INTERMET CORP - 10-Q Quarterly Report

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.


Part I — Financial Information
Item 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 Operations
Item 3. Quantitative and Qualitative Disclosure 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
Exhibit 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1 Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial Officer
		Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


		Three Months Ended						Nine Months Ended

		September 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		$	609,794
Cost of sales			167,332			180,646			525,645			554,236

Gross profit			14,722			11,957			53,187			55,558
Operating expenses:
	Selling, general and administrative		8,663			7,938			25,031			24,374
	Restructuring and impairment charges		(1,278	)		—			10,314			—
	Other operating expense (income), net		820			(495	)		2,218			(327	)

			8,205			7,443			37,563			24,047

Operating profit			6,517			4,514			15,624			31,511
Other expense (income):
	Interest expense, net		7,790			7,540			22,927			21,075
	Other (income) expense, net		(1,475	)		784			(1,314	)		617

			6,315			8,324			21,613			21,692

Income (loss) before income tax			202			(3,810	)		(5,989	)		9,819
Income tax (expense) benefit			(193	)		2,629			1,872			(1,970	)
Equity interest in a joint venture			—			273			752			692

Income (loss) from continuing operations			9			(908	)		(3,365	)		8,541
Loss from discontinued operation, net of tax:
	Loss from operation		(18	)		(105	)		(81	)		(449	)
	Loss on sale		(41	)		—			(41	)		—

(Loss) income before cumulative effect of change in accounting			(50	)		(1,013	)		(3,487	)		8,092
Cumulative effect of change in accounting, net of tax			—			—			—			481

Net (loss) income			($50	)		($1,013	)		($3,487	)	$	8,573

(Loss) earnings per common share:
	Basic:
		$	—			($0.04	)		($0.13	)	$	0.34
	(Loss) earnings from continuing operations
	Loss from discontinued operation, net of tax		—			—			(0.01	)		(0.02	)
	Cumulative effect of change in accounting, net of tax		—			—			—			0.02

	(Loss) earnings per share — basic	$	—			($0.04	)		($0.14	)	$	0.34

	Diluted:
		$	—			($0.04	)		($0.13	)	$	0.33
	(Loss) earnings from continuing operations
	Loss from discontinued operation, net of tax		—			—			(0.01	)		(0.02	)
	Cumulative effect of change in accounting, net of tax		—			—			—			0.02

	(Loss) earnings per share — diluted	$	—			($0.04	)		($0.14	)	$	0.33

Dividends declared per common share		$	0.04		$	0.04		$	0.12		$	0.12
Weighted average shares outstanding:
	Basic		25,591			25,462			25,576			25,430
	Diluted		25,725			25,462			25,576			25,747


			September 30,		December 31,
			2003		2002

			(Unaudited)
			(in thousands of dollars)
Assets
Current assets:
	Cash and cash equivalents		$	4,988	$	3,298
	Accounts receivable:
		Trade, less allowance for doubtful accounts of $5,377 in 2003 and $9,212 in 2002		87,674		72,749
		Other		11,438		12,754

				99,112		85,503
	Inventories			76,501		63,739
	Other current assets			32,581		24,461
	Current assets of discontinued operation			—		3,407

Total current assets				213,182		180,408
Property, plant and equipment, at cost				684,400		639,494
Less:
	Accumulated depreciation and foreign industrial development grants, net of amortization			358,979		312,532

Property, plant and equipment, net				325,421		326,962
Goodwill				217,016		217,016
Other non-current assets				25,625		34,640
Non-current assets of discontinued operation				—		5,072

Total assets			$	781,244	$	764,098


		September 30,			December 31,
		2003			2002

		(Unaudited)
		(in thousands of dollars)
Liabilities and shareholders’ equity
Current liabilities:
	Accounts payable	$	75,690		$	69,960
	Accrued liabilities		64,239			64,313
	Long-term debt due within one year		11,626			1,567
	Current liabilities of discontinued operation		—			1,865

