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United States
Securities and Exchange Commission
Washington, D.C. 20549

Form 10-Q

[X]
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the quarterly period ended September 30, 2003, or[  ]
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the transition period from        to        .


Commission File No. 0-13787

INTERMET Corporation
(Exact name of registrant as specified in its charter)

Georgia
    
    58-1563873(State or other jurisdiction of
    
    (IRS Employerincorporation or organization)
    
    Identification No.)5445 Corporate Drive, Suite 200, Troy, Michigan
    
    48098-2683(Address of principal executive offices)
    
    (Zip code)


(248) 952-2500
(Registrants telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [  ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [X] No [  ]

At November 7, 2003 there were 25,602,391 shares of common stock, $0.10 par
value, outstanding.





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TABLE OF CONTENTS



|                                                                                              |                                                              |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | ------------------------------------------------------------ |  |  |  |  |  |  | 
|Part I  Financial Information                                                               
|Item 1. Interim Condensed Consolidated Financial Statements (Unaudited)                      
|                                                                                              | Notes to Interim Condensed Consolidated Financial Statements
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|Item 3. Quantitative and Qualitative Disclosures about Market Risk                           
|Item 4. Controls and Procedures                                                              
|Part II  Other Information                                                                  
|Item 1. Legal Proceedings                                                                    
|Item 6. Exhibits and Reports on Form 8-K                                                     
|Signature                                                                                    
|Exhibit Index                                                                                
|302 Certification of Chief Executive Officer                                                 
|302 Certification of Chief Financial Officer                                                 
|906 Certification of CEO & CFO                                                               



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##### Table of Contents



TABLE OF CONTENTS

Part I  Financial InformationItem 1. Interim Condensed Consolidated Financial Statements (Unaudited)Notes to Interim Condensed Consolidated Financial Statements (Unaudited)Item 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosure about Market RiskItem 4. Controls and ProceduresPart II  Other InformationItem 1. Legal ProceedingsItem 6. Exhibits and Reports on Form 8-KSignatureExhibit IndexExhibit 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Exhibit 31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Exhibit 32.1 Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial OfficerPursuant to Section 906 of the Sarbanes-Oxley Act of 2002


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##### Table of Contents






Part I  Financial Information




Item 1. Financial Statements

INTERMET Corporation
Interim Condensed Consolidated Statements of Operations

Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2003
    
    
    2002
    
    
    2003
    
    
    2002(Unaudited)(in thousands of dollars, other than per share data)Net sales
    
    $
    182,054
    
    
    $
    192,603
    
    
    $
    578,832
    
    
    $
    609,794Cost of sales
    
    
    167,332
    
    
    
    180,646
    
    
    
    525,645
    
    
    
    554,236Gross profit
    
    
    14,722
    
    
    
    11,957
    
    
    
    53,187
    
    
    
    55,558Operating expenses:Selling, general and administrative
    
    
    8,663
    
    
    
    7,938
    
    
    
    25,031
    
    
    
    24,374Restructuring and impairment charges
    
    
    (1,278
    )
    
    
    
    
    
    
    10,314
    
    
    
    Other operating expense (income), net
    
    
    820
    
    
    
    (495
    )
    
    
    2,218
    
    
    
    (327
    )8,205
    
    
    
    7,443
    
    
    
    37,563
    
    
    
    24,047Operating profit
    
    
    6,517
    
    
    
    4,514
    
    
    
    15,624
    
    
    
    31,511Other expense (income):Interest expense, net
    
    
    7,790
    
    
    
    7,540
    
    
    
    22,927
    
    
    
    21,075Other (income) expense, net
    
    
    (1,475
    )
    
    
    784
    
    
    
    (1,314
    )
    
    
    6176,315
    
    
    
    8,324
    
    
    
    21,613
    
    
    
    21,692Income (loss) before income tax
    
    
    202
    
    
    
    (3,810
    )
    
    
    (5,989
    )
    
    
    9,819Income tax (expense) benefit
    
    
    (193
    )
    
    
    2,629
    
    
    
    1,872
    
    
    
    (1,970
    )Equity interest in a joint venture
    
    
    
    
    
    
    273
    
    
    
    752
    
    
    
    692Income (loss) from continuing operations
    
    
    9
    
    
    
    (908
    )
    
    
    (3,365
    )
    
    
    8,541Loss 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
    )
    
    
    8,092Cumulative effect of change in accounting, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    481Net (loss) income
    
    
    ($50
    )
    
    
    ($1,013
    )
    
    
    ($3,487
    )
    
    $
    8,573(Loss) earnings per common share:Basic:$
    
    
    
    
    ($0.04
    )
    
    
    ($0.13
    )
    
    $
    0.34(Loss) earnings from continuing operationsLoss from discontinued operation, net of tax
    
    
    
    
    
    
    
    
    
    
    (0.01
    )
    
    
    (0.02
    )Cumulative effect of change in accounting, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.02(Loss) earnings per share  basic
    
    $
    
    
    
    
    ($0.04
    )
    
    
    ($0.14
    )
    
    $
    0.34Diluted:$
    
    
    
    
    ($0.04
    )
    
    
    ($0.13
    )
    
    $
    0.33(Loss) earnings from continuing operationsLoss from discontinued operation, net of tax
    
    
    
    
    
    
    
    
    
    
    (0.01
    )
    
    
    (0.02
    )Cumulative effect of change in accounting, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.02(Loss) earnings per share  diluted
    
    $
    
    
    
    
    ($0.04
    )
    
    
    ($0.14
    )
    
    $
    0.33Dividends declared per common share
    
    $
    0.04
    
    
    $
    0.04
    
    
    $
    0.12
    
    
    $
    0.12Weighted average shares outstanding:Basic
    
    
    25,591
    
    
    
    25,462
    
    
    
    25,576
    
    
    
    25,430Diluted
    
    
    25,725
    
    
    
    25,462
    
    
    
    25,576
    
    
    
    25,747


See accompanying notes.

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INTERMET Corporation
Interim Condensed Consolidated Balance Sheets

September 30,
    
    
    December 31,2003
    
    
    2002(Unaudited)(in thousands of dollars)AssetsCurrent assets:Cash and cash equivalents
    
    $
    4,988
    
    
    $
    3,298Accounts receivable:Trade, less allowance for doubtful
accounts of $5,377 in 2003 and $9,212
in 2002
    
    
    87,674
    
    
    
    72,749Other
    
    
    11,438
    
    
    
    12,75499,112
    
    
    
    85,503Inventories
    
    
    76,501
    
    
    
    63,739Other current assets
    
    
    32,581
    
    
    
    24,461Current assets of discontinued operation
    
    
    
    
    
    
    3,407Total current assets
    
    
    213,182
    
    
    
    180,408Property, plant and equipment, at cost
    
    
    684,400
    
    
    
    639,494Less:Accumulated depreciation and foreign
industrial development grants, net of
amortization
    
    
    358,979
    
    
    
    312,532Property, plant and equipment, net
    
    
    325,421
    
    
    
    326,962Goodwill
    
    
    217,016
    
    
    
    217,016Other non-current assets
    
    
    25,625
    
    
    
    34,640Non-current assets of discontinued operation
    
    
    
    
    
    
    5,072Total assets
    
    $
    781,244
    
    
    $
    764,098


See accompanying notes.

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INTERMET Corporation
Interim Condensed Consolidated Balance Sheets

September 30,
    
    
    December 31,2003
    
    
    2002(Unaudited)(in thousands of dollars)Liabilities and shareholders equityCurrent liabilities:Accounts payable
    
    $
    75,690
    
    
    $
    69,960Accrued liabilities
    
    
    64,239
    
    
    
    64,313Long-term debt due within one year
    
    
    11,626
    
    
    
    1,567Current liabilities of discontinued operation
    
    
    
    
    
    
    1,865Total current liabilities
    
    
    151,555
    
    
    
    137,705Non-current liabilities:Long-term debt due after one year
    
    
    281,815
    
    
    
    278,536Retirement benefits
    
    
    77,562
    
    
    
    77,571Other non-current liabilities
    
    
    14,292
    
    
    
    12,717Total non-current liabilities
    
    
    373,669
    
    
    
    368,824Shareholders equity:Common stock
    
    
    2,601
    
    
    
    2,601Capital in excess of par value
    
    
    57,132
    
    
    
    57,124Retained earnings
    
    
    205,878
    
    
    
    212,437Accumulated other comprehensive loss
    
    
    (9,403
    )
    
    
    (14,562
    )Unearned restricted stock
    
    
    (188
    )
    
    
    (31
    )Total shareholders equity
    
    
    256,020
    
    
    
    257,569Total liabilities and shareholders equity
    
    $
    781,244
    
    
    $
    764,098


See accompanying notes.

