INTERMET Reports 2004 Second-Quarter Results; Sales Increase 19 Percent
Scrap-steel costs continue to affect earnings
TROY, Mich., July 15 -- INTERMET Corporation , one of the world's leading manufacturers of cast-metal automotive components, today reported 2004 second-quarter sales of $217.2 million, a 19-percent increase over 2003 second-quarter sales of $182.1 million. Contributing to increased sales were $18.9 million in incremental sales-volume growth and $10.6 million resulting from the consolidation of the company's Porto, Portugal, foundry.
The company reported a 2004 second-quarter net loss of $6.5 million, or $0.25 per diluted share, compared with a 2003 second-quarter net loss of $6.6 million, or $0.26 per diluted share. INTERMET's 2004 second-quarter results reflect the effects of continued high material costs, including scrap steel in both North America and Europe, which were approximately $6.6 million, or $0.26 per diluted share higher than the same period of the previous year. Additionally, $1.2 million, or $0.05 per diluted share in restructuring charges related to the shutdown of its Havana Foundry were incurred by the company. These costs contributed to a loss from continuing operations of $5.2 million, or $0.20 per diluted share, compared with a profit from continuing operations of $2.1 million, or $0.08 per diluted share, for the same period last year. As a result of the deferred tax asset valuation reserve recorded in 2003, the company is not currently recording a tax benefit related to its losses. However, during the second quarter, the company completed a prior year's income tax audit, which resulted in a $2.7 million tax refund that has been included in the company's results.
Commenting on the quarter, Gary F. Ruff, President and Chief Executive Officer, said, "We are pleased with our strong sales growth, especially since it's the third consecutive quarter showing an increase. This sales increase was achieved despite a nearly three-percent production decline by our four biggest OEM customers during the quarter. We believe this is evidence that our growth strategy, which focuses on highly engineered and structural components, and our continued success in diversifying INTERMET's customer base, is working. However, even though our plants are consistently demonstrating improvements in quality and throughput, our manufacturing operations continue to be substantially affected by the unrelenting price increases for scrap steel and other raw materials. Although it appeared that prices were starting to level off, we saw an increase to new record levels toward the end of the quarter. Customer surcharges are beginning to come in, but they have not been enough to make up for the shortfall. The situation with steel prices remains unpredictable and we are taking specific actions to mitigate the effects of these large cost increases."
INTERMET reported debt of $360.8 million at the end of the second quarter of 2004. Capital spending for the quarter was $5.6 million, and depreciation and amortization expense was reported at $13.0 million.
Six-Month Results
INTERMET reported 2004 six-month sales of $427.8 million, an increase of $52.7 million, or 14 percent, over the same period last year. The company reported a 2004 six-month net loss of $14.3 million, or $0.56 cents per diluted share, compared with a net loss of $3.4 million, or $0.13 per diluted share, for the same period last year. The loss from continuing operations for the first six months of 2004 was $12.3 million compared with a profit from continuing operations of $5.4 million for the same period in 2003. The major factors affecting INTERMET's profitability from continuing operations during the first six months of 2004 were as follows: higher scrap-steel costs, which were $14.0 million, or $0.55 per diluted share; restructuring costs associated with the Havana Foundry closure, which totaled $1.2 million, or $0.05 per diluted share; and costs related to the company's debt refinancing that was completed in January of this year, which were $1.4 million, or $0.05 per diluted share.
Cash used in operations during the first six months of 2004 was $5.3 million and depreciation and amortization expense was reported at $25.3 million. An income tax benefit was recorded related to tax refunds totaling $2.7 million, or $0.10 per diluted share, in connection with the completion of tax audits on a prior year. Capital spending to date totaled $12.5 million, in line with the company's plans for funding the maintenance of equipment and facilities and the implementation of new technologies.
Dividend
The INTERMET Board of Directors voted today to reduce its quarterly dividend to $0.01 per share, beginning with the dividend payable October 1, 2004, to shareholders of record as of September 1, 2004. This is a reduction from the previous quarterly dividend of $0.04 per share.
"The decision to reduce the dividend was made in an effort to increase the company's current financial flexibility," said Vice President Finance and CFO Bob Belts. "We believe that reducing the dividend and using the cash saved to invest in and grow our business will improve our results both in the short and long term."
INTERMET will hold a conference call today at 3:00 p.m. ET to discuss second-quarter results. 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. 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 August 15, 2004.
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 approximately 6,000 employees at facilities in North America and Europe. More information is available on the Internet at http://www.intermet.com/ .