Total current liabilities			151,555			137,705
Non-current liabilities:
	Long-term debt due after one year		281,815			278,536
	Retirement benefits		77,562			77,571
	Other non-current liabilities		14,292			12,717

Total non-current liabilities			373,669			368,824
Shareholders’ equity:
	Common stock		2,601			2,601
	Capital in excess of par value		57,132			57,124
	Retained earnings		205,878			212,437
	Accumulated other comprehensive loss		(9,403	)		(14,562	)
	Unearned restricted stock		(188	)		(31	)

Total shareholders’ equity			256,020			257,569

Total liabilities and shareholders’ equity		$	781,244		$	764,098


			Nine Months Ended

			September 30,			September 30,
			2003			2002

			(Unaudited)
			(in thousands of dollars)
Operating activities:
(Loss) income from continuing operation				($3,365	)	$	8,541
Adjustments to reconcile net (loss) income to cash provided by operating activities:
	Cumulative effect of changes in accounting			—			481
	Loss from discontinued operations			(122	)		(449	)
	Depreciation			37,272			36,934
	Amortization of debt discount and issuance costs			1,496			2,583
	Amortization of other assets			818			93
	Results 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	)		10,808
		Inventories		(5,575	)		5,642
		Accounts payable and current liabilities		(9,357	)		8,437
		Other assets and liabilities		(1,768	)		(5,792	)

Net cash provided by continuing operating activities				20,767			66,586
Net cash provided by discontinued operation				1,314			1,071

Net cash provided by operating activities				22,081			67,657
Investing 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			360

Net 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			—			175,000
	Repayment 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			490

Net cash used in financing activities				(8,550	)		(73,717	)
Effect of exchange rate changes on cash and cash equivalents				(283	)		4,390

Net increase (decrease) in cash and cash equivalents				1,690			(8,190	)
Cash and cash equivalents at beginning of period				3,298			13,866

Cash and cash equivalents at end of period			$	4,988		$	5,676

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.”

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.

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 Ended

		September 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	)	$	8,573
Less: 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	)	$	0.34
	Basic — pro forma		($0.01	)		($0.05	)		($0.16	)	$	0.31
	Diluted — as reported	$	—			($0.04	)		($0.14	)	$	0.33
	Diluted — pro forma		($0.01	)		($0.05	)		($0.16	)	$	0.31

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.

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.

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 Ended

	September 30,			September 30,			September 30,			September 30,
	2003			2002			2003			2002

				(in thousands of dollars)
Sales	$	915		$	3,961		$	8,007		$	10,824
Cost of sales		881			3,872			7,615			10,872

Gross profit (loss)		34			89			392			(48	)
Expenses		63			260			526			688

Loss before income tax benefit		(29	)		(171	)		(134	)		(736	)
Income tax benefit		11			66			53			287

Loss from discontinued operation, net of tax		($18	)		($105	)		($81	)		($449	)

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			Employee
	of			Write-down			Termination			Postretirement
	fixed assets			of inventory			Benefits			Benefits			Other			Total

Initial charge in second quarter of 2003	$	7,554		$	2,351		$	1,336		$	301		$	50		$	11,592
Noncash charges		(7,554	)		(2,351	)		—			(301	)		—			(10,206	)

Balance at June 30, 2003		—			—			1,336			—			50			1,386
Reduction of post- retirement obligations		—			—			—			(1,278	)		—			(1,278	)
Noncash credit		—			—			—			1,278			—			1,278
Cash payments		—			—			(28	)		—			(50	)		(78	)

Balance at September 30, 2003	$	—		$	—		$	1,308		$	—		$	—		$	1,308

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

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.

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

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.

