VIA FACSIMILE AND U.S. MAIL
September 9, 2005
Robert E. Belts
Chief Financial Officer
Intermet Corporation
5445 Corporate Drive, Suite 200
Troy, Michigan 48098-2683
RE: Form 10-K for Fiscal Year Ended December 31, 2004
Forms 10-Q for Quarters Ended March 31 and June 30, 2005
File No. 0-13787
Dear Mr. Belts:
We have reviewed these filings and have the following
comments. If you disagree with a comment, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information
so we may better understand your disclosure. After reviewing this
information, we may or may not raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We
look forward to working with you in these respects. We welcome
any
questions you may have about our comments or on any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2004
General
1. Where a comment below requests additional disclosures or other
revisions, please show us in your response what the revisions will
look like. These revisions should be included in your future
filings,
including your interim filings where appropriate.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations, page 21
2. Please discuss the business reasons for the changes between
periods
in the gross profit and operating income (loss) of each of your
segments discussed in Note 14 of your financial statements, along
with
the amounts shown in the corporate and other segment. In
circumstances where more than one factor contributed to a
fluctuation
in either segment or consolidated results, you should quantify the
incremental impact of each individual factor if practicable.
Please
show us what your revised MD&A for 2004 as compared to 2003 will
look
like. Please refer to Item 303(a)(3) of Regulation S-K and
Financial
Reporting Codification 501.04 and 501.06.
Tabular Disclosure of Contractual Obligations, page 27
3. Please revise your table of contractual cash obligations to
include
estimated interest payments on your debt. Because the table is
aimed
at increasing transparency of cash flow, we believe these payments
should be included in the table. Please also disclose any
assumptions
you made to derive these amounts. At a minimum interest payments
should be disclosed in a note to the table. Please refer to note
46
of SEC Release 33-8350.
Financial Statements, page 31
Consolidated Statements of Operations, page 31
4. To the extent interest expense differs from stated contractual
interest, please disclose this parenthetically on the face of the
statement of operations. Please refer to paragraph 29 of SOP 90-
7.
Consolidated Statements of Cash Flows, page 34
5. Please confirm that cash flows from all reorganization items
have
been separately presented in accordance with paragraph 31 of SOP
90-7
or revise your presentation accordingly.
Note 1 - Description of Business and Summary of Significant
Accounting
Policies, page 36
6. Please disclose the types of expenses that you include in the
cost
of sales line item and the types of expenses that you include in
the
selling, general and administrative line item. Please tell us
whether
you include inbound freight charges, purchasing and receiving
costs,
inspection costs, warehousing costs, internal transfer costs, and
the
other costs of your distribution network in the cost of sales line
item. With the exception of warehousing costs, if you currently
exclude a portion of these costs from cost of sales, please
disclose:
* in a footnote the line items that these excluded costs are
included
in and the
amounts included in each line item for each period
presented,
and
* in MD&A that your gross margins may not be comparable to those
of
other
entities, since some entities include all of the costs related to
their distribution network in cost of sales and others like you
exclude a portion of them from gross profit, including them
instead in
a line item such as selling, general and administrative.
Business, page 36
7. You indicate that you perform value-added services in addition
to
producing castings. Please tell us and disclose the amount of
service
revenues and related cost of sales as required by Rule 5-03(b)(1)
and
(2) of Regulation S-X on the face of the income statement, if
applicable.
Revenue Recognition, page 37
8. Please expand your revenue recognition policy to disclose the
additional factors affecting recognition discussed under critical
accounting policies on page 18.
Property, Plant & Equipment, page 39
9. The range of useful lives for your machinery and equipment of 2
to
21 years is very broad. Please separately discuss and disclose
the
types of assets that fall in each part of the range.
Note 3 - Acquisitions, page 46
10. You indicate that Melfina - Estudos, Servicos e Participacoes,
S.A. had a put option, requiring you to buy the remaining 25%
ownership interest for an additional investment of Euro 4.9
million.
Please tell us the terms of the put option and how you accounted
for
this put option. Cite the accounting literature used to determine
the
appropriate accounting. Please also tell us the offsetting entry
in
initially recognizing the liability for the put option in accounts
payable.
Note 5 - Restructuring and Impairment Charges, page 50
11. Please provide a reconciliation of the beginning and ending
restructuring liability balances showing separately the changes
during
the period in accordance with paragraph 20(b)(2) of SFAS 146.