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INTERMET Corporation
Interim Condensed Consolidated Statements of Cash Flows

Nine Months EndedSeptember 30,
    
    
    September 30,2003
    
    
    2002(Unaudited)(in thousands of dollars)Operating activities:(Loss) income from continuing operation
    
    
    ($3,365
    )
    
    $
    8,541Adjustments to reconcile net (loss) income to cash provided
by operating activities:Cumulative effect of changes in accounting
    
    
    
    
    
    
    481Loss from discontinued operations
    
    
    (122
    )
    
    
    (449
    )Depreciation
    
    
    37,272
    
    
    
    36,934Amortization of debt discount and issuance costs
    
    
    1,496
    
    
    
    2,583Amortization of other assets
    
    
    818
    
    
    
    93Results of equity investment
    
    
    (752
    )
    
    
    (692
    )Restructuring and impairment charges
    
    
    10,314
    
    
    
    Gain on disposal of property, plant and equipment
    
    
    (1,660
    )
    
    
    Stock-based compensation
    
    
    35
    
    
    
    Change in operating assets and liabilities:Accounts receivable
    
    
    (6,569
    )
    
    
    10,808Inventories
    
    
    (5,575
    )
    
    
    5,642Accounts payable and current liabilities
    
    
    (9,357
    )
    
    
    8,437Other assets and liabilities
    
    
    (1,768
    )
    
    
    (5,792
    )Net cash provided by continuing operating activities
    
    
    20,767
    
    
    
    66,586Net cash provided by discontinued operation
    
    
    1,314
    
    
    
    1,071Net cash provided by operating activities
    
    
    22,081
    
    
    
    67,657Investing activities:Additions to property, plant and equipment by continuing operations
    
    
    (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
    
    
    
    360Net cash used in investing activities
    
    
    (11,558
    )
    
    
    (6,520
    )Financing activities:Net decrease in revolving credit facility
    
    
    (1,000
    )
    
    
    (67,000
    )Proceeds from debt offering
    
    
    
    
    
    
    175,000Repayment of term loan
    
    
    
    
    
    
    (171,750
    )Repayments of other debts
    
    
    (4,085
    )
    
    
    (1,461
    )Payments of revolving credit facility fees
    
    
    (405
    )
    
    
    Payment of debt issuance costs
    
    
    
    
    
    
    (5,940
    )Dividends paid
    
    
    (3,072
    )
    
    
    (3,056
    )Issuance of common stock
    
    
    12
    
    
    
    490Net cash used in financing activities
    
    
    (8,550
    )
    
    
    (73,717
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (283
    )
    
    
    4,390Net increase (decrease) in cash and cash equivalents
    
    
    1,690
    
    
    
    (8,190
    )Cash and cash equivalents at beginning of period
    
    
    3,298
    
    
    
    13,866Cash and cash equivalents at end of period
    
    $
    4,988
    
    
    $
    5,676


See accompanying notes.

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INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

September 30, 2003 (Unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in
the United States for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by accounting principles
generally accepted in the United States for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three-month period and nine-month period ended
September 30, 2003 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2003.

The balance sheet at December 31, 2002 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by accounting principles generally accepted in the
United States for complete financial statements. Refer to our 2002 Annual
Report and Form 10-K for complete financial statement and footnotes.

Adoption of Accounting Pronouncement  Loss on Early Extinguishment of Debt

On January 1, 2003, we adopted Statement of Financial Accounting Standards
(SFAS) No. 145, Rescission of FASB Statement No. 4, 44 and 64, Amendment of
FASB Statement No. 13 and Technical Corrections. This Statement requires
certain gains and losses associated with the extinguishment of debt previously
treated as extraordinary items to be classified as income or loss from
continuing operations. As required under SFAS No. 145, we reclassified pretax
losses of $927,000 related to the extinguishment of bank term loan in the 2002
Statement of Operations from Extraordinary Item to Interest Expense, Net.

Adoption of Accounting Pronouncement  Goodwill

On January 1, 2002, we adopted SFAS No. 142, Goodwill and Other Intangible
Assets. Under this Statement, goodwill is no longer amortized but is subject
to annual impairment tests (or more frequent tests if impairment indicators
arise). As required under SFAS No. 142, we wrote off negative goodwill of
$481,000, net of taxes, in the first quarter of 2002 as a cumulative effect
of a change in accounting principle.

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INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

September 30, 2003 (Unaudited)

1. Basis of Presentation (continued)

Stock-Based Compensation

We grant stock options to employees and directors with exercise prices equal to
the fair values of the shares at the dates of grant. We account for stock
option grants in accordance with Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and, accordingly, we recognize no
compensation expense for the stock option grants. Had compensation expense
been determined based on the fair values of these stock options at the grant
dates consistent with the method of SFAS No. 123, Accounting for Stock-Based
Compensation, our pro forma net (loss) income, basic (loss) earnings per share
and diluted (loss) earnings per share would have been the following:

Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2003
    
    
    2002
    
    
    2003
    
    
    2002(in thousands of dollars, other than per share data)Net (loss) income, as reported
    
    
    ($50
    )
    
    
    ($1,013
    )
    
    
    ($3,487
    )
    
    $
    8,573Less: Total stock-based
employee compensation expense
determined under fair value
method for all awards, net of
related tax effects
    
    
    (136
    )
    
    
    (187
    )
    
    
    (541
    )
    
    
    (605
    )Pro forma net (loss) income
    
    
    ($186
    )
    
    
    ($1,200
    )
    
    
    ($4,028
    )
    
    $
    7,968(Loss) earnings per share:Basic  as reported
    
    $
    
    
    
    
    ($0.04
    )
    
    
    ($0.14
    )
    
    $
    0.34Basic  pro forma
    
    
    ($0.01
    )
    
    
    ($0.05
    )
    
    
    ($0.16
    )
    
    $
    0.31Diluted  as reported
    
    $
    
    
    
    
    ($0.04
    )
    
    
    ($0.14
    )
    
    $
    0.33Diluted  pro forma
    
    
    ($0.01
    )
    
    
    ($0.05
    )
    
    
    ($0.16
    )
    
    $
    0.31


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INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

September 30, 2003 (Unaudited)

2. Acquisition

On June 25, 2003, we entered into an agreement with Estudos, Servicos e
Participacoes, S.A. to acquire 100% ownership of the shares of Fundicao
Nodular, S.A. (PortCast), which is located in Porto, Portugal. Previously we
owned 50% interest in PortCast. PortCast is a caster of various ductile-iron
automotive components. Under the terms of the agreement, we acquired 25% of the
shares of PortCast for a cash investment of $5.6 million (4.9 million Euros) on
July 1, 2003, increasing our ownership in PortCast from 50% to 75%. We have a
call option to acquire, and Estudos, Servicos e Participacoes, S.A. has a put
option to sell, the remaining 25% ownership for an additional cash investment
of $5.6 million (4.9 million Euros) on July 1, 2004.

We accounted for the acquisition of additional shares in PortCast using the
purchase accounting method. The purchase price has been allocated to the
assets purchased and liabilities assumed based upon the estimated fair values
at the date of acquisition. PortCast became a consolidated subsidiary at July
1, 2003 and the results of operations of PortCast from July 1, 2003 are
included in our consolidated results of operations. Our equity in the net
income of PortCast for the period before July 1, 2003 is included in Equity
interest in a joint venture in the accompanying statements of operations. The
pro forma effects of this acquisition are not material to our consolidated
results of operations.

3. Disposition  Discontinued Operation

On July 24, 2003, we sold substantially all the assets of Frisby P.M.C.,
Incorporated (Frisby) for $5.3 million, consisting of $3.9 million in cash
and $1.4 million in the form of a promissory note, the balance of which will be
paid by July 31, 2008. This transaction resulted in a loss on sale of $0.1
million, net of taxes. Frisby operated a machining plant that manufactures
precision-machined components primarily for the automotive, truck and power
tool markets. Frisby was a non-core operation, and is included in our
Corporate and Other segment in Note 10, Reporting for Business Segments.

Net assets of discontinued operation of Frisby are as follows:

July 24, 2003
    
    
    December 31, 2002(In thousands of dollars)Assets:Accounts receivable
    
    $
    2,061
    
    
    $
    1,276Inventory
    
    
    1,552
    
    
    
    1,717Property, plant and equipment
    
    
    4,453
    
    
    
    5,072Other assets
    
    
    158
    
    
    
    414Liabilities:Accounts payable
    
    $
    848
    
    
    $
    973Accrued liabilities
    
    
    855
    
    
    
    892Deferred tax liabilities
    
    
    716
    
    
    
    716


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INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

September 30, 2003 (Unaudited)

3. Disposition  Discontinued Operation (continued)

The after-tax loss on sale of the assets of Frisby, and the results of
operations of Frisby for all periods presented, have been classified as
discontinued operations in the consolidated statements of operations in
accordance with SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. We have reported the results of operations of Frisby for
the periods ended September 30 as follows:

Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2003
    
    
    2002
    
    
    2003
    
    
    2002(in thousands of dollars)Sales
    
    $
    915
    
    
    $
    3,961
    
    
    $
    8,007
    
    
    $
    10,824Cost of sales
    
    
    881
    
    
    
    3,872
    
    
    
    7,615
    
    
    
    10,872Gross profit (loss)
    
    
    34
    
    
    
    89
    
    
    
    392
    
    
    
    (48
    )Expenses
    
    
    63
    
    
    
    260
    
    
    
    526
    
    
    
    688Loss before income tax benefit
    
    
    (29
    )
    
    
    (171
    )
    
    
    (134
    )
    
    
    (736
    )Income tax benefit
    
    
    11
    
    
    
    66
    
    
    
    53
    
    
    
    287Loss from discontinued
operation, net of tax
    
    
    ($18
    )
    
    
    ($105
    )
    
    
    ($81
    )
    
    
    ($449
    )


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INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements

September 30, 2003 (Unaudited)

4. Restructuring and Impairment Charges

In May 2003, due to changes in market conditions and production technology, as
well as a substantial investment necessary for continued operation, we decided
to permanently close our shell-molding plant in Radford, Virginia. The Radford
Foundry manufactures gray-iron and ductile-iron components for the automotive
industry. Production at the plant was substantially ceased at the end of the
third quarter of 2003. We anticipate that the final plant closure will occur
and substantially all the 333 hourly and salaried employees will be terminated
by December 31, 2003. For the nine-month period ended September 30, 2003, the
Radford Foundry had revenues of $31.0 million and net losses of $9.3 million.
The facility is included in the Ferrous Metals segment in Note 10, Reporting
for Business Segments.

