FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the period ended July 3, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ___________
Commission File Number 0-13787
INTERMET CORPORATION
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(Exact name of registrant as specified in its charter)
Georgia 58-1563873
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(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
Suite 1600, 2859 Paces Ferry Road, Atlanta, Georgia 30339
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(Address of principal executive offices and zip code)
(404) 431-6000
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(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
Shares outstanding of each of the issuer's classes of
common stock at August 16, 1994: 24,594,719 shares of
Common Stock, $0.10 par value per share.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTERMET CORPORATION
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
Dec 31 July 3
1993 1994
------ ------
ASSETS
------
Current assets:
Cash and cash equivalents $ 11,240 $ 4,442
Accounts receivable:
Trade, less allowance for
doubtful accounts of $518
in 1993 and 1994 47,440 67,616
Other 5,502 5,179
------ ------
52,942 72,795
Inventories 37,232 36,170
Income taxes 5,629 2,331
Prepaid expenses 1,586 1,077
------ ------
Total current assets 108,629 116,815
Property, plant and equipment,
at cost 328,665 344,074
Less:
Foreign industrial development
grants, net of amortization ( 5,275) ( 5,316)
Accumulated depreciation and
amortization (150,093) (166,202)
-------- --------
Net property, plant
and equipment 173,297 172,556
Other assets 19,634 18,917
Deferred income taxes 5,898 4,361
-------- --------
$307,458 $312,649
======== ========
See accompanying notes.
INTERMET CORPORATION
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
Dec 31 July 3
1993 1994
------ ------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 34,784 $ 30,778
Accrued liabilities 29,482 32,143
Notes payable 10,739 13,726
Debt due within one year 2,463 4,438
-------- --------
Total current liabilities 77,468 81,085
Noncurrent liabilities:
Debt due after one year 93,391 90,878
Retirement benefits 45,624 46,724
Deferred income taxes 4,482 4,482
Other noncurrent liabilities 8,124 5,850
------- -------
Total noncurrent liabilities 151,621 147,934
Minority interests 2,837 2,837
Shareholders' equity:
Common stock 2,457 2,459
Capital in excess of par value 51,742 51,848
Retained earnings 22,715 26,864
Accumulated translation adjustments 1,499 2,503
Minimum pension liability adjustment (2,881) (2,881)
-------- --------
Total shareholders' equity 75,532 80,793
-------- --------
$307,458 $312,649
======== ========
See accompanying notes.
INTERMET CORPORATION
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands of dollars, except per share data)
Three months ended Six months ended
------------------ ----------------
July 4 July 3 July 4 July 3
1993 1994 1993 1994
------ ------ ------ ------
Net sales $122,692 $124,582 $245,455 $243,471
Cost of sales 109,769 109,408 219,825 214,710
-------- -------- -------- --------
Gross profit 12,923 15,174 25,630 28,761
Operating expenses:
Selling 1,496 1,474 3,187 2,890
General and administrative 6,805 6,760 14,198 13,829
-------- ------- -------- -------
8,301 8,234 17,385 16,719
-------- ------- -------- -------
Operating profit 4,622 6,940 8,245 12,042
Other income and expenses:
Interest income 40 20 72 87
Interest expense (1,162) (1,567) (2,646) (2,964)
Other, net ( 33) 34 ( 30) 126
--------- ------- ------- -------
(1,155) (1,513) (2,604) (2,751)
--------- ------- ------- -------
Income before income taxes
and minority interest 3,467 5,427 5,641 9,291
Provision for income taxes 2,282 2,988 3,749 5,142
-------- --------- -------- -------
Income before minority
interest 1,185 2,439 1,892 4,149
Minority interest 28 - 41 -
-------- -------- -------- ---------
Net income $ 1,213 $ 2,439 $ 1,933 $ 4,149
======== ======== ======== ========
Earnings per share $ 0.05 $ 0.10 $ 0.08 $ 0.17
======== ======== ======== ========
See accompanying notes.
