Intermet (INMTQ) 10-Q 2005 Q2 Quarterly report

United States
Securities and Exchange Commission

Washington, D.C. 20549

Form 10-Q

þ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2005, or

o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from            to             .

Commission File No. 0-13787

INTERMET Corporation

(Exact name of registrant as specified in its charter)

Georgia (State or other jurisdiction of incorporation or organization)	58-1563873 (IRS Employer Identification No.)
5445 Corporate Drive, Suite 200, Troy, Michigan (Address of principal executive offices)	48098-2683 (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. Yeso Noþ

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yesþ Noo

At July 31, 2005 there were 25,665,257 shares of common stock, $0.10 par value, outstanding.

TABLE OF CONTENTS

Certifications

 Certification of Chief Executive Officer pursuant to Section 302

 Certification of Chief Financial Officer pursuant to Section 302

 Certification of Periodic Financial Report by the CEO and CFO to Section 906

2

Part I – Financial Information

Item 1. Financial Statements

INTERMET Corporation

Interim Condensed Consolidated Statements of Operations

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2005			2004			2005			2004
	(Unaudited)
	(in thousands of dollars, except per share data)
Net sales	$	215,892		$	217,185		$	450,382		$	427,831
Cost of sales		204,487			204,473			425,632			401,629
Gross profit		11,405			12,712			24,750			26,202
Selling, general and administrative expenses		10,996			10,778			22,997			21,501
Reorganization charges		9,483			—			17,683			—
Restructuring and impairment charges		1,530			1,165			2,932			1,165
Operating (loss) profit		(10,604	)		769			(18,862	)		3,536
Other expense:
Interest expense, net		5,846			7,991			11,289			17,193
Other expense (income), net		874			146			525			(445	)
		6,720			8,137			11,814			16,748
(Loss) income from continuing operations before income taxes		(17,324	)		(7,368	)		(30,676	)		(13,212	)
Income tax (expense) benefit		(1,891	)		2,169			(5,138	)		872
(Loss) income from continuing operations		(19,215	)		(5,199	)		(35,814	)		(12,340	)
(Loss) income from discontinued operations, net of tax		(593	)		(1,255	)		(984	)		(1,967	)
Net loss	($	19,808	)	($	6,454	)	($	36,798	)	($	14,307	)
Net (loss) income per common share:
Basic and diluted:
(Loss) income from continuing operations	($	0.75	)	($	0.20	)	($	1.40	)	($	0.48	)
(Loss) income from discontinued operations, net of tax		(0.02	)		(0.05	)		(0.04	)		(0.08	)
Net loss per share — basic and diluted	($	0.77	)	($	0.25	)	($	1.44	)	($	0.56	)
Dividends declared per common share	$	0.00		$	0.04		$	0.00		$	0.04
Weighted average shares outstanding:
Basic		25,665			25,599			25,665			25,597
Diluted		25,665			25,599			25,665			25,597

See accompanying notes.

3

INTERMET Corporation

Interim Consolidated Statements of Comprehensive Income

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2005			2004			2005			2004
	(Unaudited)
	(in thousands of dollars)
Net loss	($	19,808	)	($	6,454	)	($	36,798	)	($	14,307	)
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment		(5,966	)		(419	)		(10,350	)		(2,803	)
		(5,966	)		(419	)		(10,350	)		(2,803	)
Total comprehensive (loss) income	($	25,774	)	($	6,873	)	($	47,148	)	($	17,110	)

See accompanying notes.

4

INTERMET Corporation

Interim Condensed Consolidated Balance Sheets

	June 30,			December 31,
	2005			2004
	(Unaudited)
	(in thousands of dollars)
ASSETS
Current assets:
Cash and cash equivalents	$	10,759		$	11,239
Accounts receivable:
Trade, less allowance of $6,434 in 2005 and $9,560 in 2004		120,957			108,932
Other		5,396			5,593
		126,353			114,525
Inventories		77,440			71,527
Other current assets		8,938			11,410
Assets held for sale		1,794			1,837
Total current assets		225,284			210,538
Property, plant and equipment, net		249,986			276,243
Other non-current assets		19,840			26,042
Total assets	$	495,110		$	512,823
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	26,757		$	29,969
Accrued liabilities		67,637			61,830
Current portion of retirement benefits		11,085			11,855
Short-term lines of credit		39,386			15,975
Long-term debt due within one year		170,918			168,180
Total current liabilities		315,783			287,809
Liabilities subject to compromise		250,233			250,464
Non-current liabilities:
Long-term debt due after one year		2,152			4,055
Retirement benefits		74,966			70,982
Other non-current liabilities		7,779			8,168
Total non-current liabilities		84,897			83,205
Shareholders’ deficit:
Common stock		2,606			2,606
Capital in excess of par value		57,276			57,276
Retained deficit		(203,052	)		(166,254	)
Accumulated other comprehensive loss		(12,442	)		(2,092	)
Unearned restricted stock		(191	)		(191	)
Total shareholders’ deficit		(155,803	)		(108,655	)
Total liabilities and shareholders’ deficit	$	495,110		$	512,823

See accompanying notes.

5

INTERMET Corporation

Interim Condensed Consolidated Statements of Cash Flows

	Six Months Ended
	June 30,			June 30,
	2005			2004
	(Unaudited)
	(in thousands of dollars)
OPERATING ACTIVITIES:
Loss from continuing operations	($	35,814	)	($	12,340	)
Adjustments to reconcile loss from continuing operations to cash (used in) provided by operating activities:
Depreciation and amortization		21,736			25,309
Amortization of debt discount and issuance costs		1,914			2,135
Restructuring and impairment charges		2,932			1,165
Loss on disposal of property, plant and equipment		918			—
Change in operating assets and liabilities:
Accounts receivable		(15,932	)		(18,935	)
Inventories		(10,197	)		2,280
Accounts payable and current liabilities		6,084			4,475
Other assets and liabilities		7,326			(9,653	)
Net cash used in continuing operating activities		(21,033	)		(5,564	)
Net cash (used in) provided by discontinued operations		(674	)		223
Net cash used in by operating activities		(21,707	)		(5,341	)
INVESTING ACTIVITIES:
Additions to property, plant and equipment		(7,494	)		(12,547	)
Proceeds from sale of property, plant and equipment		3,385			379
Net cash used in investing activities		(4,109	)		(12,168	)
FINANCING ACTIVITIES:
Net increase (decrease) in lines of credit		1,437			(49,424	)
Proceeds from term loan		—			120,000
Proceeds from debtor-in-possession facility		26,700			—
Repayment of term loan and other debts		(1,496	)		(2,661	)
Funding of restricted cash		—			(35,819	)
Payments of debt issuance costs		—			(3,359	)
Dividends paid		—			(2,051	)
Issuance of common stock		—			13
Net cash provided by financing activities		26,641			26,699
Effect of exchange rate changes on cash and cash equivalents		(1,305	)		(880	)
Net increase (decrease) in cash and cash equivalents		(480	)		8,310
Cash and cash equivalents at beginning of period		11,239			1,035
Cash and cash equivalents at end of period	$	10,759		$	9,345

See accompanying notes.

6

INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

June 30, 2005 (Unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of INTERMET Corporation have been prepared in accordance with accounting principles generally accepted in the United States 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 accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month period and six-month period ended June 30, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005.

The balance sheet at December 31, 2004 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. See our Annual Report on Form 10-K for the year ended December 31, 2004 for complete financial statements and footnotes.

On September 29, 2004, INTERMET Corporation and 17 of its wholly-owned domestic subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code, (“the Bankruptcy Code”) in the United States Bankruptcy Court for the Eastern District of Michigan (the “Bankruptcy Court”). These Chapter 11 cases have been consolidated for the purposes of joint administration as In re:INTERMET Corporation, et al. (Case No. 04-67597). We have continued to operate our U.S. businesses as debtors-in-possession under Bankruptcy Court protection from creditors. See additional discussion in Note 3, Voluntary Reorganization Under Chapter 11 and Administration.

The accompanying consolidated financial statements have been prepared in accordance with AICPA Statement of Position 90-7, “Financial Reporting by Entities in Reorganization under the Bankruptcy Code” (“SOP 90-7”) using a going concern assumption. However, as a result of the Chapter 11 proceedings, such realization of assets and liquidation of liabilities, without substantial adjustments and/or change of ownership, is highly uncertain. Given this uncertainty, there is substantial doubt about our ability to continue as a going concern. A plan of reorganization filed with the Bankruptcy Court sets forth the means for treating claims, including liabilities subject to compromise and results in, among other things, the cancellation of existing equity interests and the issuance of new equity securities to creditors. The confirmation of any plan of reorganization will require creditor acceptance as required under the Bankruptcy Code and approval of the Bankruptcy Court. Further, the plan of reorganization could materially change the amounts and classifications in our historical consolidated financial statements. While operating the businesses as debtors-in-possession, we and our subsidiaries may dispose of assets or settle liabilities for amounts materially different from those in the accompanying consolidated financial statements. The appropriateness of using a going concern assumption in the preparation of the accompanying consolidated financial statements is dependent upon, among other things, our ability to comply with the covenants of our secured debtor-in-possession revolving credit facility and our ability to generate cash from operations.

Restricted Cash

In accordance with a letter of credit facility agreement and cash collateral agreement dated January 8, 2004, $35.7 million of cash, and certain interest income on this cash, were used as collateral for $35.0 million of variable rate limited obligation revenue bonds issued in connection with our Columbus Foundry. See Note 8, Debt, for further information. Restricted cash is excluded from cash and cash equivalents in the accompanying balance sheets. On October 29, 2004 the bonds were paid in full with the restricted cash and the letter of credit terminated.

7

INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

June 30, 2005 (Unaudited)

1. Basis of Presentation (continued)

Stock-Based Compensation

We grant stock options to employees and directors with an exercise price equal to the fair value of the shares at the date of grant. We account for stock option grants in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and, accordingly, recognize no compensation expense for the stock option grants. Had compensation expense for these stock option grants been determined based on the fair values at the grant dates for awards under the stock option plans consistent with the method of SFAS No. 123, “Accounting for Stock-Based Compensation,” our pro forma net loss, basic loss per share and diluted loss per share would be as follows:

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2005			2004			2005			2004
	(in thousands of dollars, except per share data)
Net loss, as reported	($	19,808	)	($	6,454	)	($	36,798	)	($	14,307	)
Less: Total stock-based employee compensation expense determined under fair value method for all awards, net of related tax effects		(153	)		(267	)		(319	)		(503	)
Pro forma net loss	($	19,961	)	($	6,721	)	($	37,117	)	($	14,810	)
Loss per share – basic and diluted:
As reported	($	0.77	)	($	0.25	)	($	1.44	)	($	0.56	)
Pro forma	($	0.78	)	($	0.26	)	($	1.45	)	($	0.58	)

2. Balance Sheet Details

Inventories

The components of inventories are as follows (in thousands of dollars):

	June 30,		December 31,
	2005		2004
Finished goods	$	22,739	$	24,123
Work in process		9,422		9,751
Raw materials		20,299		11,947
Supplies and patterns		24,980		25,706
Total inventories	$	77,440	$	71,527

8

INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

June 30, 2005 (Unaudited)

2. Balance Sheet Details (continued)

Property, Plant and Equipment, Net

The components of net property, plant and equipment are as follows (in thousands of dollars):

	June 30,		December 31,
	2005		2004
Land	$	5,817	$	6,066
Buildings and improvements		134,817		138,459
Machinery and equipment		532,293		549,705
Construction in progress		11,242		22,695
Property, plant and equipment, at cost		684,169		716,925
Less: Accumulated depreciation		434,183		440,682
Property, plant and equipment, net	$	249,986	$	276,243

3. Voluntary Reorganization under Chapter 11 and Administration

On September 29, 2004, INTERMET and 17 of its wholly-owned domestic subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Michigan. These Chapter 11 cases have been consolidated for the purposes of joint administration asIn re: INTERMET Corporation, et al. (Case No. 04-67597).