As a result of this closure, we recorded $11.6 million in pretax restructuring
and impairment charges in the accompanying statements of operations for the
second quarter of 2003. These restructuring and impairment charges included a
write-down of $9.9 million to reduce the capital assets and inventories to
their fair values, $1.4 million for employee severance and related
contractually guaranteed benefit costs, and $0.3 million for employee pension
costs. During the third quarter of 2003, we reduced other postretirement
benefit obligations by $1.3 million due to the termination of over 200 hourly
and salaried employees. The accruals for employee severance and related
contractually guaranteed benefit costs and for employee pension costs are
included in Accrued liabilities and Retirement benefits, respectively, in
the accompanying balance sheet at September 30, 2003.

We expect to accrue an additional $0.2 million in employee benefit costs and to
further reduce the other postretirement benefit obligations when the remaining
employees are terminated. The reduction of postretirement benefit obligations
in the fourth quarter of 2003 is expected to be approximately $0.5 million. We
also expect to incur approximately $0.4 million for environmental remediation
when the Radford Foundry is closed, in addition to the environmental
remediation costs that are discussed in Note 11, Environmental and Legal
Matters.

Activities relating to the restructuring liabilities are as follows (in
thousands of dollars):

Impairment
    
    
    
    
    
    
    Employee
    
    
    Employeeof
    
    
    Write-down
    
    
    Termination
    
    
    Postretirementfixed assets
    
    
    of inventory
    
    
    Benefits
    
    
    Benefits
    
    
    Other
    
    
    TotalInitial charge in second
quarter of 2003
    
    $
    7,554
    
    
    $
    2,351
    
    
    $
    1,336
    
    
    $
    301
    
    
    $
    50
    
    
    $
    11,592Noncash charges
    
    
    (7,554
    )
    
    
    (2,351
    )
    
    
    
    
    
    
    (301
    )
    
    
    
    
    
    
    (10,206
    )Balance at June 30, 2003
    
    
    
    
    
    
    
    
    
    
    1,336
    
    
    
    
    
    
    
    50
    
    
    
    1,386Reduction of post-
retirement obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,278
    )
    
    
    
    
    
    
    (1,278
    )Noncash credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,278
    
    
    
    
    
    
    
    1,278Cash payments
    
    
    
    
    
    
    
    
    
    
    (28
    )
    
    
    
    
    
    
    (50
    )
    
    
    (78
    )Balance at September
30, 2003
    
    $
    
    
    
    $
    
    
    
    $
    1,308
    
    
    $
    
    
    
    $
    
    
    
    $
    1,308


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##### Table of Contents



INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements (continued)

September 30, 2003 (Unaudited)

5. Inventories

Net inventories consist of the following (in thousands of dollars):

September 30,
    
    
    December 31,2003
    
    
    2002Finished goods
    
    $
    20,216
    
    
    $
    15,525Work in process
    
    
    12,187
    
    
    
    7,947Raw materials
    
    
    7,330
    
    
    
    6,458Supplies and patterns
    
    
    36,768
    
    
    
    33,809$
    76,501
    
    
    $
    63,739


6. Property, Plant and Equipment

Property, plant and equipment consist of the following (in thousands of
dollars):

September 30,
    
    
    December 31,2003
    
    
    2002Land
    
    $
    6,723
    
    
    $
    5,304Buildings and improvements
    
    
    138,176
    
    
    
    133,974Machinery and equipment
    
    
    514,430
    
    
    
    490,784Construction in progress
    
    
    25,071
    
    
    
    9,432Property, plant and equipment, at cost
    
    
    684,400
    
    
    
    639,494Less: Accumulated depreciation and foreign industrial
development grants, net of amortization
    
    
    358,979
    
    
    
    312,532Property, plant and equipment, net
    
    $
    325,421
    
    
    $
    326,962


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##### Table of Contents



INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements (continued)

September 30, 2003 (Unaudited)

7. Debt

On June 13, 2002, we completed a senior note offering of $175 million. The
notes bear an annual fixed rate of interest of 9.75% and will mature on June
15, 2009. Interest is due June 15 and December 15 of each year. The notes are
unsecured and rank equally with all of our existing and future unsecured senior
debt. The net proceeds of the senior note offering were used to pay the
remaining balance on a bank term loan ($161.7 million) and for working capital
purposes. Debt issuance costs of $5.9 million were capitalized in connection
with the debt offering and are included in other non-current assets in the
accompanying balance sheet and are being amortized over seven years. See Note
13, Supplemental Condensed Consolidating Financial Information, for additional
information regarding the senior unsecured notes.

During the first quarter of 2003, we amended our secured bank revolving credit
agreement. The credit agreement facility was reduced from $300 million to $225
million. In addition, two financial covenants were modified to provide less
restrictive terms.

Long-term debt consists of the following (in thousands of dollars):

September 30,
    
    
    December 31,2003
    
    
    2002Revolving credit facility
    
    $
    62,000
    
    
    $
    63,000Senior notes due 2009
    
    
    175,000
    
    
    
    175,000Industrial revenue bonds
    
    
    39,350
    
    
    
    40,200Capitalized leases and other debt
    
    
    17,091
    
    
    
    1,903Total debt
    
    
    293,441
    
    
    
    280,103Less: Long-term debt due within one year
    
    
    11,626
    
    
    
    1,567Long-term debt due after one year
    
    $
    281,815
    
    
    $
    278,536


Maturities of long-term debt at September 30, 2003 and for each twelve-month
period thereafter are as follows (in thousands of dollars):

Twelve-month period ending
September 30, 2004
    
    $
    11,626September 30, 2005
    
    
    66,032September 30, 2006
    
    
    4,337September 30, 2007
    
    
    1,446Thereafter
    
    
    210,000$
    293,441


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##### Table of Contents



INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements (continued)

September 30, 2003 (Unaudited)

8. Derivative Financial Instruments

We enter into various derivative transactions pursuant to our risk management
policies. We do not use derivative financial instruments for trading purposes.

We have an interest rate swap agreement with a notional amount of $50 million
to manage our exposure to the interest rate risk associated with our debt. We
have designated this swap transaction as a cash flow hedge. This hedge is
considered to be perfectly effective. Therefore, the entire change in the fair
value of the swap agreement has been recognized in Other Comprehensive (Loss)
Income, and no hedge ineffectiveness is recorded in earnings.

To hedge foreign currency risks, we periodically use over-the-counter forward
contracts. At September 30, 2003, we had outstanding foreign exchange contracts
with a notional amount of $14.1 million (12.3 million Euros) to hedge our
European operations. We have designated these forward contracts as fair value
hedges. The fair value of such foreign exchange contracts was minimal at
September 30, 2003.

9. Comprehensive Income (Loss)

Total comprehensive income (loss) consisted of the following (in thousands of
dollars):

Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2003
    
    
    2002
    
    
    2003
    
    
    2002Net (loss) income
    
    
    ($50
    )
    
    
    ($1,013
    )
    
    
    ($3,487
    )
    
    $
    8,573Other comprehensive income (loss):Fair value of interest rate swap
    
    
    608
    
    
    
    (99
    )
    
    
    1,233
    
    
    
    213Foreign currency translation
adjustment
    
    
    (426
    )
    
    
    (1,342
    )
    
    
    3,926
    
    
    
    8,763Total other comprehensive income
    
    
    182
    
    
    
    (1,441
    )
    
    
    5,159
    
    
    
    8,976Total comprehensive income (loss)
    
    $
    132
    
    
    
    ($2,454
    )
    
    $
    1,672
    
    
    $
    17,549


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##### Table of Contents



INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements (continued)

September 30, 2003 (Unaudited)

10. Reporting for Business Segments

We individually evaluate the operating performance of our business units.
Under the provisions of SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, 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. The Light Metals segment consists of
aluminum, magnesium and zinc casting operations and their related machining
operations. The Corporate and Other segment includes operations that do not
fall within the Ferrous Metals or Light Metals segments, and includes the
corporate business unit and its related expenses and eliminations. Certain
administrative costs such as interest and amortization are included within
the Corporate and Other segment. For the three-month and nine-month periods
ended September 30, 2003, a pre-tax gain on the disposal of property, plant
and equipment of $1.7 million was included within the Corporate and Other
segment. This information is displayed in the following table:

Ferrous
    
    
    Light
    
    
    Corporate andMetals
    
    
    Metals
    
    
    Other
    
    
    Consolidated(in thousands of dollars)Three-month period ended September 30, 2003:Net sales
    
    $
    124,481
    
    
    $
    57,573
    
    
    $
    
    
    
    $
    182,054Operating profit
    
    $
    3,465
    
    
    $
    2,723
    
    
    $
    329
    
    
    $
    6,517Interest expense, net
    
    
    (1,446
    )
    
    
    (1,229
    )
    
    
    (5,115
    )
    
    
    (7,790
    )Other income, net
    
    
    
    
    
    
    
    
    
    
    1,475
    
    
    
    1,475Tax (expense) benefit
    
    
    (737
    )
    
    
    (630
    )
    
    
    1,174
    
    
    
    (193
    )Loss from discontinued operation, net of tax
    
    
    
    
    
    
    
    
    
    
    (59
    )
    
    
    (59
    )Net loss
    
    
    ($50
    )Three-month period ended September 30, 2002:Net sales
    
    $
    127,082
    
    
    $
    65,521
    
    
    $
    
    
    
    $
    192,603Operating profit (loss)
    
    $
    5,042
    
    
    $
    2,335
    
    
    
    ($2,863
    )
    
    $
    4,514Interest expense, net
    
    
    (673
    )
    
    
    (1,051
    )
    
    
    (5,816
    )
    
    
    (7,540
    )Other expense, net
    
    
    
    
    
    
    
    
    
    
    (784
    )
    
    
    (784
    )Tax (expense) benefit
    
    
    (794
    )
    
    
    (540
    )
    
    
    3,963
    
    
    
    2,629Equity interest in a joint venture
    
    
    273
    
    
    
    
    
    
    
    
    
    
    
