Annual Report (Form 10-K), fiscal year 1994

ITEM 1. BUSINESS
General - -------
The Registrant is a leading independent manufacturer of precision ductile and gray iron castings, with production facilities in North America and Germany. The Registrant's castings are used primarily in passenger cars and light trucks, as well as in heavy trucks. The castings also have railroad, municipal and construction applications. The Registrant specializes in safety-related parts critical to vehicle control that meet its customers' exacting metallurgical, dimensional and quality control standards. Products manufactured for the automotive, light truck and heavy truck industries include brake parts, steering components, differential cases, camshafts and crankshafts. The Registrant provides castings used by over 20 automobile manufacturers throughout the world, including Ford, Chrysler, General Motors, Volkswagen, BMW and Mercedes-Benz.
As used herein, the term "Registrant" refers collectively to Intermet Corporation and its subsidiaries, and their respective predecessors, except where otherwise indicated by context.
Recent Developments - -------------------
On October 27, 1994, George W. Mathews, Jr. retired as Chairman, Chief Executive Officer and President of the Registrant. Curtis W. Tarr retired as Vice Chairman of the Registrant and President of Intermet International, Inc. as of December 31, 1994. Both Mr. Mathews and Mr. Tarr remain directors of the Registrant. Mr. Mathews was succeeded by John Doddridge as Chairman and Chief Executive. See Item 11, "EXECUTIVE COMPENSATION" for a description of the terms of the retirement arrangements and employment agreement entered into by the Registrant.
A number of one-time adjustments were recorded in the fourth quarter of 1994 which resulted in the Registrant's posting a net loss for the year. These adjustments included Board-approved retirement pay for Mr. Mathews and Mr. Tarr, accrual of severance benefits related to the planned termination of salaried employees, the write down of certain idle and underutilized equipment, the write off of remaining goodwill related to a subsidiary, PBM Industries, Inc., and the write off of the Registrant's investment in a joint venture with Comalco Aluminum, Ltd. ("Comalco"), from which the Registrant plans to withdraw. These adjustments reduced the Registrant's operating profit by $16.3 million in 1994.
Products, Markets and Sales - ---------------------------
The Registrant specializes in safety-related parts critical to vehicle control, including brake parts and steering system components, as well as differential cases, camshafts and crankshafts. Products for other industries include brackets, valves and railroad adaptors.
The Registrant has had a longstanding quality assurance program and is committed to maintaining its reputation for high quality products and timely delivery. Most of the Registrant's facilities hold Ford's Q-1 quality award and/or Chrysler's PENTASTAR award.
The Registrant markets its products exclusively through its own sales and customer service staff, except in Europe where it also uses independent sales representatives. The Registrant currently maintains sales offices in Michigan and Germany. The Registrant produces principally to customer order and does not maintain any significant inventory of finished goods not on order.
The Registrant provides extensive production and technical training to its sales staff. This technical background enables the sales staff to act as an effective liaison between customers and the Registrant's production personnel and permits the Registrant to offer customer assistance at the design stage of major casting programs. The Registrant also employs quality assurance representatives and engineers who work with customers' manufacturing personnel to detect and avoid potential problems and to develop new product opportunities for the Registrant. In addition to working with customer purchasing personnel, the Registrant's sales engineers confer with design engineers and other technical staff.
During 1992, 1993 and 1994, direct sales to Ford accounted for 20%, 23% and 23%, respectively, direct sales to Chrysler accounted for 22%, 23% and 23%, respectively, and direct sales to General Motors Corporation accounted for 10%, 12% and 14%, respectively, of the Registrant's consolidated net sales. The loss of any of these customers or a substantial reduction in their purchases from the Registrant would have a material adverse effect on the Registrant. The Registrant's six largest customers accounted for approximately 73%, 78% and 79% of the Registrant's consolidated net sales during 1992, 1993 and 1994, respectively.
The following table sets forth information regarding sales by the Registrant to customers in these markets during 1992, 1993 and 1994.
In 1994 reported sales included 419,000 tons of casting shipments, compared to 381,000 tons in 1993. The Registrant's foundries operated at 84% of average annual capacity during 1994, compared to 82% during 1993. The Registrant's foundries in production during 1994 operated at an average annual capacity of 99% during 1994, while the Registrant's foundries in production during 1993 operated at an average annual capacity of 84% during 1993.
Manufacturing, Machining and Design - -----------------------------------
The Registrant produces both ductile and gray iron castings. Gray iron, the oldest and most widely used cast iron, is readily cast into intricate shapes that are easily machinable and wear resistant. Ductile iron, which is produced by removing sulphur from the molten iron and adding magnesium and other alloys, has greater strength and elasticity than gray iron, and its use as a higher strength substitute for gray iron and a lower-cost substitute for steel has grown steadily. For the years ended December 31, 1992, 1993 and 1994, sales of ductile iron castings represented 85%, 87% and 89%, respectively, of the Registrant's total sales of castings, the balance being gray iron. The Registrant's castings range in size from small pieces weighing less than one pound to castings weighing up to 100 pounds.
The manufacturing process involves melting steel scrap and pig iron in cupola or electric furnaces, adding various alloys and pouring the molten metal into molds made primarily of sand. The molten metal solidifies and cools in the molds, and the molds are broken and removed.
Customers usually specify the properties their castings are to embody, such as hardness and strength, and the Registrant determines how best to meet those specifications. Constant testing and monitoring of the manufacturing process is necessary to maintain the quality and performance consistency of the castings. Electronic testing and monitoring equipment, including x-ray, cobalt x-ray, ultrasonic and magnetic-particle testing equipment, is used extensively in grading scrap metal, analyzing molten metal and testing castings. The Registrant also uses its testing
equipment and procedures to provide particular tests requested by a customer for its castings.
Many castings require machining (which may include drilling, threading or cutting operations) before they can be put to their ultimate use. Most customers machine their own castings or have them machined by third parties. The Registrant operates facilities in Columbus, Georgia and Chesterfield, Michigan, where it machines castings produced by it or by others. The Registrant also contracts with other companies to machine castings it produces before shipment to customers.
The Registrant's design and engineering teams assist the customer, when requested, in the initial stages of product creation and modification. Among other computer-aided design techniques, the Registrant uses three-dimensional solid modeling software in conjunction with rapid prototype equipment. This equipment greatly enhances the Registrant's design flexibility and, depending on the complexity of the product, can reduce the time required to produce sample castings for customers by several weeks.
Research and Development - ------------------------
The Registrant conducts process and product development programs, principally at its separate research and development foundry located adjacent to the Archer Creek facility in Lynchburg, Virginia, and to a lesser extent at the laboratories in its other facilities. Current research and testing projects encompass both new manufacturing processes and product development. The research foundry has a self-contained melting and molding facility with complete metallurgical, physical and chemical testing capabilities. The work on new manufacturing processes is focused on ways to lower costs and improve quality. Product development work includes projects to enhance existing iron castings, such as austempering, which enhances the strength and elasticity of iron, as well as projects to develop new products, such as the conversion of forgings to castings. Amounts expensed for research and development totalled $1.4 million, $1.6 million and $1.5 million in 1992, 1993 and 1994, respectively.
Competition - -----------
The Registrant competes with many other foundries, both in the United States and Europe. Some of these foundries are owned by major users of iron castings, and a number of foundry operators have, or are subsidiaries of companies which have, greater financial resources than the Registrant. For example, the three largest domestic automobile manufacturers, which are among the Registrant's largest customers, operate their own foundries. However, they also purchase a significant amount of castings from the Registrant and others, and there is a trend toward increased outsourcing by the domestic original equipment manufacturers. Castings produced by the Registrant also compete to some degree with malleable iron castings, other metal castings and steel forgings.
The machining industry is highly fragmented and competitive. As in the foundry industry, large purchasers of machined components
often have significant in-house capabilities to perform their own machining work.
The Registrant competes primarily on the basis of product quality, engineering, service and price. The Registrant emphasizes its ability to produce complex, precision-engineered products in order to compete for value- added castings that generally provide a higher profit margin.
Raw Materials - -------------
The primary raw material used by the Registrant to manufacture iron castings is steel scrap. The Registrant is not dependent on any single supplier of scrap. The Registrant has no long-term contractual commitments with any scrap supplier and does not anticipate any difficulties in obtaining scrap because of the large number of suppliers and because of the Registrant's position as a major purchaser. The cost of steel scrap is subject to fluctuations, but the Registrant has implemented arrangements with most of its customers for adjusting its castings prices to reflect those fluctuations.
The Registrant has contractual arrangements, which expire at various times through 1998, for the purchase of various materials, other than steel scrap, used in or during the manufacturing process. While these contracts and the Registrant's overall level of purchases provide some protection against price increases, in most cases the Registrant does not have specific arrangements in place to adjust its casting prices for fluctuations in the prices of alloys and other materials.
Cyclicality and Seasonality - ---------------------------
Most of the Registrant's products are generally not affected by year-to-year automotive style changes. However, the inherent cyclicality of the automotive industry has affected the Registrant's sales and earnings during periods of slow economic growth or recession. The Registrant's third and fourth quarter sales are usually lower than first and second quarter sales due to plant closings by automakers for vacations and model changeovers.
Backlog - -------
Most of the Registrant's business involves supplying all or a stated portion of the customer's annual requirements, generally flexible in amount, for a particular casting against blanket purchase orders. The lead time and cost of commencing production of a particular casting tend to inhibit transfers of production from one foundry to another. Customers typically issue firm releases and shipping schedules on a monthly basis. The Registrant's backlog at any given time therefore consists only of the orders which have been released for shipment. Since the Registrant produces upon specific customer request, it had no backlog of orders at December 31, 1994.
Employees - ---------
At February 5, 1995 the Registrant employed 4,415 persons, including 3,900 in the United States. Of the persons employed in the United States, 3,120 were hourly manufacturing personnel, and the remainder were clerical, sales and management personnel. The Registrant employed 515 persons in Germany, 432 of whom were hourly manufacturing personnel. Most of the manufacturing personnel are represented by unions under collective bargaining agreements expiring at various times through 1998. Two domestic bargaining agreements covering approximately 520 hourly workers expire in 1995. One agreement, covering 85 employees, was replaced in February 1995, and the Registrant expects to replace the second agreement during 1995.
The Registrant from time to time adjusts the size of its work force to meet fluctuations in production demands at various facilities and for other reasons. For example, the Registrant expects to significantly reduce its salaried work force during 1995. During the past ten years the Registrant has not experienced any strike or work stoppage, other than a five-week strike by the 69 covered employees at the Hibbing, Minnesota plant during 1992. The Registrant believes that its relationship with its employees is satisfactory.