12. Please tell us the amount of inventory write-downs incurred
during
all periods presented and subsequent interim periods. If true,
confirm that these inventory write-downs were included in cost of
sales. If not, please advise or revise.
Note 9 - Supplemental Condensed Consolidating Financial
Information,
page 57
13. If true, please confirm to us and revise your disclosures to
clarify that your guarantor subsidiaries are 100% owned as defined
by
Rule 3-10(h)(1) of Regulation S-X. Please note that this
definition
is different than the term wholly-owned, as defined by Rule 1-
02(aa)
of Regulation S-X. Please also disclose that the guarantees are
"full" and unconditional in accordance with Rule 3-10(f)(2) of
Regulation S-X.
Note 11 - Commitments and Contingencies, page 69
14. You indicate that you have accrued $2.3 million for
remediation
activity at Radford Foundry and it is possible that ultimate
remediation costs could exceed the amounts accrued. Please note
that
if it is reasonably possible that an additional loss may have been
incurred in excess of amounts accrued for any sites, including
Radford, Virginia and Havana, Decatur and Addison, Illinois, you
should disclose your estimate the additional possible loss or
range of
loss or state that such an estimate cannot be made. Please refer
to
paragraphs 9 and 10 of SFAS 5.
15. You state in note 11 and on page 20 that you do not believe
other
legal proceedings will have a material adverse effect on your
results
of operations. Please revise your disclosure to clarify whether
you
believe such proceedings will have a material adverse effect on
your
financial position or cash flows.
Note 13 - Income Taxes, page 76
16. Please separately disclose the amounts and expiration dates of
operating loss carryforwards, foreign tax credits and alternative
minimum tax credit carryforwards. Please refer to paragraph 48 of
SFAS 109.
Note 14 - Reporting for Business Segments, page 78
17. Please disclose and quantify the components of the corporate
and
other segment for all periods presented. Please also disclose
what
identifiable assets are included in the corporate and other
segment as
of each balance sheet date. Refer to paragraphs 31 and 32 of SFAS
131.
Item 9A. Controls and Procedures, page 88
Management`s Report on Internal Control over Financial Reporting,
page
88
18. Please provide us with additional detail regarding your
material
weaknesses and the steps taken to remediate the weaknesses and
prevent
recurrence. The additional detail should include the following:
* The amounts and the periods affected by the adjustments
related
to income
tax expense and accrued income tax liabilities.
* The amounts and the periods affected by the adjustments
related
to the write-
off of capitalized debt issuance costs associated with your
outstanding senior notes.
* A description of any additional adjusting entries related to
identified material weaknesses.
* A timeline of the remedial steps taken, including the hiring of
additional personnel and implementation of additional controls.
* A description of the current status of the remediation efforts
and
your expectations regarding the restoration of an effective
control
environment.
Exhibit 23 - Consent of Independent Registered Public Accounting
Firm
19. It appears that your auditor`s consent is not signed. In
future
filings where your auditor`s consent is required, please ensure
such
consent is signed.
FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 2005
Item 4. Controls and Procedures, page 36
20. You indicated that "except as noted above," there was no
change in
your internal control over financial reporting that occurred
during
the quarter ended June 30, 2005. It is unclear to what changes
you
are referring. Please revise to state clearly, if correct, that
there
were changes in your internal control over financial reporting
that
occurred during the quarter that have materially affected, or are
reasonably likely to materially affect, your internal control over
financial reporting.
* * * *
Please respond to these comments within 10 business
days, or
tell us when you will provide us with a response. Please provide
us
with a response letter that keys your responses to our comments
and
provides any requested information. Detailed letters greatly
facilitate our review. Please file your response on EDGAR as a
correspondence file. Please understand that we may have
additional
comments after reviewing your responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing
includes all information required under the Securities Exchange
Act of
1934 and that they have provided all information investors require
for
an informed investment decision. Since the company and its
management
are in possession of all facts relating to a company`s disclosure,
they are responsible for the accuracy and adequacy of the
disclosures
they have made.
In connection with responding to our comments, please
provide, in
writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in their filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal
securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division
of Corporation Finance in our review of your filing or in response
to
our comments on your filing.
You may contact Ernest Greene, Staff Accountant, at (202)
551-
3733, or in his absence, Scott Watkinson, at (202) 551-3741, if
you
have questions regarding comments on the financial statements and
related matters.
Sincerely,
Rufus Decker
Accounting Branch Chief
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Mr. Robert E. Belts
September 9, 2005
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE