
Other 6 10 8
</TABLE>
Products manufactured for the automotive industry include brake parts, steering
and suspension system components and differential cases. The Company produces
brake adapter plates for the rail car industry.
The Company utilizes the in-house sales and customer service staff of Intermet.
The Company produces principally to customer order and does not maintain any
significant inventory of finished goods not on order.
The major customers of the Company during 1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
% of total Company Sales
year ended December 31,
----------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Dana 30% 29% 22%
General Products Delaware Corp. 28 24 20
Chrysler 12 11 9
Ford 5 12 23
</TABLE>
2
<PAGE> 3
The sales to General Products Delaware Corporation ("General Products") are
under the terms of a purchase order issued by Ford. Intermet, through a
subsidiary purchased in December 1996, owns a 35% interest in General Products,
a machining and assembly company with operations in Michigan and Indiana.
The loss of any of these customers or a substantial reduction in their purchases
from the Company would have a material adverse effect upon the Company unless
the work were replaced by sales to other customers. See Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
MANUFACTURING, MACHINING AND DESIGN
The Company produces ductile iron castings. Ductile iron, which is produced by
removing sulfur from molten iron and adding magnesium and other alloys, has
greater strength and elasticity than the more widely used gray iron, and its use
as a higher-strength substitute for gray iron and a lower-cost substitute for
steel has grown steadily. The Company's castings range in size from products
weighing approximately six pounds to castings weighing 125 pounds.
The manufacturing process involves melting steel scrap and pig iron in a gas and
coke-fired cupola furnace, adding various alloys and pouring the molten metal
into molds made primarily of sand. The molten metal cools and solidifies in the
molds, and the molds are broken and removed.
The Company shipped approximately 56,000 tons, 58,000 tons and 74,000 tons
during 1997, 1996 and 1995 respectively. The decrease in shipments is
primarily due to the phase out of the Ford F-150 I-beam program without
replacement.
Customers usually specify the properties their castings are to embody, such as
hardness and strength, and the Company determines how best to meet those
specifications. Constant testing and monitoring of the manufacturing process is
important in order to maintain the quality and performance consistency of the
castings. Electronic testing and monitoring equipment, including x-ray, cobalt
x-ray, ultrasonic and magnetic-particle testing equipment, are used extensively
in grading scrap metal, analyzing molten metal and testing castings. The
Company also uses its testing equipment and procedures to provide particular
tests requested by a customer for its castings.
COMPETITION
The Company competes with many other foundries, including others owned by
Intermet, both in the United States and Europe. Some of these foundries are
owned by major users of iron castings, and a number of foundry operators have,
or are subsidiaries of companies which have, greater financial resources than
the Company. For example, the three largest domestic automobile manufacturers,
two of which are among the Company's largest customers, operate their own
foundries. However, they also purchase castings from the Company and others,
and there is a trend toward increased outsourcing by the domestic original
equipment manufacturers. Castings produced by the Company also compete to some
degree with malleable iron castings, other metal castings and steel forgings.
The Company competes on the basis of product quality, engineering, service and
price. The Company emphasizes its ability to produce complex,
precision-engineered products in order to compete for value-added castings,
which generally provide a higher profit margin.
3
<PAGE> 4
RAW MATERIALS
The primary raw material the Company uses to manufacture iron castings is steel
scrap. The Company has no long-term contractual commitments with any steel
scrap supplier, and does not anticipate any difficulties in obtaining scrap
because of the large number of suppliers and because of Intermet's position as a
major purchaser. Scrap was obtained from a variety of sources during the three
years ended December 31, 1997. Competitive prices are assured through
discussions with various suppliers of steel scrap. The cost of steel scrap is
subject to fluctuations, but the Company has implemented arrangements with many
of its customers for adjusting its castings prices to reflect those
fluctuations. The Company can generally adjust its castings prices to reflect
such cost fluctuations.
Various alloys that are added to scrap steel in the manufacturing process have
been in short supply from time to time, resulting in price increases. The
Company has always been able to purchase necessary alloys; alternate alloys may
be substituted in some cases.
The Company benefits from the contractual arrangements of Intermet, which expire
at various times through 2002, for the purchase of various materials other than
steel scrap used in or during the manufacturing process. Although these
contracts and Intermet's overall level of purchases provide some protection
against price increases, in most cases neither the Company nor Intermet has
specific arrangements in place to adjust its casting prices for fluctuations in
the price of alloys and other materials.
CYCLICALITY AND SEASONALITY
Most of the Company's products are generally not affected by year-to-year
automotive style changes. However, the inherent cyclicality of the automotive
industry has affected the Company's sales and earnings during periods of slow
economic growth or recession. The Company's third and fourth quarter sales are
usually lower than first and second quarter sales due to plant closings by
domestic automakers for vacations and model changeovers.
BACKLOG
Most of the Company's business involves supplying all or a stated portion of the
customer's annual requirements, generally flexible in amount, for a particular
casting against blanket purchase orders. Credit is extended based on an
evaluation of the customer's financial condition, and generally collateral is
not required. The lead time and cost of commencing production of a particular
casting tend to inhibit transfer of production from one foundry to another.
Customers typically issue releases and shipping schedules on a monthly basis.
The Company's backlog at any given time therefore consists only of the orders
which have been released for shipment.
EMPLOYEES
As of February 27, 1998, the Company employed 416 members of the local
bargaining unit, United Steelworkers of America, and 80 salaried employees. The
bargaining agreement was set to expire in January 1997, but was replaced with a
new agreement in September 1996, which expires January 31, 2000. The Company
has not experienced any strike or work stoppage since it commenced operations in
1986. The Company believes that its relationship with its employees is
satisfactory.
4
<PAGE> 5
ENVIRONMENTAL MATTERS
The Company's operations are subject to various federal, state and local laws
and regulations relating to the protection of the environment. These
regulations, which are implemented principally by the United States
Environmental Protection Agency and the Ohio EPA, govern the management of solid
and hazardous waste, the discharge of pollutants into the air and into surface
and ground waters, and the manufacture, treatment and disposal of hazardous and
non-hazardous substances.
See "Item 3. Legal Proceedings" concerning an issue raised by the Ohio Attorney
General's office. 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 advised the Company of certain alleged
violations of Ohio air pollution regulations. It is not known whether the
agency will eventually demand the payment of civil penalties for these past air
violations.
The Company also has recurring costs related to environmental matters,
particularly the management and disposition of waste (principally
non-hazardous) generated as part of ongoing operations. In 1997, 1996 and 1995
such costs totaled approximately $1.3 million, $2.5 million and $3.0 million,
respectively. Although the Company continues to take various steps to control
environmental costs, they may increase in the future. In addition, a portion of
the Company's capital expenditures are regularly incurred to limit or monitor
pollution, principally for ventilation and dust control equipment. Such
expenditures were approximately $0.3 million in 1997, $0.7 million in 1996 and
$0.4 million in 1995.