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


		Three Months Ended						Nine Months Ended

		September 30,			September 30,			September 30,			September 30,
		2003			2002			2003			2002

Net (loss) income			($50	)		($1,013	)		($3,487	)	$	8,573
Other comprehensive income (loss):
	Fair value of interest rate swap		608			(99	)		1,233			213
	Foreign currency translation adjustment		(426	)		(1,342	)		3,926			8,763

Total other comprehensive income			182			(1,441	)		5,159			8,976

Total comprehensive income (loss)		$	132			($2,454	)	$	1,672		$	17,549

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 and
		Metals			Metals			Other			Consolidated

					(in thousands of dollars)
Three-month period ended September 30, 2003:
	Net sales	$	124,481		$	57,573		$	—		$	182,054

	Operating profit	$	3,465		$	2,723		$	329		$	6,517
	Interest expense, net		(1,446	)		(1,229	)		(5,115	)		(7,790	)
	Other income, net		—			—			1,475			1,475
	Tax (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		$	—		$	192,603

	Operating profit (loss)	$	5,042		$	2,335			($2,863	)	$	4,514
	Interest expense, net		(673	)		(1,051	)		(5,816	)		(7,540	)
	Other expense, net		—			—			(784	)		(784	)
	Tax (expense) benefit		(794	)		(540	)		3,963			2,629
	Equity interest in a joint venture		273			—			—			273
	Loss from discontinued operation, net of tax		—			—			(105	)		(105	)

								Net loss				($1,013	)


		Ferrous			Light			Corporate and
		Metals			Metals			Other			Consolidated

					(in thousands of dollars)
Nine-month period ended September 30, 2003:
	Net sales	$	400,382		$	178,450		$	—		$	578,832

	Operating profit (loss)	$	8,079		$	9,635			($2,090	)	$	15,624
	Interest expense, net		(3,492	)		(3,585	)		(15,850	)		(22,927	)
	Other income, net		—			—			1,314			1,314
	Tax (expense) benefit		(1,500	)		(2,525	)		5,897			1,872
	Equity interest in a joint venture		752			—			—			752
	Loss 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		$	—		$	609,794

	Operating profit (loss)	$	21,745		$	15,979		$	(6,213	)	$	31,511
	Interest 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			—			—			692
	Loss from discontinued operation, net of tax		—			—			(449	)		(449	)
	Cumulative effect of changes in accounting, net of tax		481			—			—			481

								Net loss			$	8,573

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.

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 Ended

		September 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	)	$	8,573

Denominator:
	Denominator for basic (loss) earnings per share — weighted average shares		25,591			25,462			25,576			25,441
	Effect of shares held in deferred compensation plan		—			—			—			(11	)

	Denominator for basic (loss) earnings per share — weighted average shares		25,591			25,462			25,576			25,430

Effect of dilutive securities:
	Effect of shares held in deferred compensation plan		—			—			—			11
	Employee stock options and unearned restricted stock		134			—			—			306

	Denominator for diluted (loss) earnings per share — adjusted weighted average shares and assumed exercise of options		25,725			25,462			25,576			25,747

Basic (loss) earnings per share		$	—			($0.04	)		($0.14	)	$	0.34

Fully diluted (loss) earnings per share		$	—			($0.04	)		($0.14	)	$	0.33

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.


		Three Months Ended September 30, 2003

					Combined			Combined
					Guarantor			Non-Guarantor
		Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated

					(in thousands of dollars)
INCOME STATEMENT DATA
Net sales		$	—		$	155,265		$	29,475			($2,686	)	$	182,054
Cost of sales			—			145,229			24,789			(2,686	)		167,332

Gross profit			—			10,036			4,686			—			14,722
Selling, general and administrative			530			5,212			2,892			29			8,663
Restructuring and impairment charges			—			(1,278	)		—			—			(1,278	)
Other operating (income) expenses			(37	)		499			387			(29	)		820

Operating (loss) profit			(493	)		5,603			1,407			—			6,517
Other income and expenses:
	Interest expense (income), net		5,102			2,308			380			—			7,790
	Other income , net		(1,060	)		(6	)		(409	)		—			(1,475	)