INTERMET’s subsidiaries for which bankruptcy petitions were filed are Alexander City Casting Company, Inc., Cast-Matic Corporation, Columbus Foundry, L.P., Diversified Diemakers, Inc., Ganton Technologies, Inc., INTERMET Holding Company, INTERMET Illinois, Inc., INTERMET International, Inc., INTERMET U.S. Holding, Inc., Ironton Iron, Inc., Lynchburg Foundry Company, Northern Castings Corporation, Sudbury, Inc., SUDM, Inc., Tool Products, Inc., Wagner Castings Company and Wagner Havana, Inc., all of which, together with INTERMET, are currently operating as debtors and debtors-in-possession. Other INTERMET subsidiaries, including foreign subsidiaries, are not parties to the Chapter 11 proceedings and are operating in the normal course.

Our bankruptcy proceedings were initiated primarily in response to substantial and unprecedented increases in the cost of raw materials, especially scrap steel. The price of scrap steel, which is our primary raw material, increased from approximately $160 per net ton at the beginning of 2003, to approximately $210 per net ton at the end of 2003, and to approximately $380 per net ton at September 30, 2004. This included record increases of $85 per gross ton ($75 per net ton) and $65 per gross ton ($58 per net ton) in July and August of 2004, respectively. Because of pre-existing contractual pricing terms with most of our customers, we were limited in our ability to pass these cost increases to our customers. At the same time, some of our largest trade creditors began to tighten or eliminate credit terms, which increased our working capital requirements. We also experienced operational difficulties at our Pulaski, Tennessee and Racine, Wisconsin light-metals plants.

These financial and operational difficulties impaired our ability to continue to draw on our pre-petition revolving credit facility. In an effort to avoid anticipated defaults under our loan covenants, which would have occurred as of September 30, 2004, we entered into discussions with the agent for our pre-petition lenders, seeking waivers of certain conditions contained in the pre-petition credit facility. We were unable to obtain waivers on acceptable terms and, consequently, the Chapter 11 cases were filed on September 29, 2004.

9

INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

June 30, 2005 (Unaudited)

3. Voluntary Reorganization under Chapter 11 and Administration (continued)

We have continued to operate our U.S. businesses as debtors-in-possession under bankruptcy court protection from creditors. We continue to review all aspects of our business for opportunities to improve performance, while seeking to restructure our secured and unsecured debt, rationalize our facilities and cost structure and effect a customer strategy focused on scrap steel cost recovery and other commercial and financial issues.

On December 8, 2004, our Board of Directors adopted an Amended and Restated Key Employee Retention Plan in order to retain certain key employees during our bankruptcy proceedings. The plan provides for the payment of bonuses to participants who remain employed by us through a successful reorganization or sale of the company. The plan was approved by the bankruptcy court on December 22, 2004. The number of employees who are participants in the plan is approximately 100, and we estimate that the total amount payable to participants will be approximately $5.2 million. One third (1/3) of each participant’s payment is due following confirmation of a plan of reorganization and the remaining two thirds (2/3) is due between January 1, 2006 and January 10, 2006. The plan also provides for severance benefits under certain conditions.

On June 24, 2005, we filed our Plan of Reorganization with the Bankruptcy Court. On June 27, 2005, INTERMET filed a Disclosure Statement with the Bankruptcy Court in connection with our proposed Plans of Reorganization. On June 27, 2005, we filed a copy of the Plan of Reorganization with the Securities and Exchange Commission on a Form 8-K and on June 28, 2005, we filed a copy of the Disclosure Statement with the Securities and Exchange Commission on a Form 8-K. On August 12, 2005, we filed an Amended Plan of Reorganization and related Amended Disclosure Statement with the Bankruptcy Court, and the Bankruptcy Court approved the Amended Disclosure Statement and related solicitation and balloting procedures the same day. The Bankruptcy Court has set September 26, 2005 as the date the confirmation hearing with respect to the Amended Plan of Reorganization is scheduled to begin. See Note 16, Subsequent Events, for further details.

Liabilities Subject to Compromise

Liabilities subject to compromise refers to liabilities of the debtors incurred prior to September 29, 2004, and represent the estimates of known or potential pre-petition claims to be resolved in connection with the bankruptcy proceedings. Such claims remain subject to future proceedings. Payment terms for these claims will be established in connection with the bankruptcy proceedings.

The amounts of the various liabilities that are subject to compromise are set forth below (in thousands of dollars):

	June 30,		December 31,
	2005		2004
Senior notes payable	$	177,000	$	177,000
Accounts payable		62,600		64,192
Interest payable		5,000		5,000
Other accrued liabilities		5,633		4,272
Subtotal		250,233		250,464
Intercompany payables to affiliates		173,985		197,547
Total liabilities subject to compromise	$	424,218	$	448,011

Changes in the “Intercompany payables to affiliates” balances are primarily due to foreign currency exchange fluctuations.

Debtors’ Financial Statements

The condensed consolidated financial statements of the debtors are presented below. These statements reflect the financial position, results of operations and cash flows of the combined Debtor companies, including certain amounts and activities between Debtor and non-Debtor subsidiaries of the Company, which are eliminated in the consolidated financial statements.

10

INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

June 30, 2005 (Unaudited)

3. Voluntary Reorganization under Chapter 11 and Administration (continued)

Debtors’ Condensed Consolidated Statements of Operations
(in thousands of dollars)

	Three Months			Six Months
	Ended			Ended
	June 30,			June 30,
	2005			2005
Net sales	$	159,661		$	337,038
Cost of sales		156,447			327,515
Gross profit		3,214			9,523
Operating expenses:
Selling, general and administrative		7,251			15,474
Management fee income from non-Debtors		(217	)		(435	)
Reorganization charges		9,483			17,683
Restructuring and impairment charges		1,530			2,932
Total operating expenses		18,047			35,654
Operating loss		(14,833	)		(26,131	)
Other expenses (income):
Interest expense, net		5,858			7,035
Other expense, net		928			606
Net total other expenses		6,786			7,641
Loss from continuing operations before income taxes and equity income of non-Debtor subsidiaries		(21,619	)		(33,772	)
Income tax expense		478			911
Loss from continuing operations before equity loss of non-Debtor subsidiaries		(22,097	)		(34,683	)
Equity income (loss) from continuing operations of non-Debtor subsidiaries		2,882			(1,131	)
Loss from continuing operations		(19,215	)		(35,814	)
Loss from discontinued operations, net of tax		(593	)		(984	)
Net loss	($	19,808	)	($	36,798	)

11

INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

June 30, 2005 (Unaudited)

3. Voluntary Reorganization under Chapter 11 and Administration (continued)

Debtors’ Condensed Consolidated Balance Sheet
(in thousands of dollars)

	As of			As of
	June 30,			December 31,
	2005			2004
ASSETS
Current assets:
Cash and cash equivalents	$	1,975		$	1,729
Accounts receivable, net		89,385			78,454
Accounts receivable, non-Debtors		68,809			68,897
Inventories		55,156			45,856
Other current assets		8,377			10,757
Assets held for sale		1,794			1,837
Total current assets		225,496			207,530
Property, plant and equipment, net		183,433			199,378
Investment in non-Debtors		53,641			69,399
Loan receivable from non-Debtors		139,711			154,821
Other noncurrent assets		13,365			19,167
Total noncurrent assets		390,150			442,765
Total assets	$	615,646		$	650,295
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	12,723		$	9,877
Accounts payable, non-Debtors		(7	)		(3	)
Other accrued liabilities		60,993			61,861
Short-term lines of credit		29,700			3,000
Long-term debt due within one year		167,598			163,585
Total current liabilities		271,007			238,320
Liabilities subject to compromise		424,218			448,011
Noncurrent liabilities:
Retirement benefits		74,966			70,982
Deferred income tax liabilities		(2,781	)		(2,781	)
Other noncurrent liabilities		4,039			4,418
Total noncurrent liabilities		76,224			72,619
Shareholders’ deficit		(155,803	)		(108,655	)
Total liabilities and shareholders’ deficit	$	615,646		$	650,295

12

INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

June 30, 2005 (Unaudited)

3. Voluntary Reorganization under Chapter 11 and Administration (continued)

Debtors’ Condensed Consolidated Statement of Cash Flows
(in thousands of dollars)

	Six Months
	Ended
	June 30,
	2005
Cash used in operating activities	($	28,940	)
INVESTING ACTIVITIES:
Additions to property, plant and equipment		(4,624	)
Proceeds from sale of property, plant and equipment		3,385
Cash used in investing activities		(1,239	)
FINANCING ACTIVITIES:
Net increase in revolving credit facility		3,270
Proceeds from debtor-in-possession facility		26,700
Net increase in other debts		455
Cash provided by financing activities		30,425
Effect of foreign currency exchange rate changes		—
Net increase in cash and cash equivalents		246
Cash and cash equivalents at beginning of year		1,729
Cash and cash equivalents at end of year	$	1,975

4. Acquisition

On June 25, 2003, we entered into an agreement with Melfina — Estudos, Servicos e Participacoes, S.A. to acquire 100% ownership of the shares of Fundicao Nodular, S.A. (“Porto Foundry”), which is located in Porto, Portugal. Previously we owned a 50% interest in the Porto Foundry. The Porto Foundry is a caster of various ductile-iron automotive components. Under the terms of the agreement, we acquired an additional 25% of the Porto Foundry’s shares for a cash investment of Euro 4.9 million (approximately $5.6 million) on July 1, 2003, increasing our ownership from 50% to 75%. We had a call option to acquire, and Melfina — Estudos, Servicos e Participacoes, S.A. had a put option, requiring us to buy the remaining 25% ownership for an additional cash investment of Euro 4.9 million (approximately $6.2 million based on the exchange rate on December 31, 2003) on July 1, 2004.

On July 1, 2004, we exercised the call option to acquire the remaining 25% ownership of the Porto Foundry. The purchase price of approximately Euro 4.9 million (approximately $6.2 million at the exchange rates at the time of the payments) together with interest accruing at European Interbank Offered Rate (“EURIBOR”) was paid in six equal monthly installments beginning July 2004.