This news release includes forward-looking statements about INTERMET, including statements about the outlook for INTERMET for the current year and beyond. Projections and other forward-looking statements are subject to risks and uncertainties that can cause actual results to differ materially from anticipated results. These risks and uncertainties include continued uncertainty with respect to the cost of raw materials, particularly scrap steel. Continued high scrap-steel costs could have a significant negative impact on INTERMET's earnings, its ability to borrow under its credit arrangements and consequently, its liquidity. Other risks and uncertainties that could have negative impacts on the results anticipated by our forward- looking statements, including the outlook for 2004, are detailed in the preface to the Management's Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report for the year ended December 31, 2003. In addition, the results set forth in this news release remain subject to audit.
INTERMET Corporation Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, 2004 June 30, 2003 June 30, 2004 June 30, 2003
(Unaudited)
Net sales $217,185 $182,118 $427,831 $375,158
Cost of sales 204,473 164,195 401,629 335,994
Gross profit 12,712 17,923 26,202 39,164
Selling, general and
administrative
expenses 10,778 7,586 21,501 16,143
Restructuring
charge 1,165 - 1,165 -
Operating profit 769 10,337 3,536 23,021
Interest expense,
net 7,991 7,626 17,193 14,927
Other expense
(income), net 146 (111) (445) 161
(Loss) income from continuing
operations before income taxes
and equity interest in a
joint venture (7,368) 2,822 (13,212) 7,933
Income tax benefit
(expense) 2,169 (1,260) 872 (3,291)
Equity interest in a
joint venture - 492 - 752
(Loss) income from
continuing
operations (5,199) 2,054 (12,340) 5,394
Loss from discontinued
operations, net
of tax: (1,255) (8,643) (1,967) (8,831)
Net loss ($6,454) ($6,589) ($14,307) ($3,437)
(Loss) earnings per common share:
Basic
(Loss) earnings from
continuing
operations ($0.20) $0.08 ($0.48) $0.21
Loss from discontinued
operations, net of
tax (0.05) (0.34) (0.08) (0.34)
Loss per common
share - basic ($0.25) ($0.26) ($0.56) ($0.13)
Diluted
(Loss) earnings from
continuing
operations ($0.20) $0.08 ($0.48) $0.21
Loss from discontinued
operations, net
of tax (0.05) (0.34) (0.08) (0.34)
Loss per common
share - diluted ($0.25) ($0.26) ($0.56) ($0.13)
Weighted average shares outstanding:
Basic 25,599 25,589 25,597 25,568
Diluted 25,599 25,589 25,597 25,568
INTERMET Corporation Condensed Consolidated Balance Sheets
(In thousands)
June 30, 2004 December 31, 2003
(Unaudited)
Assets:
Current assets:
Cash and cash equivalents $9,345 $1,035
Accounts receivable 102,992 86,773
Inventory 74,200 77,411
Other current assets 10,721 10,748
Total current assets 197,258 175,967
Property, plant and equipment, net 308,986 324,080
Goodwill 165,933 165,933
Restricted cash 35,819 -
Other non-current assets 27,825 20,704
Total assets $735,821 $686,684
Liabilities and shareholders' equity:
Current liabilities:
Accounts payable $78,273 $80,737
Accrued liabilities 64,482 59,542
Short-term lines of credit 9,192 9,992
Long-term debt due within one year 5,378 4,303
Total current liabilities 157,325 154,574
Non-current liabilities:
Long-term debt due after one year 346,203 279,248
Other non-current liabilities 89,288 90,725
Total non-current liabilities 435,491 369,973
Shareholders' equity 143,005 162,137
Total liabilities and shareholders'
equity $735,821 $686,684
INTERMET Corporation Condensed Consolidated Statements of Cash Flows
(In thousands)
Six months ended
June 30, 2004 June 30, 2003
(Unaudited)
Cash (used in) provided by continuing
operating activities ($5,564) $5,727
Cash provided by (used in)
discontinued operations 223 (134)
Cash (used in) provided by
operating activities (5,341) 5,593
Additions to property, plant and
equipment (12,547) (6,329)
Additions to property, plant and
equipment by discontinued operations - (141)
Proceeds from sale of property,
plant and equipment 379 -
Cash used in investing activities (12,168) (6,470)
Net (decrease) increase in lines
of credit (49,724) 6,000
Proceeds from term loan 120,000 -
Repayment of term loan and other debts (2,361) (1,226)
Funding of restricted cash (35,819) -
Payments of debt issuance costs (3,359) (405)
Issuance of common stock 13 18
Dividends paid (2,051) (2,044)
Cash provided by financing activities 26,699 2,343
Effect of exchange rate changes on
cash and cash equivalents (880) 518
Net increase in cash and cash
equivalents 8,310 1,984
Cash and cash equivalents, beginning
of period 1,035 3,298
Cash and cash equivalents, end
of period $9,345 $5,282