    273Loss from discontinued operation, net of tax
    
    
    
    
    
    
    
    
    
    
    (105
    )
    
    
    (105
    )Net loss
    
    
    ($1,013
    )


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##### Table of Contents



INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements (continued)

September 30, 2003 (Unaudited)

10. Reporting for Business Segments (continued)

Ferrous
    
    
    Light
    
    
    Corporate andMetals
    
    
    Metals
    
    
    Other
    
    
    Consolidated(in thousands of dollars)Nine-month period ended September 30, 2003:Net sales
    
    $
    400,382
    
    
    $
    178,450
    
    
    $
    
    
    
    $
    578,832Operating profit (loss)
    
    $
    8,079
    
    
    $
    9,635
    
    
    
    ($2,090
    )
    
    $
    15,624Interest expense, net
    
    
    (3,492
    )
    
    
    (3,585
    )
    
    
    (15,850
    )
    
    
    (22,927
    )Other income, net
    
    
    
    
    
    
    
    
    
    
    1,314
    
    
    
    1,314Tax (expense) benefit
    
    
    (1,500
    )
    
    
    (2,525
    )
    
    
    5,897
    
    
    
    1,872Equity interest in a joint venture
    
    
    752
    
    
    
    
    
    
    
    
    
    
    
    752Loss from discontinued operation, net of tax
    
    
    
    
    
    
    
    
    
    
    (122
    )
    
    
    (122
    )Net loss
    
    
    ($3,487
    )Nine-month period ended September 30, 2002:Net sales
    
    $
    400,864
    
    
    $
    208,930
    
    
    $
    
    
    
    $
    609,794Operating profit (loss)
    
    $
    21,745
    
    
    $
    15,979
    
    
    $
    (6,213
    )
    
    $
    31,511Interest expense, net
    
    
    (3,052
    )
    
    
    (3,278
    )
    
    
    (14,745
    )
    
    
    (21,075
    )Other expense, net
    
    
    
    
    
    
    
    
    
    
    (617
    )
    
    
    (617
    )Tax (expense) benefit
    
    
    (5,605
    )
    
    
    (5,107
    )
    
    
    8,742
    
    
    
    (1,970
    )Equity interest in a joint venture
    
    
    692
    
    
    
    
    
    
    
    
    
    
    
    692Loss from discontinued operation, net of tax
    
    
    
    
    
    
    
    
    
    
    (449
    )
    
    
    (449
    )Cumulative effect of changes in accounting,
net of tax
    
    
    481
    
    
    
    
    
    
    
    
    
    
    
    481Net loss
    
    $
    8,573


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INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements (continued)

September 30, 2003 (Unaudited)

11. Environmental and Legal Matters

On March 14, 2002, we entered into a Consent Order with the U.S. Environmental
Protection Agency (USEPA), which will require investigation of the nature and
extent of any hazardous waste disposed of at our Radford, Virginia, facilities.
We have entered into this Consent Order in connection with the USEPAs
Corrective Action Program, which is being undertaken on a nationwide basis by
USEPA pursuant to the Resource Conservation and Recovery Act of 1976. The
Corrective Action Program requires facilities that have historically generated
or handled hazardous waste to determine whether those activities have or could
adversely affect groundwater or adversely affect human health. Because we
historically disposed of waste material at this site, it is possible that
remedial action will be required with respect to that on-site disposal.

We are subject to federal, state, local and foreign environmental laws and
regulations concerning, among other things, air emissions, effluent discharges,
storage treatment and disposal of hazardous materials and remediation of
contaminated soil and groundwater. At some of our industrial sites, hazardous
materials have been managed for many years. Consequently, we are subject to
various environmental laws that impose compliance obligations and can create
liability for historical releases of hazardous substances. It is likely that we
will be subject to increasingly stringent environmental standards in the future
and that we will be required to make additional expenditures, which could be
significant, relating to environmental matters on an ongoing basis.

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 we own. We are in the process
of reviewing Maximum Achievable Control Technology Standards that will be
applicable to our industry.

We also have current and former operating entities (for which we may be
responsible) that are potentially responsible for cleanup of known
environmental sites. These include third-party-owned sites, as well as sites
that are currently owned, or formerly owned, by us or our subsidiaries. As of
September 30, 2003, we have accrued $7.1 million to cover estimated future
environmental expenditures for known environmental sites, which includes $1.6
million in additional reserves for the Radford facilities that we provided for
during the second quarter of 2003. The $7.1 million reserve also includes a
$3.2 million cash escrow account acquired as a part of the acquisition of
Ganton Technologies in 1999 that is being used to fund the clean-up of an
inactive property located in Addison, Illinois. There can be no assurance that
costs in excess of these accruals will not be incurred, or that unknown
conditions will not be discovered that result in material additional
expenditures by us for environmental matters.

We are a party to a number of other legal proceedings associated with
environmental, employment, commercial, product liability or other matters in
the ordinary course of our business. We do not believe that such pending or
threatened legal proceedings to which we are a party, or to which any of our
property is subject, will have a material adverse effect on our consolidated
financial position or results of operations or liquidity, taken as a whole. It
is possible, however, that future results of operations for any particular
quarterly or annual period could be materially affected by changes in our
assumptions related to these proceedings.

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INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements (continued)

September 30, 2003 (Unaudited)

12. Earnings per Share

Basic earnings per share is computed by dividing income available to
shareholders of common stock by the weighted average number of common shares
outstanding for the period. The dilutive earnings per share calculation
reflects the assumed exercise of stock options and issuance of unearned
restricted stock.

Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2003
    
    
    2002
    
    
    2003
    
    
    2002(in thousands of dollars, except per share data)Numerator:Net (loss) income
    
    
    ($50
    )
    
    
    ($1,013
    )
    
    
    ($3,487
    )
    
    $
    8,573Denominator:Denominator for basic (loss) earnings per
share  weighted average shares
    
    
    25,591
    
    
    
    25,462
    
    
    
    25,576
    
    
    
    25,441Effect of shares held in deferred
compensation plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11
    )Denominator for basic (loss) earnings per
share  weighted average shares
    
    
    25,591
    
    
    
    25,462
    
    
    
    25,576
    
    
    
    25,430Effect of dilutive securities:Effect of shares held in deferred
compensation plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11Employee stock options and unearned
restricted stock
    
    
    134
    
    
    
    
    
    
    
    
    
    
    
    306Denominator for diluted (loss) earnings
per share  adjusted weighted average
shares and assumed exercise of options
    
    
    25,725
    
    
    
    25,462
    
    
    
    25,576
    
    
    
    25,747Basic (loss) earnings per share
    
    $
    
    
    
    
    ($0.04
    )
    
    
    ($0.14
    )
    
    $
    0.34Fully diluted (loss) earnings per share
    
    $
    
    
    
    
    ($0.04
    )
    
    
    ($0.14
    )
    
    $
    0.33


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##### Table of Contents



INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements (continued)

September 30, 2003 (Unaudited)

13. Supplemental Condensed Consolidating Financial Information

On June 13, 2002, we issued $175 million of senior notes, which will mature in
2009. The senior notes are guaranteed by certain of our domestic wholly-owned
subsidiaries (Combined Guarantor Subsidiaries). The guarantees are
unconditional and joint and several. The senior notes are effectively
subordinated to the secured debt of the Company (Parent). Restrictions
contained in the indenture covering the senior notes include, but are not
limited to, restrictions on incurring additional secured debt, repurchasing of
our capital stock, disposal of assets, affiliate transactions, and transfer of
assets. As of September 30, 2003, the Parent and the Combined Guarantor
Subsidiaries had approximately $275.1 million of secured debt outstanding and
approximately $103.0 million of unused commitments, net of outstanding letters
of credit, under our credit facility. The secured debt of the Parent is also
guaranteed by each of the Combined Guarantor Subsidiaries.

Certain of our domestic subsidiaries (Intermet International, Inc., Intermet
Holding Company, Transnational Indemnity Company, and Western Capital
Corporation) and all of our foreign subsidiaries are not guarantors of the
notes (Combined Non-Guarantor Subsidiaries). The Combined Non-Guarantor
Subsidiaries had approximately $16.0 million of debt outstanding as of
September 30, 2003.

Presented below is summarized condensed consolidating financial information for
the Parent, the Combined Guarantor Subsidiaries, the Combined Non-Guarantor
Subsidiaries, and the Company on a consolidated basis as of September 30, 2003
and December 31, 2002, and for the three and nine months ended September 30,
2003 and 2002.

Investments in subsidiaries are presented using the equity method of
accounting. Separate financial statements of the Combined Guarantor
Subsidiaries are not provided as the condensed consolidating financial
information contained herein provides a more meaningful disclosure to allow
investors to determine the nature of the assets held by and the operations of
the combined group.