Environmental Matters - ---------------------
The Registrant's operations are subject to various federal, state and local laws and regulations relating to the protection of the environment. These regulations, which are implemented principally by the EPA and corresponding state agencies, govern the management of solid and hazardous waste, the discharge of pollutants into the air and into surface and underground waters, and the manufacture and disposal of chemical substances. The Registrant believes that current operations of its facilities are in substantial compliance with applicable environmental laws, regulations and government orders.
In 1992 the Registrant's Board of Directors established an Environmental Compliance Committee to oversee the Registrant's environmental program. The Registrant has completed internal environmental reviews of all of its facilities and intends to remedy all non-complying situations. In addition, the Registrant has environmental compliance personnel on-site at most facilities, and the Registrant has expanded its training programs to emphasize environmental matters.
The Registrant is currently in the process of attempting to resolve certain environmental matters with various governmental agencies and third parties. In addition to the administrative complaint filed by the EPA and the issue raised by the Ohio Attorney General's Office described in "Item 3 -- Legal Proceedings", these matters include the closure of five former hazardous waste treatment units at the Archer Creek and Radford Shell facilities, the remediation of soil and groundwater contamination at the Lower Basin foundry, and certain other soil remediation and clean-up projects. In addition, the Registrant is currently assessing the extent of soil and groundwater
contamination at its Chesterfield, Michigan facility, a site which has been designated a facility in need of remediation under Michigan Act 307. The sellers of the Chesterfield, Michigan facility have agreed to indemnify the Registrant for the costs related to the environmental problems at such site, up to certain limits, which the Registrant does not currently expect to exceed, although the costs of remediating the property cannot be determined until further assessments of the site are completed and a remediation plan is approved by the State of Michigan.
The Registrant believes that expenses to be incurred in resolving the foregoing matters will not materially exceed reserves established for such purposes or cause the Registrant to exceed its level of anticipated capital expenditures. However, it is not possible to accurately predict such costs.
The recent amendments to the federal Clean Air Act are expected to have a major impact on the compliance costs of many U.S. companies, including foundries of the type owned by the Registrant. Until regulations implementing those amendments are adopted by the federal and state governments, it is not possible to estimate such costs.
Over the years, the Registrant has landfilled wastes, such as baghouse dust and foundry sand, on or near its foundry properties. The Registrant believes its landfills and its other waste management units comply with all existing regulations. However, it is not possible to predict whether, or to what extent, future federal, state or local regulations will require the Registrant to incur additional costs to monitor, close, remediate or otherwise manage those units in ways not currently contemplated.
Although the Registrant's practices have, in certain instances, resulted in non-compliance with environmental laws and regulations and in non-material fines related thereto, the Registrant currently does not anticipate any environmentally related costs that would have a material adverse effect on its operations. However, it cannot be assured that the Registrant's activities will not give rise to actions by governmental agencies or private parties, which could cause the Registrant to incur fines, penalties, operational shutdowns, damages, cleanup costs or other similar expenses. Also, the Registrant's foundries' capacity levels or increases thereof are dependent upon the Registrant's ability to maintain, or obtain increases in, such levels in its permits for air emissions. It cannot be assured that the Registrant will be able to maintain its current permits, or obtain appropriate increases in capacity levels under such permits, so as to maintain its current level of operations or increase capacity as it may desire in the future.
Foreign Operations - ------------------
Information as to revenues, operating profits and identifiable assets for its foreign operations for 1994, 1993 and 1992 is contained in Note 11 of the consolidated financial statements included in the Registrant's 1994 Annual Report to Shareholders included as Exhibit 13 to this Report and is incorporated herein by reference.
Executive Officers of the Registrant - ------------------------------------
Executive officers are elected by the Board of Directors annually at its meeting immediately following the Annual Meeting of Shareholders, and hold office until the next Annual Meeting unless they sooner resign or are removed from office by the Board of Directors.
The executive officers of the Registrant as of February 15, 1995 and their ages and principal positions with the Registrant as of that date are as follows:
Name (Age) Principal Position(s) ---------- ---------------------
John Doddridge (54) Chairman of the Board and Chief Executive Officer
C. Douglas Brown (48) Vice President - Sales and Marketing
John C. Engeswick (61) Vice President - Technical Services
John D. Ernst (51) Vice President - Finance, Chief Financial Officer and Treasurer
Daryl R. Marsh (56) Vice President - Machining Services
C. James Peterson (47) Vice President - Foundry Operations
James W. Rydel (50) Vice President - Administration and Secretary
Peter C. Bouxsein (41) Controller
Mr. Doddridge became Chairman of the Board and Chief Executive Officer in October 1994. Mr. Doddridge was Vice Chairman and Chief Executive Officer of Magna International, Inc., a supplier of motor vehicle parts, from November 1992 until November 1994. From 1989 to 1992 he served as President of North American Operations of Dana Corporation, a motor vehicle parts manufacturer, and prior to that time he served as President of Hayes-Dana Inc., a subsidiary of Dana Corporation.
Mr. Brown became Vice President - Sales and Marketing in February 1995. Prior to that time he served as Vice President -Sales and Marketing of Intermet Foundries, Inc. ("IFI"), commencing in February 1993. From February 1991 to February 1993 he was General Sales Manager of IFI. Prior to that time he served as a Regional Sales Manager for IFI.
Mr. Engeswick became Vice President - Technical Services in February 1995. Prior to that time he served as Vice President -Quality Assurance for IFI.
Mr. Ernst became Treasurer in 1984 and served as Secretary of the Registrant from 1986 to February 1995. He was named Vice President - Finance and Chief Financial Officer in 1991.