INTERMET CORPORATION
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In thousands of dollars)
Six months ended
----------------
July 4 July 3
1993 1994
------ -------
Operating activities:
Net income $ 1,933 $ 4,149
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 13,221 13,630
Deferred income taxes - 2,132
Other 586 ( 280)
Changes in assets and liabilities:
Accounts receivable (15,492) (18,463)
Inventories ( 4,060) 1,726
Accounts payable and accrued
liabilities 11,490 ( 1,083)
Other assets and liabilities 1,586 3,292
-------- -------
Net cash provided by operating activities 9,264 5,103
-------- -------
Investing activities:
Additions to property, plant and equipment (18,657) (12,949)
Other 285 ( 263)
-------- -------
Net cash used in investing activities (18,372) (13,212)
-------- -------
Financing activities:
Increase in borrowings 13,290 3,530
Reduction in borrowings ( 3,105) ( 2,312)
Issuance of common stock 273 108
Dividends paid ( 1,964) -
Other ( 110) -
-------- -------
Net cash provided by financing activities 8,384 1,326
-------- -------
Effect of exchange rate changes on cash
and cash equivalents ( 297) ( 15)
-------- -------
Net decrease in cash and cash
equivalents ( 1,021) ( 6,798)
Cash and cash equivalents at beginning of
period 6,097 11,240
--------- -------
Cash and cash equivalents at end of period $ 5,076 $ 4,442
======== =======
See accompanying notes.
INTERMET CORPORATION
NOTES TO INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed consolidated balance sheet at December 31,
1993 has been derived from audited consolidated financial statements.
The interim condensed consolidated financial statements at July 3,
1994 and for the periods ended July 4, 1993 and July 3, 1994 are
unaudited; however, in the opinion of management, all adjustments,
consisting only of normal recurring accruals, necessary for a fair
presentation have been included. The results of operations for the
interim period ended July 3, 1994 are not necessarily indicative of
the results to be expected for the full year.
Certain reclassifications have been made to the consolidated
balance sheet at December 31, 1993 to conform to the July 3, 1994
balance sheet presentation.
2. Inventories consist of the following (in thousands of
dollars):
Dec 31 July 3
1993 1994
------ ------
Finished goods $ 6,316 $ 5,283
Work in process 7,154 4,856
Raw materials 5,345 5,932
Supplies and patterns 18,417 20,099
-------- -------
$ 37,232 $36,170
======== =======
3. Property, plant and equipment consist of the following (in
thousands of dollars):
Dec 31 July 3
1993 1994
------ ------
Land $ 3,520 $ 3,695
Buildings and improvements 62,669 74,370
Machinery and equipment 218,733 245,090
Construction in progress 43,743 20,919
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$ 328,665 $ 344,074
========= =========
4. Long-term debt consists of the following (in thousands
of dollars:
Dec 31 July 3
1993 1994
------ -------
Intermet $ 79,624 $ 80,000
Subsidiaries 16,230 15,316
--------- --------
Total long-term debt 95,854 95,316
Less amounts due within one year 2,463 4,438
--------- -------
$ 93,391 $ 90,878
========= ========
5. The provision for income taxes differs from the amount
computed by applying the statutory U.S. federal income tax rate to
income before income taxes for the following reasons (in thousands of
dollars):
Three months ended
------------------
July 4 July 3
1993 1994
------ ------
Provision for income taxes
at U. S. statutory rate $ 1,179 $ 1,900
Charges with no tax effect 288 293
Difference between U.S. and
foreign tax rates 319 362
State income taxes net of
federal benefit 387 391
Other 109 42
--------- --------
$ 2,282 $ 2,988
========= ========
Six months ended
----------------
July 4 July 3
1993 1994
------ ------
Provision for income taxes
at U. S. statutory rate $ 1,918 $ 3,252
Charges with no tax effect 525 585
Difference between U.S. and
foreign tax rates 496 551
State income taxes net of
federal benefit 667 706
Other 143 48
--------- --------
$ 3,749 $ 5,142
========= ========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Material Changes in Financial Condition
- - ---------------------------------------
The Company's financial position has changed little since
the beginning of the year. Cash balances were unusually high at
year-end due to the timing of cash receipts and have now returned
to more normal levels. Accounts receivable were also higher than
normal at the end of June due to the timing of cash receipts.
The Company received significant cash payments from customers in
the first few days of July.
In the first six months of 1994 the Company charged
approximately $4 million against the restructuring reserve
established last year. Amounts charged against the reserve
consisted primarily of operating losses related to the Lower
Basin foundry plus severance pay and related costs. This
activity had little impact on the Company's cash flow as the
charges were funded by the liquidation of working capital
previously used to support Lower Basin operations.