In addition to these recurring and anticipated expenditures, the 1990
amendments to the federal Clean Air Act are expected to have a major impact
on the compliance costs of many U.S. companies, including foundries of the type
owned by the Company. Until final regulations implementing those amendments are
adopted by the federal and state governments, it is not possible to estimate
such costs.
The Company currently does not anticipate any environmental costs that would
have a material adverse effect on its operations. However, it cannot be assured
that the Company's activities will not give rise to actions by governmental
agencies or private parties which could cause the Company to incur fines,
penalties, operational shutdowns, damages, cleanup costs or other similar
expenses. Also, the Company's foundry capacity levels and increases therein are
dependent upon the Company's ability to maintain, or obtain increases in such
capacity levels in its permits for air emissions or water discharges. In the
event the Company desires to increase its foundry capacity levels in the
future, it cannot be assured that the Company will be able to obtain approvals
of such increases under its applicable permits.
ITEM 2. PROPERTIES
The Company owns its foundry and offices located at 2520 South Third Street,
Ironton, Ohio. The foundry and offices consist of an aggregate of 514,000
square feet situated on 26 acres of land zoned for industrial use.
ITEM 3. 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, which were paid in July 1997. In
August 1997 the Company paid $272,103 in civil penalties, which had been fully
accrued since 1995.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the Company during
the fourth quarter of the 1997 fiscal year.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no established public trading market for the Company's Common Stock or
Series A Cumulative Preferred Stock. As of March 10, 1998 none of the
registrant's Common Stock was held by non-affiliates of the registrant;
therefore, the aggregate market value of the registrant's voting stock held by
non-affiliates of the registrant was $0. As of this same date, there were 1,390
holders of record of the Company's Series A Cumulative Preferred Stock and
Intermet was the sole holder of the Company's Common Stock. The Company did not
sell unregistered securities within the past three years.
5
<PAGE> 6
The Company has paid no dividends on its Common Stock or Series A Preferred
Stock since its organization. Because the Company has had cumulative operating
losses since its organization, it is unlikely that it will pay dividends in 1998
on its outstanding Common Stock or Series A Cumulative Preferred Stock.
ITEM 6. SELECTED FINANCIAL DATA
IRONTON IRON, INC.
Selected Historical Financial Data
----------------------------------
(in thousands)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $ 51,305 $ 54,497 $ 74,746 $ 76,315 $ 56,434
Operating (loss)/profit (6,508) (6,007) 2,138 (6,186) (14,056)
Net (loss)/profit (7,016) (6,505) 793 (8,730) (16,977)
Net (loss)/profit per common share (a) (a) (a) (a) (a)
Weighted average common shares outstanding (a) (a) (a) (a) (a)
Working capital $ 3,409 $ 627 $ 3,626 $ 2,370 $ 3,243
Property, plant and equipment, net 16,095 16,893 19,160 20,353 19,364
Total assets 24,366 23,597 28,041 31,416 30,242
Long-term liabilities 40,309 31,302 30,078 37,002 41,460
Redeemable preferred stock 3,388 3,272 3,155 3,038 2,921
Net common shareholders' deficiency (24,175) (17,043) (10,421) (17,097) (21,250)
Cash dividends declared -- -- -- -- --
</TABLE>
(a) On October 31, 1988 IFI became the sole shareholder of the Company's Common
Stock. On March 31, 1996, IFI was merged into Intermet, thus making Intermet
the sole shareholder of the Company's Common Stock. As a result, common share
data is not presented because it is no longer meaningful.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. When used in this section,
the words "anticipate," "believe," "estimate" and "expect" and similar
expressions are generally intended to identify forward-looking statements.
Readers are cautioned that any forward-looking statements, including statements
regarding the intent, belief or current expectations of the Company or its
management, are not guarantees of future performance and involve risks and
uncertainties, and that actual results may differ materially from those in the
forward-looking statements as a result of various factors including, but not
limited to: (i) general economic conditions in the markets in which the Company
operates; (ii) fluctuations in worldwide or regional automobile and light and
heavy truck production; (iii) labor disputes involving the Company or its
significant customers; (iv) changes in practices and/or policies of the
Company's significant customers toward outsourcing automotive components and
systems; (v) foreign currency and exchange fluctuations; and (vi) other risks
detailed from time to time in the Company's filings with the Securities and
Exchange Commission. The Company does not intend to update these
forward-looking statements.
RESULTS OF OPERATIONS
Net sales decreased approximately $3.2 million (6%) in 1997 compared to 1996 and
declined $20.2 million (27%) in 1996 compared to 1995. The decline in sales was
primarily due to the phase out of the Ford F 150 I-Beam program without
replacement.
Operating losses for 1997 and 1996 were approximately $6.5 million and $6.0
million, respectively. 1995's operating profit of $2.1 million, the first since
Intermet's purchase in 1988, was due primarily to higher sales volumes and cost
reduction and improvement programs.
6
<PAGE> 7
LIQUIDITY AND CAPITAL RESOURCES
Working capital at December 31, 1997 increased approximately $2.8 million from a
balance of $0.6 million at December 31, 1996. This relates primarily to an
increase in accounts receivable of $1.2 million because sales in December 1997
were approximately $1.0 million higher than sales in December 1996. In
addition, the Company is paying down current liabilities, primarily accounts
payable, using long term funds provided by Intermet.
Prior to its acquisition by IFI, which was subsequently merged into Intermet,
the Company was in violation of certain loan agreements and had exhausted all
available sources of capital. Much of the Company's debt was refinanced by IFI
after it purchased the Company. Intermet and IFI have continued to provide
financial support to the Company by funding operating losses, working capital
increases and capital expenditures since the acquisition. During 1995 and 1994,
$6 million and $13 million, respectively, of the amount due to Intermet and IFI
was converted to equity in order to reduce the Company's interest-bearing debt
levels. Intermet currently intends to continue providing financial support to
the Company. As such, the Company believes it has adequate resources to satisfy
its current obligations due to nonaffiliates.
The Company also incurs recurring costs to manage and dispose of waste
(principally nonhazardous waste) generated as part of ongoing operations. In
1997, 1996 and 1995 such costs totaled approximately $1.3 million, $2.5 million
and $3.0 million, respectively. Although the Company continues to take various
steps to control these costs, they may increase in the future. In addition, a
portion of the Company's capital expenditures are regularly incurred to limit or
monitor pollution, principally for ventilation and dust control equipment. Such
expenditures were approximately $0.3 million, $0.7 million and $0.4 million in
1997, 1996 and 1995, respectively. See Note 8 to the Financial Statements
included elsewhere herein.
The Company has paid the Ohio Attorney General $285,000 for past violations of
Ohio water pollution laws. See "Item 1, Business-Environmental Matters" and
"Item 3, Legal Proceedings."
Year 2000
The Company has developed plans to address issues related to the impact on its
computer systems and operations of the Year 2000. Financial and operational
systems have been assessed and plans have been developed to address systems
modification requirements. The financial impact of making the required systems
changes is not expected to be material to the Company's consolidated financial
position, results of operations or cash flows. The Company expects to be Year
2000 compliant before December 31, 1999.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and the report of independent auditors identified in
Item 14(a) are included in this Report beginning on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Within the 24-month period prior to the date of the Company's financial
statements for the fiscal year ended December 31, 1997, the Company did not
change auditors.
7
<PAGE> 8
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
As of February 27, 1998, the directors and executive officers of the Company,
their respective ages, positions, date of election and principal occupations
were as follows:
<TABLE>
<CAPTION>
Name (Age) Principal Position(s)
- ---------- ---------------------
<S> <C>
John Doddridge (57) Director
C. James Peterson (50) President, Chief Executive Officer and Director
Doretha J. Christoph (48) Vice President, Secretary, Treasurer and Director
</TABLE>
Mr. Doddridge became Director of the Company in March 1995. He served as
President of the Company from March 1995 to January 1997. Mr. Doddridge became
Chairman of the Board and Chief Executive Officer of Intermet in 1994. He was
Vice Chairman and Chief Executive Officer of Magna International, Inc., a
supplier of motor vehicle parts, from November 1992 until November 1994. From
1989 to 1992 he served as President of North American Operations of Dana
Corporation, a motor vehicle parts manufacturer, and prior to that time he
served as President of Hayes-Dana Inc., a subsidiary of Dana Corporation.
Mr. Peterson became President and Chief Executive Officer of the Company in
January 1997 and became a Director of the Company in March 1995. He was Vice
President of the Company from March 1995 to January 1997. He became Vice
President - Foundry Operations of Intermet in February 1995, and he served as
Director of Manufacturing of IFI from 1993 to 1995. From 1985 to 1993 he was
with Columbus Foundries, Inc., a subsidiary of Intermet, most recently as
General Manager.
Ms. Christoph became Vice President, Secretary and Director in January of 1997
and has been Treasurer of the Company since June 1995. Ms. Christoph became
Vice President - Finance of Intermet in June 1995. In addition, she was named
Chief Financial Officer of Intermet in March 1996 and Secretary of Intermet in
January 1997. Prior to that time she served as Vice President and Director of
Administration of LNP Engineering Plastics, a worldwide supplier of engineered
plastics and a subsidiary of Kawasaki Steel Corporation, from November 1991
until May 1995. From 1989 to 1991, she served as Director of Finance for the
Engineering Plastics Americas operation of ICI, plc.
There are no family relationships between or among any of the officers and
directors of the Company.
The term of office for each director commences with his or her election and
continues until the next annual meeting of shareholders and until his or her
successor is elected and qualified.
ITEM 11. EXECUTIVE COMPENSATION
The Company has paid no compensation or offered any benefits of any kind to its
executive officers or members of the Board of Directors since its acquisition by
IFI (and subsequently by Intermet). See Note 1 to the Financial Statements
included elsewhere herein.
8
<PAGE> 9
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of February 27, 1998, none of the officers or directors of the Company
beneficially owned any of the Company's Common Stock, the only class of voting
securities of the Company. As of that date, Intermet Corporation, 5445
Corporate Drive, Suite 200, Troy, Michigan 48098-2683, owned 23,000 shares of
the Company's Common Stock (100% of the class).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See Note 6 to the Financial Statements included elsewhere herein.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following financial statements and notes thereto of the Company are
incorporated by reference into Item 8 of this Report:
Report of Independent Auditors
Balance Sheets at December 31, 1997 and 1996
Statements of Operations for the years ended December 31, 1997, 1996 and
1995
Statements of Net Common Shareholders' Deficiency for the years ended
December 31, 1997, 1996 and 1995
Statements of Cash Flows for the years ended December 31, 1997, 1996 and
1995
Notes to Financial Statements
2. Financial Statement Schedules
The following financial statement schedule for the Company is filed as Item
14(d) hereof, beginning on page F-1.
Schedule II - Valuation and Qualifying Accounts
3. Exhibits
9
<PAGE> 10
The following exhibits are required to be filed with this Report by Item 601 of
Regulation S-K:
<TABLE>
<CAPTION>
Exhibit Number Description of Exhibit
<S> <C>
3.1 and 4.1 Articles of Incorporation of Ironton Iron, Inc., as amended
(included as Exhibit 3.1 and 4 to the Company's Annual Report on
Form 10-K for the 1988 fiscal year, file no. 0-17028, previously
filed with the Commission and incorporated herein by reference).
3.2 and 4.2 Code of Regulations of Ironton Iron, Inc., as amended (included as
Exhibit 3.2 to the Company's Annual Report on Form 10-K for the
1988 fiscal year, file no. 0-17028, previously filed with the
Commission and incorporated herein by reference).
4.3 Master Note and Continuing Guaranty, dated September 29, 1997,
by and among Intermet Corporation, Lynchburg Foundry Company,
Ironton Iron, Inc., Northern Castings Corporation, Intermet
International, Inc., New River Castings Company and Bank of
America National Trust and Savings Association and other
subsidiaries or affiliates of BankAmerica Corporation.
10.1 Ironton Iron, Inc. Retirement Plan, as amended (included as Exhibit
10.1 to the Company's Annual Report on Form 10-K for the 1988
fiscal year, file no. 0-17028, previously filed with the Commission
and incorporated herein by reference).
10.2 Third Amended and Restated Credit Agreement, dated November 14,
1996, by and among Intermet Corporation, Sun Trust Bank, Atlanta
(formerly known as Trust Company Bank) as lender and agent and
the various lenders named therein (included as Exhibit 4.14 to
the Intermet's Form 10-K for the year ended December 31, 1996,
File No. 0-13787, previously filed with the Commission and
incorporated herein by reference).
10.3 Master Assignment and Acceptance Agreement dated December 9,
1996, by and among Intermet Corporation and various lenders
named therein (included as Exhibit 4.15 to Intermet's Form 10-K
for the year ended December 31, 1996, File No. 0-13787,
previously filed with the Commission and incorporated herein by
reference).
10.4 Amended and Restated Note Agreement, dated March 21, 1996, by
and between Intermet Corporation and The Prudential Insurance
Company of America, relating to $25,000,000 principal amount of
8.05% Senior Notes due December 11, 2002 and related Promissory
Note (included as Exhibit 4.20 to Intermet's Form 10-K for the
year ended December 31, 1995, File No. 0-13787, previously filed
with the Commission and incorporated herein by reference).
24 Power of Attorney is included on the signature pages of this Report.
27 Financial Data Schedule
</TABLE>
(b) The Company did not file a report of Form 8-K during the fourth quarter
of the Company's fiscal year ended December 31, 1997.
(c) The Company hereby files as exhibits to this Report the exhibits set forth
in Item 14(a)(3) hereof.