Mr. Marsh became Vice President - Machining Services of the Registrant in February 1995. From 1993 to 1995, he served as Vice President - Machining. From 1969 through 1993, Mr. Marsh was employed by Simpson Industries, Inc., most recently as Group Vice President, Transmission and Chassis Group.
Mr. Peterson became Vice President - Foundry Operations in February 1995. He served as Director of Manufacturing of IFI from 1993 to 1995. Prior to that time he served as General Manager of Columbus Foundries, Inc.
Mr. Rydel has served as Vice President - Administration and Secretary since February 1995. He served as Vice President - Human Resources of the Registrant from 1991 until February 1995. He served as Director of Compensation and Benefits of the Registrant from 1986 until 1990, when he became Director of Human Resources of the Registrant.
Mr. Bouxsein became Controller of the Registrant in 1991. From 1987 until 1991 he was Corporate Director - Financial Reporting of the Registrant.
ITEM 2.



ITEM 2. PROPERTIES
The Registrant currently owns or operates or has an ownership interest in 9 ductile and gray iron foundries, one aluminum test foundry and one research foundry. Most castings can be produced at more than one of the Registrant's foundries.
The following provides information about the location and capacity of the iron foundries, all of which are wholly-owned by the Registrant:
The capacity figures above are based on operating two shifts per day for a five day work week. Many facilities can operate a full or partial third shift, and all facilities can operate on a six or seven day work week as needed.
The Registrant continually reviews the operation of its foundries and may from time to time close one or more foundries on a permanent or temporary basis due to its production needs and general business and economic conditions. The Pennsylvania foundry has been idled since 1991. The Lower Basin foundry stopped pouring iron in 1993 and was closed completely in 1994.
The aluminum test foundry is located in Lewisport, Kentucky and is jointly owned by the Registrant and Comalco. In 1994, the Registrant notified Comalco that it intends to withdraw from this joint venture. The research foundry is located in Virginia and is wholly-owned by the Registrant.
The Registrant owns or leases several machining and design facilities. The Registrant owns a 100,000 square foot machining facility in Columbus, Georgia. The Registrant also has a machining operation housed in a leased facility containing approximately 200,000 square feet in Chesterfield, Michigan. InterMotive Technologies, Inc., a subsidiary providing engineering and design services, operates from a 38,000 square foot leased facility in Van Buren Township, Michigan.
In addition, the Registrant owns or leases certain executive, sales, and other management offices, located in Georgia, Michigan and Virginia. The Registrant believes that all of its facilities are well maintained.
The only property of the Registrant which secures long-term indebtedness is the German foundry, which secures indebtedness with an aggregate outstanding principal balance at December 31, 1994 of $4,316,000. See Note 6 to the consolidated financial statements of the Registrant included in the Registrant's 1994 Annual Report to Shareholders included as Exhibit 13 to this Report for additional information on secured debt.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
Except as set forth below, the Registrant is not aware of any material pending or threatened legal proceedings to which the Registrant or any of its subsidiaries is a party or of which any of their property is the subject.
On August 5, 1991 Lynchburg Foundry Company ("Lynchburg"), a wholly-owned subsidiary of the Registrant, was served with a complaint (the "Complaint") dated July 31, 1991 by the United States Environmental Protection Agency (the "EPA"). The Complaint alleges certain violations by Lynchburg of the Resource Conservation and Recovery Act ("RCRA"), the most significant of which relates to the treatment of certain hazardous waste at two of Lynchburg's foundry sites. The EPA initially proposed a civil penalty of $1,514,000, which Lynchburg appealed. In November 1994 Lynchburg signed a consent order agreeing to pay a penalty of $330,000. The Registrant expects to pay the penalty in 1995.
The Registrant has entered into negotiations with the Office of the Ohio Attorney General with respect to certain past violations by the Registrant's Ironton, Ohio foundry of Ohio water pollution laws and regulations. The Attorney General's Office has advised the Registrant that the Registrant could avoid litigation with respect to such violations by entering into a consent order. The Registrant has responded to the Attorney General's office and expects to enter into a consent order providing for monetary penalties. Management does not expect this matter to have a material adverse effect on the Registrant's financial position or results of operations.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the Registrant during the fourth quarter of the fiscal year covered by this Report.
PART II
ITEM 5.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information and Dividends - --------------------------------
The information contained in Note 12 to the consolidated financial statements of the Registrant included in the Registrant's Annual Report to Shareholders for the fiscal year ended December 31, 1994, furnished to the Commission as Exhibit 13 to this Report, is hereby incorporated herein by reference.
The Registrant's Common Stock, $0.10 par value, is traded in the over-the- counter market under the Nasdaq symbol "INMT." As of March 7, 1995, there were approximately 880 holders of record of the Registrant's Common Stock.
The Board of Directors of the Registrant suspended payment of the regular quarterly dividend in October 1993 pending improvement
in the Registrant's operating performance. Even if payment of dividends resumes, the payment is subject to the discretion of the Board of Directors and will depend upon the results of operations and financial condition of the Registrant and other factors the Board of Directors deems relevant. The Registrant is also subject to restrictions on the payment of dividends under certain loan agreements. As of December 31, 1994, all of the Registrant's retained earnings were restricted and unavailable for the payment of dividends under those agreements.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA
Selected financial data included in the Registrant's 1994 Annual Report to Shareholders, portions of which are furnished to the Commission as Exhibit 13 to this Report, under the headings "Statement of Operations Data," "Share Data" and "Balance Sheet Data," are hereby incorporated herein by reference.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The information included under the heading "Discussion of Financial Information" in the Registrant's 1994 Annual Report to Shareholders, portions of which are furnished to the Commission as Exhibit 13 to this Report, is hereby incorporated herein by reference.