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INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements (continued)

September 30, 2003 (Unaudited)

13. Supplemental Condensed Consolidating Financial Information (continued)

Three Months Ended September 30, 2003Combined
    
    
    CombinedGuarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands of dollars)INCOME STATEMENT DATANet sales
    
    $
    
    
    
    $
    155,265
    
    
    $
    29,475
    
    
    
    ($2,686
    )
    
    $
    182,054Cost of sales
    
    
    
    
    
    
    145,229
    
    
    
    24,789
    
    
    
    (2,686
    )
    
    
    167,332Gross profit
    
    
    
    
    
    
    10,036
    
    
    
    4,686
    
    
    
    
    
    
    
    14,722Selling, general and administrative
    
    
    530
    
    
    
    5,212
    
    
    
    2,892
    
    
    
    29
    
    
    
    8,663Restructuring and impairment charges
    
    
    
    
    
    
    (1,278
    )
    
    
    
    
    
    
    
    
    
    
    (1,278
    )Other operating (income) expenses
    
    
    (37
    )
    
    
    499
    
    
    
    387
    
    
    
    (29
    )
    
    
    820Operating (loss) profit
    
    
    (493
    )
    
    
    5,603
    
    
    
    1,407
    
    
    
    
    
    
    
    6,517Other income and expenses:Interest expense (income), net
    
    
    5,102
    
    
    
    2,308
    
    
    
    380
    
    
    
    
    
    
    
    7,790Other income , net
    
    
    (1,060
    )
    
    
    (6
    )
    
    
    (409
    )
    
    
    
    
    
    
    (1,475
    )(Loss) income before income tax
    
    
    (4,535
    )
    
    
    3,301
    
    
    
    1,436
    
    
    
    
    
    
    
    202Income tax benefit (expense)
    
    
    2,274
    
    
    
    (2,048
    )
    
    
    (419
    )
    
    
    
    
    
    
    (193
    )(Loss) income from continuing operations
    
    
    (2,261
    )
    
    
    1,253
    
    
    
    1,017
    
    
    
    
    
    
    
    9Loss from discontinued operation, net of tax
    
    
    
    
    
    
    (59
    )
    
    
    
    
    
    
    
    
    
    
    (59
    )Net (loss) income
    
    
    ($2,261
    )
    
    $
    1,194
    
    
    $
    1,017
    
    
    $
    
    
    
    
    ($50
    )


20



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INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements (continued)

September 30, 2003 (Unaudited)

13. Supplemental Condensed Consolidating Financial Information (continued)

Three Months Ended September 30, 2002Combined
    
    
    CombinedGuarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands of dollars)INCOME STATEMENT DATANet sales
    
    $
    
    
    
    $
    176,042
    
    
    $
    21,154
    
    
    
    ($4,593
    )
    
    $
    192,603Cost of sales
    
    
    
    
    
    
    165,680
    
    
    
    19,550
    
    
    
    (4,584
    )
    
    
    180,646Gross profit (loss)
    
    
    
    
    
    
    10,362
    
    
    
    1,604
    
    
    
    (9
    )
    
    
    11,957Selling, general and administrative
    
    
    883
    
    
    
    5,213
    
    
    
    1,652
    
    
    
    190
    
    
    
    7,938Other operating expenses (income)
    
    
    4
    
    
    
    (16
    )
    
    
    (294
    )
    
    
    (189
    )
    
    
    (495
    )Operating (loss) profit
    
    
    (887
    )
    
    
    5,165
    
    
    
    246
    
    
    
    (10
    )
    
    
    4,514Other income and expenses:Interest expense (income), net
    
    
    5,806
    
    
    
    1,902
    
    
    
    (168
    )
    
    
    
    
    
    
    7,540Other expense, net
    
    
    127
    
    
    
    140
    
    
    
    517
    
    
    
    
    
    
    
    784(Loss) income before income tax
    
    
    (6,820
    )
    
    
    3,123
    
    
    
    (103
    )
    
    
    (10
    )
    
    
    (3,810
    )Income tax benefit (expense)
    
    
    3,342
    
    
    
    (1,325
    )
    
    
    612
    
    
    
    
    
    
    
    2,629Equity interest in a joint venture
    
    
    
    
    
    
    
    
    
    
    273
    
    
    
    
    
    
    
    273(Loss) income from continuing operations
    
    
    (3,478
    )
    
    
    1,798
    
    
    
    782
    
    
    
    (10
    )
    
    
    (908
    )Loss from discontinued operation, net of tax
    
    
    
    
    
    
    (105
    )
    
    
    
    
    
    
    
    
    
    
    (105
    )Net (loss) income
    
    $
    (3,478
    )
    
    $
    1,693
    
    
    $
    782
    
    
    
    ($10
    )
    
    
    ($1,013
    )


21



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INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements (continued)

September 30, 2003 (Unaudited)

13. Supplemental Condensed Consolidating Financial Information (continued)

Nine Months Ended September 30, 2003Combined
    
    
    CombinedGuarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands of dollars)INCOME STATEMENT DATANet sales
    
    $
    
    
    
    $
    510,757
    
    
    $
    82,190
    
    
    
    ($14,115
    )
    
    $
    578,832Cost of sales
    
    
    
    
    
    
    468,497
    
    
    
    71,263
    
    
    
    (14,115
    )
    
    
    525,645Gross profit
    
    
    
    
    
    
    42,260
    
    
    
    10,927
    
    
    
    
    
    
    
    53,187Selling, general and administrative
    
    
    1,911
    
    
    
    16,503
    
    
    
    6,530
    
    
    
    87
    
    
    
    25,031Restructuring and impairment charges
    
    
    
    
    
    
    10,314
    
    
    
    
    
    
    
    
    
    
    
    10,314Other operating expenses (income)
    
    
    79
    
    
    
    1,759
    
    
    
    467
    
    
    
    (87
    )
    
    
    2,218Operating (loss) profit
    
    
    (1,990
    )
    
    
    13,684
    
    
    
    3,930
    
    
    
    
    
    
    
    15,624Other income and expenses:Interest expense, net
    
    
    15,810
    
    
    
    6,920
    
    
    
    197
    
    
    
    
    
    
    
    22,927Other income, net
    
    
    (873
    )
    
    
    (13
    )
    
    
    (428
    )
    
    
    
    
    
    
    (1,314
    )(Loss) income before income tax
    
    
    (16,927
    )
    
    
    6,777
    
    
    
    4,161
    
    
    
    
    
    
    
    (5,989
    )Income tax benefit (expense)
    
    
    6,811
    
    
    
    (3,624
    )
    
    
    (1,315
    )
    
    
    
    
    
    
    1,872Equity interest in a joint venture
    
    
    
    
    
    
    
    
    
    
    752
    
    
    
    
    
    
    
    752(Loss) income from continuing operations
    
    
    (10,116
    )
    
    
    3,153
    
    
    
    3,598
    
    
    
    
    
    
    
    (3,365
    )Loss from discontinued operation, net of tax
    
    
    
    
    
    
    (122
    )
    
    
    
    
    
    
    
    
    
    
    (122
    )Net (loss) income
    
    
    ($10,116
    )
    
    $
    3,031
    
    
    $
    3,598
    
    
    $
    
    
    
    
    ($3,487
    )


22



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INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements (continued)

September 30, 2003 (Unaudited)

13. Supplemental Condensed Consolidating Financial Information (continued)

Nine Months Ended September 30, 2002Combined
    
    
    CombinedGuarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands of dollars)INCOME STATEMENT DATANet sales
    
    $
    
    
    
    $
    554,503
    
    
    $
    66,775
    
    
    
    ($11,484
    )
    
    $
    609,794Cost of sales
    
    
    (35
    )
    
    
    506,855
    
    
    
    58,891
    
    
    
    (11,475
    )
    
    
    554,236Gross profit (loss)
    
    
    35
    
    
    
    47,648
    
    
    
    7,884
    
    
    
    (9
    )
    
    
    55,558Selling, general and administrative
    
    
    3,296
    
    
    
    15,801
    
    
    
    4,706
    
    
    
    571
    
    
    
    24,374Other operating expenses (income)
    
    
    105
    
    
    
    (86
    )
    
    
    223
    
    
    
    (569
    )
    
    
    (327
    )Operating (loss) profit
    
    
    (3,366
    )
    
    
    31,933
    
    
    
    2,955
    
    
    
    (11
    )
    
    
    31,511Other income and expenses:Interest expense (income), net
    
    
    14,719
    
    
    
    6,677
    
    
    
    (321
    )
    
    
    
    
    
    
    21,075Other expense (income), net
    
    
    391
    
    
    
    (198
    )
    
    
    424
    
    
    
    
    
    
    
    617(Loss) income before income tax
    
    
    (18,476
    )
    
    
    25,454
    
    
    
    2,852
    
    
    
    (11
    )
    
    
    9,819Income tax benefit (expense)
    
    
    7,966
    
    
    
    (10,168
    )
    
    
    232
    
    
    
    
    
    
    
    (1,970
    )Equity interest in a joint venture
    
    
    
    
    
    
    
    
    
    
    692
    
    
    
    
    
    
    
    692(Loss) income from continuing operations
    
    
    (10,510
    )
    
    
    15,286
    
    
    
    3,776
    
    
    
    (11
    )
    
    
    8,541Loss from discontinued operation, net of tax
    
    
    
    
    
    
    (449
    )
    
    
    
    
    
    
    
    
    
    
    (449
    )Cumulative effect of changes in accounting, net of tax
    
    
    
    
    
    
    
    
    
    
    481
    
    
    
    
    
    
    
    481Net (loss) income
    
    
    ($10,510
    )
    
    $
    14,837
    
    
    $
    4,257
    
    
    
    ($11
    )
    
    $
    8,573


23



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##### Table of Contents



INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements (continued)

September 30, 2003 (Unaudited)

13. Supplemental Condensed Consolidating Financial Information (continued)

As of September 30, 2003Combined
    
    
    CombinedGuarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands of dollars)BALANCE SHEET DATAASSETSCurrent assets:Cash and cash equivalents
    
    $
    3,010
    
    
    $
    413
    
    
    $
    1,565
    
    
    $
    
    
    
    $
    4,988Accounts receivable, net
    
    
    155
    
    
    
    73,832
    
    
    
    25,125
    
    
    
    
    
    
    
    99,112Inventories
    
    
    
    
    
    
    57,493
    
    
    
    19,067
    
    
    
    (59
    )
    
    
    76,501Other current assets
    
    
    22,126
    
    
    
    4,059
    
    
    
    6,395
    
    
    
    1
    
    
    
    32,581Total current assets
    
    
    25,291
    
    
    
    135,797
    
    
    
    52,152
    
    
    
    (58
    )
    