We accounted for the acquisition of additional shares using the purchase accounting method. The purchase price has been allocated to the assets purchased and liabilities assumed based upon the estimated fair values at the date of acquisition. As the Porto Foundry became our consolidated subsidiary at July 1, 2003, the results of its operations from that date are included in our consolidated results of operations. Our equity in the net income of the Porto Foundry for the period before July 1, 2003 is included in “Equity interest in a joint venture” in the accompanying statements of operations. The pro forma effects of this acquisition are not material to our consolidated results of operations.

13

INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

June 30, 2005 (Unaudited)

5. Discontinued Operations

Frisby

On July 24, 2003, we sold substantially all the assets of Frisby P.M.C., Incorporated (“Frisby”) for $5.3 million, consisting of $3.9 million in cash and $1.4 million in the form of a promissory note, the balance of which is due to be paid in full by July 31, 2008. This transaction resulted in a loss on sale of $0.1 million, net of taxes. Frisby was a non-core operation and is included in our Corporate and Other segment in Note 13, Reporting for Business Segments.

Radford

In May 2003, we decided to close our facility in Radford, Virginia due to changes in market conditions and production technology, as well as the fact that substantial investment in environmental controls would have been necessary for continued operation of this facility. The Radford facility manufactured gray-iron and ductile-iron components for the automotive industry and had approximately 41 salaried and 333 hourly employees. The facility is included in the Ferrous Metals segment in Note 13, Reporting for Business Segments.

As a result of this decision, we recorded an $11.6 million pre-tax restructuring and impairment charge during the second quarter of 2003. The charge included a write-down of $9.9 million to reduce the capital assets and inventories to their fair values, $1.4 million for employee severance and related contractually guaranteed benefit costs, and $0.3 million for employee pension costs. In the fourth quarter of 2003, we accrued for an additional $0.1 million for employee severance costs. The accruals for the employee severance and benefit costs are included in “Accrued liabilities” in the accompanying balance sheet at June 30, 2005. No material additional restructuring charge was recorded in the first six months of 2005.

In addition, we recorded pre-tax gains of $1.3 million and $0.7 million on the reduction of postretirement benefit obligations when the employees were terminated in the third and fourth quarter of 2003, respectively. By December 2003, the Radford Foundry was closed and substantially all of the employees were terminated. At June 30, 2005, we had $2.2 million accrued for environmental remediation at the Radford Foundry. See additional discussion in Note 10, Commitments and Contingencies. The after-tax results of operations of the Radford Foundry for all periods presented have been reported as “Loss from discontinued operations, net of tax” in the accompanying statements of operations.

Activities relating to the restructuring charges and liabilities arising from to the Radford Foundry closure are as follows (in thousands of dollars):

	Impairment			Write-			Employee			Employee
	of			down of			Termination			Postretirement
	fixed assets			inventory			Benefits			Benefits			Other			Total
Initial charge in second quarter of 2003	$	7,554		$	2,351		$	1,336		$	301		$	50		$	11,592
Additional charge		—			—			138			—			—			138
Noncash charges		(7,554	)		(2,351	)		—			(301	)		—			(10,206	)
Reduction of post-retirement obligations		—			—			—			(1,997	)		—			(1,997	)
Noncash credit		—			—			—			1,997			—			1,997
Cash payments		—			—			(920	)		—			(50	)		(970	)
Balance at December 31, 2003		—			—			554			—			—			554
Additional charge		—			120			35			—			—			155
Noncash charge		—			(120	)		—			—			—			(120	)
Cash payments		—			—			(473	)		—			—			(473	)
Balance at December 31, 2004		—			—			116			—			—			116
Cash payments		—			—			(25	)		—			—			(25	)
Balance at June 30, 2005	$	—		$	—		$	91		$	—		$	—		$	91

14

INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

June 30, 2005 (Unaudited)

5. Discontinued Operations (continued)

Major classes of assets and liabilities of the Radford Foundry are as follows (in thousands of dollars):

	June 30,		December 31,
	2005		2004
Accounts receivable	$	—	$	56
Property, plant and equipment, net		440		440
Total assets	$	440	$	496
Accrued liabilities	$	1,119	$	1,062
Retirement benefits		2,684		2,439
Other non-current liabilities		1,989		2,039
Total liabilities	$	5,792	$	5,540

The results of operations of the Radford Foundry are summarized as follows (in thousands of dollars):

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2005			2004			2005			2004
Sales	$	—		($	142	)	$	—		$	33
Cost of sales		593			1,083			974			1,949
Gross loss		(593	)		(1,225	)		(974	)		(1,916	)
Expenses		—			30			10			51
Loss before income taxes		(593	)		(1,255	)		(984	)		(1,967	)
Income tax benefit		—			—			—			—
(Loss) income from discontinued operation, net of tax	($	593	)	($	1,255	)	($	984	)	($	1,967	)

No corporate interest expense was allocated to Frisby or Radford Foundry for the three months and six months ended June 30, 2005 and 2004.

SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” provides that the results of operations of a component of an entity that has been disposed of should be reported as a discontinued operation when the operations and cash flows of the component have been eliminated from the ongoing operations of the entity and the entity will not have any significant continuing involvement in the operations of the component after the disposal transaction. This occurred when Frisby was sold in July 2003 and when the Radford Foundry was closed in December 2003. As a result, the results of operations of both Frisby and the Radford Foundry for all periods presented have been reported as discontinued operations in the accompanying statements of operations.

6. Restructuring and Impairment Charges

Hannibal Plant

Some customers of our Hannibal facility have informed us that present product programs will end or they intend to move their magnesium die casting work from that facility to other suppliers or transition to alternative processes. Approximately one-half of the work at this plant was moved to other suppliers by July, 2005. We currently anticipate that remaining work will be transferred to our Palmyra facility by December 2005 and that the operation at the Hannibal facility will be suspended until we are able to utilize the capacity.

15

INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

June 30, 2005 (Unaudited)

6. Restructuring and Impairment Charges (continued)

Decatur Closure

On March 29, 2005, we announced a plan to close our Decatur Foundry located in Decatur, Illinois during the fourth quarter of 2005, in order to improve our capacity utilization. The Decatur Foundry manufactures and machines ductile iron components for the automotive industry, and has approximately 70 salaried and 245 hourly employees. Production will be transferred to other INTERMET facilities during the third quarter of 2005. We recognized asset impairment charges of $10.9 million in the third quarter of 2004 to reduce capital assets to their fair values. In the first quarter of 2005, we recognized a write-down of $1.4 million to reduce inventories to their fair values and in the second quarter of 2005 and we recognized a pension curtailment expense of $1.6 million. The facility is included in the Ferrous Metals segment in Note 13, Reporting for Business Segments, to our Consolidated Financial Statements. The Decatur Foundry had revenues of $64.9 million and $72.0 million, and net loss of $20.4 million and $0.8 million for the years ended December 31, 2004 and 2003, respectively.

Racine Closure

On December 15, 2004, we announced our plan to close our Racine Die-Casting Plant and Racine Machining Plant in Sturtevant, Wisconsin. The planned closure is due to the high operating costs of the facilities and underutilization of capacity at these plants. The Racine Plants manufacture and machine aluminum die-castings for the automotive industry, and have approximately 84 salaried and 519 hourly employees. We closed these plants during the third quarter of 2005. The facility is included in the Light Metals segment in Note 13, Reporting for Business Segments, to our Consolidated Financial Statements. The Racine Plants had revenues of $78.8 million and $68.2 million, and net loss of $20.2 million and $4.6 million for the years ended December 31, 2004 and 2003, respectively. We recognized asset impairment charges of $6.5 million in the third quarter of 2004 to reduce capital assets to their fair values. In addition, we recognized plant closure and asset impairment charges of $3.8 million in the fourth quarter of 2004. The amount included a write-down of $2.4 million to reduce inventories to their fair values, a pension curtailment expense of $1.2 million and $0.2 million for employee severance and related contractually guaranteed benefit costs.

Columbus Machining Closure

On October 14, 2004, we announced our plan to close our Columbus Machining Plant in Midland, Georgia, in order to improve our capacity utilization and to reduce operating costs. The Columbus Machining Plant machined ductile iron and light metal castings for the automotive industry, and had approximately 15 salaried and 71 hourly employees. We closed this plant during the first quarter of 2005. The facility is included in the Ferrous Metals segment in Note 13, Reporting for Business Segments, to our Consolidated Financial Statements. The Columbus Machining Plant had revenues of $12.7 million and $20.8 million, and net losses of $0.8 million and $0.1 million for the years ended December 31, 2004 and 2003, respectively. We recognized plant closure costs of $0.3 million in the fourth quarter of 2004.

During the second quarter of 2005, we initiated the process of selling assets related to the Columbus Machining Plant with a carrying value of $1.8 million. We expect the sale to be completed within one year. The carrying value of the assets held for sale is separately presented in the “Assets held for sale” caption in the accompanying balance sheets.

16

INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

June 30, 2005 (Unaudited)

6. Restructuring and Impairment Charges (continued)

Havana Plant Closure

In December 2003, we decided to close our ductile iron foundry in Havana, Illinois, in order to improve our capacity utilization. The Havana Foundry manufactured ductile iron components for the automotive industry, and had approximately 33 salaried and 141 hourly employees. The plant closure was completed in June, 2004. We recognized a $1.2 million and $0.5 million pre-tax charge during the second and third quarter of 2004, respectively, due to the closing. This charge is included in the “Restructuring and impairment charges” in the accompanying statements of operations and is in addition to the $8.5 million and $4.9 million charges detailed below.

Due to the announced closing, we recorded an $8.5 million pretax charge during the fourth quarter of 2003. The amount included a write-down of $8.0 million to reduce the capital assets and inventories to their fair values and $0.5 million for employee severance and related contractually guaranteed benefit costs. During the second quarter of 2004, we recorded a $1.2 million pre-tax charge which included $1.1 million for facility closure costs and costs of product testing and validation required to transfer production of products to our other facilities, and $0.1 million for employee separation costs. During the third quarter of 2004, we recorded another $0.5 million restructuring charge related to facility closure costs as well as product testing and validation costs. The remaining accruals for the employee severance and benefit costs of $0.1 million were reversed in the second quarter of 2005. These charges and reversals are included in “Restructuring and impairment charges” in the accompanying statements of operations.

The facility is included in the Ferrous Metals segment in Note 13, Reporting for Business Segments. The Havana Foundry had revenues of $11.5 million and $25.7 million and net losses of $9.3 million and $5.0 million for the years ended December 31, 2004 and 2003, respectively.

7. Short-term Lines of Credit

Columbus Neunkirchen Foundry GmbH, our wholly owned European subsidiary, has various revolving lines of credit which are payable upon demand. These credit lines provide for borrowings up to Euro 4.5 million (approximately $5.4 million) at June 30, 2005. There were no outstanding borrowings under these agreements as of June 30, 2005.

Portcast Fundicao Nodular, SA, our wholly-owned foreign subsidiary, has various lines of credit for up to Euro 15.4 million (approximately $18.7 million). There was approximately $9.7 million outstanding under these credit lines as of June 30, 2005. Annual interest accrues at various rates from approximately 3% to 4% and is payable monthly.

