INTERMET Reports Fiscal-Year and
Fourth-Quarter Results
Sales for the year set a record
TROY, Mich., Feb. 1 INTERMET Corporation
today reported record full-year sales of $1.04 billion for 2000, up
$82 million, or 9 percent, compared with 1999 sales results. Net income for
the year was $40.9 million, or $1.61 per diluted share, compared with
$36.4 million, or $1.42 per diluted share in 1999. A number of one-time
events influenced sales and earnings for the year. The details of these
influences are discussed later in this press release.
INTERMET's fourth-quarter 2000 sales were $215 million, down 11 percent
from 1999 fourth-quarter results, due to severe late November and December
vehicle-build reductions. Fourth-quarter earnings of $11.5 million, or $0.45
per diluted share, compared with prior-year earnings of $0.2 million, or $0.01
per diluted share. Several one-time events also affected fourth-quarter
results.
The INTERMET Board of Directors voted to approve a quarterly dividend of
$0.04 per share, payable March 30, 2001, to shareholders of record as of
March 1, 2001.
INTERMET Chairman and Chief Executive Officer John Doddridge said, "It has
been quite a year for INTERMET. It was full of challenges, with many success
stories as well as a few potholes. We passed the billion-dollar revenue mark
for the first time and the Ganton Technologies/Diversified Diemakers
acquisitions were successfully integrated, substantially increasing our
product and materials offerings in aluminum, magnesium and zinc. In addition,
we significantly increased ferrous capacity in North America and Europe, our
engineers developed great new products, and a new test laboratory was built in
Virginia. And our two accident-damaged plants were rebuilt and improved in
record time.
"As we previously reported in March, an explosion destroyed most of our
New River ferrous-casting foundry in Radford, Virginia, sadly costing the
lives of three of our employees and injuring several others," said Doddridge.
"In May, a serious fire at our foundry in Neunkirchen, Germany, also seriously
disrupted production. New ferrous capacity in our Columbus, Georgia, plant
encountered lengthy delays before coming on line. The net effect of all this
is that about 20 percent of our ferrous capacity was off line for most of the
year in North America and 30 percent was off line in Europe for about eight
weeks -- all occurring in a year of record North American and strong European
vehicle builds."
As previously reported, the Company's financial performance also has been
negatively affected by the launch of a complex new part for a major customer.
The cost of producing the part is substantially higher than anticipated. As a
result, INTERMET plans to discontinue making the part by July 3, 2001.
Doddridge continued: "The North American automobile industry appears to
have entered into a substantial slowdown. Excessive inventories by the
automakers have caused even deeper declines to occur in production builds,
which will likely continue through the first quarter. We don't know if this
will be a long or deep downturn, but preliminary January auto sales numbers
are encouraging. While we don't like a downturn, we think it gives us an
opportunity to strengthen our company. We are in the process of eliminating
many of the costs that were in place to support the torrid pace of the last
several years. Also, it gives us a chance to move at a more rapid but
controlled pace in the evolution of our new materials-process continuum. We
believe that our expanded ability to provide high-quality, complex castings
across a broad array of materials makes us unique in our industry.
"If the downturn continues, the year 2001 could be challenging for all of
us in the auto industry," said Doddridge. "In addition to a steep reduction
in orders and pricing pressures, we are an energy-intensive company and our
energy costs are currently skyrocketing. We have been moving rapidly to
adjust our overhead structure to current conditions. There is much
uncertainty in our industry regarding the level of anticipated auto sales in
the first quarter of 2001. If the North American January build rate continues
into February and March, we will likely be about breakeven in the first
quarter. Nevertheless, our cash flow should remain strong. Capital spending
has been curtailed and depreciation and amortization is expected to be about
$60 million in 2001."
Total debt to capital for INTERMET has decreased to 59 percent from a
65-percent level at the end of 1999. Total capital spending for plant,
property and equipment during the year was $92.2 million. Of the total, the
additions to fixed assets were $57.7 million. Additionally, $34.4 million of
the capital spent was insurance related for replacement or repair of destroyed
or damaged equipment and facilities. Depreciation and amortization in 2000
increased to $53.7 million from $40.1 million in 1999. Foreign exchange for
the year 2000 negatively impacted sales $14.8 million compared with the
previous year.
