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EXHIBIT 13
Management's Discussion and Analysis of Financial Condition and Results of
Operations
THE CHAIRMAN'S LETTER, THE MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS AND THE 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 INTERMET OR
ITS MANAGEMENT, ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND
UNCERTAINTIES. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS INCLUDING, BUT NOT
LIMITED TO:
- - General economic conditions, including any economic downturn in the
markets in which we operate
- - Fluctuations in worldwide or regional automobile and light and heavy
truck production
- - Changes in practices or policies of our significant customers toward
outsourcing their requirements for automotive components
- - Changes in the sourcing and pricing practices of our major customers,
including demands for price concessions as a condition to retaining
current business or obtaining new business
- - Fluctuations in foreign currency exchange rates
- - Fluctuations in interest rates that may affect our borrowing costs
- - Fluctuations in the cost of raw materials, including the cost of energy,
and our ability, if any, to pass those costs on to our customers
- - Work stoppages or other labor disputes that could disrupt production at
our facilities or those of our major customers
- - Factors or presently unknown circumstances that may affect the charges
related to the impairment of assets
- - Our ability to fully utilize the capacity available from the rebuilding
of our New River and Neunkirchen facilities within the timeframes we are
projecting
- - Other risks as detailed from time to time in our filings with the
Securities and Exchange Commission
WE DO NOT INTEND TO UPDATE THESE FORWARD-LOOKING STATEMENTS.
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Results of Operations 2000 compared to 1999
For the year ended December 31, 2000, INTERMET had sales of $1,039 million
compared to 1999 sales of $957 million, an increase of $82 million or 8.6%. Net
income for the year was $41 million compared to $36 million during 1999, an
increase of 12.5%. During 2000, we had various one-time events impacting current
operations and net income. On October 12, 2000, we sold our interest in Iowa
Mold Tool Co. Inc., "IMT", resulting in a pre-tax gain of $22.3 million. During
2000, INTERMET completed the shutdown of Ironton Iron, Inc. and incurred pre-tax
loss of $6.1 million during the first quarter. During the fourth quarter of
2000, INTERMET recorded a pre-tax workforce reduction charge of $1.7 million and
loss in connection with the valuation of non-core assets of $7.5 million. These
moves position us appropriately for the current challenges we face in the auto
industry. Also in 2000, INTERMET had gains related to the replacement of assets
as a result of the explosion at the New River foundry and the fire at the
Neunkirchen foundry, both of which will be discussed further below. The pre-tax
insurance gain, net of related costs, was $20.5 million.
One-time events in 2000 net of related taxes;
- ----------------------------------------------------------------------------------------------
2000
- ----------------------------------------------------------------------------------------------
$ millions Per diluted
share
- ----------------------------------------------------------------------------------------------
INCOME BEFORE ADJUSTMENTS 28.0 1.10
- ----------------------------------------------------------------------------------------------
NEW RIVER AND NEUNKIRCHEN
- ----------------------------------------------------------------------------------------------
INSURANCE GAIN * 13.4 0.53
- ----------------------------------------------------------------------------------------------
IOWA MOLD TOOLING SALE ** 11.4 0.45
- ----------------------------------------------------------------------------------------------
ASSET WRITE DOWN ** (6.8) (0.27)
- ----------------------------------------------------------------------------------------------
WORKFORCE REDUCTION ** (1.1) (0.04)
- ----------------------------------------------------------------------------------------------
IRONTON SHUTDOWN ** (4.0) (0.16)
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
REPORTED NET INCOME $40.9 $1.61
- ----------------------------------------------------------------------------------------------
* Principally included in "other non-operating income and expense" on a pre-tax
basis.
** Included in "other operating expenses" on a pre-tax basis.
As noted in the table, before one-time events, INTERMET's net income was $28.0
million in 2000, down from $36.4 in 1999. This decrease in INTERMET's
profitability can be traced to several issues the company faced during this last
fiscal year. First, our decreased profitability is a result of the decrease in
operations due to the explosion at our New River foundry and the fire at our
Neunkirchen foundry. These accidents also caused production issues at other
plants as they tried to absorb the lost capacity due to these two accidents. In
addition, costs incurred launching two new complex products were far greater
than expected. Further, the launch of a ductile iron casting as well as serious
equipment start-up problems also lowered 2000 earnings. Lastly, exchange rates
had an unfavorable impact on INTERMET's earnings of approximately $1.8 million
when compared to the prior year.
The North American light vehicle builds for 2000 were 17.2 million. This is the
seventh consecutive year of builds in excess of 15 million. Even with the
weakening auto market, analysts are predicting builds in excess of 15 million
units again in 2001. These analysts anticipate that light-trucks will make up
slightly more than one half of this production. Industry analysts project
another strong year for Europe as well. Actual results may differ materially,
however in view of economic uncertainties.
Sales for the ferrous metals segment were $634.4 million in 2000 compared to
$770.4 million in 1999. The explosion of our plant at New River and fire at our
Neunkirchen facility had a negative impact on our current
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sales results. Also during 2000 we closed our Ironton facility. The decrease in
sales is largely explained by these three one-time events. Sales year over year
for the Ferrous segment from operations without regard to the one-time events
were $511.7 million in 2000 and $502.4 million in 1999. This represents an
increase of 1.8% over 1999. This increase is due to the strong automobile
industry during most of 2000.
Sales in the light metals segment have continued to be strong with annual sales
of $333.9 million. This is an increase of $231.6 million over 1999 levels. The
increase is mainly due to the acquisition of Ganton Technologies Inc. ("Ganton")
and Diversified Diemakers, Inc. ("Diemakers") in December of 1999, which have
been successfully integrated into our core operations. Light metal sales year
over year for operations in place during both years were $104.1 million in 2000
and $97.1 million in 1999. This represents an increase of 7.3%. Profitability of
the light metals group has decreased during 2000. This is due almost entirely to
the launch issues incurred at our lost foam operation.
Sales for our domestic operations were up 11.4% in 2000 over 1999. This is
inclusive of the one-time events discussed above as well as acquisitions and
disposals that have taken place over the last two years. For domestic operations
in place for both periods, sales were up $2.7 million. This was due to the
all-time record North American light vehicle builds in 2000.
Sales in our non-core businesses were down $13.6 million (16.2%) for the year.
This decrease results mainly from the IMT sale.
European sales during 2000, in local currency, approximated 1999 sales levels.
Sales would have been up significantly over 1999 had it not been for the fire at
our Neunkirchen Foundry. However, 2000 was still a record setting year for
INTERMET's European operations. This is due primarily to an increase in
production and sales of light and heavy duty vehicles in Europe. The effect of
changes in exchange rates on 2000 consolidated European sales was an unfavorable
$13.8 million (12.6%) when compared using exchange rates for 1999.
INTERMET's gross profit for 2000 of $126 million was 12.1% of sales, down from
the 1999 gross profit of 12.8%. Operating issues at two locations were primarily
responsible for the negative affect on gross profit in 2000. Our lost foam
operation had technical difficulties launching two new complex products, and our
Columbus Foundry, a ductile-iron casting operation, had extraordinarily high
costs related to the launch of a ductile-iron casting as well as serious
equipment start-up problems.
Selling, general and administrative expenses were flat to the prior year and
down slightly as a percent of sales at 3.7% from 1999 expenses at 3.9%. Goodwill
amortization increased to $6.4 million from $4.2 million the prior year as a
result of the additional goodwill generated from the acquisition of Ganton and
Diemakers in late 1999. In 2000, "Other operating (income) expenses" were
attributable to the gain on the sale of certain non-core assets, offset by the
first quarter operating results from Ironton and the write down of other
non-core assets. In 1999, "Other operating (income) expenses" were primarily
comprised of asset impairment and shutdown costs related to the shutdown of
Ironton.
Other income for 2000 is composed primarily of gains related to the replacement
of assets at our New River and Neunkirchen foundries, net of the write-off for
destroyed assets. Insurance proceeds covered the replacement costs of these
assets.
Interest expense for the years ended December 31, 2000 and 1999 was $39.2
million and $15.2 million, respectively. This change was a result of an increase
in borrowings to purchase Ganton and Diemakers at the end of 1999, coupled with
slightly higher interest rates for the period.
Diluted earnings per share for 2000 were $1.61. Diluted earnings per share from
operations, excluding the one-
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time events and assets impairment and shutdown costs discussed above, would have
been $1.10 for 2000.
The income tax rate for 2000, excluding the impact of the sale of non-core
assets, was 43.5%. Sale of our investment in General Products and IMT caused the
effective tax rate for the year to increase from 43.5% to 46.9%. During 1999,
the Company implemented foreign tax strategies that resulted in a decrease in
the effective tax rate of approximately 18.6%. The effective tax rate for 1999
without the benefit of the foreign tax restructuring would have also been 43.5%.
During 2000, we amortized $5.8 million in nondeductible goodwill, which also
increased our effective tax rate. For information concerning the provision for
income taxes as well as information regarding differences between effective tax
rates and statutory rates, see Note 10 of the notes to our consolidated
financial statements.
