UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2000, or |
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Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to . |
Commission File Number 0-17028
Ironton Iron, Inc.
(Exact name of registrant as specified in its charter)
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| Ohio |
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31-1117407 |
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(State or other jurisdiction of
incorporation or organization) |
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(IRS Employer
Identification No.) |
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| 5445 Corporate Drive, Suite 200, Troy Michigan |
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48098-2683 |
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| (Address of principal executive offices) |
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(Zip code) |
(248) 952-2500
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
At May 5, 2000 there were 23,000 shares of Common Stock, no par value,
outstanding.
TABLE OF CONTENTS
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Ironton Iron, Inc.
(In Process of Orderly Shutdown)
Statement of Net Liabilities in Liquidation
(in thousands of dollars)
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March 31,
2000 |
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December 31,
1999 |
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| Assets: |
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Cash |
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$ |
25 |
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$ |
16 |
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Accounts receivable |
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3,396 |
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6,654 |
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Inventories |
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1,104 |
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1,831 |
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Assets held for sale |
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6,862 |
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8,093 |
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| Total assets |
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11,387 |
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16,594 |
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| Liabilities: |
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Accounts payable |
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429 |
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2,699 |
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Accrued liabilities |
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1,852 |
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2,310 |
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Shutdown costs |
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7,552 |
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7,789 |
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Accrued net operating losses |
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— |
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4,700 |
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Due to affiliates |
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73,195 |
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68,822 |
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| Total liabilities |
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83,028 |
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86,320 |
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| Net liabilities in liquidation |
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($71,641 |
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($69,726 |
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See accompanying notes.
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Ironton Iron, Inc.
(In Process of Orderly Shutdown)
Statement of Deficiency
(in thousands of dollars)
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Net Liabilities |
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In |
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Liquidation |
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| Net liabilities in liquidation at January 1, 2000 |
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69,726 |
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Adjust net liabilities in liquidation to fair value |
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1,915 |
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| Net liabilities in liquidation at March 31, 2000 |
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$ |
71,641 |
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See accompanying notes.
3
Ironton Iron, Inc.
(In Process of Orderly Shutdown)
Notes to Interim Condensed Financial Statements
1. Summary of Significant Accounting Policies
Background and Summary of Significant Developments
Until March 31, 2000 Ironton Iron, Inc. was engaged in the production and sale
of ductile iron castings, primarily for the automotive industry. Ironton is a
subsidiary of INTERMET Corporation.
During the fourth quarter of 1999, INTERMET’s board of directors authorized the
closure of Ironton and INTERMET’s management approved and announced its plan
for the orderly shutdown of Ironton. Ironton ceased all operations on March
31, 2000 and terminated approximately 575 employees during the first quarter as
a result of the shutdown. At March 31, 2000, 15 people were still employed by
Ironton, mainly in accounting and administrative functions. INTERMET expects
that these employees will be terminated sometime during 2000. Pursuant to a
closing agreement negotiated with the United Steelworkers of America and its
Local 3664, all of the hourly employees were paid severance of approximately
$1.0 million, in the aggregate, during the first quarter of 2000. These
expenses were charged against cost of sales. Ironton agreed to make
another $1.0 million severance payment to hourly employees after production
ended, which was contingent on predetermined production performance as set
forth in the closing agreement. However, the predetermined and agreed upon
production performance was not achieved. Thus, no severance was paid to hourly
employees beyond that which was paid during the first quarter. On April 7,
2000, the union filed a grievance seeking payment of the remaining $1.0 million
severance payment. INTERMET denied the grievance on May 8, 2000 and the union
has 30 calendar days from that date to appeal. At that point, the grievance
could be subject to arbitration under the collective bargaining agreement. If
the grievance is arbitrated, INTERMET expects this will occur during 2000.
During December 1999 Ironton adopted the liquidation basis of accounting and
recorded a $4.7 million liability at December 31, 1999 for estimated operating
losses during the liquidation period from January 1, 2000 through February 29,
2000. The charge for operating losses was recorded directly to the statement
of deficiency. Estimated operating results subsequent to February 29, 2000
were not recorded in the 1999 financial statements because the amounts could
not be accurately estimated at that time. The charge for operating losses for
the three months ended March 31, 2000 was approximately
$6.6 million and was
recorded directly to the statement of deficiency. This charge includes the
$4.7 million operating losses recorded in 1999 for the period of January 1, 2000
to February 29, 2000. Ironton does not anticipate any significant operating losses
after March 31, 2000. Thus, Ironton did not accrue any additional charges for
operating losses for future periods. Included in the charge for operating
losses was the $1.0 million of severance paid to the hourly
employees during the first quarter of 2000. During
the fourth quarter of 1999, Ironton accrued approximately $1.3 million for
severance for salaried employees, as part of the shutdown accrual.
Approximately $0.2 million of that accrual was paid during the first quarter of
2000 and, as of March 31, 2000, that is the only portion of the shutdown
accrual that has been paid. During the first quarter of 2000, Ironton
accrued an additional $0.5 million for asset impairment and
nothing additional for the shutdown.
There has been no change in the plan of disposal of the assets since December
31, 1999.
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Ironton Iron, Inc.