(d) The Company hereby files as a financial statement schedule to this Report
the schedule set forth in Item 14(a)(2) hereof.
10
<PAGE> 11
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors F-1
Balance Sheets at December 31, 1997 and 1996 F-2
Statements of Operations for the years ended December 31, 1997, 1996 and 1995 F-4
Statements of Net Common Shareholder's Deficiency for the years ended
December 31, 1997, 1996 and 1995 F-5
Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995 F-6
Notes to Financial Statements F-7
Schedule II - Valuation and Qualifying Accounts F-12
</TABLE>
11
<PAGE> 12
Report of Independent Auditors
The Board of Directors and Shareholders
Ironton Iron, Inc.
We have audited the accompanying balance sheets of Ironton Iron, Inc. as of
December 31, 1997 and 1996 and the related statements of operations, net common
shareholder's deficiency, and cash flows for each of the three years in the
period ended December 31, 1997. Our audits also included the financial
statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Ironton Iron, Inc. at December
31, 1997 and 1996, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
/s/ Ernst & Young LLP
Detroit, Michigan
January 30, 1998
F-1
<PAGE> 13
Ironton Iron, Inc.
Balance Sheets
<TABLE>
<CAPTION>
December 31,
1997 1996
------- -------
(in thousands)
<S> <C> <C>
Assets
Current assets:
Cash $ 21 $ 53
Accounts receivable:
Trade, less allowance of $300 and $687 5,255 3,886
Other 262 407
Inventories 2,578 2,283
Other current assets 137 64
------- -------
Total current assets 8,253 6,693
Property, plant and equipment, cost:
Land 295 295
Buildings and improvements 5,360 5,280
Machinery and equipment 28,670 27,344
Construction in progress 1,548 783
------- -------
35,873 33,702
Less accumulated depreciation 19,778 16,809
------- -------
Net property, plant and equipment 16,095 16,893
Other noncurrent assets 18 11
------- -------
$24,366 $23,597
======= =======
</TABLE>
F-2
<PAGE> 14
Ironton Iron, Inc.
Balance Sheets
<TABLE>
<CAPTION>
December 31,
1997 1996
--------- ---------
(in thousands)
<S> <C> <C>
Liabilities and net common shareholder's deficiency
Current liabilities:
Accounts payable $ 2,781 $ 3,505
Accrued wages and benefits 1,093 1,009
Accrued workers' compensation 597 642
Other accrued liabilities 373 910
--------- ---------
Total current liabilities 4,844 6,066
Due to affiliates 40,309 31,302
Redeemable preferred stock, $200 par value,
20,000 shares authorized; 11,685 shares issued 3,389 3,272
Net common shareholder's deficiency:
Common stock, no par value, 25,000 shares authorized;
23,000 shares issued and outstanding 2,000 2,000
Additional paid-in capital 49,523 49,523
Accumulated deficit (75,699) (68,566)
--------- ---------
Net common shareholder's deficiency (24,176) (17,043)
--------- ---------
$ 24,366 $ 23,597
======== ========
</TABLE>
See accompanying notes
F-3
<PAGE> 15
Ironton Iron, Inc.
Statements of Operations
<TABLE>
<CAPTION>
Year ended December 31,
1997 1996 1995
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Net sales $51,305 $54,497 $74,746
Cost of sales 56,116 58,117 69,432
------- ------- -------
Gross margin (4,811) (3,620) 5,314
Corporate charges 1,697 2,387 3,176
------- ------- -------
Operating income (loss) (6,508) (6,007) 2,138
Interest income - - -
Interest expense (508) (498) (1,335)
------- ------- -------
Net income (loss) before income taxes (7,016) (6,505) 803
Income taxes--currently payable - - 10
------- ------- -------
Net income (loss) $(7,016) $(6,505) $ 793
======= ======= =======
</TABLE>
See accompanying notes.
F-4
<PAGE> 16
Ironton Iron, Inc.
Statements of Net Common Shareholders' Deficiency
<TABLE>
<CAPTION>
Additional Net Common
Common Paid-In Accumulated Shareholders'
Stock Capital Deficit Deficiency
------------ ------------ ------------ -------------
(in thousands of dollars, except per share data)
<S> <C> <C> <C> <C>
Balance at December 31, 1994 $2,000 $43,523 $(62,620) $(17,097)
Contribution of intercompany
debt to additional paid-in
capital - 6,000 - 6,000
Accrued dividends on
redeemable preferred stock
($10 per share) - - (117) (117)
Net income - - 793 793
------------ ------------ ----------- ------------
Balance at December 31, 1995 2,000 49,523 (61,944) (10,421)
Accrued dividends on
redeemable preferred stock
($10 per share) - - (117) (117)
Net loss - - (6,505) (6,505)
------------ ------------ ----------- ------------
Balance at December 31, 1996 2,000 49,523 (68,566) (17,043)
Accrued dividends on
redeemable preferred stock
($10 per share) - - (117) (117)
Net loss - - (7,016) (7,016)
------------ ------------ ----------- ------------
Balance at December 31, 1997 $2,000 $49,523 $(75,699) $(24,176)
============ ============ =========== ============
</TABLE>
See accompanying notes.
F-5
<PAGE> 17
Ironton Iron, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31,
1997 1996 1995
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Operating activities:
Net (loss) income $(7,016) $(6,505) $ 793
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 2,709 3,610 3,865
Loss on disposal of fixed assets 420
Changes in operating assets and liabilities:
Accounts receivable (1,224) 2,465 2,047
Inventories (295) (518) (452)
Accounts payable and accrued liabilities (1,222) 837 (3,244)
Other assets and liabilities (73) (22) (16)
------- ------- -------
Cash (used in) provided by operating activities (7,121) 287 2,993
Investing activities:
Additions to property, plant and equipment (1,549) (1,748) (2,478)
Other (14)
-------- -------- --------
Cash used in investing activities (1,563) (1,748) (2,478)
Financing activities:
Increase (decrease) in due to affiliates 8,652 1,224 (924)
Net (decrease) increase in cash (32) (237) (409)
-------- -------- --------
Cash at beginning of year 53 290 699
Cash at end of year $ 21 $ 53 $ 290
======= ======= =======
</TABLE>
See accompanying notes.
F-6
<PAGE> 18
Ironton Iron, Inc.
Notes to Financial Statements
Years ended December 31, 1997, 1996 and 1995
1. Summary of Significant Accounting Policies
Description of Business
Ironton Iron, Inc. (the "Company") is engaged in the production and sale of
ductile iron castings, primarily for the automotive industry. The Company was a
wholly owned subsidiary of Intermet Foundries, Inc. ("IFI"), a wholly owned
subsidiary of Intermet Corporation ("Intermet"). In March 1996, IFI was merged
into Intermet and the Company became a wholly owned subsidiary of Intermet
thereafter. The Company has transactions with Intermet as described in Note 6.
The Company has incurred significant operating losses since its inception.
Intermet has provided financial support by funding losses, capital expenditures
and working capital increases. The Company remains dependent on Intermet and
Intermet presently intends to continue providing financial support to the
Company.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Inventories
Inventories are stated at the lower of cost or market. Raw material and
supplies are valued on a weighted average cost basis. Work in process and
finished goods inventories are valued at standard costs which approximate actual
costs determined on a first-in, first-out basis. The specific identification
method is used for patterns.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. The provision for
depreciation of property, plant and equipment is determined on the basis of
estimated useful lives using the straight-line method.
Other Noncurrent Assets
Other noncurrent assets consist of deferred pattern and tooling charges. Such
costs are amortized over their estimated economic lives using the straight-line
method.
Net Income (Loss) Per Common Share
Intermet is the sole shareholder of the Company's common stock. As a result,
earnings per share data is not presented since it is not meaningful.
F-7
<PAGE> 19
Ironton Iron, Inc.
Notes to Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Fair Value of Financial Instruments
The carrying amounts reported in the balance sheet for cash, accounts
receivable, accounts payable and debt approximate fair values.
Reporting for Business Segments
In June 1997, the FASB issued Statement No. 131, "Disclosures about Segments of
an Enterprise and Related Information", which will become effective for the year
ending December 31, 1998 and supersedes FASB Statement No. 14, "Financial
Reporting for Segments of a Business Enterprise". Based on the provisions in
Statement No. 14, the Company does not report segment information. The Company
is evaluating the impact, if any, of Statement No. 131 regarding segment
reporting.
2. Inventories
Inventories consist of the following (in thousands of dollars):
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Finished goods $ 64 $ 572
Work in process 376 640
Raw materials 554 456
Supplies and patterns 1,584 615
------ ------
Totals $2,578 $2,283
====== ======
</TABLE>
3. Redeemable Preferred Stock
IFI acquired all of the common stock of the Company in October 1988. As part of
this transaction, the existing preferred stock of the Company was canceled and
the previous common stockholders of the Company received an equivalent number of
shares of the Company's new 5% cumulative preferred stock with an aggregate par
value of $2,337,000. The preferred shares, by their terms, were to be retired
at par value from net income, if available, in four annual installments
beginning in 1993. However, no shares have been retired and no dividends have
been paid to date since the Company has incurred a cumulative net loss since
1988. Accrued but unpaid dividends on the preferred stock totaled $1,052,000 at
December 31, 1997.
F-8
<PAGE> 20
Ironton Iron, Inc.
Notes to Financial Statements (continued)
4. Retirement Plans and Benefits
Intermet has an Employee Stock Ownership Plan for certain of its United States
employees who are not covered by collective bargaining agreements. The plan
requires contributions equal to 3% of the annual compensation of the plan
participants. Intermet may, at its discretion, make additional contributions
within specified limits. Intermet also has a defined contribution plan for
domestic salaried employees. Intermet and its subsidiaries make contributions
equal to 2% of the annual compensation of participants. Participants are also
allowed to make contributions to the plan, on a pre-tax basis, of up to 15% of
their compensation. Intermet and its subsidiaries match 50% of participant's
contributions, up to a specified limit. The Company accrued contributions to
the two plans of $252,000, $202,000 and $196,000 in 1997, 1996 and 1995,
respectively.
The Company has also established a defined contribution plan for hourly
employees. Contributions to the Plan are based on hours worked by each employee
and totaled $189,000, $217,000 and $250,000 in 1997, 1996 and 1995,
respectively. The Plan also allows employees to make contributions, on a
pre-tax basis, of up to 15% of their compensation.
Intermet provides health care and life insurance benefits to certain retired
salaried employees and their dependents, including employees of the Company.
Costs for these benefits are incurred by Intermet and are not allocated back to
the Company. Salaried employees can become eligible for retiree health care
benefits at age 55 depending on years of service. Retirees receive
substantially the same benefits as active employees. The medical plan generally
pays 80% of most medical expenses, less deductible amounts, with employees
contributing to the cost of dependent coverage. Coverage converts to a Medicare
supplement at age 65.
5. Income Taxes
Intermet files a consolidated federal income tax return which includes the
Company. The Company's income tax provisions are calculated and reported as if
the Company filed a separate federal income tax return.
While certain temporary differences exist in recognizing expenses for income tax
and financial reporting purposes, no deferred tax liability has been recorded
because of the loss carryforwards available. The tax effects of the types of
temporary differences and loss carryforwards which give rise to deferred tax
assets (liabilities) at December 31, 1997 and 1996 are as follows (in thousands
of dollars):
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Losses after IFI acquisition $ 24,118 $ 21,881
Losses before IFI acquisition 1,975 1,975
Other temporary differences 668 492
---------- ----------
Gross deferred tax assets 26,761 24,348
Valuation allowance (25,634) (22,758)
---------- ----------
1,127 1,590
Depreciation (1,127) (1,590)
---------- ----------
Totals $ - $ -
========== ==========
</TABLE>
F-9
<PAGE> 21
Ironton Iron, Inc.
Notes to Financial Statements (continued)
5. Income Taxes (continued)
The Company utilized its operating loss carryforward to offset a substantial
portion of its 1995 income.
There are certain limitations on the use of the loss carryforward generated
prior to the Company's acquisition by IFI. This loss carryforward expires as
follows: $1,354,000 in 2001 and $621,000 in 2002.
The loss carryforward generated after the acquisition by IFI on October 31, 1988
results from calculating the Company's income tax provision on a separate tax
return basis. These losses have already been utilized by Intermet in its
consolidated federal income tax return. While no income tax benefits have been
included in the accompanying financial statements, Intermet does advance funds
to the Company in amounts which approximate the income tax benefits expected to
be realized by Intermet as a result of the Company's losses after October 31,
1988. These amounts totaled $2,482,000 and $2,404,000 in 1997 and 1996,
respectively. No interest is charged on these amounts. In 1995, the Company
generated income; therefore no such advance was received from Intermet.
6. Related Party Transactions
Intermet incurs various costs, principally related to salaries, data processing,
aircraft, interest and occupancy, which are allocated to each of its
subsidiaries. Amounts charged to each subsidiary by Intermet are a function of
the subsidiary's sales and total assets. Intermet believes the resulting
allocation to be reasonable.
Intermet has an unsecured revolving credit agreement with a bank group that was
refinanced in November 1996. The agreement, which expires in November 1999,
provides for loans up to $200,000,000 in the aggregate, $125,000,000 of which
was outstanding at December 31, 1997. The borrowing limit is reduced by certain
standby letters of credit. At December 31, 1997 such standby letters of credit
totaled $12,214,581. The revolving credit agreement provides Intermet with
several interest rate pricing mechanisms ranging from 6.25% to 7.25% per annum
at December 31, 1997. Intermet must also pay a fee at a rate of 0.15% per annum
on any unused portion of the loan commitment. The revolving credit agreement
requires Intermet to maintain certain financial ratios and imposes limitations
on certain activities.
Intermet has $25,000,000 outstanding under an unsecured term loan agreement with
The Prudential Insurance Company of America which bears interest at a rate of
8.05% per annum, payable quarterly. Principal amounts are to be repaid in five
equal annual installments beginning in December 1998. The term loan agreement
requires Intermet to maintain certain financial ratios and imposes limitations
on certain activities.
Intermet maintains various uncommitted bank lines of credit which are payable
on demand. At December 31, 1997, Intermet's borrowings under the lines of
credit totaled $5,000,000. Availability under these lines of credit at the year
ended December 31, 1997 was $40,000,000. Availability of uncommitted bank lines
of credit at December 31, 1996 was $5,000,000, none of which was outstanding at
that time. Interest is paid on a daily basis at a negotiated rate. At December
31, 1997, the interest rate was 7.25% per annum.
F-10
<PAGE> 22
Ironton Iron, Inc.
Notes to Financial Statements (continued)
6. Related Party Transactions (continued)
Intermet and its subsidiaries are jointly and severally liable for any
borrowings under the agreements described above, with the exception of the
various uncommitted bank lines of credit. The Company has no liability with
regard to the $5,000,000 outstanding at December 31, 1997. However, the
Company's liability for the uncommitted bank lines of credit extends to
$20,000,000 of the $40,000,000 available at December 31, 1997.
Intermet loans money to, or invests the excess cash of, each of its subsidiaries
depending on the cash requirements of each subsidiary. Prior to 1996,
borrowings under the credit arrangement with Intermet provided interest at the
average rate that Intermet pays for its revolving and line of credit borrowings.
Beginning in 1996, interest is calculated monthly based on net accounts
receivable and inventory balances. The total of all interest paid to Intermet
by the Company was $508,000, $498,000, and $1,557,000 in 1997, 1996 and 1995,
respectively.
7. Major Customers
Net sales to customers exceeding 10% of total net sales in any period were as
follows (as a percentage of total net sales):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Dana 30% 29% 22%
General Products Delaware Corporation 28 24 20
Chrysler 12 11 9
Ford 5 12 23
</TABLE>
Sales to General Products Delaware Corporation are under the terms of a purchase
order issued by Ford.
8. Contingency
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, which were paid in July 1997.
The Company paid $272,103 in civil penalties in August 1997, which were fully
accrued in 1995.
9. 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.
F-11
<PAGE> 23
Ironton Iron, Inc.
Schedule II
Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Balance at Balance at
Beginning of Charged to End of
Description Period Expense Other Period
- ----------- ------------- ----------- ----- -----------
(in thousands)
<S> <C> <C> <C> <C>
Year ended December 31, 1997:
Allowance for returns and doubtful
accounts (a) $ 300 $ 302 (b) $ - $ 602
Inventory reserve (e) 35 - - 35
Deferred tax asset valuation allowance 22,758 - 2,876 (c) 25,634
Year ended December 31, 1996:
Allowance for returns and doubtful
accounts (a) 687 (387) (b) - 300
Inventory reserve (e) - 35 - 35
Deferred tax asset valuation allowance 20,860 - 1,898 (c) 22,758
Year ended December 31, 1995:
Allowance for returns and doubtful
accounts (a) 362 325 (b) - 687
Deferred tax asset valuation allowance 21,156 - (296) (d) 20,860
</TABLE>
(a) Reflected as reduction of trade accounts receivable on balance sheet.
(b) Net effect of amounts charged to expense less actual returns.
(c) Increase in certain deferred tax assets due to operating loss carryforwards.
(d) Decrease in certain deferred tax assets.
(e) Reflected as reduction of inventory on the balance sheet.
F-12
<PAGE> 24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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/ C. James Peterson
---------------------
C. James Peterson
President, Chief Executive Officer and Director
Date: March 27, 1998
POWER OF ATTORNEY AND SIGNATURES
Know all men by these presents, that each person whose signature appears below
constitutes and appoints John Doddridge and Doretha J. Christoph, or either of
them, as attorney-in-fact, each with power of substitution, for such person in
any and all capacities, to sign any amendments to this Report on Form 10-K, and
to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below, as of March 27, 1998, by the following persons on behalf
of the Company in the capacities indicated.
<TABLE>
<CAPTION>
Signature Capacity
<S> <C>
/s/ John Doddridge Director
- ------------------------
John Doddridge
/s/ C. James Peterson President, Chief Executive Officer and Director
- ------------------------
C. James Peterson
/s/ Doretha J. Christoph Vice President, Secretary, Treasurer and Director
- ------------------------ (Principal Financial and Accounting Officer)
Doretha J. Christoph
</TABLE>
<PAGE> 25
Exhibits Index
<TABLE>
<CAPTION>
Exhibit Number Description of Exhibit
<S> <C>
3.1 and 4.1 Articles of Incorporation of Ironton Iron, Inc., as amended
(included as Exhibit 3.1 and 4 to the Company's Annual Report on
Form 10-K for the 1988 fiscal year, file no. 0-17028, previously
filed with the Commission and incorporated herein by reference).
3.2 and 4.2 Code of Regulations of Ironton Iron, Inc., as amended (included as
Exhibit 3.2 to the Company's Annual Report on Form 10-K for the
1988 fiscal year, file no. 0-17028, previously filed with the
Commission and incorporated herein by reference).
4.3 Master Note and Continuing Guaranty, dated September 29, 1997,
by and among Intermet Corporation, Lynchburg Foundry Company,
Ironton Iron, Inc., Northern Castings Corporation, Intermet
International, Inc., New River Castings Company and Bank of
America National Trust and Savings Association and other
subsidiaries or affiliates of BankAmerica Corporation.
10.1 Ironton Iron, Inc. Retirement Plan, as amended (included as Exhibit
10.1 to the Company's Annual Report on Form 10-K for the 1988
fiscal year, file no. 0-17028, previously filed with the Commission
and incorporated herein by reference).
10.2 Third Amended and Restated Credit Agreement, dated November 14,
1996, by and among Intermet Corporation, Sun Trust Bank, Atlanta
(formerly known as Trust Company Bank) as lender and agent and
the various lenders named therein (included as Exhibit 4.14 to
the Intermet's Form 10-K for the year ended December 31, 1996,
File No. 0-13787, previously filed with the Commission and
incorporated herein by reference).
10.3 Master Assignment and Acceptance dated December 9, 1996, by and
among Intermet Corporation and various lenders named therein
(included as Exhibit 4.15 to Intermet's Form 10-K for the year
ended December 31, 1996, File No. 0-13787, previously filed with
the Commission and incorporated herein by reference).
10.4 Amended and Restated Note Agreement, dated March 21, 1996, by
and between Intermet Corporation and The Prudential Insurance
Company of America, relating to $25,000,000 principal amount of
8.05% Senior Notes due December 11, 2002 and related Promissory
Note (included as Exhibit 4.20 to Intermet's Form 10-K for the
year ended December 31, 1995, File No. 0-13787, previously filed
with the Commission and incorporated herein by reference).