On October 22, 2004, we entered into a $60.0 million debtor-in-possession credit facility, as amended through June 24, 2005 (the “DIP Facility”), to supplement our liquidity and fund operations during our bankruptcy proceedings. Available borrowings under the DIP Facility are determined based on a budget that is subject to approval by the collateral and administrative agents, and are subject to a borrowing base calculated as a percentage of our accounts receivable, inventory and fixed assets, less reserves and fees. Interest on borrowings made under the DIP Facility is a base rate plus 2.0% per annum or a Eurodollar rate plus 3.0% per annum. Principal repayments are made on a daily basis from our cash collections. Borrowings under the DIP Facility are secured by a first priority lien on substantially all of our domestic assets and a pledge of 65% of the stock of our foreign subsidiaries. The maturity date of the DIP Facility is the earlier of October 21, 2005 or the dates of certain accelerating events. In addition, the DIP Facility requires us to maintain certain financial covenants. The key financial covenants are limitations on capital expenditures and requirements that we achieve certain minimum consolidated EBITDA thresholds. At June 30, 2005, we were in compliance with all debt covenants under our DIP Facility. As a result of entering into the DIP Facility, we incurred $1.8 million of debt issuance costs in October 2004 which were deferred as “Other non-current assets” in the balance sheet. As of June 30, 2005 the balance outstanding under the DIP Facility was $29.7 million. The interest rate on the $29.7 million balance was 8.2%. The issuance of letters of credit also reduces the amount we have available under the DIP Facility. As of June 30, 2005, we had $10.8 million in letters of credit outstanding under the DIP Facility.

17

INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

June 30, 2005 (Unaudited)

8. Debt

Long-term debt consists of the following (in thousands of dollars):

	June 30,		December 31,
	2005		2004
INTERMET:
Revolving credit facility	$	46,931	$	43,661
Term loan		120,607		119,708
Domestic subsidiaries:
Capitalized leases		61		504
Foreign subsidiaries:
Bank term note		3,892		5,890
Capitalized leases		1,579		2,472
Total		173,070		172,235
Less: Long-term debt due within one year		170,918		168,180
Long-term debt due after one year	$	2,152	$	4,055

Due to the bankruptcy proceedings, unsecured pre-petition long-term debt has been reclassified to “Liabilities subject to compromise” in the June 30, 2005 and December 31, 2004 consolidated balance sheets. The following is the long-term debt included in liabilities subject to compromise (in thousands of dollars):

	June 30,		December 31,
	2005		2004
Senior notes	$	175,000	$	175,000
Industrial development bonds		2,000		2,000
Total debt included in liabilities subject to compromise	$	177,000	$	177,000

Bank Credit Agreement

On January 8, 2004, we refinanced our then-existing bank credit agreement by entering into a First Amended and Restated Credit Agreement, subsequently amended through June 24, 2005 (“Bank Credit Agreement”), which provided for a $90.0 million revolving credit line and a $120.0 million term loan. The Bank Credit Agreement is secured by substantially all of our domestic assets and a pledge of 65% of the stock of our foreign subsidiaries. The $90.0 million revolving credit portion has a maturity date of January 8, 2009, and the $120 million term loan has a maturity date of January 8, 2010. During 2004, principal payments of $0.6 million had been made towards the term loan before the filing of our bankruptcy proceedings. Due to the filing of our bankruptcy proceedings, we are in default under the Bank Credit Agreement. As a result, effective September 30, 2004 pricing on the revolving loan and term loan were modified to a floating rate. The annual interest rates as of June 30, 2005 were 7.5% for the revolving credit line and 8.0% for the term loan. Interest is payable monthly on both loans. In addition, and also effective as of September 30, 2004, we are required to accrue additional interest at an annual rate of 1.5%, which is added monthly to the outstanding loan balances for both the revolver and term loan.

In addition to borrowings under the $90.0 million credit line, we also had standby letters of credit outstanding totaling $21.5 million as of June 30, 2005. These letters of credit are used to guarantee the payment or performance of various obligations that we have, such as workers compensation and environmental remediation. These letters of credit are issued with one year maturity dates and re-issued for an additional year upon each maturity date. Any draws under the letters of credit increase the bank revolver balance and have a corresponding decrease in the outstanding letter of credit amounts.

18

INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

June 30, 2005 (Unaudited)

8. Debt (continued)

Both the term loan and the revolver have covenants that require us to maintain certain financial ratios, place restrictions on the amount that we can pay in dividends, as well as impose other covenants and restrictions. Since September 30, 2004, we were not in compliance with these covenants and the outstanding balances were included in “Long-term debt due within one year” in the consolidated balance sheet. As a result of entering into the Bank Credit Agreement, we incurred debt issuance costs during the first quarter and second quarter of 2004 of $2.4 million and $1.0 million, respectively. These costs are deferred and included in “Other non-current assets” in the accompanying balance sheet as of June 30, 2005 and December 31, 2004. In addition, capitalized debt issuance costs of $1.4 million related to our previous bank financing were written off in January 2004. In connection with the Plan of Reorganization, which contemplates repayment of the Bank Credit Agreement in October 2005, $1.7 million of debt issuance costs were written off in June 2005.

Also on January 8, 2004, we entered into a $35.7 million Letter of Credit Facility Agreement as well as a Cash Collateral agreement of the same amount. Under these agreements, we used $35.7 million of the proceeds from the Bank Credit Agreement term loan as cash collateral for the issuance of a $35.7 million letter of credit to continue a guaranty of payment on our Columbus Foundry revenue bonds in the amount of $35.0 million. These bonds were issued on December 23, 1999 by the Development Authority of Columbus, Georgia in connection with an expansion project at our Columbus Foundry. Because we were in default of our obligations, on October 29, 2004 these bonds were paid in full by a draw of the letter of credit and, subsequently, we released the cash collateral to our pre-petition lenders.

Senior Notes

On June 13, 2002, we completed an unsecured senior note offering of $175.0 million (the “Senior Notes”). The Senior Notes bear a fixed rate of interest of 9.75% and mature on June 15, 2009. The net proceeds of the Senior Note offering were used to pay the remaining balance on a then-existing bank term loan and for working capital purposes. Debt issuance costs of $5.9 million were capitalized in connection with the note offering and were included in “Other noncurrent assets” in the accompanying balance sheet and were being amortized over seven years. In September 2004, the remaining $4.0 million of capitalized debt issuance costs were written off. Interest on the Senior Notes is due each June 15 and December 15. The Senior Notes are unsecured and rank equally with all of our existing and future unsecured senior debt. We are in default under the Senior Notes and the balance due together with interest has been classified as “Liabilities subject to compromise” in the consolidated balance sheets. See Note 9, Supplemental Condensed Consolidating Financial Information, for additional information regarding the Senior Notes. Due to our Chapter 11 filing, interest that was due on December 15, 2004 and June 15, 2005 was not paid.

Columbus Foundry Revenue Bonds

On December 23, 1999 the Development Authority of Columbus Georgia issued $35.0 million in revenue bonds in connection with an expansion project at our Columbus Foundry. Certain equipment financed with proceeds of these bonds, together with the real property on which the foundry is situated, was leased by Columbus Foundry, L.P. from the development authority. We were required to maintain a letter of credit to secure payment of our obligations. As described above, on October 29, 2004 these bonds were paid in full with a draw of the letter of credit.

Lynchburg Foundry Company Revenue Bonds

Under the terms of an unsecured bond indenture, Lynchburg Foundry Company, our wholly-owned subsidiary, is required to make partial redemption of certain industrial development revenue bonds on an annual basis through June 2006. The redemption amount is $0.4 million per year, with a final payment at maturity of $1.7 million. The balance outstanding as of June 30, 2005 was $2.0 million. Lynchburg Foundry Company is in default of its obligations under these bonds. No letters of credit have been issued to secure payment of these bonds and they are otherwise unsecured. The bonds are subject to optional redemption prior to maturity and bear interest at an annual rate of 7.0%. Interest is paid semi-annually, however, the interest payments that were due in December 2004 and June 2005 were not paid due to the Chapter 11 filing. The outstanding balance together with interest has been classified as “Liabilities subject to compromise” in the accompanying consolidated balance sheets.

19

INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

June 30, 2005 (Unaudited)

8. Debt (continued)

Tool Products, Inc. Revenue Bonds

As part of our acquisition of Tool Products, Inc. in 1998, we assumed $4.5 million in obligations in connection with industrial development revenue bonds issued by the Industrial Development Board of the City of Jackson, Tennessee. These bonds were issued in connection with an expansion project at our Jackson, Tennessee facility. Certain equipment and real estate financed with the proceeds of these bonds was leased from the development board. We were required to maintain a letter of credit to secure payment of our obligations under these bonds. The terms of the indenture governing these bonds required us to make annual principal payments of $0.5 million every January, with a final maturity date of January 1, 2007. Because we were in default of our obligations, the letter of credit was drawn and these bonds were paid in full on December 1, 2004 in the amount of $1.5 million, which increased the balance under our bank revolving loan by the same amount.

Maturities of long-term debt at June 30, 2005 and for each twelve-month period thereafter are as follows (in thousands of dollars):

Twelve-month period ending:
June 30, 2006	$	170,918
June 30, 2007		1,243
June 30, 2008		605
June 30, 2009		304
Thereafter		—
	$	173,070

During our bankruptcy proceedings, we have not been paying interest on unsecured pre-petition obligations and as of the date of filing of the bankruptcy proceedings we ceased accruing interest on all unsecured pre-petition debt in accordance with SOP 90-7. Interest expense not accrued or recorded on unsecured pre-petition debt totaled $12.9 million at June 30, 2005.

20

INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

June 30, 2005 (Unaudited)

9. Supplemental Condensed Consolidating Financial Information

On June 13, 2002, we issued $175.0 million of senior notes, which will mature in 2009 (the “Senior Notes”). The Senior Notes are guaranteed by certain of our wholly-owned domestic subsidiaries (“Combined Guarantor Subsidiaries”). The guarantees are unconditional and joint and several. The Senior Notes are effectively subordinated to the secured debt of INTERMET Corporation (“Parent”). Restrictions contained in the indenture covering the Senior Notes include, but are not limited to, restrictions on incurring additional secured debt, repurchasing our capital stock, disposing assets, engaging in affiliate transactions and transferring assets. As of June 30, 2005, the Parent and the Combined Guarantor Subsidiaries had $197.3 million of secured debt outstanding and $19.5 million of unused commitments, net of outstanding letters of credit, under our credit facility. The secured debt of the Parent is also guaranteed by each of the Combined Guarantor Subsidiaries.

Certain of our domestic subsidiaries (Intermet International, Inc., Intermet Holding Company, Transnational Indemnity Company, and Western Capital Corporation) and all of our foreign subsidiaries are not guarantors of the Senior Notes (“Combined Non-Guarantor Subsidiaries”). The Combined Non-Guarantor Subsidiaries had $15.2 million of debt outstanding as of June 30, 2005.