(In Process of Orderly Shutdown)
Notes to Interim Condensed Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Basis of Presentation
The accompanying unaudited condensed financial statements of Ironton have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information under the liquidation basis of
accounting and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. These financial statements should be read in conjunction with
Ironton’s financial statements and footnotes included in its annual report on
Form 10-K for the year ended December 31, 1999.
2. Inventories
Inventories are stated at fair market value in accordance with the liquidation
basis of accounting.
Inventories consist of the following (in thousands of dollars):
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March 31,
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December 31,
1999 |
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| Finished goods |
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10 |
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$ |
290 |
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| Work in process |
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477 |
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287 |
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| Raw materials |
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87 |
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621 |
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| Supplies |
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530 |
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633 |
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| Totals |
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$ |
1,104 |
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1,831 |
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3. Loss per Common Share
INTERMET is the sole common shareholder of Ironton’s common stock. As a
result, loss per share data is not presented because it is not meaningful.
4. Reporting for Business Segments
Ironton was a single operating unit with essentially one product line.
Virtually all sales were made to one geographic area (United States). Thus,
Ironton has only one reportable segment.
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Forward Looking Statement
The following Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations and Item 3. Quantitative and Qualitative
Disclosures about Market Risk 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
Ironton or its management, are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ materially from
those in the forward-looking statements as a result of various factors
including, but not limited to:
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the ability of Ironton to liquidate its assets at the stated values, |
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the ability of Ironton to address and remediate any environmental
issues within the amounts that have been reserved, |
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the future costs that may be associated with the shutdown,
including, but not limited to, demolition of the buildings and other
work that may be required at Ironton’s property |
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the outcome of the arbitration of the grievance filed by the union
with respect to severance pay, and |
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other risks detailed from time to time in Ironton’s filings with the
Securities and Exchange Commission. |
Ironton does not intend to update these forward-looking statements.
Item 2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
Ironton ceased operations on March 31, 2000 and management anticipates that the
remaining assets, other than real property, will be sold during the remainder
of 2000. Management also expects that at the earliest practical date after
sale of assets, but most likely during the fourth quarter of 2000, demolition
of the building will begin. Management anticipates that demolition would be
complete in 2001 and expects that any required remediation will take place
beginning in 2000 or 2001. Management believes that when the plan for orderly
shutdown is complete and Ironton’s present and contingent liabilities are
satisfied, it is highly unlikely that there will be any assets available for
distribution to its preferred or common shareholders and management does not
anticipate that any such distributions will be made.
Ironton’s primary sources of cash for the first quarter of 2000 were loans from
parent ($4.4 million) and accounts receivable ($3.3 million). During the first
quarter of 2000, Ironton’s uses of cash consisted primarily of losses from
operations as well as reductions of accounts payable and other liabilities.
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Assets and Liabilities following the Plan for Orderly Shutdown
As a result of the plan for orderly shutdown, Ironton adopted the liquidation
basis of accounting as of December 31, 1999. The liquidation basis of
accounting requires that assets and liabilities be stated at their estimated
fair value. Accordingly, the statement of net liabilities in liquidation
reflects assets and liabilities based on their estimated fair values and
estimated settlement amounts at March 31, 2000 and December 31, 1999. The
statement of net liabilities in liquidation has been presented on such basis to
provide more relevant information. However, as a result of the plan for
orderly shutdown, comparative information and certain other disclosures are not
meaningful and have not been presented in the Management’s Discussion and
Analysis of Financial Condition and Results of Operations and accompanying
financial statements.
Of the $7,789,000 for shutdown costs accrued during the fourth quarter of 1999,
approximately $237,000 was paid for severance in the first quarter of 2000.
Ironton’s land, machinery and equipment were segregated on the statement of net
liabilities in liquidation as assets held for sale and $770,000 of the assets
were sold during the three months ended March 31, 2000. During
the first quarter of 2000, Ironton accrued an additional $461,000 for
asset impairment and nothing additional for the shutdown.
Because Ironton adopted the liquidation basis of accounting, it recorded a
$4,700,000 liability at December 31, 1999 for estimated operating losses during
the liquidation period from January 1, 2000 through February 29, 2000. The
actual loss for the entire first quarter of 2000 was approximately
$6,600,000,
which was recorded directly to the statement of deficiency.
Year 2000 Issue
There has been no material change in Ironton’s Year-2000 readiness compliance
since December 31, 1999.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Ironton was subject to market risk with regard to interest rate and commodity
pricing. As part of the plan for orderly shutdown, Ironton ceased production
on March 31, 2000. Any disclosure regarding interest rate and commodity
pricing risk is not meaningful and is not included.
7
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
Ironton is engaged in various legal proceedings and other matters incidental to
its normal business activities. Ironton does not believe any of these matters
will have a material adverse effect on its net liabilities in liquidation or
results of its operations or cash flows, or that any of these matters affect
Ironton’s determination to proceed with the plan for orderly shutdown of
operations and liquidation of assets.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed with this Report pursuant to Item 601 of
Regulation S-K:
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Description of Exhibit |
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Financial Data Schedule. |
(b) Ironton filed no reports on Form 8-K for the three months ended March 31,
2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Ironton
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
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Ironton Iron, Inc. |
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By: |
/s/ John Doddridge |
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President and Director (Principal Executive, Financial and Accounting Officer) |
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Date: |
May 15, 2000 |
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Exhibits Index
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Description of Exhibit |
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Financial Data Schedule. |
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