(Loss) income before income tax			(4,535	)		3,301			1,436			—			202
Income tax benefit (expense)			2,274			(2,048	)		(419	)		—			(193	)

(Loss) income from continuing operations			(2,261	)		1,253			1,017			—			9
Loss from discontinued operation, net of tax			—			(59	)		—			—			(59	)

Net (loss) income			($2,261	)	$	1,194		$	1,017		$	—			($50	)


		Three Months Ended September 30, 2002

					Combined			Combined
					Guarantor			Non-Guarantor
		Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated

					(in thousands of dollars)
INCOME STATEMENT DATA
Net sales		$	—		$	176,042		$	21,154			($4,593	)	$	192,603
Cost of sales			—			165,680			19,550			(4,584	)		180,646

Gross profit (loss)			—			10,362			1,604			(9	)		11,957
Selling, general and administrative			883			5,213			1,652			190			7,938
Other operating expenses (income)			4			(16	)		(294	)		(189	)		(495	)

Operating (loss) profit			(887	)		5,165			246			(10	)		4,514
Other income and expenses:
	Interest expense (income), net		5,806			1,902			(168	)		—			7,540
	Other 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			—			2,629
Equity 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	)


		Nine Months Ended September 30, 2003

					Combined			Combined
					Guarantor			Non-Guarantor
		Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated

					(in thousands of dollars)
INCOME STATEMENT DATA
Net sales		$	—		$	510,757		$	82,190			($14,115	)	$	578,832
Cost of sales			—			468,497			71,263			(14,115	)		525,645

Gross profit			—			42,260			10,927			—			53,187
Selling, general and administrative			1,911			16,503			6,530			87			25,031
Restructuring and impairment charges			—			10,314			—			—			10,314
Other operating expenses (income)			79			1,759			467			(87	)		2,218

Operating (loss) profit			(1,990	)		13,684			3,930			—			15,624
Other income and expenses:
	Interest expense, net		15,810			6,920			197			—			22,927
	Other 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	)		—			1,872
Equity 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	)


		Nine Months Ended September 30, 2002

					Combined			Combined
					Guarantor			Non-Guarantor
		Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated

								(in thousands of dollars)
INCOME STATEMENT DATA
Net sales		$	—		$	554,503		$	66,775			($11,484	)	$	609,794
Cost of sales			(35	)		506,855			58,891			(11,475	)		554,236

Gross profit (loss)			35			47,648			7,884			(9	)		55,558
Selling, general and administrative			3,296			15,801			4,706			571			24,374
Other operating expenses (income)			105			(86	)		223			(569	)		(327	)

Operating (loss) profit			(3,366	)		31,933			2,955			(11	)		31,511
Other income and expenses:
	Interest expense (income), net		14,719			6,677			(321	)		—			21,075
	Other expense (income), net		391			(198	)		424			—			617

(Loss) income before income tax			(18,476	)		25,454			2,852			(11	)		9,819
Income 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	)		8,541
Loss from discontinued operation, net of tax			—			(449	)		—			—			(449	)
Cumulative effect of changes in accounting, net of tax			—			—			481			—			481

Net (loss) income			($10,510	)	$	14,837		$	4,257			($11	)	$	8,573


		As of September 30, 2003

					Combined		Combined
					Guarantor		Non-Guarantor
		Parent			Subsidiaries		Subsidiaries			Eliminations			Consolidated

					(in thousands of dollars)
BALANCE SHEET DATA
ASSETS
Current assets:
	Cash and cash equivalents	$	3,010		$	413	$	1,565		$	—		$	4,988
	Accounts receivable, net		155			73,832		25,125			—			99,112
	Inventories		—			57,493		19,067			(59	)		76,501
	Other current assets		22,126			4,059		6,395			1			32,581