Results of Operations 1999 Compared to 1998
Sales in 1999 were $956.8 million compared to 1998 sales of $841.6 million, an
increase of $115.2 million or 13.7%. Sales for operations in place both years
were 8.3% higher in 1999 than in 1998. Ferrous metals segment sales for 1999,
excluding acquisitions and dispositions in 1999 or 1998, were $69.1 million
(10.0%) higher than for 1998. This is primarily a result of strong domestic
light truck sales and European vehicle sales, which are two of the largest
markets we supply. Light metals segment sales for 1999, excluding acquisitions
and dispositions in 1999 or 1998, were $3.7 million (12.9%) lower than for 1998.
The acquisition of Tool Products at the end of 1998 increased our light metals
segment sales 256% for 1999 over 1998 levels. Other segment sales, for
operations in place both years, were up 2.9% over 1998.
Sales for our domestic operations were up 15.4% in 1999 from the prior year.
Excluding acquisitions or dispositions in both years, sales in 1999 for domestic
operations increased 8.9% from 1998, primarily because North American light
vehicle production was an all-time record. In 1999, North American light-vehicle
production was 17 million units and exceeded 15 million units for the sixth
consecutive year.
European sales during 1999, in local currency and excluding acquisitions or
dispositions in 1999 and 1998, increased 5.7% from 1998. This set a new record
for our European-based operations compared to previous years. This was due
primarily to an increase in production and sales of light and heavy duty
vehicles in Europe. The effect of changes in exchange rates on 1999 consolidated
European sales was an unfavorable $4.9 million (4.2%) when compared using
exchange rates for the same period in 1998.
Gross profit increased to $122.2 million in 1999 from $110.7 million in 1998.
Gross profit from operations in place both years was $2.7 million lower in 1999
than in 1998. This decrease was due primarily to the higher costs associated
with operating some facilities in excess of capacity and the difficulty of
obtaining qualified labor in a full employment economy. Gross profit, as a
percentage of sales, was 12.8% in 1999 versus 13.2% in 1998.
Operating expenses as a percentage of sales were 6.3% and 4.2% for 1999 and
1998, respectively. During December 1999, we announced the shutdown of our
Ironton Iron, Inc. facility. Without the charges for the Ironton asset
impairment and shutdown, and the charges related to a re-capitalization of our
international operations, the operating expenses as a percentage of sales would
have been 4.3% for 1999.
Interest expense for the years ended December 31, 1999 and 1998 was $15.2
million and $11.3 million, respectively. This change was a result of an increase
in borrowings to purchase fixed assets and Ganton and Diemakers at the end of
1999, as well as slightly higher interest rates.
The net of other income and expenses was income of $1.2 million and $0.6 million
in 1999 and 1998, respectively.
Diluted earnings per share for 1999 were $1.42. During the year, we were able to
utilize two non-recurring tax benefits of $8.5 million in aggregate ($0.33 per
diluted share). These benefits are discussed further in Note 10 of the Notes to
Consolidated Financial Statements. The after-tax effect of the charges for the
asset impairment and
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shutdown of Ironton was $12.1 million or $0.47 per diluted share (see Asset
Impairment and Shutdown section of Management's Discussion and Analysis).
For information concerning the provision for income taxes as well as information
regarding differences between effective tax rates and statutory rates, see Note
10 of the Notes to Consolidated Financial Statements.
Liquidity and Capital Resources
During 2000, cash provided by operating activities was $69.4 million, relatively
unchanged from $70.3 million in 1999. Non-cash charges from depreciation,
amortization and impairment expense were $61.2 million. Accounts receivable
decreased primarily because of decreased sales in the fourth quarter of 2000 and
the sale of IMT. Accounts payable and current liabilities decreased mainly due
to the decreased operating activities and the sale of IMT in the fourth quarter.
Our investing activities for 2000 used cash of $4.8 million. This included $92.2
million paid for the purchase of fixed assets, of which $34.4 million was funded
from insurance proceeds, which is discussed further below. INTERMET received
another $64.2 million for the sale of a subsidiary, discussed further below, and
the sale of an equity investment during 2000. Bank borrowings decreased $55.8
million, in the aggregate, from the end of 1999. In addition, we paid $4.1
million in dividends during 2000 ($0.04 per share per quarter).
Cash and cash equivalents increased to $19.7 million at December 31, 2000 from
$3.4 million at December 31, 1999 due to timing of payments from significant
customers. These payments were not received in time to pay down existing debt.
Outstanding funded debt moved from $455.0 million at December 31, 1999 to $399.2
at December 31, 2000. The decrease in debt is primarily from application of the
proceeds of sale of IMT and cash provided from operations. Our debt-to-equity
ratio decreased from 65% at December 31, 1999 to 59% at December 31, 2000.
Shareholders' equity increased $37 million to $279 million at December 31, 2000,
which is almost entirely the current year net income offset by current year
dividends paid.
INTERMET, like many large manufacturing companies, has recurring costs related
to environmental clean-up, pollution prevention measures and disposition of
waste (principally non-hazardous waste) generated as part of ongoing operations.
In 2000 and 1999, such costs totaled approximately $10.0 and $15.1 million,
respectively. Although we continue to take various steps to control
environmental costs, they are expected to increase in the future. As noted
above, a portion of our capital expenditures is regularly incurred to prevent or
monitor pollution, principally for ventilation and dust control equipment. Sales
volume levels and available engineering resources, among other factors, will
influence the actual amount of capital expenditures.
INTERMET also has current and former operating entities which have been named as
potentially responsible parties for cleanup of known environmental sites. For
known environmental sites, INTERMET, with the assistance of environmental
engineers and consultants, has accrued $7.5 million to cover estimated future
environmental expenditures. This reserve includes $1.2 million related to the
shutdown of Ironton. There could exist, however, more extensive or unknown
environmental situations at existing or previously owned businesses for which
the future cost is not known or accrued at December 31, 2000.
In addition to these recurring and anticipated expenditures, 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 owned by INTERMET. Until Federal and state
governments adopt final regulations implementing those amendments and until
certain control measures under existing regulations are determined, it is not
possible to estimate such costs.
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We are also a party to certain lawsuits and claims arising out of the conduct of
our business, including those relating to commercial transactions, product
liability, environmental, safety and health matters. We self-insure a
significant portion of our health care, property and casualty insurance risks.
However, we purchase additional insurance for catastrophic losses.
While the contingencies mentioned above are estimates of INTERMET's future
obligations and their ultimate impact on the Company is unknown, we do not
believe that these contingencies will have a material adverse effect on our
consolidated financial position, results of operations or cash flows. However,
we cannot be assured that our activities will not give rise to actions by
private parties or governmental agencies that could cause us to incur liability
from damages, fines, penalties, operational shutdowns, damages, cleanup costs or
other similar expenses.
At December 31, 2000, we had commitments for the purchase of operating equipment
of approximately $4.1 million, which we expect to fund through cash flow from
operations. We had unsecured revolving credit agreements with bank groups that
provide for loans up to $300 million in the aggregate, and an unsecured
eighteen-month term loan for $200 million. We had $399.2 million of long-term
debt outstanding at December 31, 2000. Of this amount, we are scheduled to pay
$216.5 million during 2001. We intend to refinance the current portion of long
term-debt which is due in June of 2001. We had committed and uncommitted bank
credit facilities with unused borrowing capacity of $112.9 million at December
31, 2000.
Quantitative and Qualitative Disclosures about Market Risks
INTERMET has exposure to three types of market risk. The first is the risk of
interest rates change and how it impacts our current operating results. Second,
we have risk with regard to foreign currency and its impact on our international
operating results. Last, we have risk related to commodity pricing which, based
on current pricing trends, has been immaterial to INTERMET with the exception of
energy costs. Energy costs have more than doubled for company during the last
quarter. Though we have seen a softening of these costs, the overall trend does
represent a risk to the operating results of the Company.
Since most of our debt is variable rate debt we have entered into certain
interest rate swaps to minimize the impact of a significant interest rate
fluctuations. Nonetheless, a 1% change in interest rates on the debt not covered
by swap agreements would have changed net income approximately $2.5 million and
$2.6 million for 2000 and 1999, respectively. This interest rate sensitivity
analysis does not consider the effects of the reduced or increased level of
overall economic activity that could result from a change in interest rates.
Due to the size of our European operations, our earnings are also affected by
fluctuations in the value of the U.S. dollar as compared to foreign currencies,
predominately in Germany. A 5% change in the value of the dollar relative to the
currencies in which our sales are denominated, the Euro starting in 2001, would
have resulted in a change in net income of approximately $1.0 million and $0.5
million for the years ended December 31, 2000 and 1999, respectively. The
increase is largely due to the increased size and significance of our European
operations. This sensitivity analysis of the effects of the changes in foreign
currency exchange rates does not factor in a potential change in the sales
levels or local currency sales prices.