ITEM 8.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and related notes of the Registrant and the report of the independent auditors thereon included in the Registrant's 1994 Annual Report to Shareholders, portions of which are furnished to the Commission as Exhibit 13 to this Report, are hereby incorporated herein by reference.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Within the 24-month period prior to the date of the Registrant's financial statements for the fiscal year ended December 31, 1994, the Registrant did not change auditors and had no disagreement with its auditors on any matter of accounting principles or practices or financial statement disclosure.
PART III
ITEM 10.



ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained under the heading "INFORMATION ABOUT NOMINEES FOR DIRECTORS" in the definitive Proxy Statement used in connection with the solicitation of proxies for the Registrant's Annual Meeting of Shareholders to be held April 27, 1995, filed with the Commission, is hereby incorporated herein by reference. Pursuant to Instruction 3 to Paragraph (b) of Item 401 of Regulation S-K, information relating to the executive officers of the Registrant is included in Item 1 of this Report.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION
The information contained under the heading "EXECUTIVE COMPENSATION" in the definitive Proxy Statement used in connection with the solicitation of proxies for the Registrant's Annual Meeting of Shareholders to be held April 27, 1995, filed with the Commission, is hereby incorporated herein by reference.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained under the heading "VOTING SECURITIES AND PRINCIPAL HOLDERS" in the definitive Proxy Statement used in connection with the solicitation of proxies for the Registrant's Annual Meeting of Shareholders to be held April 27, 1995, filed with the Commission, is hereby incorporated herein by reference.
For purposes of determining the aggregate market value of the Registrant's voting stock held by nonaffiliates, shares held by all current directors and executive officers of the Registrant have been excluded. The exclusion of such shares is not intended to, and shall not, constitute a determination as to which persons or entities may be "affiliates" of the Registrant as defined by the Securities and Exchange Commission.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained under the headings "CERTAIN TRANSACTIONS" in the definitive Proxy Statement used in connection with the solicitation of proxies for the Registrant's Annual Meeting of Shareholders to be held April 27, 1995, filed with the Commission, is hereby incorporated herein by reference.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following consolidated financial statements and notes thereto of the Registrant and its subsidiaries contained in the Registrant's 1994 Annual Report to Shareholders are incorporated by reference in Item 8 of this Report:
Consolidated Balance Sheets at December 31, 1994 and 1993
Consolidated Statements of Operations for the Years Ended December 31, 1994, 1993 and 1992
Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
Report of Independent Auditors
2. Financial Statement Schedules
The following consolidated financial statement schedule for the Registrant is filed as Item 14(d) hereof, beginning on page.
Consent of Independent Auditors
Schedule II - Valuation and Qualifying Accounts
3. Exhibits
The following exhibits are required to be filed with this Report by Item 601 of Regulation S-K:
Exhibit Number Description of Exhibit - ------ ----------------------
3.1 and 4.1 Amended and Restated Articles of Incorporation of the Registrant (included as Exhibit 4.1 to the Registrant's Form S-3 Registration Statement, filed June 3, 1992, File No. 33-48304, previously filed with the Commission and incorporated herein by reference).
3.2 and 4.2 By-Laws of the Registrant, as amended.
4.3 Promissory Note of Lynchburg Foundry Company, dated December 1, 1973, payable to Industrial Development Authority of the City of Lynchburg, Virginia in the original principal amount of $4,400,000.*
4.4 Guaranty Agreement, dated December 1, 1973, by and between The Mead Corporation and the Industrial Development Authority of the City of Lynchburg, Virginia.*
4.5 Trust Indenture, dated December 1, 1973, by and among Industrial Development Authority of the City of Lynchburg, Virginia, Lynchburg Foundry Company and United Virginia Bank, as trustee.*
4.6 Promissory Notes of Lynchburg Foundry Company, dated June 1, 1976, payable to Industrial Development Authority of the City of Lynchburg, Virginia, in the original principal amounts of $2,700,000, $1,000,000, $550,000 and $550,000, respectively.*
4.7 Guaranty Agreement, dated June 1, 1976, of The Mead Corporation in favor of Industrial Development Authority of the City of Lynchburg, Virginia.*
4.8 Trust Indenture, dated June 1, 1976, by and among Industrial Development Authority of the City of Lynchburg, Virginia, Lynchburg Foundry Company and United Virginia Bank, as trustee, with respect to Pollution Control Revenue Bonds (Mead-Lynchburg Foundry
Project), Series 1976, Series 1976A, Series 1976B and Series 1976C.*
4.9 Loan Contract, dated September 28, 1988, by and between Columbus Neunkirchen Foundry GmbH and Saarlandische Investitionskreditbank, relating to a loan in the original principal amount of DM 740,000.*
4.10 Loan Contract, dated October 11, 1988, by and between Columbus Neunkirchen Foundry GmbH and the Landesbank Saar Girozentrale, relating to a loan in the original principal amount of DM 1,550,000.*
4.11 Loan Contract, dated December 14, 1988, by and between Columbus Neunkirchen Foundry GmbH and Saarlandische Investitionskreditbank, relating to a loan in the principal amount of DM 3,833,500.*
4.12 Loan Contract, dated January 20, 1982, by and between Columbus Neunkirchen Foundry GmbH and Saarlandische Investitionskreditbank, relating to a loan in the principal amount of DM 1,450,000.*
4.13 Loan Contract, dated March 1, 1989, by and between Columbus Neunkirchen Foundry GmbH and Saarlandische Investitionskreditbank, relating to a loan in the principal amount of DM 2,000,000.*
4.14 Loan Contract, dated April 12, 1989, by and between Columbus Neunkirchen Foundry GmbH and Landesbank Saar Girozentrale, relating to a loan in the principal amount of DM 2,725,000.*
4.15 Loan Contract, dated April 8, 1993, by and between Columbus Neunkirchen Foundry GmbH and IKB International, relating to a loan in the principal amount of DM 3,000,000.*
4.16 Credit Agreement, dated August 31, 1992, by and among the Registrant, Trust Company Bank, NBD Bank, N.A., Wachovia Bank of North Carolina, The First National Bank of Boston, First Union National Bank of Georgia, NationsBank of North Carolina, N.A., The First National Bank of Louisville, Trust Company Bank, as agent, and Landesbank Saar Girozentrale, relating to a $75,000,000 and DM 8,000,000 Revolving Credit and Related Promissory Notes (included as Exhibit 4.16 to the Registrant's Form 10-K for the year ended December 31, 1992, File No. 0-13787, previously filed with the Commission and incorporated herein by reference).