INTERMET Corporation Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Three months ended Twelve months ended
(Unaudited) (Unaudited)
December 31, December 31, December 31, December 31,
2000 1999 2000 1999
Net sales $215,159 $240,557 $1,038,844 $956,832
Cost of sales 203,305 209,542 913,262 834,545
Gross profit 11,854 31,015 125,582 122,287
Selling, general and
administrative 9,425 11,885 38,546 37,473
Goodwill amortization 1,588 1,787 6,353 4,154
Other operating (income)
expense (12,749) 17,790 (8,009) 18,499
Operating profit 13,590 (447) 88,692 62,161
Interest (expense),
net (9,408) (4,836) (39,261) (14,905)
Other income, net 21,285 773 27,668 1,197
Income (loss) before
income taxes 25,467 (4,510) 77,099 48,453
Provision (benefit)
for income taxes 13,947 (4,686) 36,191 12,076
Net income $11,520 $176 $40,908 $36,377
Income per common share:
Basic $0.45 $0.01 $1.61 $1.43
Diluted $0.45 $0.01 $1.61 $1.42
Weighted average shares outstanding:
Basic 25,364 25,338 25,362 25,480
Diluted 25,395 25,376 25,438 25,571
INTERMET Corporation Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
December 31, December 31,
2000 1999
Assets:
Cash and cash equivalents $19,737 $3,416
Accounts Receivable 134,881 174,391
Inventory 93,870 102,802
Other current assets 27,769 23,911
Property, plant and equipment, net 397,634 369,731
Intangible assets, net of amortization 224,846 248,864
Other non-current assets 20,059 34,177
Total assets $918,796 $957,292
Liabilities and shareholders' equity:
Accounts payable $103,501 $114,105
Debt - current 216,479 6,406
Other current liabilities 82,555 87,963
Debt - long term 182,687 448,634
Other non-current liabilities 54,167 57,807
Total shareholders' equity 279,407 242,377
Total liabilities and shareholders'
equity $918,796 $957,292
INTERMET Corporation Condensed Consolidated Statements of Cash Flow
(In thousands)
(Unaudited)
December 31, December 31,
2000 1999
Operating activities:
Net Income $40,908 $36,377
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation 45,122 35,140
Amortization 8,600 4,978
Impairment of assets -- 10,811
Results of equity investments (782) (337)
Deferred income taxes -- (6,391)
Dissolution of foreign holding -- --
(Gain) loss on sale of subsidiary and other
assets (23,747) 692
Write-down of non-core assets 7,476 --
(Gain) loss on insurance (26,502) --
Changes in operating assets and liabilities
excluding the effects of acquisitions and
dispositions 33,034 (11,011)
Cash provided by operating activities 84,109 70,259
Investing activities:
Additions to property, plant and
equipment (57,747) (78,743)
PP&E additions covered by insurance (34,414) --
Proceeds from sale of subsidiary 53,903 --
Proceeds from insurance 34,414 --
Purchase of businesses, net of cash
acquired -- (274,338)
Other - net -- (3,886)
Cash used in investing activities (3,844) (356,967)
Financing activities:
Change in debt (55,807) 289,842
Issuance of common stock 380 --
Dividends paid (4,061) (4,076)
Other - net -- (5,870)
Cash provided by (used in) financing
activities (59,488) 279,896
Effect of exchange rate changes on cash
and cash equivalents (4,456) 4,380
Net increase (decrease) in cash and cash
equivalents 16,321 (2,432)
Cash and cash equivalents at beginning of
year 3,416 5,848
Cash and cash equivalents at end of year $19,737 $3,416
Sales from the Company's light-metals segment increased $232 million over
prior year levels as a result of the December 1999 acquisition of Ganton
Technologies and Diversified Diemakers.
Full-year 2000 sales for the Ferrous Metals Group were $136 million less
than 1999 sales, due primarily to the explosion at the New River Foundry and
fire at the Neunkirchen Foundry. Sales also were reduced as a result of the
closure of Ironton Foundry and the divestiture of Iowa Mold Tooling, as well
as foreign-exchange issues.
One-time events in 2000 and 1999 influencing net income are summarized
below:
2000 1999
$ millions Per diluted $ millions Per diluted
share share
Income Before Adjustments 28.0 1.10 40.7 1.59
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) (12.0) (0.47)
European Tax Benefit 8.5 0.33
Acquisition Costs (0.8) (0.03)
Reported Net Income $40.9 $1.61 $36.4 $1.42
* 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 of the end of year 2000, the adjustments for one-time events noted
above include costs incurred at Ironton Foundry during the first quarter.