Asset Impairment and Shutdown
In December of 1999, INTERMET announced plans to permanently close its Ironton
Iron, Inc. Foundry. Ironton is included in the ferrous metals segment of the
Reporting for Business Segments footnote. Ironton had revenues of $6 million,
$57 million and $55 million and net operating losses of approximately $4
million, $35 million and $10 million for the years ended December 31, 2000, 1999
and 1998, respectively. Operations at the foundry continued through first
quarter of 2000 in order to fulfill customer needs. The results of current
operations for 2000 have been classified within "Other operating expenses" on
the accompanying statement of operations. The foundry ceased operations at the
end of the first quarter of 2000 and demolition is expected to be completed
during the second quarter of 2001. During the year, the facility utilized the
proceeds from the sale of certain
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fixed assets of $4.5 million to fund the cost of demolishing the foundry. Also
during 2000, $1.4 million of the assets remaining at the facility at December
31, 1999 were transferred to other INTERMET facilities.
At December 31, 1999, we had $7.8 million accrued for the remaining costs to be
incurred as a result of the shutdown. During the year we incurred $5.2 million
for demolition and environmental remediation and $1.0 against an accrual for
wages and benefits. Also during the 2000 we paid $1.0 million in severance and
benefits relating to the 500 union employees at Ironton, which was not
previously accrued.
In December of 2000, INTERMET recorded a charge in connection with a writedown
of the value of certain assets of our non-core operations. The basis for the
writedown was poor operating results from these non-core assets. In determining
the amount of the necessary reserve, we utilized discounted future cash flows.
Based on this evaluation we have decreased the carrying value of these assets by
$7.5 million. This amount eliminated $5.7 million of goodwill and $1.8 million
of fixed assets.
Impact of Insurance Proceeds in 2000
As discussed above, two accidents resulted in insurance reimbursement of $104
million to the Company during the year. Accordingly, the Company has received
insurance proceeds for the replacement of property, plant and equipment, for
non-capitalizable expenditures related to demolition and extra expenses, and for
income attributable to lost sales related to production line shutdowns. Based on
the funds received, and the book value of the assets destroyed, we had a gain on
the involuntary conversion of assets of $20.5 million, net of related expenses,
in accordance with generally accepted accounting principles relating to
involuntary conversion of assets. The book value of the assets destroyed was
approximately $7.7 million.
Readers are cautioned that forward looking statements contained in this Asset
Impairment and Shutdown discussion should be read in conjunction with our
disclosures under the cautionary statement for the purposes of the "Safe Harbor"
Provisions of the Private Securities Litigation Reform Act of 1995, included
elsewhere in Management's Discussion and Analysis of Financial Condition and
Results of Operations.
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Consolidated Financial Statements
INTERMET Corporation
Years ended December 31, 2000, 1999 and 1998
with Report of Independent Auditors
9
Report of Independent Auditors
The Board of Directors and Shareholders
INTERMET Corporation
We have audited the accompanying consolidated balance sheets of INTERMET
Corporation as of December 31, 2000 and 1999, and the related consolidated
statements of operations, comprehensive income, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of INTERMET
Corporation at December 31, 2000 and 1999, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States.
Detroit, Michigan
February 1, 2001
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INTERMET Corporation
Consolidated Statements of Operations
Years ended December 31,
2000 1999 1998
-------------------- ------------------- ------------------
(in thousands of dollars, except per share data)
Net sales $1,038,844 $956,832 $841,598
Cost of sales 913,262 834,545 730,857
-------------------- ------------------- ------------------
Gross profit 125,582 122,287 110,741
Selling, general and administrative 38,546 37,473 32,022
Goodwill amortization 6,353 4,154 3,070
Other operating (income) expenses (8,009) 18,499 -
-------------------- ------------------- ------------------
Operating profit 88,692 62,161 75,649
Other income and expenses:
Interest expense, net (39,261) (14,905) (11,075)
Other, net 27,668 1,197 614
-------------------- ------------------- ------------------
(11,593) (13,708) (10,461)
-------------------- ------------------- ------------------
Income before income taxes 77,099 48,453 65,188
Income taxes 36,191 12,076 24,199
-------------------- ------------------- ------------------
Net income $40,908 $36,377 $40,989
==================== =================== ==================
Net Income per common share $1.61 $1.43 $1.60
==================== =================== ==================
Net Income per common share - assuming dilution $1.61 $1.42 $1.58
==================== =================== ==================
See accompanying notes.
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INTERMET Corporation
Consolidated Statements of Comprehensive Income
Years ended December 31,
2000 1999 1998
-------------------- ------------------- ------------------
(in thousands of dollars, except per share data)
Net income $40,908 $36,377 $40,989
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment (129) (1,155) 348
Minimum pension liability adjustment - 849 (837)
-------------------- ------------------- ------------------
Total other comprehensive loss (129) (306) (489)
Comprehensive income $40,779 $36,071 $40,500
==================== =================== ==================
See accompanying notes.
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INTERMET Corporation
Consolidated Balance Sheets
December 31,
2000 1999
------------------- ---------------
(in thousands of dollars)
Assets
Current assets:
Cash and cash equivalents $19,737 $3,416
Accounts receivable:
Trade, less allowances of $9,451 in 2000 and $7,426 in 1999 125,745 154,742
Other 9,136 19,649
------------------- ---------------
134,881 174,391
Inventories:
Finished goods 17,865 24,235
Work in process 21,816 19,054
Raw materials 8,940 15,313
Supplies and patterns 45,249 44,200
------------------- ---------------
93,870 102,802
Deferred income taxes 13,999 10,047
Other current assets 17,961 13,864
------------------- ---------------
Total current assets 280,448 304,520
Property, plant and equipment, at cost:
Land 5,408 5,411
Buildings and improvements 116,181 110,777
Machinery and equipment 467,819 422,215
Construction in progress 46,724 67,818
------------------- ---------------
636,132 606,221
Less:
Accumulated depreciation and foreign industrial development grants,
net 238,498 236,490
------------------- ---------------
Net property, plant and equipment 397,634 369,731
Intangible assets, net of amortization 224,873 248,864
Other non-current assets 15,841 34,177
------------------- ---------------
$918,796 $957,292
=================== ===============
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INTERMET Corporation
Consolidated Balance Sheets
December 31,
2000 1999
------------------- ---------------
(in thousands of dollars, except
share and per share data)
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $103,501 $114,105
Accrued wages, severance and benefits 31,520 33,449
Accrued liabilities 51,035 54,514
Long-term debt due within one year 216,479 6,406
------------------- ---------------
Total current liabilities 402,535 208,474
Noncurrent liabilities:
Long-term debt 182,687 448,634
Retirement benefits 45,685 46,628
Other noncurrent liabilities 8,481 11,179
------------------- ---------------
Total noncurrent liabilities 236,853 506,441
Shareholders' equity:
Preferred stock; 5,000,000 shares authorized; none issued Common stock, $0.10
par value; 50,000,000 shares authorized; 25,393,824 and
25,337,824 shares issued and outstanding in 2000 and 1999 2,588 2,585
Capital in excess of par value 57,110 56,661
Retained earnings 220,279 183,432
Accumulated other comprehensive loss (363) (234)
Unearned restricted stock (206) (67)
------------------- ---------------
Total shareholders' equity 279,408 242,377
------------------- ---------------
$918,796 $957,292
=================== ===============
See accompanying notes.
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INTERMET Corporation
Consolidated Statements of Cash Flows
Years ended December 31,
2000 1999 1998
---------------- --------------- ----------------
(in thousands of dollars)
Operating activities:
Net income $40,908 $36,377 $40,989
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation 45,122 35,140 31,975
Amortization 8,600 4,978 3,868
Impairment of assets 7,476 10,811 -
Results of equity investments (782) (337) 351
Deferred income taxes 14,459 (6,391) (2,406)
Dissolution of foreign holding - - 4,282
(Gain) loss on sale of subsidiary and other assets (22,392) 692 (575)
Gain on insurance proceeds from involuntary conversion of assets (26,502) - -
Changes in operating assets and liabilities excluding the effects of
acquisitions and dispositions:
Accounts receivable 30,835 (18,688) (13,944)
Inventories 1,844 (4,811) (78)
Accounts payable and current liabilities (10,490) 10,305 35,078
Shutdown costs - 7,789 -
Other assets and liabilities (19,723) (5,606) (3,095)
---------------- --------------- ----------------
Cash provided by operating activities 69,355 70,259 96,445
Investing activities:
Additions to property, plant and equipment (57,747) (78,743) (49,496)
Additions to property, plant and equipment from insurance (34,414) - -
Proceeds from insurance for replacement of property, plant and
equipment 34,414 - -
Purchase of businesses, net of cash acquired - (274,338) (60,339)
Investment in joint venture - (4,500) (2,000)
Proceeds from sales of assets 10,309 1,032 1,441
Proceeds from sale of subsidiary 53,903 - 22,860
Other, net (1,628) (418) (915)
---------------- --------------- ----------------
Cash provided by (used in) investing activities 4,837 (356,967) (88,449)
Financing activities:
Net change in revolving credit facility (54,500) 193,500 5,000
Proceeds from term loan 15,000 200,000 -
Payoff of senior note (15,000) - -
Repayment of revolving credit facility - (130,000) -
Change in other debt (1,307) 31,342 (7,787)
Payment on notes payable - (5,000) (4,000)
Acquisition of treasury stock - (6,833) -
Issuance of common stock 452 114 5,263
Dividends paid (4,061) (4,076) (4,100)
Other, net (140) 849 (836)
---------------- --------------- ----------------
Cash provided by (used in) financing activities (59,556) 279,896 (6,460)
Effect of exchange rate changes on cash and cash equivalents 1,685 4,380 (2,710)
---------------- --------------- ----------------
Net increase (decrease) in cash and cash equivalents 16,321 (2,432) (1,174)
Cash and cash equivalents at beginning of year 3,416 5,848 7,022
6
15
---------------- --------------- ----------------
Cash and cash equivalents at end of year $19,737 $3,416 $5,848
================ =============== ================
See accompanying notes.
