INTERMET Reports 2003 Third-Quarter Results
Earnings improve over 2002
TROY, Mich., Oct. 16 -- INTERMET Corporation , one of the world's leading manufacturers of cast-metal automotive components, today reported 2003 third-quarter sales from continuing operations of $182.1 million, compared with $192.6 million in the year-ago period. The company also reported a 2003 third-quarter net loss of $50 thousand, or 0 cents per diluted share, compared with a net loss of $1.0 million, or 4 cents per diluted share in the third quarter of last year. These essentially breakeven results were in line with INTERMET's prior projections and First Call consensus. Income before income tax and minority interest was $281 thousand, compared with a $3.8 million pretax loss in the third quarter of 2002.
Sales for the quarter were influenced primarily by lower production levels at the traditional U.S. Big 3, the closure of the Radford Foundry, the sale of Frisby P.M.C., and slower-than-expected launches of new programs. Third- quarter earnings were impacted by the reduced level of sales and rising steel scrap prices, offset by a gain on a sale of assets and a post-retirement benefit curtailment gain related to the Radford Foundry closure. It should also be noted that in July of this year, INTERMET announced the sale of Frisby P.M.C. as a divestiture of non-core operations. As a result, the company is reporting amounts related to Frisby as "discontinued operations" for all periods presented.
Commenting on the quarter, President and CEO Gary F. Ruff said, "A significant move by our major customers to reduce inventories with incentive programs resulted in low production numbers from the 'Big 3,' which, in part, caused a five-percent drop in sales for INTERMET compared with last year's third quarter. Also, we began the shutdown of the Radford Foundry and sold our Frisby machining operation, which further impacted our sales results. However, I am still pleased that we have been able to report essentially breakeven results despite lower sales in what is traditionally our toughest quarter.
"We have maintained efforts to balance steady improvement in our operating efficiencies with continuing work on new and proprietary technologies, many of which have or are being implemented into production," Ruff said. "We believe that our leading technology position along with increased productivity will assure market-share gains for INTERMET and prepare the company to take full advantage of the worldwide growth of the automotive industry."
Vice President Finance and CFO Bob Belts said, "Gross margin for the third quarter was 8.1 percent, 1.9 percentage points higher than the 6.2 percent reported in the third quarter of 2002. The higher margin is directly attributable to structural changes we made during the quarter along with efficiency improvements at our plants."
Selling and administrative expenses were higher for the quarter, mainly the result of the consolidation of the SG&A of the Porto, Portugal, foundry. Overall debt at the end of the quarter was $293.4 million, which also includes $15.7 million from the full consolidation of Porto. Excluding Porto, debt would have been $7.2 million lower than the second quarter. Depreciation and amortization was reported at $13.1 million for the quarter.
For the first nine months of 2003, the company recorded a net loss of $3.5 million, or 14 cents per diluted share, after the Radford Foundry closure costs. This compares with a 2002 nine-month net income of $8.6 million, or 33 cents per diluted share. INTERMET's 2003 nine-month sales were $578.8 million, down $31.0 million from the same period last year. The company generated cash flow from operations of $22.1 million during the nine-month period, which was used to help fund capital requirements and the Porto purchase. Capital spending to date totaled $11.6 million.
Ruff also commented, "As we are implementing our LASIK Vision strategy and working to continually improve performance, a number of very positive things already occurred within INTERMET during the third quarter. The acquisition of another 25 percent of Porto, with the remaining 25 percent coming on board next year, is an integral part of our global and low-cost operation strategies. To further support these strategies, work has begun on INTERMET's 100,000-square-foot ferrous foundry in Mexico. With a number of customer orders already in hand, we expect to be in production by next summer. And the opening of engineering and sales centers in Germany and Japan reflects our strategy to bring INTERMET's full-service capabilities to growing customer bases in both Europe and Asia."
The INTERMET Board of Directors voted to approve a quarterly dividend of 4 cents per share, payable January 2, 2004, to shareholders of record as of December 1, 2003.
Fourth-Quarter Outlook
"We anticipate sales in the $188 million to $194 million range, and diluted earnings per share from continuing operations to be around two cents per diluted share," said CFO Belts. "The tax rate in the fourth quarter is expected to be 33 percent and depreciation and amortization is expected to be about $12.5 million. Capital spending should be about $5.0 million."
INTERMET will hold a Conference Call today at 3 p.m. ET to discuss third- quarter results as well as the outlook for the fourth quarter. Investors and interested parties can listen to a live webcast by visiting www.intermet.com and clicking on the "Financial/Investor Information" link on the home page. A slide presentation also will be available on the web site. It is recommended that access to the live webcast be established 10-15 minutes prior to the scheduled start time. A replay of the webcast briefing also is expected to be available on the company's web site beginning two hours after completion of the briefing through November 16, 2003.
Director John H. Reed
INTERMET recently lost a valued colleague and friend when John H. (Jack) Reed, a director since 1998, passed away on September 20 from complications resulting from a battle with cancer. He was 71.
"Jack Reed has made significant contributions to INTERMET during his tenure on the board," said John Doddridge, Chairman of INTERMET. "We were fortunate to have had his leadership and wisdom available to us over the past five years. His tremendous knowledge of the automotive industry and his technical intellect were matched by a very gracious and generous demeanor. His presence will be missed."