Presented below are summarized condensed consolidating financial information for the Parent, the Combined Guarantor Subsidiaries, the Combined Non-Guarantor Subsidiaries and INTERMET on a consolidated basis as of June 30, 2005 and December 31, 2004, and for the three months and six months ended June 30, 2005 and 2004.

Investments in subsidiaries are presented using the equity method of accounting. Separate financial statements of the Combined Guarantor Subsidiaries are not provided as the condensed consolidating financial information contained herein provides a more meaningful disclosure to allow investors to determine the nature of the assets held by and the operations of the combined group.

The senior notes are unsecured pre-petition obligations. Under the Bankruptcy Code, actions to collect pre-petition indebtedness, as well as most other pending litigation, are stayed and other contractual obligations against us may not be enforced. On September 29, 2004 we ceased accruing interest on the Senior Notes and other liabilities subject to compromise in accordance with SOP 90-7.

21

INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

June 30, 2005 (Unaudited)

9. Supplemental Condensed Consolidating Financial Information (continued)

	Three Months Ended June 30, 2005
				Combined			Combined
				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
	(in thousands of dollars)
INCOME STATEMENT DATA
Net sales	$	—		$	163,987		$	56,231		($	4,326	)	$	215,892
Cost of sales		—			160,503			48,040			(4,056	)		204,487
Gross profit		—			3,484			8,191			(270	)		11,405
Selling, general and administrative expenses		1,616			5,689			3,961			(270	)		10,996
Reorganization charges		9,483			—			—			—			9,483
Restructuring and impairment charges		—			1,530			—			—			1,530
Operating (loss) profit		(11,099	)		(3,735	)		4,230			—			(10,604	)
Other (income) expenses, net:
Interest expense, net		1,912			3,463			471			—			5,846
Other (income) expense, net		(23	)		948			(51	)		—			874
(Loss) income from continuing operations before income taxes		(12,988	)		(8,146	)		3,810			—			(17,324	)
Income tax expense (benefit)		(257	)		735			1,413			—			1,891
(Loss) income from continuing operations		(12,731	)		(8,881	)		2,397			—			(19,215	)
Loss from discontinued operations, net of tax		—			(593	)		—			—			(593	)
Equity in net income (loss) of subsidiaries		(7,077	)		2,397			—			4,680			—
Net (loss) income	($	19,808	)	($	7,077	)	$	2,397		$	4,680		($	19,808	)

	Three Months Ended June 30, 2004
				Combined			Combined
				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
	(in thousands of dollars)
INCOME STATEMENT DATA
Net sales	$	—		$	176,350		$	44,112		($	3,277	)	$	217,185
Cost of sales		—			169,939			37,811			(3,277	)		204,473
Gross profit		—			6,411			6,301			—			12,712
Selling, general and administrative expenses		2,092			5,210			3,476			—			10,778
Restructuring and impairment charges		—			1,165			—			—			1,165
Operating (loss) profit		(2,092	)		36			2,825			—			769
Other (income) expenses, net:
Interest expense, net		5,335			2,301			355			—			7,991
Other (income) expense, net		(147	)		50			243			—			146
(Loss) income from continuing operations before income taxes		(7,280	)		(2,315	)		2,227			—			(7,368	)
Income tax benefit (expense)		2,343			(139	)		(35	)		—			2,169
(Loss) income from continuing operations		(4,937	)		(2,454	)		2,192			—			(5,199	)
Loss from discontinued operations, net of tax		—			(1,255	)		—			—			(1,255	)
Equity in net income (loss) of subsidiaries		(1,517	)		2,192			—			(675	)		—
Net (loss) income	($	6,454	)	($	1,517	)	$	2,192		$	(675	)	($	6,454	)

22

INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

June 30, 2005 (Unaudited)

9. Supplemental Condensed Consolidating Financial Information (continued)

	Six Months Ended June 30, 2005
				Combined			Combined
				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
	(in thousands of dollars)
INCOME STATEMENT DATA
Net sales	$	—		$	345,847		$	113,344		($	8,809	)	$	450,382
Cost of sales		—			335,885			98,117			(8,370	)		425,632
Gross profit		—			9,962			15,227			(439	)		24,750
Selling, general and administrative expenses		3,114			12,364			7,958			(439	)		22,997
Reorganization charges		17,683			—			—			—			17,683
Restructuring and impairment charges		—			2,932			—			—			2,932
Operating (loss) profit		(20,797	)		(5,334	)		7,269			—			(18,862	)
Other (income) expenses, net:
Interest expense, net		4,086			6,480			723			—			11,289
Other (income) expense , net		(164	)		769			(80	)		—			525
(Loss) income from continuing operations before income taxes		(24,719	)		(12,583	)		6,626			—			(30,676	)
Income tax expense (benefit)		(196	)		1,107			4,227			—			5,138
(Loss) income from continuing operations		(24,523	)		(13,690	)		2,399			—			(35,814	)
Loss from discontinued operations, net of tax		—			(984	)		—			—			(984	)
Equity in net income (loss) of subsidiaries		(12,275	)		2,399			—			9,876			—
Net (loss) income	($	36,798	)	($	12,275	)	$	2,399		$	9,876		($	36,798	)

	Six Months Ended June 30, 2004
				Combined			Combined
				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
	(in thousands of dollars)
INCOME STATEMENT DATA
Net sales	$	—		$	347,513		$	86,564		($	6,246	)	$	427,831
Cost of sales		—			334,472			73,403			(6,246	)		401,629
Gross profit		—			13,041			13,161			—			26,202
Selling, general and administrative expenses		3,595			11,024			6,882			—			21,501
Restructuring and impairment charges		—			1,165			—			—			1,165
Operating (loss) profit		(3,595	)		852			6,279			—			3,536
Other (income) expenses, net:
Interest expense, net		11,617			4,790			786			—			17,193
Other income, net		(344	)		(94	)		(7	)		—			(445	)
(Loss) income from continuing operations before income taxes		(14,868	)		(3,844	)		5,500			—			(13,212	)
Income tax benefit (expense)		2,072			(324	)		(876	)		—			872
(Loss) income from continuing operations		(12,796	)		(4,168	)		4,624			—			(12,340	)
Loss from discontinued operations, net of tax		—			(1,967	)		—			—			(1,967	)
Equity in net income (loss) of subsidiaries		(1,511	)		4,624			—			(3,113	)		—
Net (loss) income	($	14,307	)	($	1,511	)	$	4,624		$	(3,113	)	($	14,307	)

23

INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

June 30, 2005 (Unaudited)

9. Supplemental Condensed Consolidating Financial Information (continued)

	As of June 30, 2005
						Combined
				Combined Guarantor		Non-Guarantor
	Parent			Subsidiaries		Subsidiaries			Eliminations			Consolidated
	(in thousands of dollars)
BALANCE SHEET DATA ASSETS
Current assets:
Cash and cash equivalents	$	1,948		$	27	$	8,784		$	—		$	10,759
Accounts receivable, net		731			88,669		36,953			—			126,353
Inventories		—			55,214		22,285			(59	)		77,440
Other current assets		5,982			4,623		564			(2,231	)		8,938
Assets held for sale		—			1,794		—			—			1,794
Total current assets		8,661			150,327		68,586			(2,290	)		225,284
Other assets:
Property, plant and equipment, net		3,673			178,919		66,553			841			249,986
Other non-current assets		8,082			6,095		6,471			(808	)		19,840
Intercompany , net		(49,615	)		77,614		(31,757	)		3,758			—
Investments in subsidiaries		285,596			56,474		—			(342,070	)		—
Total assets	$	256,397		$	469,429	$	109,853		($	340,569	)	$	495,110
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	1,118		$	11,670	$	13,969		$	—		$	26,757
Accrued liabilities		22,143			38,791		17,730			58			78,722
Short-term lines of credit		29,700			—		9,686			—			39,386
Long-term debt due within one year		167,538			60		3,320			—			170,918
Total current liabilities		220,499			50,521		44,705			58			315,783
Liabilities subject to compromise		187,855			62,378		—			—			250,233
Non-current liabilities
Long-term debt due after one year		—			—		2,152			—			2,152
Retirement benefits		3,245			71,721		—			—			74,966
Other non-current liabilities		601			656		6,522			—			7,779
Total non-current liabilities		3,846			72,377		8,674			—			84,897
Shareholders’ equity (deficit)		(155,803	)		284,153		56,474			(340,627	)		(155,803	)
Total liabilities and shareholders’ equity (deficit)	$	256,397		$	469,429	$	109,853		($	340,569	)	$	495,110

24

INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

June 30, 2005 (Unaudited)

9. Supplemental Condensed Consolidating Financial Information (continued)

	As of December 31, 2004
						Combined
				Combined Guarantor		Non-Guarantor
	Parent			Subsidiaries		Subsidiaries			Eliminations			Consolidated
	(in thousands of dollars)
BALANCE SHEET DATA ASSETS
Current assets:
Cash and cash equivalents	$	1,477		$	252	$	9,510		$	—		$	11,239
Accounts receivable, net		654			77,806		36,065			—			114,525
Inventories		—			45,915		25,671			(59	)		71,527
Other current assets		6,812			6,175		654			(2,231	)		11,410
Other current assets		—			1,837		—			—			1,837
Total current assets		8,943			131,985		71,900			(2,290	)		210,538
Non-current assets:
Property, plant and equipment, net		8,738			189,781		76,865			859			276,243
Other non-current assets		13,853			10,881		2,116			(808	)		26,042
Intercompany , net		(50,741	)		78,189		(31,210	)		3,762			—
Investments in subsidiaries		291,505			64,426		—			(355,931	)		—
Total assets	$	272,298		$	475,262	$	119,671		($	354,408	)	$	512,823
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	1,986		$	7,958	$	20,025		$	—		$	29,969
Accrued liabilities		20,392			41,123		12,112			58			73,685
Short-term lines of credit		3,000			—		12,975			—			15,975
Long-term debt due within one year		163,369			504		4,307			—			168,180
Total current liabilities		188,747			49,585		49,419			58			287,809
Liabilities subject to compromise		186,820			63,644		—			—			250,464
Non-current liabilities
Long-term debt due after one year		—			—		4,055			—			4,055
Retirement benefits		4,786			66,196		—			—			70,982
Other non-current liabilities		600			5,795		1,773			—			8,168
Total non-current liabilities		5,386			71,991		5,828			—			83,205
Shareholders’ equity (deficit)		(108,655	)		290,042		64,424			(354,466	)		(108,655	)
Total liabilities and shareholders’ equity (deficit)	$	272,298		$	475,262	$	119,671		($	354,408	)	$	512,823

25

INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

June 30, 2005 (Unaudited)