7
16
INTERMET Corporation
Consolidated Statements of Shareholders' Equity
Years ended December 31,
2000 1999 1998
-------------------- ----------------- -----------------
(in thousands of dollars, except share and per share data)
Common stock
Beginning balance $2,585 $2,583 $2,526
Exercise of options to purchase 26,000, 14,000, and 576,450
shares of common stock in 2000, 1999 and 1998 3 2 57
-------------------- ----------------- -----------------
Ending balance 2,588 2,585 2,583
Capital in excess of par value
Beginning balance 56,661 63,382 58,176
Exercise of options to purchase shares of common stock 449 112 5,206
Purchase of 509,000 shares of treasury stock - (6,833) -
-------------------- ----------------- -----------------
Ending balance 57,110 56,661 63,382
Retained earnings
Beginning balance 183,432 151,131 114,242
Net income 40,908 36,377 40,989
Cash dividends of $0.16 per share in 2000, 1999 and 1998 (4,061) (4,076) (4,100)
-------------------- ----------------- -----------------
Ending balance 220,279 183,432 151,131
Accumulated translation adjustment
Beginning balance (234) 921 573
Translation adjustment (198) (1,777) 535
Related income tax effect 69 622 (187)
-------------------- ----------------- -----------------
Ending balance (363) (234) 921
Minimum pension liability adjustment
Beginning balance - (849) (12)
Adjustment - 1,306 (1,379)
Related income tax effect - (457) 542
-------------------- ----------------- -----------------
Ending balance - - (849)
Unearned restricted stock
Beginning balance (67) (163) (77)
Issuance of 30,000 and 8,000 shares of common stock in
2000 and 1998 (251) - (155)
Amortization 112 96 69
-------------------- ----------------- -----------------
Ending balance (206) (67) (163)
-------------------- ----------------- -----------------
Total shareholders' equity $279,408 $242,377 $217,005
==================== ================= =================
See accompanying notes.
8
17
INTERMET Corporation
Notes to Consolidated Financial Statements
Years ended December 31, 2000, 1999 and 1998
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements, presented in conformity with
accounting principles generally accepted in the United States ("GAAP"), include
the accounts of INTERMET Corporation ("INTERMET") and its subsidiaries. All
significant intercompany transactions and balances have been eliminated in
consolidation.
Business
INTERMET produces ferrous metals, including ductile and gray iron, and light
metals castings, including aluminum, magnesium and zinc. In addition, we perform
value-added services, principally for automotive manufacturers in North America
and Europe. We also supply precision-machined components to automotive and other
industrial customers.
Use of Estimates
The preparation of the financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates.
Reclassification
Certain amounts previously reported in the 1999 and 1998 financial statements
and notes thereto have been reclassified to conform to the 2000 presentation.
Revenue Recognition
We recognize revenue upon shipment of products.
Shipping and handling costs
We record shipping and handling costs as component of "Cost of sales" within our
statement of operations.
Cash and Cash Equivalents
All short-term investments with original maturities of less than 90 days are
deemed to be cash equivalents for purposes of the statements of cash flows.
9
18
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Inventories
Inventories are stated at the lower of cost or market. Cost is determined on the
last-in, first-out ("LIFO") method for 19% and 22% of the December 31, 2000 and
1999 inventories, respectively. Certain raw materials and supplies inventories
are valued on a weighted average cost basis; average production cost is used for
certain work in process and finished goods inventories and other inventories are
valued by the first-in, first-out ("FIFO") method. The specific identification
method is used for pattern inventories. If LIFO inventories were valued using
the same cost methods used for other inventories, their carrying values would
have increased by $1,149,000 and $1,343,000 at December 31, 2000 and 1999,
respectively.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. The provision for depreciation
and amortization of property, plant and equipment is determined on the basis of
estimated useful lives using the straight-line method. Industrial development
grants provided by the Federal and State governments of Germany are included as
reductions of property, plant and equipment and are being amortized over the
estimated useful lives of the related assets.
Intangible Assets
Intangible assets of $ 224,873,000 and $248,864,000 (net of accumulated
amortization of $15,531,000 and $10,867,000) at December 31, 2000 and 1999,
respectively, consist principally of costs in excess of net assets acquired. We
amortize these costs using the straight-line method over periods ranging
principally from ten to forty years. In setting the life of intangibles, we
consider the long-term strategic value of the acquired assets. We periodically
assess the recoverability of the cost of our intangibles based on a review of
projected undiscounted cash flows of the related operating entities.
Fair Value of Financial Instruments
The carrying amounts reported in the consolidated balance sheets for cash and
cash equivalents, accounts receivable and accounts payable approximate fair
value. The fair value of our debt approximates the reported amounts in the
accompanying consolidated balance sheets as their respective interest rates
approximate the respective year end market rates for similar debt instruments.
We obtain the fair value of the interest rate swaps, as noted in Note 14, from
dealer quotes. These values represent the estimated amount we would receive or
pay to terminate agreements taking into consideration current interest rates,
the creditworthiness of the counter-parties and current foreign currency
exchange rates.
Stock-Based Compensation
We generally grant stock options for a fixed number of shares 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 APB Opinion
No. 25, "Accounting for Stock Issued to Employees", and, accordingly, recognize
no compensation expense for the stock option grants.
10
19
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
2. Reporting for Business Segments
INTERMET's management evaluates the operating performance of its business units
individually. We have aggregated operating segments that have similar
characteristics, including manufacturing processes and raw materials. The
ferrous metals segment consists of ferrous foundry operations and their related
machining operations along with certain unallocated costs such as interest
expense and goodwill amortization. The light metals segment consists of
aluminum, magnesium and zinc casting operations and their related machining
operations. The operating units that comprise other are all non-core operations,
and none of them constitutes a reportable segment on its own. This information
is displayed in the following table.
Ferrous Metals Light Metals Other Consolidated
-------------- ------------ ----- ------------
(in thousands of dollars)
Year ended December 31, 2000
Net sales $634,392 $333,851 $70,601 $1,038,844
Depreciation expense 23,315 19,482 2,325 45,122
Amortization expense 7,999 - 601 8,600
Provision for income taxes 21,550767 1,139 13,502 36,191
Net income 30,258 1,479 9,171 40,908
Purchases of property, plant and equipment 73,691 17,691 779 92,161
December 31, 2000
Total assets $510,794 $399,223 $8,779 $918,796
Year ended December 31, 1999
Net sales $770,393 $102,239 $84,200 $956,832
Depreciation expense 28,685 3,925 2,530 35,140
Amortization expense 4,445 - 533 4,978
Provision for income taxes 8,397 1,415 2,264 12,076
Net income 31,077 1,851 3,449 36,377
Purchases of property, plant and equipment 62,141 13,661 2,941 78,743
December 31, 1999
Total assets $526,733 $388,055 $42,504 $957,292
Year ended December 31, 1998
Net sales $702,679 $28,785 $110,134 $841,598
Depreciation expense 27,220 1,505 3,250 31,975
Amortization expense 3,335 - 533 3,868
Provision for income taxes 24,470 (863) 592 24,199
Net income 41,650 (1,602) 941 40,989
Purchases of property, plant and equipment 42,414 2,958 4,124 49,496
11
20
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
3. Acquisitions and Dispositions
On October 12, 2000, we sold our interest in Iowa Mold Tooling Co. Inc., "IMT".
This was a consolidated subsidiary that was included in "Other" in the Reporting
for Business Segments footnote. This sale is indicative of INTERMET's commitment
to place emphasis on our core business. We sold our interest in IMT for $53.9
million. The pre-tax gain of $22.3 million is included in "Other operating
expenses" in the accompanying statement of operations.
In March of 2000, we sold our equity interest in General Products Corporation
for $10.3 million, net of expenses. INTERMET realized a gain from the
transaction of $129,000, net of related taxes. Prior to the sale, General
Products was an equity investment included in "Other non-current assets".
On December 20, 1999, we acquired all of the issued and outstanding stock of
Diversified Diemakers, Inc. ("Diemakers") and Ganton Technologies, Inc.
("Ganton") for a purchase price of $270,000,000. We accounted for this
transaction using purchase accounting and, accordingly, the excess purchase
price of the transaction of $127,261,000 was allocated to goodwill and is being
amortized over the next 40 years. INTERMET accrued approximately $3.7 million
for severance and office closing costs. Sales, engineering and certain other
administrative and operating functions of Ganton and Diemakers are being
combined with INTERMET's existing functions. As a result of this combination of
activities, we have eliminated duplicate activities during fiscal year 2000. All
but $800,000 of the amounts accrued either were paid during 2000 or will be paid
over the next two years. The remaining $800,000 was reversed against the
allocated goodwill in 2000.
12
21
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
3. Acquisitions and Dispositions (continued)
On December 31, 1998, INTERMET acquired certain operating assets and the
aluminum die-casting business of Quadion Corporation for $58,304,000 in cash.
These assets form the base of our wholly owned subsidiary, Tool Products, Inc.
("Tool Products"). This transaction was accounted for as a purchase.
Also on December 31, 1998 we acquired 100% of the outstanding shares of
Vorpommersche Eisenwerke GmbH Ueckermunde ("VEGU") for DM 6,000,000 in cash. The
transaction was accounted for as a purchase. VEGU is a ferrous foundry company
located in eastern Germany.
In June 1998 we sold substantially all the operating assets of our subsidiary,
Industrial Powder Coatings.
The following represents our unaudited pro forma consolidated results of
operations (in thousands of dollars, except per share data) for 1999 and 1998,
based on the purchase of Ganton and Diemakers, Tool Products, and VEGU and the
sale of Industrial Powder Coatings assuming the acquisitions and disposition
occurred on January 1 of each year presented.
1999 1998
-------------------- ---------------------
Net sales $1,182,044 $1,102,286
Net income $36,339 $40,693
Income per common share $1.43 $1.59
Income per common share - Assuming Dilution $1.42 $1.57
These unaudited pro forma results are presented for comparative purposes only.
They are not necessarily indicative of what would have occurred had the
acquisitions and dispositions actually been made on the dates indicated or of
future results of operations.
13
22
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
3. Acquisitions and Dispositions (continued)
In 1999 and 1998 we increased our investment in PortCast. Our investment in
PortCast is accounted for on the equity method. Also in 1998 we wrote-off
certain assets related to IWESA, an 82.4% owned subsidiary.
4. Impairment of Assets and Shutdown
During December 2000, due to unfavorable operating results of our non-core
operations and our concern for the continuing decline in the market share, we
assessed the ongoing value of our non-core assets. Based on this assessment, we
recorded a charge of $7.5 million, which eliminated goodwill of $5.7 million and
resulted in a write-down of certain fixed assets of $1.8 million. This change
was determined based on an estimate of the discounted future cashflows and is
included in "Other operating (income) expense" in the accompanying statement of
operations.
In December of 1999, we announced plans to permanently close our Ironton Iron,
Inc. foundry ("Ironton"). Ironton was included in the ferrous metals segment of
the Reporting for Business Segments footnote. Ironton's enduring operational
difficulties and significant operating losses, as well as loss of customer base
impacted our decision. Ironton had revenues of $6 million, $57 million, and $55
million and net losses of approximately $4 million, $35 million and $10 million
for the years ended December 31, 2000, 1999 and 1998.
The decision to close this foundry was the principal reason for recording an
$18.5 million charge for impairment of assets and shutdown costs in the fourth
quarter of 1999, which was included in "Other operating (income) expenses" in
the accompanying statement of operations in 1999. The charge included a
writedown of $10.7 million to fair value for capital assets; building demolition
and remediation costs of $6.6 million; and provisions totaling $1.2 million for
severance pay and employee benefits. The related accruals for the building
demolition and remediation and severance pay and employee benefits of $7.8
million were included in "Other accrued liabilities" in the accompanying balance
sheet at December 31, 1999. In addition, at December 31, 1999 we included
Ironton's land, machinery and equipment of $8.0 million, which were held for
sale, in "Other current assets" in the accompanying balance sheet.
During 2000, we incurred approximately $5.2 million related to costs for
remediation and to raze the building. The remaining accrual of $1.5 million,
which is included in "Other accrued liabilities" at December 31, 2000, is our
estimate of the remaining costs to be incurred related primarily to remediation.
We paid out approximately $1.0 million accrued at December 31, 1999 for the
severance and related benefits of 100 salaried employees. The remaining $.2
million of the amount accrued during 1999, was recorded as a recovery in "Other
operating (income) expenses" in the accompanying statement of operations. In
addition, during the first quarter of 2000, we paid $1.0 million for severance
and employees benefits for approximately 500 union employees.
During 2000, we transferred assets with net book values of approximately $1.4
million, which were included in "Other current assets" at December 31, 1999, to
our other facilities. We sold $4.5 million and $1.9 million are included with
"Other current assets" on the accompanying balance sheet at December 31, 2000.
As a service to our customers, we continued operations at Ironton at a greatly
reduced pace through March 31, 2000, in order to allow them to resource the
parts to other suppliers. Since Ironton is no longer a continuing operation and
we continued operations in 2000 merely to accommodate our customers, we have
reclassified
14
23
Ironton's sales and related cost of sales which net to a negative $6.1 million
to "Other operating (income) expenses" in the accompanying statement of
operations.
5. Short-term Lines of Credit
Columbus Neunkirchen Foundry GmbH, a wholly owned subsidiary of INTERMET, has
various revolving note agreements which are payable upon the earlier of demand
or December 31, 2001, unless extended. These notes provide for borrowings up to
DM 14,000,000 (approximately $6,744,000) at December 31, 2000. There were no
outstanding borrowings under these agreements as of December 31, 2000 and 1999.
6. Debt
Our debt consists of the following at December 31, (in thousands of dollars):
2000 1999
-------------------- -------------------
Revolving credit facility $139,000 $193,500
Term loan 200,000 200,000
Prudential note - 15,000
Bank of Nova Scotia 15,000 -
Domestic Subsidiaries:
Industrial development bonds 41,725 42,400
Capitalized leases 2,803 3,262
Other - -
Foreign Subsidiaries:
Foreign bank term notes 638 878
-------------------- -------------------
Total $399,166 $455,040
Less long-term debt due within one year 216,479 6,406
-------------------- -------------------
Long-term debt due after one year $182,687 $448,634
==================== ===================
On November 5, 1999, INTERMET signed a five-year $300 million unsecured
revolving credit agreement with a bank group. In addition, we executed a $100
million 364-day unsecured revolving credit agreement. INTERMET let the 364-day
facility expire on October 3, 2000. During the year there was no usage under the
$100 million facility. Certain standby letters of credit reduce the amount that
the Company is able borrow under its revolving credit facility. At December 31,
2000 such standby letters of credit totaled $48,065,000. The revolving credit
agreement provides us with several interest rate-pricing mechanisms. We must
also pay a fee, at a rate of 0.175% to 0.375% per annum, based on leverage, on
any unused portion of the $300 million. During the year we also paid a
commitment fee of 0.35% per annum, on the $100 million loan commitment. The
revolving credit agreement requires us to maintain specified financial ratios
and impose limitations on certain activities. At December 31, 2000, we had
$112,935,000 available for use under our revolving credit facility.
On December 20, 1999 we borrowed $200 million in the form of an eighteen-month
unsecured term loan with a consortium of banks in order to facilitate the
financing of our acquisition of Ganton and Diemakers. Interest is based on
several interest rate pricing mechanisms. The term loan requires us to maintain
financial ratios and impose limitations on specified activities.
In March 2000, the Prudential note was terminated and replaced with a $15
million term loan from The Bank of Nova Scotia which is due on June 29, 2001.
This financing is unsecured and bears an interest rate of LIBOR plus 1.50%. The
term loan agreement requires us to maintain certain financial ratios and imposes
limitations on certain activities.
On December 23, 1999 Columbus Foundry, L.P., a wholly owned subsidiary, issued
$35,000,000 of variable rate limited obligation revenue bonds. Under the terms
of the indenture, Columbus Foundry, L.P. is require to make
15
24
interest only payments at a variable rate. The interest rate resets weekly and
at December 31, 2000 it was 6.70%. The principal is due December 1, 2019.
Under the terms of a bond indenture entered into by Lynchburg Foundry Company,
our wholly owned subsidiary, Lynchburg Foundry Company is required to redeem
various amounts of industrial development revenue bonds on an annual basis
through June 2006. These amounts range from $175,000 to $350,000 per year, with
a final payment at maturity of $1,650,000. The balance outstanding as of
December 31, 2000 was $3,225,000. The bonds are subject to optional redemption
prior to maturity and bear an interest rate of 7.0%.
As part of our acquisition of Tool Products in 1998, we assumed $4,500,000 of
industrial development revenue bond debt. We are required to make annual
principal payments of $500,000, with a final maturity date of January 1, 2007.
The balance as of December 31, 2000 was $3,500,000.
We also have capital lease obligations of approximately $2,803,000 at December
31, 2000, which relate to assets with net book values of approximately
$3,073,000. Interest rates for these leases range from 7.50% to 8.58%.
The foreign bank term notes bear an interest rate of 5.0% per annum. These
borrowings are secured by property, plant and equipment with net book values
aggregating to approximately $25,207,000 at December 31, 2000.
Maturities of long-term debt and capital leases at December 31, 2000 are as
follows (in thousands of dollars):
2001 $216,479
2002 1,603
2003 1,554
2004 140,406
2005 1,444
Thereafter 37,680
-------------------
Totals $399,166
===================
Interest paid totaled approximately $41,101,000, $12,953,000, and $10,398,000 in
2000, 1999, and 1998, respectively At December 31, 2000, approximately
$37,797,000 was available for the payment of dividends.
7. Shareholders' Equity
We have executive stock option and incentive award plans ("Employee Plans") and
a directors' stock option plan ("Directors' Plan"). The Employee Plans permit
the grant of options and restricted shares for up to 3,000,000 shares of common
stock. The Directors' Plan permits the grant of options to purchase up to
150,000 shares of common stock. Options granted under the Employee Plans vest
over a four-year period. Options under the Directors' Plan were exercisable at
the grant date. Certain options also remain outstanding from prior stock option
plans. At December 31, 2000 options for 772,400 shares were exercisable, while
1,398,000 of the Employee Plans' shares and 66,000 Directors' Plan shares were
available for future grant.
We apply Accounting Principles Board Opinion No. 25 and related interpretations
in accounting for the stock option plans. Accordingly, we have not recognized
compensation expense for our stock option plans. Had compensation expense for
these plans been determined based on the fair value at the grant dates for
awards under those plans consistent with the method of SFAS No. 123, our pro
forma net income, basic earnings per share and diluted earnings per share would
have been approximately $40,033,000, $35,581,000 and $40,290,000; $1.58, $1.40
and $1.57; and $1.57, $1.39 and $1.55 in 2000, 1999 and 1998, respectively.
16
25
The fair values of our stock options, as disclosed above, were estimated as of
the date of grant using a Black-Scholes option pricing model with the following
weighted average assumptions for 2000, 1999 and 1998: risk-free interest rates
ranging from 4.75% to 6.4%; a dividend yield of 1.0%; volatility factor of the
expected market price of our common stock ranging from .32 to .831; and a
weighted average expected life of the options of 6 years. For purposes of the
pro forma disclosures required under SFAS No. 123, the estimated fair value of
the options is amortized over the options' vesting period.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
our employee stock options have characteristics significantly different from
those of traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the fair
value of its stock options.
17
26
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
7. Shareholders' Equity (continued)
A summary of our stock option activity for the three years ended December 31,
2000 is as follows:
Number of Weighted Average Exercise
Options Exercise Price Price Range
-------------------- -------------------- -----------------------
Outstanding at January 1, 1998 1,479,500 $ 9.87
Granted 305,750 18.11 $18.06-$19.38
Exercised (576,450) 8.79 5.69-12.75
Forfeited (24,750) 13.74 9.00-17.00
--------------------
Outstanding at December 31, 1998 1,184,050 $13.64
====================
Exercisable at December 31, 1998 557,050 $11.14
Weighted average fair value of
Options granted during 1998 $7.91
Outstanding at January 1, 1999 1,184,050 $13.64
Granted 323,000 14.28 $12.75-$14.31
Exercised (14,000) 8.05 5.69-10.75
Forfeited (43,500) 15.94 12.75 - 18.06
--------------------
Outstanding at December 31, 1999 1,449,550 $13.76
====================
Exercisable at December 31, 1999 784,500 $12.14
Weighted average fair value of
Options granted during 1999 $14.31
Outstanding at January 1, 2000 1,449,550 $13.76
Granted 532,250 6.38 $6.34 - $8.94
Exercised (26,000) 7.75 7.25 - 8.56
Forfeited (401,750) 13.86 9.00 - 18.06
--------------------
Outstanding at December 31, 2000 1,554,050 $11.31
====================
Exercisable at December 31, 2000 772,358 $12.69
Weighted average fair value of
Options granted during 2000 $6.38
Exercise prices for options outstanding as of December 31, 2000 ranged
principally from $5.81 to $9.69 and $11.63 to $19.38, with weighted-average
remaining contractual lives of those options ranging from 5.8 to 9.5 and 5.7 to
7.5 years, respectively.
18
27
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
7. Shareholders' Equity (continued)
We have an Employee Stock Ownership Plan and Trust ("ESOP") for some of our
United States employees who are not covered by collective bargaining agreements.
The ESOP requires that we make contributions equal to 3% of the annual
compensation of the ESOP participants. We may, at our discretion, make
additional contributions within specified limits. Contributions to the ESOP of
$1,020,000, $984,000 and $872,000 were expensed in 2000, 1999 and 1998,
respectively.
On October 6, 1995 our board of directors declared a dividend of one right for
each share of INTERMET common stock held of record at the close of business on
October 17, 1995, pursuant to a Shareholder Protection Rights Agreement dated
October 6, 1995. The rights are generally not exercisable until 10 days after an
announcement by INTERMET that a person, as defined (excluding, with certain
limitations, certain holders of 10% or more of our common stock who do not
acquire additional shares, any of our ESOPs or benefit plans, and INTERMET or
any of its wholly-owned subsidiaries), has acquired 10% of our common stock or
announces a tender offer which could result in the ownership of 10% or more of
our common stock. Each right, should it become exercisable, will entitle the
owner to buy 1/100th of a share of Participating Preferred Stock, a new series
of our preferred stock, at an exercise price of $40. On October 16, 1997, we
amended the rights agreement to provide that certain institutional investors who
own in excess of 10%, but less than 15% of our common stock, are not "Acquiring
Persons", as defined by the rights agreement.
In the event the rights become exercisable as a result of the acquisition of
shares, each right will entitle the owner, other than the acquiring person, to
buy at the rights' then current exercise price a number of shares of common
stock with a market value equal to twice the exercise price. In addition, unless
the acquiring person owns more than 50% of the outstanding shares of common
stock, the board of directors may elect to exchange all outstanding rights
(other than those owned by such acquiring person or affiliates thereof) at an
exchange ratio of one share of common stock per right. Unless we merge with
another company under certain conditions or redeem or exchange the rights before
October 6, 2005, the rights will expire on such date.
8. Commitments and Contingencies
Future minimum rental payments required under building and equipment operating
leases that have initial or remaining non-cancelable lease terms in excess of
one year at December 31, 2000 are as follows (in thousands of dollars):
2001 $4,758
2002 3,673
2003 2,566
2004 1,822
2005 1,599
Thereafter 27
------------------
Total $14,445
==================
19
28
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
8. Commitments and Contingencies (continued)
Total rental expense under operating leases aggregated $5,059,000, $5,242,000
and $5,255,000 in 2000, 1999 and 1998, respectively.
At December 31, 2000 we had commitments to purchase capital equipment of
approximately $4,124,000 in the aggregate.
Some of our subsidiaries have been named as potentially responsible parties
liable for cleanup of known environmental conditions. For known environmental
situations, INTERMET, with the assistance of environmental engineers and
consultants, has recorded reserves to cover estimated undiscounted future
environmental expenditures. Environmental reserves at December 31, 2000 and 1999
approximated $7,469,000 and $10,198,000, respectively. The environmental reserve
at December 31, 2000 includes $1,200,000 related to the shutdown of Ironton.
Also included is an environmental reserve of $3,257,000 acquired as part of the
purchase of Ganton, which is fully covered by specifically identified liquid
assets. We also have corrective action plans and/or preventive environmental
projects to ensure the safe and lawful operation of our facilities. There could
exist, however, more extensive or unknown environmental situations at existing
or previously owned businesses for which the future cost is not known or exceeds
amounts accrued at December 31, 2000.
In addition to these recurring and anticipated expenditures, 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 owned by INTERMET. Until Federal and state
governments adopt final regulations implementing those amendments and until
certain control measures under existing regulations are determined, it is not
possible to estimate such costs.
We are also engaged in various legal proceedings and other matters incidental to
our normal business activities. We do not believe any of these above-mentioned
proceedings or matters will have a material adverse effect on our consolidated
financial position or results of operations or cash flows.
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INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
9. Retirement Plans and Benefits
We maintain several noncontributory defined benefit pension plans for certain of
our U.S. employees covered by collective bargaining agreements. The benefits are
based on years of service. Our policy is to fund amounts as required under
applicable laws and regulations. In addition to providing pension benefits, we
provide health care and life insurance benefits to certain retired U.S.
employees and their dependents. Certain salaried employees can become eligible
for retiree health care benefits at age 55 depending on years of service.