With headquarters in Troy, Michigan, INTERMET Corporation is a manufacturer of powertrain, chassis/suspension and structural components for the automotive industry. INTERMET's strategy is to be the world's leading supplier of cast-metal automotive components. The company has more than 5,500 employees at facilities located in North America and Europe. More information is available on the Internet at www.intermet.com .
This news release and INTERMET's conference call include forecasts and other forward-looking statements about INTERMET, its industry and the markets in which it operates. The achievement of forecasts, projections and strategic goals are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those expressed. Some of these risks and uncertainties are detailed as a preface to the Management's Discussion and Analysis of Financial Condition in the company's 2002 Annual Report for the year ended December 31, 2002.
INTERMET Corporation Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2003 2002 2003 2002
(Unaudited)
Net sales $182,054 $192,603 $578,832 $609,794
Cost of sales 167,332 180,646 525,645 554,236
Gross profit 14,722 11,957 53,187 55,558
Selling, general
and
administrative 8,663 7,938 25,031 24,374
Restructuring and
impairment
charges (1,278) - 10,314 -
Other operating
expense (income),
net 820 (495) 2,218 (327)
Operating profit 6,517 4,514 15,624 31,511
Interest expense,
net 7,711 7,540 22,848 21,075
Other (income)
expense, net (1,475) 784 (1,314) 617
Income (loss)
before income tax
and minority
interest 281 (3,810) (5,910) 9,819
Income tax (expense)
benefit (107) 2,629 1,958 (1,970)
Minority interest
and equity
interest in a
joint venture (165) 273 587 692
Income (loss) from
continuing
operation 9 (908) (3,365) 8,541
Loss from discontinued
operation, net of tax:
Loss from
operation (18) (105) (81) (449)
Loss on sale (41) - (41) -
(Loss) income before
cumulative effect
of change in
accounting (50) (1,013) (3,487) 8,092
Cumulative effect
of change in
accounting,
net of tax - - - 481
Net (loss) income ($50) ($1,013) $(3,487) $8,573
(Loss) earnings per common share:
Basic
(Loss) earnings
from continuing
operation $ - ($0.04) $(0.13) $0.34
Loss from
discontinued
operation,
net of tax - - (0.01) (0.02)
Cumulative effect
of change in
accounting,
net of tax - - - 0.02
(Loss) earnings
per common
share - basic $ - ($0.04) $(0.14) $0.34
Diluted
(Loss) earnings
from continuing
operation $ - ($0.04) $(0.13) $0.33
Loss from
discontinued
operation,
net of tax - - (0.01) (0.02)
Cumulative effect
of change in
accounting,
net of tax - - - 0.02
(Loss) earnings
per common
share - diluted $ - ($0.04) $(0.14) $0.33
Weighted average shares outstanding:
Basic 25,591 25,462 25,576 25,430
Diluted 25,725 25,462 25,576 25,747
INTERMET Corporation Condensed Consolidated Balance Sheets
(In thousands)
September 30, December 31,
2003 2002
(Unaudited)
Assets:
Current assets:
Cash and cash equivalents $4,988 $3,298
Accounts receivable 99,112 85,503
Inventory 76,501 63,739
Other current assets 32,581 24,461
Current assets of
discontinued operation - 3,407
Total current assets 213,182 180,408
Property, plant and equipment, net 325,659 326,962
Goodwill 217,016 217,016
Other non-current assets 25,625 34,640
Non-current assets of
discontinued operation - 5,072
Total assets $781,482 $764,098
Liabilities and shareholders' equity:
Current liabilities:
Accounts payable $75,690 $69,960
Accrued liabilities 58,877 64,313
Long term debt due within one year 11,626 1,567
Current liabilities of
discontinued operation - 1,865
Total current liabilities 146,193 137,705
Non-current liabilities:
Long term debt due after one year 281,815 278,536
Other non-current liabilities 91,854 90,288
Total non-current liabilities 373,669 368,824
Minority interest 5,600 -
Shareholders' equity 256,020 257,569
Total liabilities and
shareholders' equity $781,482 $764,098
INTERMET Corporation Condensed Consolidated Statements of Cash Flow
(In thousands)
Nine months ended
September 30, September 30,
2003 2002
(Unaudited)
Cash provided by continuing
operating activities $22,709 $67,538
Cash (used in) provided by
discontinued operation (628) 119
Cash provided by operating activities 22,081 67,657
Additions to property, plant and
equipment by continuing operation (11,612) (6,732)
Additions to property, plant and
equipment by discontinued operation - (148)
Purchase of shares of a subsidiary (5,571) -
Proceeds from sale of assets
of a subsidiary 3,925 -
Proceeds from sale of property,
plant and equipment 1,700 360
Cash used in investing activities (11,558) (6,520)
Net decrease in revolving
credit facility (1,000) (67,000)
Proceeds from debt offering - 175,000
Repayments of term loan - (171,750)
Repayments of other debts (4,085) (1,461)
Payments of revolving credit
facility fees (405) -
Payments of debt issuance costs - (5,940)
Issuance of common stock 12 490
Dividends paid (3,072) (3,056)
Cash used in financing activities (8,550) (73,717)
Effect of exchange rate changes
on cash and cash equivalents (283) 4,390
Net increase (decrease) in cash
and cash equivalents 1,690 (8,190)
Cash and cash equivalents,
beginning of period 3,298 13,866
Cash and cash equivalents,
end of period $4,988 $5,676