Material Changes in Results of Operations
- - -----------------------------------------
Net sales for the second quarter showed a modest increase
over the second quarter of 1993, while sales for the first six
months dipped slightly from the previous year. Both 1994 periods
would have shown increases were it not for the loss of revenue
from operating units closed or sold during 1993. Sales at plants
operating in both periods actually rose almost 8% in the second
quarter and 6% for the first six months. This sales growth was
primarily the result of an increase in tons shipped, although
price increases on certain products also contributed to the rise.
Sales for the balance of the year are expected to be well above
prior year amounts despite the loss of revenue from units closed
or sold in 1993.
Gross profit continued to recover, increasing $2.3 million
for the second quarter and $3.1 million for the first six months
over the prior year amounts. Gross profit as a percent of sales
also rose in both 1994 periods compared to prior year figures.
Operating results at the Ironton, Ohio foundry have improved
significantly over 1993. Results at the German foundry also
improved due in part to the recent strengthening of the European
economy. However, the performance of the New River foundry in
Virginia suffered as it approached the startup of its new
production line. The first castings were shipped from this line
in June, and management expects the line to be near capacity by
year-end. In addition, the Radford Shell foundry in Virginia is
not expected to be able to handle all of the work moved out of
the closed Lower Basin foundry until the end of the third
quarter. Consolidated gross profit for the rest of the year
should significantly exceed the amount reported in the last half
of 1993, and may approach the amount reported for the first six
months of 1994.
Operating expenses declined in both the second quarter and
first six months compared to the same periods in 1993 due in part
to staff reductions. Operating expenses are expected to remain
slightly below prior year amounts for the balance of the year.
Interest expense in both 1994 and 1993 was affected by
capitalized interest related to the expansion of the New River
foundry. Capitalized amounts totaled approximately $660,000 and
$350,000 in the first six months of 1994 and 1993 respectively.
Interest expense increased over prior year amounts in both the
second quarter and first half of this year after considering the
effects of capitalized interest. The increases were due to
higher borrowing levels and higher interest rates.
The Company's effective income tax rate varied for the
reasons set forth in Note 5 to the interim condensed consolidated
financial statements.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
In August 1991 Lynchburg Foundry Company
("Lynchburg"), a wholly-owned subsidiary of the
Registrant, was served with a complaint (the
"Complaint") by the United States Environmental
Protection Agency (the "EPA"). The Complaint
alleges certain violations by Lynchburg of the
Resource Conservation and Recovery Act, the most
significant of which relate to the treatment of
certain hazardous waste at two of Lynchburg's
foundries. The EPA initially proposed a civil
penalty in the amount of $1,514,000 which Lynchburg
appealed. Lynchburg and the EPA have reached an
agreement in principle calling for a penalty of
$330,000.
The Registrant has entered into negotiations with the
Office of the Ohio Attorney General with respect to
certain past violations by the Registrant's Ironton,
Ohio foundry of Ohio water pollution laws and
regulations. In a letter received in March 1994, the
Attorney General's office advised the Registrant that
the Registrant could avoid litigation with respect to
such violations by entering into a consent order. The
Registrant responded to the Attorney General's letter in
April and expects to enter into a consent order
providing for monetary penalties. Management does not
expect this matter to have a material adverse effect on
the Registrant's operations or financial position.
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
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The Annual Meeting of Shareholders was held on April 28,
1994. The following persons were nominated and elected
to serve on the Board of Directors until the next annual
meeting and until their successors are elected and
qualified:
Votes For Withheld
--------- ---------
George W. Mathews, Jr. 19,890,064 35,754
Curtis W. Tarr 19,775,159 150,659
Vernon R. Alden 19,889,530 36,288
J. Frank Broyles 19,888,505 37,313
J. Patrick Crecine 19,889,630 36,188
Anton Dorfmueller, Jr. 19,774,933 150,885
John B. Ellis 19,890,730 35,088
Wilfred E. Gross, Jr. 19,889,475 36,343
A. Wayne Hardy 19,819,039 106,779
Harold C. McKenzie, Jr. 19,688,240 237,578
J. Mason Reynolds 19,890,730 35,088
No other matters were voted upon at the Annual Meeting.
A total of 4,828,901 shares were not voted.
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) The following Exhibit is filed as a part of
this report:
Exhibit
Number Description
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11.1 Computation of Earnings per Common Share
(b) None
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
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By: /s/ Peter C. Bouxsein
-----------------------
Peter C. Bouxsein
Controller
(Principal Accounting Officer)
DATE: August 17, 1994
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EXHIBIT INDEX
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Exhibit
Number Description
------ ----------------------------------
11.1 Computation of Earnings per Common
Shares