24 Power of Attorney is included on the signature pages of this Report.
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 4.3
MASTER NOTE
September 29, 1997 Chicago, Illinois
FOR VALUE RECEIVED, the undersigned, Intermet Corporation ("Borrower")
promises to pay, in lawful money of the United States of America and immediately
available funds, to the order of BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION ("Bank") at Bank's Corporate Service Center, 231 South LaSalle
Street, Chicago, Illinois 60697, or such other place as the holder may from time
to time designate, the aggregate unpaid principal amount of all advances made by
Bank from time to time from and after the date hereof in its sole discretion to
or for the benefit of Borrower under this Note (each, an "Advance"), on the
maturity dates (each, a "Maturity Date") as may be offered by Bank and accepted
by Borrower with respect to such Advances (which acceptance shall in any event
be deemed to occur upon receipt by Borrower of the proceeds of any Advance),
together with interest accrued thereon, on the applicable Maturity Date and on
such other interest payment dates and at such rates as may be so offered and
accepted. Any amount not paid within five business days after the date due
(whether at maturity, by acceleration or otherwise) shall bear interest from
such due date until the date paid at a rate per annum equal to the rate
announced from time to time by Bank as its "reference rate" plus two percent
(2.0%).
The loan account records maintained by Bank shall at any time be
conclusive evidence as to the amount of any Advance, and its Maturity Date,
interest rate, interest payment dates and outstanding amount at such time,
absent manifest error. All interest will be calculated on the basis of a 360-day
year, actual days elapsed. If any payment of principal or of interest on this
Note shall become due on a day other than a business day, such payment shall be
made on the next succeeding business day and such extension of time shall be
included in computing the amount of interest due and payable. For purposes
hereof, "business day" means any day other than a Saturday, Sunday or other day
on which commercial banks in San Francisco, California are authorized or
required by law to close.
Any of the following shall constitute an "Event of Defaults" hereunder:
(a) Borrower shall fail to pay in full the amount of any Advance,
together with all accrued interest, on the applicable Maturity Date, or any
accrued interest on any applicable interest payment date;
(b) Borrower shall fail to pay when due any indebtedness under, or
shall fail to perform or observe any material term, covenant or condition under,
or there shall otherwise occur any default or event of default under, any
instrument or agreement relating to (i) borrowed money, (ii) reimbursement
obligations with respect to bonds, letters of credit or acceptances, (iii) the
deferred purchase price of property or services, or (iv) any capital lease; or
(c) (i) Borrower shall become insolvent, or (ii) any voluntary or
involuntary case, action or proceeding seeking liquidation, reorganization,
appointment of a receiver, trustee or custodian, assignment for the benefit of
creditors, or similar relief shall be commenced by or against, and with respect
to Borrower.
<PAGE> 2
Upon the occurrence of any Event of Default, (i) the amount of all
unpaid Advances, together with all accrued interest, shall, at the option of the
holder (or, in the case of an Event of Default under clause (e)(ii),
automatically) become immediately due and payable, without demand, notice of
nonpayment, presentment, protest or notice of dishonor (all of which are
expressly waived), and (ii) Bank shall be under no obligation to fund any
further Advances, including any as to which an offer and acceptance of terms has
occurred. However, nothing in this Note shall be deemed a commitment by Bank to
make Advances to Borrower.
Borrower agrees to notify Bank in writing immediately upon the
occurrence of any Event of Default pursuant to paragraph (b) or (c) above. No
Advance may be voluntarily prepaid in whole or in part prior to its applicable
Maturity Date.
The request of Borrower for any Advance and the receipt by Borrower of
the proceeds thereof shall be deemed a representation by Borrower as of each
such date that no Event of Default has occurred and that Borrower is duly
authorized to incur such indebtedness hereunder. Borrower acknowledges that it
may, for its convenience, request Bank to make Advances from time to time on the
basis of telephonic or written requests. Borrower assumes all risks regarding
the validity, authenticity, due authorization and correct interpretation of any
such request purported to be made by or on behalf of Borrower and agrees that
its obligations hereunder shall not be affected in any way by Bank's failure to
receive or provide written confirmation of any such request or of the terms of
any offer or acceptance relating to any Advance. Borrower hereby authorizes Bank
to charge any deposit account of Borrower now or hereafter maintained with Bank
for amounts due hereunder.
Borrower shall pay holder upon demand for all costs, expenses and
attorneys' fees (including allocated costs of internal counsel) incurred in
connection with the enforcement or attempted enforcement of this Note.
At any time and from time to time, without prior notice to or consent
of Borrower, the holder may assign or otherwise transfer, in whole or in part,
to any person (an "Assignee") this Note or any Advance, or may sell a
participation therein to any person. Borrower agrees not to assert against any
Assignee any claim or defense which Borrower may have against Bank.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW
OF THE STATE OF ILLINOIS. No delay or omission on the part of the holder in
exercising any right hereunder shall operate as a waiver of such right. If any
provision of this Note shall be held invalid or unenforceable in whole or in
part, such invalidity or unenforceability shall not affect the remaining
provisions hereof.
INTERMET CORPORATION
By /s/ Michael Skrzypczak
----------------------
Printed Name Michael Skrzypczak
------------------
Title Assistant Treasurer
-------------------
<PAGE> 3
CONTINUING GUARANTY
To: BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION and other
subsidiaries or affiliates of
BankAmerica Corporation ("Bank")
(1) For valuable consideration, the undersigned ("Guarantors") jointly and
severally unconditionally guarantee and promise to pay to Bank, or order, on
demand, in lawful money of the United States, any and all indebtedness of
INTERMET CORPORATION ("Borrowers") to Bank. The word "indebtedness" is used
herein in its most comprehensive sense and includes any and all advances, debts,
obligations and liabilities of Borrowers or any one or more of them, heretofore,
now, or hereafter made, incurred or created, whether voluntary or involuntary
and however arising, whether direct or acquired by Bank by assignment or
succession, whether due or not due, absolute or contingent, liquidated or
unliquidated, determined or undetermined, and whether Borrowers may be liable
individually or jointly with others, or whether recovery upon such indebtedness
may be or hereafter become barred by any statute of limitations, or whether such
indebtedness may be or hereafter become otherwise unenforceable.
(2) The liability of Guarantors under this Guaranty (exclusive of
liability under any other guaranties executed by Guarantors) shall not exceed at
any one time the total of (a) Twenty Million U.S. Dollars ($20,000,000), for the
principal amount of the indebtedness and (b) all interest fees, and other costs
and expenses relating to or arising out of the indebtedness or such part of the
indebtedness as shall not exceed the foregoing limitation. Bank may permit the
indebtedness of Borrowers to exceed Guarantors' liability, and may apply any
amounts received from any source, other than from Guarantors, to the
unguaranteed portion of Borrowers' indebtedness. This is a Continuing Guaranty
relating to any indebtedness, including that arising under successive
transactions which shall either continue the indebtedness or from time to time
renew it after it has been satisfied. Any payment by Guarantors shall not reduce
their maximum obligation hereunder, unless written notice to that effect be
actually received by Bank at or prior to the time of such payment.