	Total current assets		25,291			135,797		52,152			(58	)		213,182
Property, plant and equipment, net			3,592			260,609		60,677			543			325,421
Other assets:
	Goodwill		—			217,016		—			—			217,016
	Other non-current assets		18,311			4,081		1,790			1,443			25,625
	Intercompany, 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	)	$	781,244

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
	Accounts payable	$	1,357		$	61,786	$	12,790			($243	)	$	75,690
	Accrued liabilities		15,783			37,284		11,113			59			64,239
	Long-term debt due within one year		350			1,003		10,273			—			11,626

	Total current liabilities		17,490			100,073		34,176			(184	)		151,555
Long-term debt due after one year			239,000			37,115		5,700			—			281,815
Retirement benefits			77,342			220		—			—			77,562
Other non-current liabilities			4,663			7,990		892			747			14,292

	Total non-current liabilities		321,005			45,325		6,592			747			373,669
Shareholders’ equity			256,020			555,604		44,749			(600,353	)		256,020

Total liabilities and shareholders’ equity		$	594,515		$	701,002	$	85,517			($599,790	)	$	781,244


		As of December 31, 2002

					Combined		Combined
					Guarantor		Non-Guarantor
		Parent			Subsidiaries		Subsidiaries			Eliminations			Consolidated

							(in thousands of dollars)
BALANCE SHEET DATA
ASSETS
Current assets:
	Cash and cash equivalents	$	1,122		$	167	$	2,009		$	—		$	3,298
	Accounts receivable, net		162			62,060		23,281			—			85,503
	Inventories		—			55,659		8,139			(59	)		63,739
	Other current assets		21,291			2,487		682			1			24,461
	Current assets of discontinued operation		—			3,407		—			—			3,407

	Total current assets		22,575			123,780		34,111			(58	)		180,408
Property, plant and equipment, net			4,598			289,709		32,112			543			326,962
Other assets:
	Goodwill		—			217,016		—			—			217,016
	Other non-current assets		18,749			3,867		10,581			1,443			34,640
	Intercompany, net		(40,038	)		63,759		(25,323	)		1,602			—
	Investments in subsidiaries		592,765			—		—			(592,765	)		—
	Non-current assets of discontinued operation		—			5,072		—			—			5,072

Total assets		$	598,649		$	703,203	$	51,481			($589,235	)	$	764,098

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
	Accounts payable	$	2,462		$	62,426	$	5,337			($265	)	$	69,960
	Accrued liabilities		19,603			33,588		11,041			81			64,313
	Long-term debt due within one year		350			1,107		110			—			1,567
	Current liabilities of discontinued operation		—			1,865		—			—			1,865

	Total current liabilities		22,415			98,986		16,488			(184	)		137,705
Long-term debt due after one year			240,350			37,974		212			—			278,536
Retirement benefits			70,812			6,759		—			—			77,571
Other non-current liabilities			7,503			6,955		(2,488	)		747			12,717

	Total non-current liabilities		318,665			51,688		(2,276	)		747			368,824
Shareholders’ equity			257,569			552,529		37,269			(589,798	)		257,569

Total liabilities and shareholders’ equity		$	598,649		$	703,203	$	51,481			($589,235	)	$	764,098


		Nine Months Ended September 30, 2003

					Combined			Combined
					Guarantor			Non-Guarantor
		Parent			Subsidiaries			Subsidiaries			Eliminations		Consolidated

					(in thousands of dollars)
CASH FLOW DATA
Cash provided by continuing operating activities		$	6,018		$	4,780		$	9,969		$	—	$	20,767
Cash provided by discontinued operation			—			1,314			—			—		1,314

Net cash provided by operating activities			6,018			6,094			9,969			—		22,081
Investing 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			—			—		3,925
Proceeds from sale of property, plant and equipment			1,700			—			—			—		1,700