9. Supplemental Condensed Consolidating Financial Information (continued)

	Six Months Ended June 30, 2005
				Combined			Combined
				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations		Consolidated
	(in thousands of dollars)
CASH FLOW DATA
Cash (used in) provided by continuing operating activities	($	29,740	)	$	1,154		$	7,233		$	—	($	21,353	)
Cash used in discontinued operations		—			(354	)		—			—		(354	)
Net cash (used in) provided by operating activities		(29,740	)		800			7,233			—		(21,707	)
Investing activities:
Additions to property, plant and equipment		(657	)		(3,967	)		(2,870	)		—		(7,494	)
Proceeds from sale of property, plant and equipment		—			3,385			—			—		3,385
Net cash used in investing activities		(657	)		(582	)		(2,870	)		—		(4,109	)
Financing activities:
Net (decrease) increase in lines of credit		3,270			—			(1,833	)		—		1,437
Proceeds from debtor-in-possession facility		26,700			—			—			—		26,700
Proceeds from (repayment of) other debts		898			(443	)		(1,951	)		—		(1,496	)
Net cash provided by (used in) financing activities		30,868			(443	)		(3,784	)		—		26,641
Effect of exchange rate changes on cash and cash equivalents		—			—			(1,305	)		—		(1,305	)
Net increase (decrease) in cash and cash equivalents	$	471		($	225	)	($	726	)	$	—	($	480	)

	Six Months Ended June 30, 2004
				Combined			Combined
				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations		Consolidated
	(in thousands of dollars)
CASH FLOW DATA
Cash (used in) provided by continuing operating activities	($	23,722	)	$	9,746		$	8,412		$	—	($	5,564	)
Cash provided by discontinued operations		—			223			—			—		223
Net cash (used in) provided by operating activities		(23,722	)		9,969			8,412			—		(5,341	)
Investing activities:
Additions to property, plant and equipment		(1,196	)		(8,884	)		(2,467	)		—		(12,547	)
Proceeds from sale of property, plant and equipment		300			79			—			—		379
Net cash used in investing activities		(896	)		(8,805	)		(2,467	)		—		(12,168	)
Financing activities:
Net decrease in revolving credit facility		(49,000	)		—			(424	)		—		(49,424	)
Proceeds from term loan		120,000			—			—			—		120,000
Repayment of other debts		(600	)		(1,087	)		(974	)		—		(2,661	)
Funding of restricted cash		(35,819	)		—			—			—		(35,819	)
Payment of debt issuance costs		(3,359	)		—			—			—		(3,359	)
Dividends paid		(2,051	)		—			—			—		(2,051	)
Issuance of common stock		13			—			—			—		13
Net cash (used in) provided by financing activities		29,184			(1,087	)		(1,398	)		—		26,699
Effect of exchange rate changes on cash and cash equivalents		—			—			(880	)		—		(880	)
Net increase in cash and cash equivalents	$	4,566		$	77		$	3,667		$	—	$	8,310

26

INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

June 30, 2005 (Unaudited)

10. Commitments and Contingencies

We are subject to federal, state, local and foreign environmental laws and regulations concerning, among other things, air emissions, effluent discharges, storage treatment and disposal of hazardous materials and remediation of contaminated soil and groundwater. At some of our industrial sites, hazardous materials have been managed for many years. Consequently, we are subject to various environmental laws that impose compliance obligations and can create liability for historical releases of hazardous substances. It is likely that we will be subject to increasingly stringent environmental standards in the future and that we will be required to make additional expenditures, which could be significant, relating to environmental matters on an ongoing basis.

The 1990 amendments to the Federal Clean Air Act and regulations promulgated thereunder are expected to have a major impact on the compliance cost of many U.S. companies, including foundries of the type we own. We are in the process of reviewing Maximum Achievable Control Technology Standards that will be applicable to our industry.

We also have current and former operating entities (for which we may be responsible) that are potentially responsible for clean-up of known environmental sites. These include third-party-owned sites, as well as sites that are currently owned, or formerly owned, by us or our subsidiaries. For known environmental sites, we have recorded reserves, on an undiscounted basis, to cover estimated future environmental expenditures. Environmental reserves were $6.2 million as of June 30, 2005. These reserves include a $3.1 million cash escrow account acquired as a part of our acquisition of Ganton Technologies in 1999 that is being used to fund the clean-up of an inactive property located in Addison, Illinois. The reserves also include $2.2 million for the now-closed Radford Foundry, which is discussed below. There can be no assurance that costs in excess of these accruals will not be incurred, or that unknown conditions will not be discovered that result in material additional expenditures by us for environmental matters.

On March 14, 2002, we entered into a Consent Order with the U.S. Environmental Protection Agency (“USEPA”), which will require investigation of the nature and extent of any hazardous waste disposed of at our Radford Foundry. We entered into this Consent Order in connection with the USEPA’s Corrective Action Program, which is being undertaken on a nationwide basis by USEPA pursuant to the Resource Conservation and Recovery Act of 1976. The Corrective Action Program requires facilities that have historically generated or handled hazardous waste to determine whether those activities have or could adversely affect groundwater or human health. Because we historically disposed of waste material at this site, it is probable that remedial action will be required with respect to that on-site disposal. We have accrued $2.2 million for such remediation activity based on our investigation to date. However, our investigation of this site will continue and it is possible that ultimate remediation costs could exceed the amounts that we have accrued.

We are also a party to other legal proceedings in the ordinary course of our business, most of which were stayed with the filing of our bankruptcy cases on September 29, 2004. At the present time, we do not believe that any of these proceedings will have a material adverse effect on our results of operations.

We self-insure a significant portion of our health care and property and casualty insurance risks. We purchase additional insurance for catastrophic losses. We carry a $2.5 million property deductible per occurrence.

27

INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

June 30, 2005 (Unaudited)

11. Retirement Benefits

We maintain six noncontributory defined benefit pension plans for certain of our U.S. employees. Our policy is to fund amounts as required under applicable laws and regulations. In addition, we provide health care and life insurance benefits to certain retired U.S. employees and their dependents.

The components of net periodic benefit cost are as follows (in thousands of dollars):

							Other
	Pension Benefits						Postretirement Benefits
	Three Months Ended June 30,
	2005			2004			2005			2004
Service cost	$	631		$	587		$	113		$	112
Interest cost		1,586			1,557			553			608
Expected return on plan assets		(1,492	)		(1,421	)		—			—
Amortization of prior service cost		210			230			(93	)		(91	)
Amortization of loss (gain)		647			537			40			38
Curtailment loss		1,626			—			—			—
Net periodic benefit cost	$	3,208		$	1,490		$	613		$	667

							Other
	Pension Benefits						Postretirement Benefits
	Six Months Ended June 30,
	2005			2004			2005			2004
Service cost	$	1,261		$	1,174		$	226		$	224
Interest cost		3,173			3,115			1,106			1,216
Expected return on plan assets		(2,984	)		(2,843	)		—			—
Amortization of prior service cost		421			460			(186	)		(182	)
Amortization of loss (gain)		1,293			1,074			80			75
Curtailment loss		1,626			—			—			—
Net periodic benefit cost	$	4,790		$	2,980		$	1,226		$	1,333

We previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2004 that we expected to contribute $8.1 million to our pension plans in 2005. As of June 30, 2005, no contributions have been made. We presently expect to contribute $7.8 million to fund our pension plans in 2005.

Our measurement of the Wagner Castings Company postretirement medical obligations includes the anticipated impact of the federal subsidy enabled by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. These effects are measured in accordance with the Financial Accounting Standards Board Staff Position (FSP FAS106-2). For expense, the impact is to be recognized prospectively, beginning with the 2005 fiscal year expense and are believed to be reasonable best estimates based on the “two-pronged” approach to subsidy determination set forth in the regulations. Under this standard, the Wagner Casting Company’s post-Medicare prescription drug plan is “actuarially equivalent” for all retirees receiving medical benefits after 65 years of age (except for hourly participants who retired prior to June 1, 1980) as the value of the plan benefits exceeds the value of Medicare Part D benefits less participant premiums. The annual Medicare subsidy is projected to be $623 per person starting in 2006. This average subsidy amount is assumed to increase at a rate of 8.12% in 2007 decreasing to 5.0% in 2022 and thereafter. With respect to our other (non-Wagner) retiree medical plans, because we do not provide prescription drug benefits to retirees after age 65, it is assumed that the employer will not qualify for the federal subsidy. The Act had no impact on disclosed results.

We recognized a curtailment in the Wagner Castings Company Pension Plan as of June 30, 2005, resulting in a $1.6 million increase to our pension cost.

28

INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

June 30, 2005 (Unaudited)

12. Income Taxes

The effective tax rate differs from the United States statutory rate primarily as a result of the provision of valuation allowances on domestic losses until the pre-tax profit of our domestic operations exceeds our accumulated tax loss and credits carryforward. As a result of the accumulation of losses in the past three years, the deferred tax asset derived from the pre-tax loss of our domestic operations is fully reserved. Income tax expense in 2005 and 2004 was mainly comprised of state tax expense on our domestic operations and tax expense on our profitable foreign operations. The income tax benefit in the second quarter of 2004 reflected the recording of tax refunds of $2.7 million not previously provided for which were identified after the United States Internal Revenue Service completed their examination of our tax year 2001.

13. Reporting for Business Segments

We evaluate our financial results in two business segments, the Ferrous Metals segment and the Light Metals segment. Our segment reporting is consistent with the manner in which our business is managed and our resources are allocated by management. The Ferrous Metals segment consists of ferrous foundry operations and their related machining operations. The Light Metals segment consists of aluminum, magnesium and zinc casting operations and their related machining operations. The Corporate and Other segment includes operations that do not fall within the Ferrous Metals segment or Light Metals segment, and the corporate business unit and its related expenses and eliminations. Selected financial information of each of our business segments is as follows:

	Ferrous			Light			Corporate
	Metals			Metals			and Other			Consolidated
				(in thousands of dollars)
Three-month period ended June 30, 2005:
Net sales	$	156,964		$	58,928		$	—		$	215,892
Operating loss	$	9,898		($	9,411	)	($	11,091	)	($	10,604	)
Interest expense, net		(471	)		23			(5,398	)		(5,846	)
Other (expense) income, net		(585	)		(250	)		(39	)		(874	)
Income tax expense		(1,515	)		(241	)		(135	)		(1,891	)
Loss from discontinued operations, net of tax		(593	)		—			—			(593	)
Net loss										($	19,808	)
Three-month period ended June 30, 2004:
Net sales	$	145,383		$	71,802		$	—		$	217,185
Operating profit (loss)	$	3,276		($	358	)	($	2,149	)	$	769
Interest expense, net		(347	)		(18	)		(7,626	)		(7,991	)
Other income, net		(282	)		(14	)		150			(146	)
Income tax (expense) benefit		(93	)		(81	)		2,343			2,169
Income (loss) from discontinued operations, net of tax		(1,255	)		—			—			(1,255	)
Net loss										($	6,454	)

29

INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

June 30, 2005 (Unaudited)

13. Reporting for Business Segments (continued)

	Ferrous			Light			Corporate
	Metals			Metals			and Other			Consolidated
				(in thousands of dollars)
Six-month period ended June 30, 2005:
Net sales	$	319,644		$	130,738		$	—		$	450,382
Operating loss	$	14,304		($	10,689	)	($	22,477	)	($	18,862	)
Interest expense, net		(723	)		13			(10,579	)		(11,289	)
Other income (expense), net		(376	)		(250	)		101			(525	)
Income tax (expense) benefit		(4,429	)		(511	)		(198	)		(5,138	)
Loss from discontinued operations, net of tax		(984	)		—			—			(984	)
Net loss										($	36,798	)
As of June 30, 2005:
Total assets	$	324,372		$	145,596		$	25,142		$	495,110
Six-month period ended June 30, 2004:
Net sales	$	286,533		$	141,298		$	—		$	427,831
Operating profit (loss)	$	6,594		$	1,631		($	4,689	)	$	3,536
Interest expense, net		(771	)		(40	)		(16,382	)		(17,193	)
Other income, net		112			(4	)		337			445
Income tax (expense) benefit		(1,012	)		(188	)		2,072			872
Loss from discontinued operations, net of tax		(1,967	)		—			—			(1,967	)
Net loss										($	14,307	)
As of December 31, 2004:
Total assets	$	378,720		$	104,031		$	30,072		$	512,823

14. Loss per Share

Loss per share is computed as follows:

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2005			2004			2005			2004
	(in thousands of dollars, except per share data)
Numerator:
Net loss	($	19,808	)	($	6,454	)	($	36,798	)	($	14,307	)
Denominator:
Denominator for basic and diluted loss per share – weighted average shares		25,665			25,599			25,665			25,597
Basic and fully diluted loss per share	($	0.77	)	($	0.25	)	($	1.44	)	($	0.56	)

The impact on fully diluted loss per share of the assumed exercise of stock options and unearned restricted stock was not material.