4.17 First Amendment to Credit Agreement dated August 31, 1992, by and among the Registrant, Trust Company Bank, Landesbank Saar Girozentrale, NBD Bank, N.A., Wachovia Bank of Georgia, N.A., The First National Bank of Boston, First Union National Bank of Georgia, NationsBank of Georgia, N.A., The First National Bank of Louisville and Trust Company Bank, as agent, dated
December 11, 1992, relating to a $75,000,000 and DM 8,000,000 Revolving Credit (included as Exhibit 4.17 to the Registrant's Form 10-K for the year ended December 31, 1992, File No. 0-13787, previously filed with the Commission and incorporated herein by reference).
4.18 Waiver and Second Amendment to Credit Agreement dated August 31, 1992, by and among the Registrant, Trust Company Bank, Landesbank Saar Girozentrale, NBD Bank, N.A., Wachovia Bank of Georgia, N.A., The First National Bank of Boston, First Union National Bank of Georgia, NationsBank of Georgia, N.A., The First National Bank of Louisville and Trust Company Bank, as agent, dated March 19, 1993, relating to a $75,000,000 and DM 8,000,000 Revolving Credit (included as Exhibit 4.18 to the Registrant's Form 10-K for the year ended December 31, 1992, File No. 0-13787, previously filed with the Commission and incorporated herein by reference).
4.19 Waiver and Third Amendment to Credit Agreement dated August 31, 1992, by and among the Registrant, Trust Company Bank, Landesbank Saar Girozentrale, NBD Bank, N.A., Wachovia Bank of Georgia, N.A., The First National Bank of Boston, First Union National Bank of Georgia, Nationsbank of Georgia, N.A., National City Bank, Kentucky, formerly known as The First National Bank of Louisville and Trust Company Bank, as agent, dated November 15, 1993, relating to a $75,000,000 and DM 8,000,000 Revolving Credit (included as Exhibit 4.19 to the Registrant's Form 10-K for the year ended December 31, 1993, File No. 0-13787, previously filed with the Commission and incorporated herein by reference).
4.20 Fourth Amendment to Credit Agreement dated August 31, 1992 by and among the Registrant, Trust Company Bank, Landesbank Saar Girozentrale, NBD Bank, N.A., Wachovia Bank of Georgia, N.A., The First National Bank of Boston, First Union National Bank of Georgia, Nationsbank of Georgia, N.A., National City Bank, Kentucky, formerly known as The First National Bank of Louisville and Trust Company Bank, as agent, dated August 10, 1994, relating to a $75,000,000 and DM 8,000,000 Revolving Credit (included as Exhibit 10.1 to the Registrant's Form 10-Q for the quarter ended October 2, 1994, File No. 0-13787, previously filed with the Commission and incorporated herein by reference).
4.21 Note Agreement ("Prudential Note Agreement"), dated December 11, 1992, by and between the Registrant and The Prudential Insurance Company of America, relating to $25,000,000 principal amount of 8.05% Senior Notes due December 11, 2002 and Related Promissory Notes (included as Exhibit 4.19 to the Registrant's Form 10-K for the year ended December 31, 1992, File No. 0-13787,
previously filed with the Commission and incorporated herein by reference).
4.22 First Amendment to Prudential Note Agreement, dated March 24, 1993, executed by the Prudential Insurance Company of America and the Registrant (included as Exhibit 4.20 to the Registrant's Form 10-K for the year ended December 31, 1992, File No. 0-13787, previously filed with the Commission and incorporated herein by reference).
4.23 Second Amendment to Prudential Note Agreement, dated November 16, 1993, executed by the Prudential Insurance Company of America and the Registrant (including form of promissory note entered into in connection therewith) (included as Exhibit 4.22 to the Registrant's Form 10-K for the year ended December 31, 1993, File No. 0-13787, previously filed with the Commission and incorporated herein by reference).