    
    213,182Property, plant and equipment, net
    
    
    3,592
    
    
    
    260,609
    
    
    
    60,677
    
    
    
    543
    
    
    
    325,421Other assets:Goodwill
    
    
    
    
    
    
    217,016
    
    
    
    
    
    
    
    
    
    
    
    217,016Other non-current assets
    
    
    18,311
    
    
    
    4,081
    
    
    
    1,790
    
    
    
    1,443
    
    
    
    25,625Intercompany, net
    
    
    (55,948
    )
    
    
    83,499
    
    
    
    (29,102
    )
    
    
    1,551
    
    
    
    Investments in subsidiaries
    
    
    603,269
    
    
    
    
    
    
    
    
    
    
    
    (603,269
    )
    
    
    Total assets
    
    $
    594,515
    
    
    $
    701,002
    
    
    $
    85,517
    
    
    
    ($599,790
    )
    
    $
    781,244LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    1,357
    
    
    $
    61,786
    
    
    $
    12,790
    
    
    
    ($243
    )
    
    $
    75,690Accrued liabilities
    
    
    15,783
    
    
    
    37,284
    
    
    
    11,113
    
    
    
    59
    
    
    
    64,239Long-term debt due within one year
    
    
    350
    
    
    
    1,003
    
    
    
    10,273
    
    
    
    
    
    
    
    11,626Total current liabilities
    
    
    17,490
    
    
    
    100,073
    
    
    
    34,176
    
    
    
    (184
    )
    
    
    151,555Long-term debt due after one year
    
    
    239,000
    
    
    
    37,115
    
    
    
    5,700
    
    
    
    
    
    
    
    281,815Retirement benefits
    
    
    77,342
    
    
    
    220
    
    
    
    
    
    
    
    
    
    
    
    77,562Other non-current liabilities
    
    
    4,663
    
    
    
    7,990
    
    
    
    892
    
    
    
    747
    
    
    
    14,292Total non-current liabilities
    
    
    321,005
    
    
    
    45,325
    
    
    
    6,592
    
    
    
    747
    
    
    
    373,669Shareholders equity
    
    
    256,020
    
    
    
    555,604
    
    
    
    44,749
    
    
    
    (600,353
    )
    
    
    256,020Total liabilities and shareholders equity
    
    $
    594,515
    
    
    $
    701,002
    
    
    $
    85,517
    
    
    
    ($599,790
    )
    
    $
    781,244


24



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##### Table of Contents



INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements (continued)

September 30, 2003 (Unaudited)

13. Supplemental Condensed Consolidating Financial Information (continued)

As of December 31, 2002Combined
    
    
    CombinedGuarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands of dollars)BALANCE SHEET DATAASSETSCurrent assets:Cash and cash equivalents
    
    $
    1,122
    
    
    $
    167
    
    
    $
    2,009
    
    
    $
    
    
    
    $
    3,298Accounts receivable, net
    
    
    162
    
    
    
    62,060
    
    
    
    23,281
    
    
    
    
    
    
    
    85,503Inventories
    
    
    
    
    
    
    55,659
    
    
    
    8,139
    
    
    
    (59
    )
    
    
    63,739Other current assets
    
    
    21,291
    
    
    
    2,487
    
    
    
    682
    
    
    
    1
    
    
    
    24,461Current assets of discontinued
operation
    
    
    
    
    
    
    3,407
    
    
    
    
    
    
    
    
    
    
    
    3,407Total current assets
    
    
    22,575
    
    
    
    123,780
    
    
    
    34,111
    
    
    
    (58
    )
    
    
    180,408Property, plant and equipment, net
    
    
    4,598
    
    
    
    289,709
    
    
    
    32,112
    
    
    
    543
    
    
    
    326,962Other assets:Goodwill
    
    
    
    
    
    
    217,016
    
    
    
    
    
    
    
    
    
    
    
    217,016Other non-current assets
    
    
    18,749
    
    
    
    3,867
    
    
    
    10,581
    
    
    
    1,443
    
    
    
    34,640Intercompany, net
    
    
    (40,038
    )
    
    
    63,759
    
    
    
    (25,323
    )
    
    
    1,602
    
    
    
    Investments in subsidiaries
    
    
    592,765
    
    
    
    
    
    
    
    
    
    
    
    (592,765
    )
    
    
    Non-current assets of discontinued
operation
    
    
    
    
    
    
    5,072
    
    
    
    
    
    
    
    
    
    
    
    5,072Total assets
    
    $
    598,649
    
    
    $
    703,203
    
    
    $
    51,481
    
    
    
    ($589,235
    )
    
    $
    764,098LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    2,462
    
    
    $
    62,426
    
    
    $
    5,337
    
    
    
    ($265
    )
    
    $
    69,960Accrued liabilities
    
    
    19,603
    
    
    
    33,588
    
    
    
    11,041
    
    
    
    81
    
    
    
    64,313Long-term debt due within one year
    
    
    350
    
    
    
    1,107
    
    
    
    110
    
    
    
    
    
    
    
    1,567Current liabilities of discontinued
operation
    
    
    
    
    
    
    1,865
    
    
    
    
    
    
    
    
    
    
    
    1,865Total current liabilities
    
    
    22,415
    
    
    
    98,986
    
    
    
    16,488
    
    
    
    (184
    )
    
    
    137,705Long-term debt due after one year
    
    
    240,350
    
    
    
    37,974
    
    
    
    212
    
    
    
    
    
    
    
    278,536Retirement benefits
    
    
    70,812
    
    
    
    6,759
    
    
    
    
    
    
    
    
    
    
    
    77,571Other non-current liabilities
    
    
    7,503
    
    
    
    6,955
    
    
    
    (2,488
    )
    
    
    747
    
    
    
    12,717Total non-current liabilities
    
    
    318,665
    
    
    
    51,688
    
    
    
    (2,276
    )
    
    
    747
    
    
    
    368,824Shareholders equity
    
    
    257,569
    
    
    
    552,529
    
    
    
    37,269
    
    
    
    (589,798
    )
    
    
    257,569Total liabilities and shareholders equity
    
    $
    598,649
    
    
    $
    703,203
    
    
    $
    51,481
    
    
    
    ($589,235
    )
    
    $
    764,098


25



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##### Table of Contents



INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements (continued)

September 30, 2003 (Unaudited)

13. Supplemental Condensed Consolidating Financial Information (continued)

Nine Months Ended September 30, 2003Combined
    
    
    CombinedGuarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands of dollars)CASH FLOW DATACash provided by continuing operating
activities
    
    $
    6,018
    
    
    $
    4,780
    
    
    $
    9,969
    
    
    $
    
    
    
    $
    20,767Cash provided by discontinued operation
    
    
    
    
    
    
    1,314
    
    
    
    
    
    
    
    
    
    
    
    1,314Net cash provided by operating activities
    
    
    6,018
    
    
    
    6,094
    
    
    
    9,969
    
    
    
    
    
    
    
    22,081Investing activities:Additions to property, plant and equipment
    
    
    (1,365
    )
    
    
    (8,460
    )
    
    
    (1,787
    )
    
    
    
    
    
    
    (11,612
    )Purchase of shares of a subsidiary
    
    
    
    
    
    
    
    
    
    
    (5,571
    )
    
    
    
    
    
    
    (5,571
    )Proceeds from sale of assets of a subsidiary
    
    
    
    
    
    
    3,925
    
    
    
    
    
    
    
    
    
    
    
    3,925Proceeds from sale of property, plant and
equipment
    
    
    1,700
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,700Net cash provided by (used in) investing
activities
    
    
    335
    
    
    
    (4,535
    )
    
    
    (7,358
    )
    
    
    
    
    
    
    (11,558
    )Financing activities:Net decrease in revolving credit facility
    
    
    (1,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,000
    )Net decrease in other debts
    
    
    
    
    
    
    (1,313
    )
    
    
    (2,772
    )
    
    
    
    
    
    
    (4,085
    )Payments of revolving credit facility fees
    
    
    (405
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (405
    )Dividends paid
    
    
    (3,072
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,072
    )Issuance of common stock
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12Net cash used in financing activities
    
    
    (4,465
    )
    
    
    (1,313
    )
    
    
    (2,772
    )
    
    
    
    
    
    
    (8,550
    )Effect of exchange rate changes on cash and
cash equivalents
    
    
    
    
    
    
    
    
    
    
    (283
    )
    
    
    
    
    
    
    (283
    )Net increase (decrease) in cash and cash
equivalents
    
    $
    1,888
    
    
    $
    246
    
    
    
    ($444
    )
    
    $
    
    
    
    $
    1,690


26



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##### Table of Contents



INTERMET Corporation

Notes to Interim Condensed Consolidated Financial Statements (continued)

September 30, 2003 (Unaudited)

13. Supplemental Condensed Consolidating Financial Information (continued)

Nine Months Ended September 30, 2002Combined
    
    
    CombinedGuarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands of dollars)CASH FLOW DATACash provided by (used in) continuing
operating activities
    
    $
    73,378
    
    
    $
    5,386
    
    
    
    ($12,178
    )
    
    $
    
    
    
    $
    66,586Cash provided by discontinued operation
    
    
    
    
    
    
    1,071
    
    
    
    
    
    
    
    
    
    
    
    1,071Net cash provided by (used in) operating
activities
    
    
    73,378
    
    
    
    6,457
    
    
    
    (12,178
    )
    
    
    
    
    
    
    67,657Investing activities:Additions to property, plant and
equipment by continuing operations
    
    
    (1,465
    )
    
    
    (4,413
    )
    
    
    (854
    )
    
    
    
    
    
    
    (6,732
    )Additions to property, plant and
equipment by discontinued operations
    
    
    
    
    
    
    (148
    )
    
    
    
    
    
    
    
    
    