30

INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

June 30, 2005 (Unaudited)

15. Derivative Financial Instruments

Under our risk management policy, the use of derivatives for managing risk is confined to hedging the exposure related to variable rate funding activities, hedging the foreign currency exposure of inter-company payables and receivables and hedging purchase commitments relating to raw materials used in our production processes and related energy costs. Specifically, we review our liability structure on a recurring basis and make the determination as to whether our risk exposure should be adjusted using derivative instruments. We do not participate in speculative derivatives trading.

In addition to these derivative financial instruments, we have other contracts for the purchase of raw materials and energy that have the characteristics of derivatives but are not required to be accounted for as derivatives. These contracts for the physical delivery of commodities qualify for the normal purchases and normal sales exception under SFAS No. 133 as we take physical delivery of the commodity and use it in the production process. This exception is an election and, if not elected, these contracts would be carried on our balance sheet at fair value with changes in the fair value reflected in earnings.

16. Subsequent Events

On August 9, 2005, we entered into a Revised Restructuring Commitment Letter, pursuant to which certain of the holders of our Senior Notes would underwrite a $75 million rights offering as a part of our bankruptcy reorganization. On August 9, 2005, the Bankruptcy Court approved the Revised Restructuring Commitment Letter, which was filed with the Securities and Exchange Commission on August 12, 2005 on a Form 8-K.

On August 12, 2005, we filed an Amended Plan of Reorganization and related Amended Disclosure Statement with the Bankruptcy Court. On August 12, 2005, the Bankruptcy Court approved the Amended Disclosure Statement and related solicitation and balloting procedures and set September 26, 2005 as the date the confirmation hearing with respect to the Amended Plan of Reorganization is scheduled to begin. On August 15, 2005, we filed our Amended Plan of Reorganization and related Amended Disclosure Statement with the Securities and Exchange Commission on a Form 8-K.

31

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Quantitative and Qualitative Disclosures about Market Risks contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in these sections, 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 INTERMET or its management, are not guarantees of future performance and involve risks and uncertainties. We undertake no obligation to publicly update or revise any forward-looking statements. The following factors are important and should be considered carefully in connection with any evaluation of INTERMET’s business, financial condition, results of operations and prospects. The following factors could cause our actual results to differ materially from those reflected in any forward-looking statements we may make from time to time. The factors identified here do not represent an exhaustive list of potential risks involved in our business and we undertake no obligation to publicly update or revise the following risk factors:

• On September 29, 2004, we and seventeen of our wholly-owned domestic subsidiaries filed voluntary bankruptcy petitions for reorganization under Chapter 11 of the United States Bankruptcy Code, and we are currently operating as debtors-in-possession under the supervision of the bankruptcy court. Although we are working to obtain confirmation of a plan of reorganization, we need to secure adequate equity and/or debt financing to do so to fund payments under a plan and to provide adequate liquidity for our post-bankruptcy operations. Our inability to timely exit bankruptcy could materially and adversely impact our business if it affects our ability to obtain new product awards or renewals of existing product awards from our customers.

• In connection with our September, 2004 bankruptcy filing we entered into a debtor-in-possession revolving credit facility in October, 2004 which expires October 2005. This facility contains a number of financial covenants and other requirements. We rely on this facility to fund our operations and provide necessary liquidity during the pendency of our Chapter 11 proceeding. Our business would be materially and adversely impacted if we were unable to borrow under this facility due to our failure to meet the covenants and other conditions required for continued borrowings under this facility.

• Sales to the automotive industry accounted for substantially all of our sales in 2004. In addition, our automotive sales are highly concentrated among a few major customers, and our products are generally sold for specific vehicle programs. Therefore, the loss of any significant customer or vehicle program could have a material adverse effect on our business. Additionally, sales of our products are dependent on unit sales of the applicable vehicle models and any reduction in sales or failure to meet sales estimates of vehicle models could also have a material adverse effect on our business.

• As is typical in the automotive supply industry, we have no long-term contracts with our customers for most of the products that we supply. While our customers provide annual estimates of their requirements and update those estimates from time to time throughout the year, most of our sales are made on a short-term purchase order basis, which generally can be terminated by the customer.

• If one or more of our customers were to initiate bankruptcy or insolvency proceedings, it could render a material portion of our accounts receivable uncollectible or substantially impaired, which could have a material adverse effect on our financial condition.

• A challenge that we and other automotive industry suppliers face is the pressure from our customers to reduce the prices we charge for our products. To the extent this trend continues, it puts pressure on our margins and profitability, and could have a material and adverse effect on our financial condition.

• The automotive industry is cyclical and dependent on consumer spending. General economic factors that adversely affect automotive sales could adversely impact our business. In addition, our business is seasonal due to lower sales in the third and fourth quarters due to the pass-through effect of plant closings by OEMs for holidays, vacations and model changeovers. Nevertheless, a substantial percentage of our costs are generally not seasonal due to our need for continued expenditures for capital equipment, product development and ongoing production improvements and support, as well as other factors, making it difficult for us to significantly reduce operating expenses in a particular period even if our net sales forecasts for that period are less than other periods.

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• Our product lines are subject to change as OEMs introduce new or redesigned products and vehicles. We compete for new business both at the beginning of the development phase of new vehicles, which generally begins two to five years prior to the marketing and public sale of models based upon such vehicles, and upon redesign of existing vehicles. Our sales would be adversely affected if we fail to obtain business for new vehicles, or fail to retain or increase business on redesigned existing vehicles.

• The substantial increases in scrap steel and other raw material costs that we have experienced were the primary factors leading to our bankruptcy filing in September of 2004. Energy costs have also risen. If raw material and energy costs continue to increase, and we are unable to pass a substantial portion of those costs on to our customers on a timely basis, it could have a material adverse effect on our financial condition.

• We are substantially leveraged and must generate enough cash to make required interest and other payments under our debtor-in-possession revolving credit facility. In the event we do not generate enough cash, a default would occur under the facility unless the lenders agreed to an amendment or a waiver. Any default would have a material adverse effect on our business. Additionally, our debt under the facility accrues interest at a rate that varies with prevailing market rates. Therefore, increases in market interest rates would increase our interest payment obligations under the facility and could have a material adverse effect on our financial condition.

• A substantial percentage of our hourly employees, as well as those of our OEM and Tier 1 customers, are represented by labor unions and work pursuant to collective bargaining agreements. Our failure, or the failure of any of our significant customers, to reach agreement with a labor union on a timely basis, resulting in either a work stoppage or strike, could have a material adverse effect on our business.

• We operate production facilities in Germany and Portugal, in addition to our production facilities in the United States, that expose us to the risks associated with non-U.S. operations, including: (i) fluctuations in currency exchange rates; (ii) compliance with the law and other regulatory requirements of non-U.S. jurisdictions; (iii) overlapping and potentially inconsistent tax structures; and (iv) possible restrictions or limitations imposed on the repatriation of funds. Any of these risks could lave a material adverse effect on our business or financial condition.

• We are subject to U.S. and non-U.S. environmental laws and regulations governing the emission, discharge, generation, handling, storage, transportation, treatment and disposal of hazardous and waste materials and the clean-up of contaminated property. Although we have made and continue to make expenditures to comply with environmental laws and regulations, future compliance with these laws may have a material adverse effect on our business or financial condition. Additionally, if an improper release of hazardous materials occurs on or from our property or from any offsite disposal site that receives or has received such materials from us or any of our predecessors, or if contamination is discovered at any of our or our predecessors current or former properties, we could be held liable for such release or for the cost to remediate contaminated property, and such liability could have a material adverse effect on our financial condition.

Material Changes in Results of Operations – Three months ended June 30, 2005

Sales for the second quarter of 2005 were $215.9 million, a decrease of $1.3 million or 0.6% as compared to sales of $217.2 million in the same period in 2004. Ferrous Metals segment sales were $157.0 million during the second quarter of 2005 compared to $145.4 million for the same period in 2004, representing an increase in sales of $11.6 million or 8.0%. Included as part of Ferrous Metals segment sales, European sales during the three months ended June 30, 2005 were $56.2 million, an increase of $12.1 million or 27.4% compared to European sales of $44.1 million for the same period in 2004. The overall increase in Ferrous Metals segment sales is mainly attributable to new business launches in our European operations and scrap steel surcharges in both North American and European operations, partially offset by lower North American Ferrous sales volumes. Light Metals segment sales were $58.9 million during the second quarter of 2005, a decrease of $12.9 million or 18.0% compared to $71.8 million for the same period in 2004. The decrease in sales is mainly attributed to lower sales associated with the closure of our Racine, Wisconsin operations.

Gross profit for the three months ended June 30, 2005 and 2004 were $11.4 million and $12.7 million, respectively. Gross profit as a percentage of sales for the three months ended June 30, 2005 and 2004 was 5.3% and 5.9%, respectively. The decrease in gross profit margin reflects the effect of the wind down and closure of our Racine, Wisconsin aluminum die casting and machining facilities, start-up costs and operating inefficiencies associated with product launches, sales volume increases during this period and operational difficulties experienced at certain Light Metals facilities.

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Selling, general and administrative expenses for the three months ended June 30, 2005 and 2004 were 5.1% and 5.0% of sales, respectively.

Reorganization related expenses of $9.5 million were recorded in the three months ended June 30, 2005, consisting primarily of professional fees and write-off of capitalized debt issuance costs in connection with the bankruptcy proceedings.