10.1(a) Intermet Corporation Key Individual Stock Option Plan, adopted April 25, 1984 (included as Exhibit 10.1 to the Registrant's registration statement on Form S-14, File No. 2-90815, previously filed with the Commission and incorporated herein by reference) (included as Exhibit 10.1 to the Registrant's Form 10-K for the year ended December 31, 1993, File No. 0-13787, previously filed with the Commission and incorporated herein by reference).**
10.1(b) Amendment No. 1 to the Intermet Corporation Key Individual Stock Option Plan, dated as of August 4, 1988 (included as Exhibit 10.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, File No. 0-13787, previously filed with the Commission and incorporated herein by reference).**
10.1(c) Amendment No. 2 to the Intermet Corporation Key Individual Stock Option Plan, dated October 27, 1988 (included as Exhibit 10.3 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, File No. 0-13787, previously filed with the Commission and incorporated herein by reference).**
10.2 Form of Intermet Corporation Directors Stock Option Agreement (included as Exhibit 10.4 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, File No. 0-13787, previously filed with the Commission and incorporated herein by reference).**
10.3 Intermet Corporation Directors Stock Option Plan (included as Exhibit 10.6 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, File No. 0-13787, previously filed with the Commission and incorporated herein by reference).**
10.4 Stock Purchase Agreement, dated March 30, 1992, by and between the Registrant, PBM Industries, Inc., Batten Design and Engineering Services, Inc., Wind Point Partners II, L.P., The Prudential Insurance Company of America, Pruco Life Insurance Company, PruSupply Capital Assets, Inc., Ingersoll Engineers, Inc. and certain individuals (included as Exhibit 2.1 to the Registrant's Form 8-K dated March 31, 1992, File No. 0-13787, previously filed with the Commission and incorporated herein by reference.)
10.5 Promissory Note, dated March 30, 1992, executed by Intermet Machining, Inc. in favor of Wind Point Partners II, L.P., as Shareholders' Representative, in the principal amount of $438,754.58 (included as Exhibit 10.7 to the Registrant's Form 10-K for the year ended December 31, 1992, File No. 0-13787, previously filed with the Commission and incorporated herein by reference).
10.6 Promissory Note, dated March 30, 1992, executed by Intermet Machining, Inc. in favor of Pruco Life Insurance Company, in the principal amount of $12,673.31 (included as Exhibit 10.8 to the Registrant's Form 10-K for the year ended December 31, 1992, File No. 0-13787, previously filed with the Commission and incorporated herein by reference)
10.7 Promissory Note, dated March 30, 1992, executed by Intermet Machining, Inc. in favor of PruSupply Capital Assets, Inc., in the principal amount of $114,059.79 (included as Exhibit 10.9 to the Registrant's Form 10-K for the year ended December 31, 1992, File No. 0-13787, previously filed with the Commission and incorporated herein by reference).
10.8 Promissory Note, dated March 30, 1992, executed by Intermet Machining, Inc. in favor of Wind Point Partners II, L.P., as Shareholders' Representative, in the principal amount of $1,982,107 (included as Exhibit 10.10 to the Registrant's Form 10-K for the year ended December 31, 1992, File No. 0-13787, previously filed with the Commission and incorporated herein by reference).
10.9 Promissory Note, dated March 30, 1992, executed by Intermet Machining, Inc. in favor of Pruco Life Insurance Company, in the principal amount of $35,240.53 (included as Exhibit 10.11 to the Registrant's Form 10-K for the year ended December 31, 1992, File No. 0-13787, previously filed with the Commission and incorporated herein by reference).
10.10 Promissory Note, dated March 30, 1992, executed by Intermet Machining, Inc. in favor of The Prudential Insurance Company of America, in the principal amount of $317,164.79 (included as Exhibit 10.12 to the Registrant's Form 10-K for the year ended December 31,
1992, File No. 0-13787, previously filed with the Commission and incorporated herein by reference).
10.11 Guaranty Agreement, dated March 30, 1992, from Intermet in favor of the shareholders named in the PBM Stock Purchase Agreement (included as Exhibit 10.13 to the Registrant's Form 10-K for the year ended December 31, 1992, File No. 0-13787, previously filed with the Commission and incorporated herein by reference).
10.12(a) Intermet Corporation 1993 Management Bonus Plan (included as Exhibit 10.15 to the Registrant's Form 10-K for the year ended December 31, 1993, File No. 0-13787, previously filed with the Commission and incorporated herein by reference).**
10.12(b) Intermet Corporation 1994 Management Bonus Plan**
10.13(a) Intermet Corporation Salaried Employees Severance Plan effective as of October 1, 1993 (included as Exhibit 10.16(a) to the Registrant's Form 10-K for the year ended December 31, 1993, File No. 0-13787, previously filed with the Commission and incorporated herein by reference).**
10.13(b) Amendment No. 1 to the Intermet Corporation Salaried Employees Severance Plan, dated December 20, 1993 (included as Exhibit 10.16(b) to the Registrant's Form 10-K for the year ended December 31, 1993, File No. 0-13787, previously filed with the Commission and incorporated herein by reference).**
10.14 1993 Special Voluntary Severance Plan for Salaried Employees of Intermet Foundries, Inc. and its subsidiaries (included as Exhibit 10.17 to the Registrant's Form 10-K for the year ended December 31, 1993, File No. 0-13787, previously filed with the Commission and incorporated herein by reference).**
10.15 Intermet Salary Continuation Plan (included as Exhibit 10.18 to the Registrant's Form 10-K for the year ended December 31, 1992, File No. 0-13787, previously filed with the Commission and incorporated herein by reference).**
10.16 Employment Agreement, dated as of December 1, 1994, by and between the Registrant and John Doddridge.**
10.17 Letter, dated as of December 19, 1994, related to George Mathews' retirement. **
10.18 Employment Agreement, dated July 15, 1993, by and between the Registrant and Daryl R. Marsh.
11 Computation of Earnings per Common Share.
13 Annual Report to Shareholders. Certain portions of this Exhibit which are incorporated by reference into this Report on Form 10-K are filed herewith.