    
    (148
    )Proceeds from sale of property, plant and
equipment
    
    
    
    
    
    
    360
    
    
    
    
    
    
    
    
    
    
    
    360Net cash used in investing activities
    
    
    (1,465
    )
    
    
    (4,201
    )
    
    
    (854
    )
    
    
    
    
    
    
    (6,520
    )Financing activities:Net decrease in revolving credit facility
    
    
    (67,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (67,000
    )Proceeds from debt offering
    
    
    175,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    175,000Repayment of term loan
    
    
    (171,750
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (171,750
    )Repayments of other debts
    
    
    (350
    )
    
    
    (804
    )
    
    
    (307
    )
    
    
    
    
    
    
    (1,461
    )Payments of debt issuance costs
    
    
    (5,940
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,940
    )Dividends paid
    
    
    (3,056
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,056
    )Issuance of common stock
    
    
    490
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    490Net cash used in financing activities
    
    
    (72,606
    )
    
    
    (804
    )
    
    
    (307
    )
    
    
    
    
    
    
    (73,717
    )Effect of exchange rate changes on cash and
cash equivalents
    
    
    
    
    
    
    
    
    
    
    4,390
    
    
    
    
    
    
    
    4,390Net (decrease) increase in cash and cash
equivalents
    
    
    ($693
    )
    
    $
    1,452
    
    
    
    ($8,949
    )
    
    $
    
    
    
    
    ($8,190
    )


27



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##### Table of Contents






Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

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 downturn in the markets in which we operate
|- |  | --------------------------------------------------------------------------------------



| |  | Fluctuations in worldwide or regional automobile and light- and heavy-truck production, which directly affect demand for
our products
|- |  | -------------------------------------------------------------------------------------------------------------------------------------



| |  | Changes in procurement practices and policies of our customers for automotive components, including the risk of the loss of
any of our major customers
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Pricing practices of our customers, including demands for price concessions as a condition to retaining current business or
obtaining new business
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Deterioration in the market share of any of our major customers
|- |  | ---------------------------------------------------------------



| |  | 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, aluminum, zinc, magnesium, alloys and scrap steel,
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 customers
|- |  | ----------------------------------------------------------------------------------------------------------------



| |  | Factors or presently unknown circumstances that may affect the charges related to the impairment of our long-lived assets
|- |  | -------------------------------------------------------------------------------------------------------------------------



| |  | Changes in environmental regulations to which we are subject, including Maximum Achievable Control Technology standards
applicable to the foundry industry, and our ability to meet these standards
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Our ability to meet the financial covenants set forth in our debt agreements, and our ability to negotiate less restrictive
covenants if necessary
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  | 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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Material Changes in Financial Condition, Liquidity and Capital Resources

Through the third quarter of 2003 net cash provided by operations totaled $22.1
million compared to $67.7 million for the same period last year. Depreciation
and amortization expense, excluding depreciation expense for our discontinued
operations, for the nine months ended September 30, 2003 and 2002 was $38.1
million and $37.0 million, respectively. For the nine months ended September
30, 2003, after adjusting for the effect of exchange rates, accounts receivable
increased by $6.6 million while inventory increased by $5.6 million. The
increase in accounts receivable and inventory is due to the consolidation of
PortCasts financial statements since July 2003. For the nine months ended
September 30, 2003, after adjusting for the effect of exchange rates, accounts
payable decreased by $0.3 million while accrued liabilities decreased by $9.1
million. The decrease in accrued liabilities is due to the payment of European
corporation and trade taxes during the nine months ended September 30, 2003.
During the first nine months of 2003 we spent $11.6 million for the purchase of
property, plant and equipment. Borrowings under our bank revolving credit
facility decreased by $1.0 million during the first nine months of 2003.
Additionally, we paid $3.1 million in dividends during the first nine months of
2003. The Company has committed capital not yet spent of approximately $4.0
million as of September 30, 2003. We anticipate that the funds needed for the
committed capital spending will come from operations.

During the first quarter of 2003, we amended our revolving credit agreement.
The credit agreement facility was reduced from $300 million to $225 million, of
which $122 million was outstanding as of September 30, 2003, consisting of
borrowings of $62.0 million and letters of credit of $60 million. In addition,
two financial covenants were modified to provide less restrictive terms. The
secured bank revolving credit facility expires on November 5, 2004. As of
September 30, 2003, we had outstanding unsecured senior notes of $175 million
and other debt of approximately $56.4 million. The senior notes will be due on
June 15, 2009. At September 30, 2003, we had committed and uncommitted bank
credit facilities with unused borrowing capacity of $103 million. However, due
to loan covenants restrictions, our borrowing availability at September 30,
2003 was $18.6 million.

We were in compliance with our revolving credit agreement covenants as of
September 30, 2003. The revolving credit agreement financial covenant ratios
as of September 30, 2003 are provided below.

Financial Covenant
    
    Requirement
    
    
    ActualFixed charge coverage ratio
    
    
    >  1.50 : 1
    
    
    
    2.22 : 1Consolidated EBITDA to
consolidated interest expense
    
    
    >  2.50 : 1
    
    
    
    2.82 : 1Funded debt to consolidated EBITDA
    
    
    <  4.00 : 1
    
    
    
    3.54 : 1Capital expenditures (in thousands of dollars)
    
    
    <  $50,000
    
    
    $
    17,245


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##### Table of Contents



The reconciliations of EBITDA, Fixed Charges and Funded Debt, and the
calculations of financial covenant ratios are provided below:

Twelve Months EndedSeptember 30, 2003(In thousands of dollars)Net loss
    
    $
    (2,527
    )Income tax benefit
    
    
    (1,889
    )Interest expense, net
    
    
    30,398Non-cash restructuring charge
    
    
    10,314Depreciation and amortization
    
    
    50,279Adjustments to consolidated EBITDA pertaining to the bank agreement *
    
    
    2,768Consolidated EBITDA
    
    
    89,343Consolidated EBITDA
    
    
    89,343Less: Capital expenditure
    
    
    13,978Less: Adjustments to capital expenditure pertaining to the bank agreement *
    
    
    3,267Consolidated EBITDA less capital expenditure
    
    $
    72,098Interest expense, net
    
    $
    30,398Adjustments to interest expense pertaining to the bank agreement *
    
    
    1,291Revenue bonds principal payments
    
    
    850Fixed charges
    
    $
    32,539


At September 30, 2003(In thousands of dollars)Total long-term debt
    
    $
    293,441Letters of credit excluding certain revenue bonds
    
    
    22,986Funded debt
    
    $
    316,427


Twelve Months EndedSeptember 30, 2003(In thousands ofdollars, except ratios)Consolidated EBITDA less capital expenditures
    
    $
    72,098Fixed charges
    
    $
    32,539Fixed charge coverage ratio (to 1)
    
    
    2.22Consolidated EBITDA
    
    $
    89,343Consolidated interest expense
    
    $
    31,689Consolidated EBITDA to consolidated interest expense (to 1)
    
    
    2.82Funded debt
    
    $
    316,427Consolidated EBITDA
    
    $
    89,343Funded debt to consolidated EBITDA (to 1)
    
    
    3.54


* Adjustments are related to the acquisition of PortCast in 2003.

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These ratios are calculated based on the last twelve months activities. EBITDA
is defined in our revolving credit agreement and is generally calculated as the
sum of net income (excluding certain non-cash charges), income taxes, interest
expense, and depreciation and amortization. EBITDA is adjusted for
acquisitions and dispositions. See our revolving credit agreement dated
November 5, 1999, as amended through the Fourth Amendment dated July 17, 2001,
included as Exhibit 4.14(a) to our quarterly report on Form 10-Q filed on
August 14, 2001, and subsequent amendments, for the complete definition of
EBITDA and other definitions as used in calculation of our financial covenant
compliance. EBITDA is not a measure prepared in accordance with accounting
principles generally accepted in the United States, but is being presented
because we and our lenders use it to evaluate our operating performance
relative to the financial covenants contained in our revolving credit
agreement. EBITDA should not be considered a substitute for income from
operations, net income, cash flows or other measures of financial performance
prepared in accordance with accounting principles generally accepted in the
United States.

The above financial covenant ratios become more restrictive over the term of
our revolving credit agreement in accordance with the terms of the agreement.

Material Changes in Results of Operations  Three months ended September 30, 2003

Sales for the third quarter of 2003 were $182.1 million, a decrease of $10.5
million or 5.5% as compared to sales in the same period in 2002 of $192.6
million. The decrease in sales is attributable mainly to weaker North American
and European automobile and light truck markets, along with lower selling
prices. Ferrous Metals segment sales were $124.5 million during the third
quarter of 2003 compared to $127.1 million for the same period last year,
representing a decrease in sales of $2.6 million or 2.0%. Included as part of
Ferrous Metals segment sales, European sales during the three months ended
September 30, 2003 were $29.5 million, an increase of $8.3 million or 39.2% as
compared to European sales of $21.2 million for the same period last year. The
overall decrease in Ferrous Metals segment sales is attributable to a decrease
in vehicle production in North America and Europe by 5% and 2%, respectively,
partially offset by the consolidation of PortCasts financial results and
favorable foreign currency exchange on European sales for the third quarter.
Light Metals segment sales were $57.6 million during the third quarter of 2003,
a decrease of $7.9 million or 12.1% compared to $65.5 million during the third
quarter of 2002. The decrease in sales is attributable to a combination of the
decrease of vehicle production, the loss of certain business, and price
reductions on certain programs.

Gross profit for the three months ended September 30, 2003 and 2002 was $14.7
million and $12.0 million, respectively. Gross profit as a percentage of sales
for the three months ended September 30, 2003 and 2002 was 8.1% and 6.2%,
respectively. The increase in gross profit margin is due to efficiency
improvements, partially offset by the lower sales volume and lower selling
price.