Restructuring and impairment charges of $1.5 million were also recorded in the three months ended June 30, 2005. These charges consisted of a pension curtailment $1.6 million relating to the Decatur Foundry closing that was announced in March 2005 and the reversal of the remaining $0.1 million of accruals for employee severance and benefit costs related to the Havana closure. Restructuring charges of $1.2 million were recorded in the second quarter of 2004 for the closure of our Havana Foundry. The charge included costs to transfer the production of Havana Foundry to our other facilities and employee separation costs. Reorganization expenses of $7.8 million were also recorded in the second quarter of 2005.

Net interest expense for the second quarter of 2005 was $5.8 million, which was $2.2 million less than the same period of 2004. The decrease is due to cessation of interest expense accrual on our Senior Notes following our bankruptcy filing on September 29, 2004, partially offset by increased interest rates also associated with our bankruptcy filing.

In the second quarter of 2005, the Company recorded tax expense of $1.9 million on a pre-tax net loss of $17.3 million. The income tax benefit in the second quarter of 2004 reflected the recording of tax refunds of $2.7 million identified after the United States Internal Revenue Service completed their examination of our tax year 2001. Excluding this amount, income tax expense in the three months ended June 30, 2004 was $0.5 million. The income tax expense in the second quarter of 2005 and 2004 were mainly comprised of state tax expense on our domestic operations and tax expense on our profitable foreign operations. No federal tax benefit was recorded on the pre-tax loss of our domestic operations. As a result of the accumulation of losses in the past three years, the deferred tax asset derived from the pre-tax loss of our domestic operations is fully reserved.

Material Changes in Results of Operations – Six months ended June 30, 2005

Sales for the six months ended June 30, 2005 were $450.4 million, an increase of $22.6 million or 5.3% as compared to sales of $427.8 million in the same period in 2004. Ferrous Metals segment sales were $319.6 million during the six months ended June 30, 2005 compared to $286.5 million for the same period in 2004, representing an increase in sales of $33.1 million or 11.6%. Included as part of Ferrous Metals segment sales, European sales during the six months ended June 30, 2005 were $113.3 million, an increase of $26.7 million or 30.1% as compared to European sales of $86.6 million for the same period in 2004. The overall increase in Ferrous Metals segment sales is mainly attributable to new business launches in our European operations and scrap steel surcharges in both North American and European operations, partially offset by lower North American Ferrous sales. Light Metals segment sales were $130.7 million during the six months ended June 30, 2005, a decrease of $10.6 million or 7.5% compared to $141.3 million for the same period in 2004. The decrease in sales is mainly attributed to lower sales associated with the closure of our Racine, Wisconsin operations.

Gross profit for the six months ended June 30, 2005 and 2004 was $24.7 million and $26.2 million, respectively. Gross profit as a percentage of sales for the six months ended June 30, 2005 and 2004 was 5.5% and 6.1%, respectively. The decrease in gross profit margin reflects the effect of the wind down and closure of our Racine, Wisconsin aluminum die casting and machining facilities, start-up costs and operating inefficiencies associated with product launches, sales volume increases during this period and operational difficulties experienced at certain Light Metals facilities.

Selling, general and administrative expenses for the six months ended June 30, 2005 and 2004 were 5.1% and 5.0% of sales, respectively.

Reorganization related expenses of $17.7 million were recorded in the six months ended June 30, 2005, consisting primarily of professional fees and write-off of capitalized debt issuance costs in connection with the bankruptcy proceedings.

Restructuring and impairment charges of $2.9 million were also recorded in the six months ended June 30, 2005. These charges consisted of the write-down of $1.4 million to reduce inventories to their fair values and a pension curtailment $1.6 million relating to the Decatur Foundry closing that was announced in March 2005, partially offset by the reversal of the remaining $0.1 million of accruals for employee severance and benefit costs related to the Havana closure. Restructuring charges of $1.2 million were recorded in the second quarter of 2004 for the closure of our Havana Foundry. The charge included costs to transfer the production of Havana Foundry to our other facilities and employee separation costs. Reorganization expenses of $16.0 million were also recorded in the six months ended June 30, 2005.

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Net interest expense for the six months ended June 30, 2005 was $11.3 million, which was $5.9 million less than the same period last year. The decrease is due to cessation of interest expense accrual on our Senior Notes following our bankruptcy filing on September 29, 2004, partially offset by increased interest rates also associated with our bankruptcy filing and the write-off of loan fees of $1.4 million in the first quarter of 2004.

For the six months ended June 30, 2005, the Company recorded tax expense of $5.1 million on a pre-tax loss of $30.7 million. The income tax benefit in the six months ended June 30, 2004 reflected the recording of tax refunds of $2.7 million identified after the United States Internal Revenue Service completed their examination of our tax year 2001. Excluding this amount, income tax expense in the six months ended June 30, 2004 was $1.8 million which was mainly comprised of state tax expense on our domestic operations and the income tax expense on our profitable foreign operations. No federal tax benefit was recorded on the pre-tax loss of our domestic operations. Federal tax expense or benefit will not be recorded until the pre-tax profit of our domestic operations exceeds our accumulated tax loss and credits carryforward. As a result of the accumulation of losses in the past three years, the deferred tax asset derived from the pre-tax loss of our domestic operations is fully reserved.

Material Changes in Financial Condition, Liquidity and Capital Resources

Through the second quarter of 2005, net cash used in operations totaled $21.7 million compared to $5.3 million for the same period in 2004. Depreciation and amortization expense for the six months ended June 30, 2005 and 2004, excluding depreciation expense related to our discontinued operations, was $21.7 million and $25.3 million, respectively. For the six months ended June 30, 2005, after adjusting for the effect of exchange rates, accounts receivable increased by $15.9 million due to increased sales, inventory increased by $8.8 million, accounts payable increased by $2.6 million and accrued liabilities increased $8.0 million.

Cash and cash equivalents at June 30, 2005 were $10.8 million, as compared to $11.2 million at December 31, 2004.

On September 29, 2004 we filed our bankruptcy proceedings. As a result of our filing, we are no longer able to borrow under our bank revolving credit facility. For a description of our debt arrangements following our bankruptcy filing, see Note 7, Short-term Lines of Credit, and Note 8, Debt, of our Notes to Interim Condensed Consolidated Financial Statements (Unaudited) included in this report. On October 1, 2004, we received a written notice from The NASDAQ Stock Market (“Nasdaq”) that our shares of common stock would be delisted at the opening of business on October 12, 2004 in accordance with Marketplace Rule 4815(a), based on Nasdaq’s determination that we did not comply with the continued listing requirements under Marketplace Rules 4300 and 4450(f). Since October 12, 2004, our common stock, $0.10 par value, has been traded on the Pink Sheets under the symbol “INMTQ” and had a closing price of $0.05 on August 5, 2005. On August 5, 2005, there were approximately 459 record holders of our common stock.

Critical Accounting Policies and Use of Estimates

Our interim condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which require management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We evaluate estimates used in the preparation of our financial statements on a continual basis. Actual results may differ from the estimates. Our critical accounting policies, and our methods and policies used to establish estimates and assumptions, previously disclosed in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Use of Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2004, and have not changed.

Item 3. Quantitative and Qualitative Disclosures about Market Risks

We have exposure to four types of market risk. The first is the risk of interest rate changes and how it impacts our interest expense and current results. Second, we have risk with regard to foreign currency and its impact on our European operating results. Third, we have risk related to commodity pricing, including energy costs, and the costs of scrap steel, aluminum, magnesium and zinc. The cost of scrap steel has increased steadily since early 2002 and represents a significant risk to our operating results, liquidity and ability to borrow. Lastly, we have consumer risk. We operate principally in the cyclical automotive industry, which is affected by economic conditions and consumer spending. A weakening of the economy represents a risk to our operating results.

Other than the continued volatility in the cost of scrap steel, there has been no material change to our exposures to market risk since December 31, 2004.

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Item 4. Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of June 30, 2005. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are not effective in timely alerting them and our management to information that is required to be included in our periodic SEC reports and filings. We have reached this conclusion because of the material weakness in internal control over financial reporting described below.

Except as noted above, there was no change in our internal control over financial reporting that occurred during the quarter ended June 30, 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Our Annual Report on Form 10-K for the year ended December 31, 2004 contains management’s report on internal controls over financial reporting as of December 31, 2004, which identified a material weakness in internal controls over financial reporting relating to our financial statement closing process.

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Part II – Other Information

Item 1. Legal Proceedings

On September 29, 2004, INTERMET Corporation and seventeen of its domestic subsidiaries filed voluntary petitions in the U.S. Bankruptcy Court for the Eastern District of Michigan seeking relief under Chapter 11 of the United States Bankruptcy Code. Along with our subsidiaries that filed for Chapter 11 protection, we are continuing to operate our businesses as debtors-in-possession under the jurisdiction of the U.S. Bankruptcy Court and in accordance with the provisions of the Bankruptcy Code. See Note 3, Voluntary Reorganization under Chapter 11 and Administration, for further details.

INTERMET Corporation received a Notice of Violation from the Illinois EPA dated March 11, 2005 alleging that prior releases of contaminants to the soil and groundwater at the former Havana Foundry violated various Illinois environmental statutes and regulations. A proposed Compliance Commitment Agreement has been sent to Illinois EPA in which Wagner-Havana, Inc. has proposed to address the allegations contained in the Notice of Violation by continuing remediation activity at the site as provided in the Illinois Site Remediation Program. The company expects that Illinois EPA will accept the Compliance Commitment Agreement.

INTERMET Corporation received a Notice of Violation from the Illinois EPA dated April 20, 2005 alleging that releases of unspecified contaminants to the soil and groundwater at the Decatur Foundry violated various Illinois environmental statutes and regulations. A proposed Compliance Commitment Agreement has been sent to Illinois EPA in which Wagner Castings Company has proposed to continue remediation activity at the site as provided in the Illinois Site Remediation Program. To date, Illinois EPA has not responded to Wagner Castings’ proposed Compliance Commitment Agreement.

See Note 10, Commitments and Contingencies, incorporated herein by reference, for a description of other environmental matters, including environmental matters relating to our Radford Foundry.

There have been no other material changes in matters reported in the Form 10-K for the year ended December 31, 2004.

We are a party to a number of legal proceedings in the ordinary course of our business, most of which were stayed upon the filing of our bankruptcy cases on September 29, 2004. We do not believe that such pending or threatened legal proceedings, will have a material adverse effect on our consolidated financial position or results of operations or liquidity, taken as a whole. It is possible, however, that future results of operations for any particular quarterly or annual period could be materially affected by changes in our assumptions related to these proceedings.

Item 2. Changes in Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities

See Note 8, Debt, incorporated herein by reference, for a description of defaults under various credit agreements triggered by the voluntary bankruptcy petitions on September 29, 2004.

Item 4. Submission of Matters to a Vote of Securities Holders

None.

Item 5. Other Information

None.

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Item 6. Exhibits

(a) Exhibits

Exhibit
Number	Description of Exhibit
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

INTERMET Corporation
By:	/s/ Robert E. Belts
	Robert E. Belts
	Vice President of Finance and
	Chief Financial Officer
Date:	August 15, 2005

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EXHIBIT INDEX

Exhibit
Number	Description of Exhibit
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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