21 Subsidiaries of the Registrant (included as Exhibit 21 to the Registrant's Form 10-K for the year ended December 31, 1993, File No. 0-13787, previously filed with the Commission and incorporated herein by reference) .
23 Consent of Independent Auditors (included herein on Page).
27 Financial Data Schedule.
99 Notice of Annual Meeting and Proxy Statement of the Registrant.
___________________
* This instrument defines the rights of holders of long-term debt of the Registrant not being registered and the total amount of securities authorized under the instrument does not exceed ten percent of the total assets of the Registrant and its subsidiaries on a consolidated basis. This instrument is not being filed, but the Registrant will furnish a copy of this instrument to the Commission upon request.
** Management contract or compensatory plan or arrangement required to be filed as an exhibit.
(b) No current reports on Form 8-K were filed during the fourth quarter of the Registrant's 1994 fiscal year.
(c) The Registrant hereby files as exhibits to this Report the exhibits set forth in Item 14(a)3 hereof.
(d) The Registrant hereby files as financial statement schedules to this Report the financial statement schedules set forth in Item 14(a)2 hereof.
INDEX TO FINANCIAL STATEMENT SCHEDULES
Item Page - ---- ----
Opinion and Consent of Independent Auditors..........................
Schedule II - Valuation and Qualifying Accounts......................
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K) of Intermet Corporation of our report dated February 8, 1995, included in the 1994 Annual Report to Shareholders of Intermet Corporation.
Our audits also included the financial statement schedule of Intermet Corporation listed in Item 14(a). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 33-57665, 33-58354 and 33-58352) pertaining to 50,000 shares of Intermet Corporation common stock, the Intermet Corporation Directors Stock Option Plan and the Intermet Corporation Key Individual Stock Option Plan, respectively, of our report dated February 8, 1995, with respect to the consolidated financial statements incorporated herein by reference, and our report included in the preceding paragraph with respect to the financial statement schedule included in the Annual Report (Form 10-K) of Intermet Corporation.
/s/ Ernst & Young LLP
Atlanta, Georgia March 21, 1995
Intermet Corporation (Consolidated)
Schedule II
Valuation and Qualifying Accounts
(a) Reflected as reduction of trade accounts receivable on consolidated balance sheet.
(b) Net effect of amounts charged to expense less actual returns.
(c) Effect of foreign currency translation.
(d) Includes $17,915 established when SFAS 109 was adopted effective January 1, 1992 and 1992 change of $2,931, primarily related to acquired operating loss carryforwards.
(e) Increase (decrease) in certain deferred tax assets, including effect of U.S. rate change in 1993.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 CORPORATION -------------------- (Registrant)
By: /s/ John Doddridge -------------------------- John Doddridge Chairman of the Board of Directors and Chief Executive Officer
Date: March 17, 1995
POWER OF ATTORNEY AND SIGNATURES
Know all men by these presents, that each person whose signature appears below constitutes and appoints John Doddridge and James W. Rydel, or either of them, as attorney-in-fact, either with power of substitution, for him in any and all capacities, to sign any amendments to this Report on Form 10-K, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below as of March 17, 1995 by the following persons on behalf of the Registrant in the capacities indicated.
Signature Capacity - --------- --------
/s/ John Doddridge Chairman of the Board of - ---------------------------- Directors and Chief John Doddridge Executive Officer (Principal Executive Officer)
/s/ Vernon R. Alden Director - ---------------------------- Vernon R. Alden
/s/ J. Frank Broyles Director - ---------------------------- J. Frank Broyles
/s/ John P. Crecine Director - ---------------------------- John P. Crecine
/s/ Anton Dorfmueller, Jr. Director - ---------------------------- Anton Dorfmueller, Jr.
/s/ John B. Ellis Director - ---------------------------- John B. Ellis
Director - ---------------------------- Wilfred E. Gross, Jr.
Director - ---------------------------- A. Wayne Hardy
Director - ---------------------------- George W. Mathews, Jr.
/s/ Harold C. McKenzie, Jr. Director - ---------------------------- Harold C. McKenzie, Jr.
/s/ J. Mason Reynolds Director - ---------------------------- J. Mason Reynolds
/s/ Curtis W. Tarr Director - ---------------------------- Curtis W. Tarr
/s/ John D. Ernst Vice President - Finance, - ----------------------------- Chief Financial Officer John D. Ernst and Treasurer (Principal Financial Officer)
/s/ Peter C. Bouxsein Controller (Principal - ----------------------------- Accounting Officer) Peter C. Bouxsein
EXHIBIT INDEX -------------
Exhibit Number Description of Exhibit - ------ ----------------------
3.2 and 4.2 By-Laws of the Registrant, as amended
10.12(b) Intermet Corporation 1994 Management Bonus Plan
10.16 Employment Agreement, dated as of December 1, 1994 by and between the Registrant and John Doddridge.
10.17 Letter, dated as of December 19, 1994, related to George Mathews' retirement.
10.18 Employment Agreement, dated July 15, 1993, by and between the Registrant and Daryl R. Marsh.
11 Computation of Earnings per Common Share.
13 Annual Report to Shareholders. Certain portions of this Exhibit which are incorporated by reference into this Report on Form 10-K are filed herewith.
23 Consent of Independent Auditors (included herein on Page).
27 Financial Data Schedule.
99 Notice of Annual Meeting and Proxy Statement of the Registrant.