Selling, general and administrative expenses for the three months ended
September 30, 2003 and 2002 were 4.8% and 4.1% of sales, respectively. The
increase is due to the consolidation of PortCasts financial results since July
2003.

A reduction of restructuring and impairment charges of $1.3 million was
recorded during the third quarter of 2003 . It represented the reduction of
other postretirement benefit obligations related to the termination of over 200
hourly and salaried employees of the Radford Foundry. We decided to
permanently close our Radford Foundry due to changes in market conditions and
production technology, as well as a substantial investment necessary for
continued operation. The closure is expected to be complete by December 31,
2003.

Net interest expense for the third quarter 2003 was $7.8 million, which was
$0.3 million more than the same period last year. The increase was because of
the consolidation of PortCasts financial results since July 2003.

Other income for the third quarter 2003 of $1.5 million included a gain on
disposal of fixed assets of $1.7 million.

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The effective income tax rate was 95.5% and 69.0% for the third quarter of 2003
and 2002, respectively. The effective income tax rate in the third quarter of
2003 was higher than the statutory rate because income tax included foreign
taxes and state taxes, partially offset by a Federal Research and Development
Tax Credit. The effective income tax benefit rate in the third quarter of 2002
was higher than the statutory rate because the income tax benefit included
foreign tax and state tax benefits, release of tax reserves, and utilization of
one-time state tax credits.

Loss from discontinued operations resulted from the sale of substantially all
the assets of Frisby during the third quarter of 2003. The loss from the
operations of Frisby and the loss on the sale of Frisbys assets, net of taxes,
for the three months ended September 30, 2003 was $18 thousand and $41
thousand, respectively.

Material Changes in Results of Operations  Nine months ended September 30, 2003

Sales for the nine months ended September 30, 2003 were $578.8 million, a
decrease of $31.0 million or 5.1% as compared to sales in the same period in
2002 of $609.8 million. The decrease in sales is attributable mainly to weaker
North American and European automobile and light truck markets, along with
lower selling price. Ferrous Metals segment sales were $400.4 million during
the nine months ended September 30, 2003 compared to $400.9 million for the
same period last year, representing a decrease in sales of $0.5 million or
0.1%. Included as part of Ferrous Metals segment sales, European sales during
the nine months ended September 30, 2003 were $82.2 million, an increase of
$15.4 million or 23.1% as compared to European sales of $66.8 million for the
same period last year. The overall slight decrease in Ferrous Metals segment
sales is attributable to an 1% decrease in vehicle production in Europe for the
nine months ended September 30, 2003 as compared to the same period last year.
This negative impact was substantially offset by the consolidation of
PortCasts sales since July 2003, and favorable foreign currency exchange on
European sales. Light Metals segment sales were $178.5 million during the nine
months ended September 30, 2003, a decrease of $30.4 million or 14.6% compared
to $208.9 million during the same period in 2002. The decrease in sales is
attributable mainly to a decrease in vehicle production in North America of 4%,
loss of certain business, and price reductions.

Gross profit for the nine months ended September 30, 2003 and 2002 was $53.2
million and $55.6 million, respectively. Gross profit as a percentage of sales
for the nine months ended September 30, 2003 and 2002 was 9.2% and 9.1%,
respectively. The increase in gross profit margin is due to continuous
improvement in production efficiency and cost reductions, but the impact is
substantially offset by lower sales volume and reduced selling prices.

Selling, general and administrative expenses for the nine months ended
September 30, 2003 and 2002 were 4.3% and 4.0% of sales, respectively. The
increase is due to the consolidation of PortCasts financial results since July
2003.

Restructuring and impairment charges of $10.3 million were recorded during the
nine months ended September 30, 2003. The charges were related to our decision
to permanently close our Radford Foundry. The closure is expected to be
complete by December 31, 2003. The restructuring and impairment charges
included a write-down of $9.9 million to reduce the capital assets and
inventories to their fair values, $1.4 million for employee severance and
related contractually guaranteed benefit costs, and $0.3 million for the
employee pension costs, reduced by $1.3 million for the reduction of other
postretirement benefit obligations related to the termination of over 200
hourly and salaried employees of the Radford Foundry.

Net interest expense for the nine-month period ended September 30, 2003 was
$22.9 million, which was $1.9 million more than the same period last year. The
increase was due to higher interest rates on our senior notes issued in June
2002, and the consolidation of PortCasts financial results since July 2003.

Other income for the nine-month period ended September 30, 2003 of $1.3 million
included a gain on disposal of fixed assets of $1.7 million.

The effective income tax rate was 31.3% and 20.1% for the nine months ended
September 30, 2003 and 2002, respectively. The effective income tax benefit
rate in the nine months ended September 30, 2003 was lower than

32



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##### Table of Contents



the statutory
rate because of foreign and state tax expenses, partially offset by a Federal
Research and Development Tax
Credit. The effective income tax expense rate in the same period of 2002 was
lower than the statutory rate because tax planning in Europe and release of tax
reserves, partially offset by the state tax expenses.

Loss from discontinued operations resulted from the sale of substantially all
the assets of Frisby during the third quarter of 2003. The loss from the
operations of Frisby and the loss on the sale of Frisbys assets, net of taxes,
for the nine months ended September 30, 2003 was $81 thousand and $41 thousand,
respectively.

Impact of Adopting SFAS 145

On January 1, 2003, we adopted SFAS No. 145, Rescission of FASB Statement No.
4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections.
This Statement requires certain gains and losses associated with the
extinguishment of debt previously treated as extraordinary items to be
classified as income or loss from continuing operations. As required under
SFAS No. 145, we reclassified pretax losses of $927,000 related to the
extinguishment of bank term loan in the 2002 Statement of Operations from
Extraordinary Item to Interest Expense, Net.

Critical Accounting Policies and Estimates

Our interim condensed consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States,
which require us to make estimates, judgments and assumptions that affect the
reported amounts of certain assets, liabilities, revenues, expenses and related
disclosures and contingencies. We evaluate estimates used in preparation of
our financial statements on a continual basis. Our critical accounting
policies previously disclosed in Item 7, Management Discussion and Analysis of
Financial Condition and Results of Operations  Critical Accounting Policies,
as described in our annual report on Form 10-K for the year ended December 31,
2002, have not changed.




Item 3. Quantitative and Qualitative Disclosures about Market Risk

We have exposure to four types of market risk. The first is the risk of
interest rate changes and how it impacts our current results. Second, we have
risk with regard to foreign currency and its impact on our European operating
results. Third, we have risk related to commodity pricing which, based on
current pricing trends, has been immaterial to us with the exception of energy
costs, and costs of aluminum, magnesium and scrap steel. The cost of scrap
steel has increased steadily since early 2002 and the overall trend represents
a risk to our operating results. Lastly, we have consumer risk. We operate
principally in the cyclical automotive industry. A weakening of the economy
represents a risk to our operating results.

There has been no material change to our exposures to market risk since
December 31, 2002.




Item 4. Controls and Procedures



|(a) |  | We have conducted an evaluation of our disclosure controls and
procedures, as such term is defined under Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended, as of September 30,
2003. Based on our evaluation, our principal executive officer and
principal financial officer have concluded that our disclosure controls
and procedures are effective to ensure that information required to be
disclosed by us is recorded, processed, summarized and reported within the
required time periods.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) |  | There have been no changes in our internal control over financial
reporting during the quarter ended September 30, 2003 that has materially
affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

33



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##### Table of Contents






Part II  Other Information




Item 1. Legal Proceedings

See Note 11, Environmental and Legal Matters, for a description of
environmental matters, including environmental matters relating to our
Radford, Virginia facilities.

We are a party to a number of legal proceedings associated with
environmental, employment, commercial, product liability and other matters in
the ordinary course of our business. We do not believe that such pending or
threatened legal proceedings to which we are a party, or to which any of our
property is subject, will have a material adverse effect on our consolidated
financial position or results of operations or liquidity, taken as a whole.
It is possible, however, that future results of operations for any particular
quarterly or annual period could be materially affected by changes in our
assumptions related to these proceedings.

There have been no other material changes in matters reported in the Form 10-K
for the year ended December 31, 2002.

Item 2. Changes in Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Securities Holders

None.

Item 5. Other Information

None.

Item 6. Exhibits and Reports on Form 8-K




(a) Exhibits

Exhibit No.
    
    Document31.1
    
    Certification by the
President and Chief
Executive Officer
pursuant to Section 302
of the Sarbanes-Oxley Act
of 200231.2
    
    Certification by the Vice
President of Finance and
Chief Financial Officer
pursuant to Section 302
of the Sarbanes-Oxley Act
of 200232.1
    
    Certification of Periodic
Financial Report by the
President and Chief
Executive Officer and
Vice President of Finance
and Chief Financial
Officer pursuant to
Section 906 of the
Sarbanes-Oxley Act of
2002


(b) Reports on Form 8-K

On October 16, 2003, we filed a current report on Form 8-K containing a press
release announcing the financial results for the third quarter of 2003.

34



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##### Table of Contents






Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

INTERMET CorporationBy:
    
    /s/ Robert E. BeltsRobert E. BeltsVice President of Finance andChief Financial OfficerDate:
    
    November 13, 2003


35



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##### Table of Contents






Exhibit Index

Exhibit No.
    
    Document Description31.1
    
    Certification by the
President and Chief
Executive Officer
pursuant to Section 302
of the Sarbanes-Oxley Act
of 200231.2
    
    Certification by the Vice
President of Finance and
Chief Financial Officer
pursuant to Section 302
of the Sarbanes-Oxley Act
of 200232.1
    
    Certification of Periodic
Financial Report by the
President and Chief
Executive Officer and
Vice President of Finance
and Chief Financial
Officer pursuant to
Section 906 of the
Sarbanes-Oxley Act of
2002


36