Certain hourly employees currently can become eligible for retiree health care
benefits at age 60 depending on years of service. Retirees receive substantially
the same health care benefits as active employees. The medical plans generally
pay most medical expenses less deductible and co-pay amounts. Salaried and
hourly employees also contribute to the cost of dependent coverage. Certain
salaried employee coverage converts to a Medicare supplement at age 65, while
most hourly employee coverage ceases at age 65.
Years ended December 31,
Pension Benefits Other Benefits
---------------- --------------
2000 1999 2000 1999
---- ---- ---- ----
(in thousands of dollars)
Change in benefit obligation:
Benefit obligation at beginning of year $65,950 $61,927 $35,218 $37,951
Service cost 1,904 1,434 816 749
Interest cost 5,151 4,335 2,673 2,535
Amendments 4,888 - 38 -
Actuarial (gains)/losses (310) (3,270) 109 (3,449)
Acquisition - 4,763 - 789
Benefits paid (4,037) (3,239) (3,309) (3,357)
---------------------------------------------------------
Benefit obligation at end of year $73,546 $65,950 $35,545 $35,218
Change in plan assets:
Fair value of plan assets at beginning of
year $72,724 $61,019
Actual return on plan assets 4,173 10,176
Company contributions 835 1,030
Acquisition - 3,738
Benefits paid (4,037) (3,239)
-------------- -------------
Fair value of plan assets at end of year $73,695 $72,724
-------------- -------------
Funded status of the plan (under-funded) $149 $6,774 ($35,545) ($35,218)
Unrecognized net actuarial loss/(gain) (3,819) (6,281) (12,271) (13,507)
Unrecognized transition obligation 67 120 - -
Unrecognized prior service cost 6,655 2,074 (64) (77)
-------------- ------------- -------------- -------------
Prepaid (accrued) benefit cost $3,051 $2,687 ($47,881) ($48,802)
============== ============= ============== =============
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INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
9. Retirement Plans and Benefits (continued)
In 2000, an amendment to increase the level of pension benefits earned caused an
increase in the projected benefit obligation of $4.9 million and pension expense
of $1.1 million.
The discount rate used in determining the actuarial present value of the
projected benefit obligations was 8.0% in 2000 and 1999. The expected long-term
rate of return on assets used in determining net pension expense was 9.5% in
2000 and 1999. Plan assets consist of publicly traded stocks and bonds, cash
equivalents and insurance contracts.
The assumed health care cost trend rate used in measuring the accumulated
post-retirement benefit obligation was 6.0% to 7.5% in 2000, declining by 0.5%
per year to an ultimate rate of 5.0% for the applicable employee age groups.
Certain subsidiaries providing a dental benefit assumed a 5.25% cost trend rate
for dental in 2000, declining to 5.0% in 2001.
Years ended December 31,
Pension Benefits Other Benefits
------------------------ ------------------------
Components of net periodic cost: 2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
(in thousands of dollars)
Service cost $1,904 $1,434 $1,204 $816 $749 $707
Interest cost 5,151 4,335 4,044 2,673 2,535 2,490
Expected return on plan assets (6,465) (5,665) (5,062) - - -
Amortization of prior service
cost and net transition
obligation (119) 344 283 (13) (13) (508)
Recognized net actuarial gain - - - (1,091) (980) (813)
--------- --------- -------- --------- --------- ---------
Benefit cost $471 $448 $469 $2,385 $2,291 $1,876
========= ========= ======== ========= ========= =========
The assumed health care cost trend rate has a significant effect on the amounts
reported. A one-percentage-point change in the assumed health care cost trend
rate would have the following effects:
One Percentage One Percentage
Point Increase Point Decrease
------------------ ------------------
(in thousands of dollars)
Effect on total service and interest cost
components in 2000 $266 ($218)
Effect on postretirement benefit
obligation as of December 31, 2000 $2,013 ($1,807)
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INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
9. Retirement Plans and Benefits (continued)
Amounts recognized for pension benefits in the consolidated balance sheets
consist of:
December 31,
2000 1999
------------ -----------
(in thousands of dollars)
Prepaid benefit cost $4,177 $3,895
Accrued benefit liability (1,981) (1,721)
Intangible asset 855 513
------------ -----------
Net amount recognized $3,051 $2,687
============ ===========
Because we aggregate the disclosures for our pension plans with plans with
accumulated benefit obligations in excess of plan assets (underfunded plans),
the following additional disclosures are applicable to our pension plans with
accumulated benefit obligations in excess of plan assets, in thousands of
dollars, as of December 31, 2000:
Projected benefit obligation $8,975
Accumulated benefit obligation 8,260
Fair value of plan assets 7,349
We maintain several defined contribution plans for certain hourly employees.
Contributions to these plans, which are principally based on hours worked by
each employee, totaled $2,097,000, $1,308,000 and $1,034,000 in 2000, 1999 and
1998, respectively. Some of the plans allow participants to make pretax
contributions as a percentage of their compensation.
We also maintain defined contribution plans for domestic salaried employees. In
certain plans we contribute a specified percentage of the annual compensation of
participants. Participants are also allowed to make pretax contributions to the
plans, as a percentage of their compensation. We match participant contributions
up to a specified limit. Certain plans provide for a discretionary
profit-sharing contribution. We accrued contributions to the plans of
$2,509,000, $1,838,000 and $1,602,000 in 2000, 1999 and 1998, respectively.
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INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
10. Income Taxes
The provision for income taxes consists of the following (in thousands of
dollars):
Years ended December 31,
2000 1999 1998
------------ ----------- ----------
Current:
Federal $10,086 $14,890 $22,317
State 3,233 3,716 3,555
Foreign 8,413 (139) 733
------------ ----------- ----------
21,732 18,467 26,605
Deferred:
Federal 11,644 (7,406) (5,651)
State 2,815 (922) (467)
Foreign - 1,937 3,712
------------ ----------- ----------
14,459 (6,391) (2,406)
------------ ----------- ----------
Totals $36,191 $12,076 $24,199
============ =========== ==========
We paid federal income taxes of approximately $15,000,000, $14,949,000 and
$15,245,000 in 2000, 1999 and 1998, respectively.
The provision for income taxes differs from the amount computed using the
statutory U.S. federal income tax rate for the following reasons (in thousands
of dollars):
Years ended December 31,
2000 1999 1998
----------- ----------- ----------
Provision for income taxes at U.S.
statutory rate $26,985 $16,959 $22,816
Income with no tax effect (335) (118) (267)
Difference between U.S. and foreign
tax rates (531) 82 84
Utilization of NOL and credit
carryforwards - (190) -
State income taxes, net of federal
income tax benefits 2,641 2,810 2,030
Reduction in valuation allowance - (9,018) -
Goodwill amortization/write-off 8,573 766 757
Other (1,142) 785 (1,221)
----------- ----------- ----------
Totals $36,191 $12,076 $24,199
=========== =========== ==========
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INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
10. Income Taxes (continued)
The tax effects of temporary differences and carryforwards that give rise to
deferred income tax assets (liabilities) at December 31, 2000 and 1999 are as
follows (in thousands of dollars):
2000 1999
------------- -----------
Compensation and benefit items, primarily related
to SFAS No. 106 $21,361 $22,274
Operating loss, capital loss, foreign tax credit
and AMT credit carryforwards 4,062 8,192
Impairment and shutdown costs 1,280 9,164
Deductible goodwill 1,320 2,178
Other temporary differences 23,559 17,124
------------- -----------
Gross deferred tax assets 51,582 58,932
Depreciation and related items (32,165) (23,200)
Other temporary differences (4,193) (14,533)
------------- -----------
Gross deferred tax liabilities (36,358) (37,733)
------------- -----------
Net deferred tax asset 15,224 21,199
Valuation allowance (50) (3,728)
------------- -----------
Net deferred income taxes $15,174 $17,471
============= ===========
During 2000, we reduced the deferred tax assets and the corresponding valuation
allowance by $3,678,000. Of this amount, $1,975,000 related to net operating
loss carryforwards of the Ironton Iron facility. As this operation has been
shutdown, there is no possibility these losses will ever be utilized.
Consequently, there is no longer a need for a valuation allowance against these
losses. In addition, $1,703,000 relates to foreign tax credit carryforwards
which expired in 2000. Tax loss carryforwards with a value of $4,000,000 expire
in various amounts between 2001 and 2010.
These income tax amounts are included in the consolidated balance sheets as
follows (in thousands of dollars):
December 31,
2000 1999
----------- -----------
Current assets $13,999 $10,047
Other non-current assets 1,175 7,424
----------- -----------
Totals $15,174 $17,471
=========== ===========
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INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
11. Geographic Area and Major Customer Information
The following is a breakout of sales, operating profit, net income and assets
based on geographic locals as of December 31 for 2000, 1999 and 1998. INTERMET
operates in North America and has other international operations, mainly German.