Ironton was effectively closed as of December 1999, and the losses incurred in
the first quarter of 2000 were due to customer commitments. Ironton costs
have been restated as one-time costs. Therefore, earnings before one-time
events, including Ironton, were $1.20 through the first nine months of 2000.
A number of one-time gains were booked in the fourth quarter. Without these
gains, the Company would have incurred a $0.10 EPS loss due to deteriorating
market conditions and the Alexander City plant problems.
The reported income tax rate of 47 percent was a result of the sale of
certain assets. The reported rate is higher because the goodwill associated
with the assets was written off at the time of sale. Goodwill, while a
deduction against reported profits, is not deductible for tax purposes;
therefore, the gain on the sale of these assets, for tax purposes, is greater
and results in more recorded taxes, inflating the tax rate of the Company.
The tax rate of the Company excluding the asset sales and other non-deductible
goodwill expenses would have been between 41 and 42 percent.
During 2000, INTERMET sold a subsidiary, Iowa Mold Tooling Company (IMT),
which was considered non-core to the Company's business, for approximately
$54 million, resulting in a booked gain of approximately $11 million.
INTERMET had un-amortized goodwill associated with IMT of approximately
$13 million that was written off at the time of the sale. Also in 2000, the
Company decreased its carrying value for certain other assets. Goodwill
associated with these assets of approximately $6 million was written off and
the carrying value of certain other long-lived assets, primarily equipment,
was also reduced. The action was taken to adjust these assets to more closely
approximate their fair market value.
As a result of the accidents at New River and Neunkirchen, the Company
filed business interruption claims under its insurance policies. The claims
were for lost revenues while these locations could not manufacture at their
normal levels. The Company has taken a conservative position related to these
claims for lost revenues and reflected recovery from the insurance provider
only to the extent of the costs incurred by the Company and for actual
settlement received from the insurance provider. While INTERMET has finalized
nearly all of the claims, the insurance provider has agreed that actual
settlements received through December 2000 represent a partial settlement of
the claims.
The accidents at New River and Neunkirchen have resulted in the
replacement of certain assets of the Company. Destroyed and damaged assets
were replaced (or repaired) and under the provisions of INTERMET's insurance
policy, the insurance provider reimbursed the Company for the replacement and
repair costs of these assets. The reimbursement received by the Company from
the insurance provider is treated as "other income" under generally accepted
accounting principles. INTERMET has realized a gain on the replacement of
these assets to the extent that the cost of the assets exceeded the value of
the destroyed assets. While this has resulted in significant profits in 2000,
the Company will realize increased expenses going forward due to the
depreciation expense related to the replaced and repaired assets.
Accounting rules for goodwill may change in 2001. The Financial
Accounting Standards Board which sets accounting policies is evaluating a rule
that could eliminate the amortization of goodwill. INTERMET currently has
approximately $225 million of carrying value for goodwill associated with
acquisitions. If this rule is enacted the Company would no longer record
goodwill amortization expense.
INTERMET will hold a Conference Call today at 2:30 p.m. Eastern time.
Investors and interested parties can listen to a live webcast by visiting
http://www.intermet.com and clicking on the "Financial/Investor Information" link on
the home page. (The webcast also will be available at http://www.streetfusion.com .)
A replay of the web cast briefing also is expected to be available on the
INTERMET web site through March 2, 2001.
With headquarters in Troy, Michigan, INTERMET Corporation is a
full-service supplier of powertrain, chassis/suspension and structural
components to the worldwide automotive industry. The company has more than
7,000 employees at facilities located in North America and Europe. More
information about the company is available on the Internet at
http://www.intermet.com .
This news release may include forecasts and forward-looking statements
about INTERMET, its industry and the markets in which it operates. Forward-
looking statements and the achievement of any forecasts or projections are
subject to risks, uncertainties and other factors that could cause actual
results to differ materially from those expressed or denied. Such risks and
uncertainties are fully detailed as a preface to the Management's Discussion
and Analysis of Financial Condition in the company's 1999 Annual Report for
the year ended December 31, 1999.