(3) The obligations hereunder are joint and several, and independent of
the obligations of Borrowers, and a separate action or actions may be brought
and prosecuted against Guarantors whether action is brought against Borrowers or
whether Borrowers be joined in any such action or actions; and Guarantors waive
the benefit of any statute of limitations affecting their liability hereunder.
(4) Guarantors authorize Bank, without notice or demand and without
affecting their liability hereunder, from time to time, either before or after
revocation hereof, to (a) renew, compromise, extend, accelerate or otherwise
change the time for payment of, or otherwise change the terms of the
indebtedness or any part thereof, including increase or decrease of the rate of
interest thereon; and (b) release or substitute any one or more of the endorsers
or guarantors.
<PAGE> 4
(5) Guarantors waive any right to require Bank to (a) proceed against
Borrowers; (b) proceed against or exhaust any security held from Borrowers; or
(c) pursue any other remedy in Bank's power whatsoever. Guarantors waive any
defense arising by reason of any disability or other defense of Borrowers, or
the cessation from any cause whatsoever of the liability of Borrowers, or any
claim that Guarantors' obligations exceed or are more burdensome than those of
Borrowers. Guarantors waive any right of subrogation, reimbursement,
indemnification, and contribution (contractual, statutory or otherwise),
including without limitation, any claim or right of subrogation under the
Bankruptcy Code (Title 11 of the U.S. Code) or any successor statute, arising
from the existence or performance of this Guaranty and Guarantors waive any
right to enforce any remedy which Bank now has or may hereafter have against
Borrowers, and waive any benefit of, and any right to participate in, any
security now or hereafter held by Bank. Bank may foreclose, either by judicial
foreclosure or by exercise of power of sale, any deed of trust securing the
indebtedness, and, even though the foreclosure may destroy or diminish
Guarantors, rights against Borrowers, Guarantors shall be liable to Bank for any
part of the indebtedness remaining unpaid after the foreclosure. Guarantors
waive all presentments, demands for performance, notices of nonperformance,
protests, notices of protest, notices of dishonor, and notices of acceptance of
this Guaranty and of the existence, creation, or incurring of new or additional
indebtedness.
(6) Guarantors acknowledge and agree that they shall have the sole
responsibility for obtaining from Borrowers such information concerning
Borrowers' financial conditions or business operations as Guarantors may
require, and that Bank has no duty at any time to disclose to Guarantors any
information relating to the business operations or financial conditions of
Borrowers.
(7) This Guaranty may be revoked at any time by Guarantors in respect
to future transactions, unless there is a continuing consideration as to such
transactions which Guarantors do not renounce. Such revocation shall be
effective upon actual receipt by Bank at the address shown below of written
notice of revocation. Revocation shall not affect any of Guarantors' obligations
or Bank's rights with respect to transactions which precede Bank's receipt of
such notice, regardless of whether or not the indebtedness related to such
transactions, before or after revocation, has been renewed, compromised,
extended, accelerated, or otherwise changed as to any of its terms, including
time for payment or increase or decrease of the rate of interest thereon, and
regardless of any other act or omission of Bank authorized hereunder. Revocation
by any one or more of Guarantors shall not affect any obligations of any
nonrevoking Guarantors. If this Guaranty is revoked, returned, or canceled, and
subsequently any payment or transfer of any interest in property by Borrowers to
Bank is rescinded or must be returned by Bank to Borrowers, this Guaranty shall
be reinstated with respect to any such payment or transfer, regardless of any
such prior revocation, return, or cancellation.
(8) Where any one or more of Borrowers are corporations or partnerships
it is not necessary for Bank to inquire into the powers of Borrowers or of the
officers, directors, partners or agents acting or purporting to act on their
behalf, and any indebtedness made or created in reliance upon the professed
exercise of such powers shall be guaranteed hereunder.
(9) Bank may, without notice to Guarantors and without affecting
Guarantors' obligations hereunder, assign the indebtedness and this Guaranty, in
whole or in part. Guarantors agree that Bank may disclose to any prospective
purchaser and any purchaser of all or part of the indebtedness any and all
information in Bank's possession concerning Guarantors, this Guaranty and any
security for this Guaranty.
<PAGE> 5
(10) Guarantors agree to pay all attorneys' fees, the allocated cost of
internal legal services and all disbursements of internal counsel, and all other
costs and expenses which may be incurred by Bank in the enforcement of this
Guaranty.
(11) Where there is but a single Borrower, or where a single Guarantor
executes this Guaranty, then all words used herein in the plural shall be deemed
to have been used in the singular where the context and construction so require;
and when there is more than one Borrower named herein, or when this Guaranty is
executed by more than one Guarantor, the words "Borrowers" and "Guarantors"
respectively shall mean all and any one or more of them.
(12) This Guaranty shall be governed by and construed according to the
laws of the State of California, to the jurisdiction of which the parties hereto
submit.
Executed this 29 day of September, 1997 by the following joint and several
Guarantors:
LYNCHBURG FOUNDRY COMPANY
(Guarantor)
By: /s/ Michael Skrzypczak
----------------------
Title: Assistant Treasurer
----------------------
IRONTON IRON, INC.
(Guarantor)
By: /s/ Michael Skrzypczak
----------------------
Title: Assistant Treasurer
----------------------
NORTHERN CASTINGS CORPORATION
(Guarantor)
By: /s/ Michael Skrzypczak
----------------------
Title: Assistant Treasurer
----------------------
INTERMET INTERNATIONAL, INC.
(Guarantor)
By: /s/ Michael Skrzypczak
----------------------
Title: Assistant Treasurer
----------------------
NEW RIVER CASTINGS COMPANY
(Guarantor)
By: /s/ Michael Skrzypczak
----------------------
Title: Assistant Treasurer
----------------------
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 21
<SECURITIES> 0
<RECEIVABLES> 6,119
<ALLOWANCES> 602
<INVENTORY> 2,578
<CURRENT-ASSETS> 8,253
<PP&E> 35,873
<DEPRECIATION> 19,778
<TOTAL-ASSETS> 24,366
<CURRENT-LIABILITIES> 4,844
<BONDS> 0
3,389
0
<COMMON> 2,000
<OTHER-SE> (26,176)
<TOTAL-LIABILITY-AND-EQUITY> 24,366
<SALES> 51,305
<TOTAL-REVENUES> 51,305
<CGS> 56,116
<TOTAL-COSTS> 57,813
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 508
<INCOME-PRETAX> (7,016)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,016)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,016)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