As of and for the years ended December 31,
2000 1999 1998
------------ ----------- ----------
(in thousands of dollars)
Net sales:
North America $943,371 $846,876 $733,889
Other international 95,473 109,956 107,709
Operating profit:
North America 72,409 41,708 61,413
Other international 16,283 20,453 14,236
Income before income taxes:
North America 51,848 29,263 53,239
Other international 25,251 19,190 11,949
Assets:
North America 841,016, 888,720 517,515
Other international 77,780 68,572 66,500
Net sales to customers exceeding 10% of consolidated net sales in 2000, 1999 or
1998, and other major customers, were as follows (as a percentage of
consolidated net sales):
2000 1999 1998
------- ------- --------
Customer:
DaimlerChrysler 18% 17% 20%
Ford 11% 16% 18%
Delphi 8% 7% 4%
Visteon 7% - -
General Motors 6% 2% 2%
TRW 4% 5% 6%
For 1999, Ford sales include sales to Ford Motor Company (8%) and Visteon
Automotive Systems (8%). For 1998, Ford sales include sales to Ford Motor
Company (10%) and Visteon Automotive Systems (8%). These sales are generated by
the ferrous and the light metals segments.
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INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
12. Earnings per Share
Earnings per share are computed as follows:
Years ended December 31,
2000 1999 1998
----------- ---------- ----------
(in thousands, except per share data)
Numerator:
Net income $40,908 $36,377 $40,989
Denominator:
Denominator for basic earnings
per share - weighted average
shares 25,362 25,480 25,610
Effect of dilutive securities:
Employee stock options and
unearned restricted stock 76 91 337
---------- ---------- ----------
Denominator for diluted earnings
per share - adjusted weighted
average shares and assumed
conversions 25,438 25,571 25,947
========== ========== ==========
Net Income per share $1.61 $1.43 $1.60
========== ========== ==========
Net Income per share - Assuming
Dilution $1.61 $1.42 $1.58
========== ========== ==========
Dilutive earnings per share reflects the assumed exercise of stock options and
unearned restricted stock.
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INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
13. Quarterly Data and Share Information (Unaudited)
First Second Third Fourth
Quarter Quarter Quarter Quarter
----------- --------- ---------- --------
(in thousands of dollars, except per share data)
2000
Net sales $302,245 $281,855 $239,585 $215,159
Gross profit 44,269 41,290 28,169 11,854
Net income 9,496 11,870 8,022 11,520
Net income per common share 0.37 0.47 0.32 0.45
Net income per common share - Assuming
Dilution 0.37 0.47 0.32 0.45
Share prices (Nasdaq):
High 14.500 9.844 10.188 7.875
Low 8.250 4.563 5.000 3.000
1999
Net sales $245,227 $245,698 $225,350 $240,557
Gross profit 34,137 33,146 23,989 31,015
Net income 12,133 16,626 7,442 176
Net income per common share 0.47 0.65 0.29 0.01
Net income per common share - Assuming
Dilution 0.47 0.65 0.29 0.01
Share prices (Nasdaq):
High 14.813 15.750 15.750 11.813
Low 10.063 13.250 8.219 8.813
1. During 2000 we had various events which impacted our quarterly net
income. During the first quarter, we had losses at our Ironton foundry
which resulted from the fulfillment of certain customer needs. Further,
during the third and fourth quarters, we had gains from insurance and
the sale of a subsidiary and also during the fourth quarter we took a
charge for a workforce reduction and the writedown of non-core assets.
Without this impact, the results of our pro-forma quarterly net income
would have been as follows:
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------
Net income 13,235 11,870 5,261 (2,428)
Net income per common share Basic 0.52 0.47 0.21 (0.10)
Net income per common share
Assuming Dilution 0.52 0.47 0.21 (0.10)
Pro forma fourth quarter net
income was impacted by the
severe slowdown in the auto
industry as well as under
performance of certain
foundries.
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2. During the fourth quarter of 1999, we recapitalized our international
operations, which resulted in a one-time tax benefit of $4.0 million.
Also, for the fourth quarter of 1999, we recorded asset impairment and
shutdown costs for the closure of Ironton totaling $18.6 million before
taxes. Without these items, pro-forma results for the fourth quarter of
1999 would have been as follows:
Net income (in thousands) $8,286
Net income per common share $0.33
Net income per common share Assuming $0.33
Dilution
Third and fourth quarter sales are usually lower than the first and second
quarter sales due to plant closings by automotive manufacturers for vacations
and model changeovers. The above share price information represents inter-dealer
transactions in The Nasdaq National Market without retail markup, markdown or
commission.
14. DERIVATIVE FINANCIAL INFORMATION
Financial Accounting Standards Board Statement No. 138, Accounting for
Derivative Instruments and Hedging Activities (Statement 138), requires
companies to recognize all of its derivative instruments as either assets or
liabilities in the statement of financial position at fair value. The accounting
for changes in the fair value (i.e., gains or losses) of a derivative instrument
depends on whether it has been designated and qualifies as part of a hedging
relationship and further, on the type of hedging relationship. For those
derivative instruments that are designated and qualify as hedging instruments, a
company must designate the hedging instrument, based upon the exposure being
hedged, as either a fair value hedge, cash flow hedge or a hedge of a net
investment in a foreign operation. The adoption of Statement 138 will not have a
material impact on our financial position, operations or cash flows based on our
current instruments. We will adopt statement 138 on January 1, 2001.
Our risk management policy is to protect our long-term debt at the lowest cost
options available. We assess market conditions periodically to determine whether
it is beneficial to enter into transactions which protect against interest rate
fluctuations on the variable portion of our long-term debt.
On October 24, 2000, we entered into an interest rate swap agreement through
Scotia Capital, Inc., a broker-dealer subsidiary of the bank of Nova Scotia. The
agreement terminates on October 24, 2003. Interest rate swaps are contractual
agreements between parties to exchange fixed and floating interest rate payments
periodically, over the life of the agreements, without the exchange of
underlying principal amounts. This swap is used to partially hedge an underlying
debt obligation and is not marked to market.
The notional principal amount of this contract is $50,000,000 US Dollars.
INTERMET will pay quarterly beginning January 24, 2001 a fixed interest rate of
6.469% with Scotia Capital, Inc. paying at the LIBOR rate. The LIBOR rate for
the initial calculation period (October 24, 2000 through January 24, 2001) is
6.761%. We do not expect to terminate the swap prior to maturity. Had the swap
been terminated at December 31, 2000, we would have been obligated to the
counter-party for approximately $911,000.
We have designated this swap transaction as a cash flow hedge. The effectiveness
of this hedge transaction will be assessed using the short cut method as it
meets the criteria outlined in Statement 138. Therefore, the above hedge is
considered to be perfectly effective. Therefore, the entire change in the fair
value of the derivative will be recorded in other comprehensive income, and no
hedge ineffectiveness is recorded in earnings.
15. INSURANCE CLAIMS
Neunkirchen Foundry
On May 20, 2000, INTERMET's Neunkirchen Foundry suffered a fire that caused
extensive damage. There were no injuries resulting from the accident but the
Foundry was shut down for a period of approximately two
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weeks. As of December 31, 2000, the plant is fully operational with a few minor
repairs remaining. Local fire and law enforcement officials completed their
investigation of the incident. The cause of the fire was deemed accidental. The
assets lost and the resulting business interrupton are covered under the
insurance policies INTERMET had in place for our Columbus Neunkirchen facility.
As of December 31, 2000, we have reached settlement with our insurance company
for the expenses and lost profit related to this incident.
New River Foundry
On March 5, 2000 our New River Foundry suffered an explosion which shutdown
operations at the facility until November of 2000. Based on our investigation,
our conclusion is that the incident was accidental. However, on September 5,
2000 the Virginia Department of Labor and Industry issued citations of alleged
violations for applicable health and safety requirements and assessed fines in
the total amount of $0.8 million which are included in "Other,net" in the
accompanying statement of operations. The rebuild of our New River facility is
substantially complete with only a few minor repairs remaining during first
quarter of 2001. Both lines are now fully operational and New River's capacity
is approximately the same as pre-accident levels. As of December 31, 2000 we
have reached partial settlement with our insurance carriers related to the New
River accident.
The resulting business interruption and loss of fixed assets is covered under
INTERMET's insurance policies for the period. As of December 31, 2000 we have
received settlements totaling $104.5 million with our insurance carriers for the
determinable portion of the claim.
The settlement has been recorded as follows:
- - For the year ended December 31, 2000, we recorded insurance recovery of
approximately $19.6 million related to business interruption.
- - We incurred accident-related expenses of approximately $40.1 million
which were offset by insurance recovery within cost of sales.
- - We recorded approximately $34.4 million for the replacement of property,
plant and equipment, of this amount, $26.5 million has been recorded as
a gain in "Other, net" in the accompanying statement of operations.
- - At December 31, 2000, approximately $10.4 million remains as deferred
revenue as well as $14.0 million as accounts receivable.
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