Net 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			—			—			—		12

Net 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


		Nine Months Ended September 30, 2002

					Combined			Combined
					Guarantor			Non-Guarantor
		Parent			Subsidiaries			Subsidiaries			Eliminations		Consolidated

					(in thousands of dollars)
CASH FLOW DATA
Cash provided by (used in) continuing operating activities		$	73,378		$	5,386			($12,178	)	$	—	$	66,586
Cash provided by discontinued operation			—			1,071			—			—		1,071

Net cash provided by (used in) operating activities			73,378			6,457			(12,178	)		—		67,657
Investing 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			—			—		360

Net 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			—			—			—		175,000
	Repayment 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			—			—			—		490

Net cash used in financing activities			(72,606	)		(804	)		(307	)		—		(73,717	)
Effect of exchange rate changes on cash and cash equivalents			—			—			4,390			—		4,390

Net (decrease) increase in cash and cash equivalents			($693	)	$	1,452			($8,949	)	$	—		($8,190	)

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

•

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

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.

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


	Twelve Months Ended
	September 30, 2003

	(In thousands of dollars)
Net loss	$	(2,527	)
Income tax benefit		(1,889	)
Interest expense, net		30,398
Non-cash restructuring charge		10,314
Depreciation and amortization		50,279
Adjustments to consolidated EBITDA pertaining to the bank agreement *		2,768

Consolidated EBITDA		89,343

Consolidated EBITDA		89,343
Less: Capital expenditure		13,978
Less: Adjustments to capital expenditure pertaining to the bank agreement *		3,267

Consolidated EBITDA less capital expenditure	$	72,098

Interest expense, net	$	30,398
Adjustments to interest expense pertaining to the bank agreement *		1,291
Revenue bonds principal payments		850

Fixed charges	$	32,539


	Twelve Months Ended
	September 30, 2003

	(In thousands of
	dollars, except ratios)
Consolidated EBITDA less capital expenditures	$	72,098
Fixed charges	$	32,539

Fixed charge coverage ratio (to 1)		2.22

Consolidated EBITDA	$	89,343
Consolidated interest expense	$	31,689

Consolidated EBITDA to consolidated interest expense (to 1)		2.82

Funded debt	$	316,427
Consolidated EBITDA	$	89,343

Funded debt to consolidated EBITDA (to 1)		3.54

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.

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

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.

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.”

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.

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.

(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.

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.


Exhibit No.		Document

31.1		Certification by the President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification by the Vice President of Finance and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		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

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.

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.


Exhibit No.		Document Description

31.1		Certification by the President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification by the Vice President of Finance and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		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


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

[ ]		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		For the transition period from to .


Georgia		58-1563873
(State or other jurisdiction of		(IRS Employer
incorporation or organization)		Identification No.)

5445 Corporate Drive, Suite 200, Troy, Michigan		48098-2683
(Address of principal executive offices)		(Zip code)


	July 24, 2003		December 31, 2002

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


	September 30,		December 31,
	2003		2002

Finished goods	$	20,216	$	15,525
Work in process		12,187		7,947
Raw materials		7,330		6,458
Supplies and patterns		36,768		33,809

	$	76,501	$	63,739


	September 30,		December 31,
	2003		2002

Revolving credit facility	$	62,000	$	63,000
Senior notes due 2009		175,000		175,000
Industrial revenue bonds		39,350		40,200
Capitalized leases and other debt		17,091		1,903

Total debt		293,441		280,103
Less: Long-term debt due within one year		11,626		1,567

Long-term debt due after one year	$	281,815	$	278,536

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

	$	293,441


Financial Covenant	Requirement		Actual

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


	At September 30, 2003

	(In thousands of dollars)
Total long-term debt	$	293,441
Letters of credit excluding certain revenue bonds		22,986

Funded debt	$	316,427


		INTERMET Corporation

		By:		/s/ Robert E. Belts

				Robert E. Belts
				Vice President of Finance and
				Chief Financial Officer
		Date:		November 13, 2003